WASHINGTON, June 17, 2015 – The new revenue protection program created by the 2014 farm bill is proving hugely popular with corn and soybean farmers and even with wheat growers. According to data released by the Farm Service Agency, 96 percent of soybean operations nationwide, 91 percent of corn farms, and 66 percent of wheat growers chose the revenue-based Agriculture Risk Coverage (ARC) program over Price Loss Coverage (PLC).
Economists had expected ARC to be the program of choice for corn and soybean growers, but it was thought that larger shares of all three commodity growers would pick PLC as their preferred option. PLC would theoretically offer better income protection during the long-term slump in prices that many forecasters have been projecting.
Farmers apparently decided to go with ARC because of the certainty of large up-front payments that will start this fall. ARC provides payments when revenue falls below a five-year rolling average. PLC triggers payments when the average price of a crop falls below a certain level, or “reference price.” Payments on 2014 crops will go to farmers this fall.
“The large expected 2014 ARC payment in most counties probably looked awfully attractive for most corn producers, especially given the likelihood of at best a small PLC payment for 2014 corn,” says Pat Westhoff, director of the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI).
There also may have been concern among farmers that Congress would reopen the programs at some point to cut spending, Westhoff says. In that case, farmers would figure they’re better off taking the ARC payments now. Another possible factor: The Supplemental Coverage Option (SCO) on crop insurance is proving less popular than some thought. Producers who take SCO can’t get ARC coverage, too.
FAPRI had estimated that 60 percent of wheat growers, 40 percent of corn farms and 30 percent of soybean producers would opt for PLC over ARC.
Lobbyists for the American Soybean Association and National Corn Growers Association have to feel vindicated by the signup numbers, given that they led the fight for a revenue program over PLC, which was favored mostly by lawmakers representing Southern growers. Some 99 percent of peanut growers and long-grain rice farms went for PLC, as well as 94 percent of medium-grain rice farms. Ninety-three of canola operations also favored PLC.
ARC is certainly proving far more popular than the old Average Crop Revenue Election (ACRE) program that the 2008 farm bill created. ACRE required farmers to give up a portion of their annual direct payments. The 2014 farm bill abolished those payments so there was nothing for producers to lose, except for the SCO option, by choosing the new revenue program. The ARC signup numbers suggest “farmers are comfortable with revenue-type programs,” says University of Illinois economist Gary Schnitkey.
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