What is Agriculture Risk Coverage (ARC) & Price Loss Coverage (PLC) Program ?
The ARC and PLC programs were reauthorized for the 2019 through 2023 crop years by the Agriculture Improvement Act of 2018 (2018 Farm Bill). For the majority of American farms, the Agriculture Risk (ARC) and Price Loss Coverage (PLC) programs provide as essential financial safety nets by protecting farmers from substantial drops in crop prices or earnings.
The USDA Farm Service Agency (FSA) advises farmers to enroll in the Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) programs by getting in touch with their local USDA Service Centers. An income support program called the ARC Program pays out when real crop revenue falls below a predetermined guarantee level. When the effective price for a covered commodity decreases below its effective reference price, the PLC Program makes income assistance payments.
There are 22 covered commodities, wheat, oats, peanuts, barley, corn, grain, rapeseed, sorghum, long grain rice, medium/short grain rice, seed cotton, dry peas, lentils, large and small chickpeas soybeans, sunflower seed, temperate japonica rice, canola, flaxseed, mustard seed, safflower, crambe, and sesame seed.
Farmers and landowners have three commodity title options available to them under the 2018 Farm Bill, ARC-IC (payment based on individual farm revenue), ARC-CO (payment based on county revenue) and PLC (payment based on market year average).
Objectives of ARC/PLC Program
Both the Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) commodity programs have different policy goals. Price Loss Coverage provides assistance when prices are low. Agriculture Risk Coverage provides assistance when transitioning from periods of high to low income.
How Does the ARC & PLC Programs Work ?
Effective reference prices shall be determined in accordance with the 2018 Farm Bill changes to allow for reference price fluctuations in periods where historical price averages are greater than the set reference price for the covered product.
Agriculture Risk Coverage (ARC) :
When a period of strong farm income is followed by a period of low agricultural revenue, ARC offers support. The ARC-CO program offers financial assistance based on historical base acres, not on the volume of covered commodities now produced. When the actual county crop revenue of a covered commodity is less than the ARC-CO guarantee for the covered commodity, ARC-CO payments are made.
When the actual individual crop revenue for all covered commodities planted on the ARC-IC farm is less than the ARC-IC guarantee for those covered commodities, payments under the Individual Agriculture Risk Coverage (ARC-IC) program are made. Instead of county-level yields, ARC-IC employs producer-certified yields.
Price Loss Coverage (PLC) :
A low price is one that is below a reference price established by Congress, and PLC is a national program that assists with low pricing. It is the most recent iteration of policies intended to shield farmers from the financial repercussions of low prices, a goal dating back to farm policies put in place during the 1930s Great Depression.
When a covered commodity's effective price is less than the corresponding reference price for that commodity, PLC program payments are made. The market year average price (MYA) or the national average loan rate for the covered commodity, whichever is higher, is the effective price.
Eligibility for ARC/PLC Program
The ARC (Agricultural Risk Coverage) and PLC (Price Loss Coverage) programs are part of the U.S. Farm Bill, aimed at providing financial support to farmers facing significant revenue or price losses. These programs are administered by the USDA (U.S. Department of Agriculture) and are available to producers who meet certain eligibility criteria:
1) Farm Ownership:
- You must be the owner or operator of a farm.
- You must participate in farming operations that produce eligible crops.
2) Crop Eligibility:
- ARC/PLC applies to specific crops, including wheat, corn, soybeans, oats, barley, rice, cotton, and others.
- The crops must be grown for commercial purposes or have a history of production.
3) Enrollment:
- You must enroll in the program annually, even if you have participated in previous years.
- Enrollment must be done through your local FSA (Farm Service Agency) office.
4) Payment Yields:
- For PLC, you need to have a history of production for the eligible crops in the form of a base yield, as determined by the FSA.
- The base yield will be used to calculate any potential payment under the program.
5) Payment Limits:
- The ARC and PLC programs have payment limits based on the size of the operation and the number of acres enrolled.
- There are overall payment caps for individual producers, which are adjusted periodically.
6) Participation in Other Programs:
- You must comply with other USDA programs like the Conservation Reserve Program (CRP) or other farm management programs, if applicable.
7) Farm Income:
- To qualify for ARC/PLC, your farm must meet certain income requirements, ensuring that you are engaged in agriculture as your primary occupation.
8) Other Requirements:
- You must adhere to USDA rules and regulations and comply with farm management practices that align with the objectives of ARC/PLC.
Eligible Crops for ARC/PLC Program
The Eligible crops for ARC/PLC coverage include, barley, large and small chickpeas, corn, long grain rice, crambe, flaxseed, grain sorghum, lentils, canola, mustard seed, oats, peanuts, dry peas, rapeseed, medium and short-grain rice, safflower seed, sesame, seed cotton, soybeans, sunflower seed and wheat.
ARC/PLC Program Selection
Program selection can vary between FSA farms as well as crop by crop (by FSA farm number). Each farm's owners/landlords must decide together a course of action to take. By default, the program registered in 2024 will be chosen for covered crops if an election is not made by March, 2025. For the crop years 2024 and 2025, producers will have the opportunity to change programs down the road.
ARC/PLC Payments
For the 2025 ARC/PLC Payments, farmers will receive financial support based on specific program conditions and market factors. The payments are designed to provide assistance when agricultural producers face revenue losses or price declines for certain crops. The Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs offer different types of protection, and the amount of assistance depends on the type of coverage selected, the market conditions for the 2025 crop year, and the performance of the farm or county.
ARC-County payments are triggered when the county's average revenue falls below a certain revenue guarantee, which is based on the county's historical yields and the national average price for the crop. The revenue guarantee is calculated as 86% of the product of the county’s average yield and the reference price for the crop. If actual revenue, which is the county’s yield multiplied by the average market price, falls below the guarantee, the ARC-County program will provide a payment. However, the payment is capped at 10% of the revenue guarantee. For 2025, the payments will depend on how the county’s crops perform in relation to the market prices and historical yield data.
For ARC-Individual, the payment is based on the individual farm’s revenue. If a farm’s actual revenue is less than the revenue guarantee, which is calculated using the farm’s historical yields and a reference price, then the farm is eligible for ARC-Individual payments. This option can be beneficial for farmers who have more variable yields, as it is based on the farm’s specific performance rather than the county's average. Like ARC-County, payments are triggered when actual revenue falls below the revenue guarantee, but with individual yield data, the payment amount can vary from one farm to another.
PLC payments are different, as they are based on price losses rather than revenue losses. Payments under PLC are triggered when the market price for an eligible crop falls below the reference price set by the USDA. For example, if the market price for corn, wheat, or soybeans drops below the reference price, PLC will provide a payment equal to the difference between the reference price and the market price, multiplied by the farm’s base acres and payment yield. This program offers price protection, which can be particularly beneficial in times of low market prices. For 2025, the reference prices and market conditions will play a key role in determining whether PLC payments are triggered for specific crops.
The amount of payment a farmer will receive from either ARC or PLC depends on several factors, including the crops grown, market prices, historical yields, and the farm's base acres. Farmers will need to stay informed about market trends and USDA updates to understand how the payments might apply to their operations. To receive ARC/PLC payments, farmers must enroll annually in the program and choose the coverage option that best suits their risk management needs for the 2025 crop year. The payment rates will be finalized by the USDA based on 2025 market conditions, so it’s crucial for producers to consult with their local FSA office for detailed projections and guidance.
Payment Distribution:
- Payments are typically disbursed starting in the fall of 2025 and may continue through the end of the calendar year. Exact payment dates will vary depending on USDA calculations and administrative processes.
- Partial Payments: In some years, the USDA may distribute partial payments before the final calculations are completed, especially in cases where payments are expected to be significant.
For further information, get in touch with the Farm Service Agency office at your local USDA Service Center.
ARC-PLC Calculator
The University of Illinois and Texas A&M University provide web-based decision tools in collaboration with USDA to help producers use crop data related to their individual farming operations to make well-informed decisions. Tools consist of :
The Texas A&M-provided ARC and PLC Decision Tool enables producers to gather fundamental knowledge about the choice and factors to consider, such as projected commodity prices and historical yields to calculate payments for 2025.
Gardner-farmdoc Payment Calculator, Producers can estimate payments for farms and counties for ARC-CO and PLC using a calculator provided by the University of Illinois.
ARC/PLC Program Crop Year Election
For the 2025 ARC/PLC Program Crop Year Election, farmers need to make decisions regarding their coverage options and how they wish to elect coverage for the upcoming crop year. Here's what you need to know:
Deadline for Election:
- The USDA will announce the specific 2025 election deadline, but it typically falls in March.
- Farmers will need to make their crop year election during the annual enrollment period, usually starting in October of the previous year.
Election Options:
Farmers must choose between ARC-County, ARC-Individual, or PLC for each crop.
- ARC-County: Provides revenue protection based on the average county yield and price.
- ARC-Individual: Provides revenue protection based on the individual farm’s yield and price.
- PLC: Provides price loss coverage if the price of the crop falls below a reference price set by the USDA.
Decision for Each Crop:
- You must make a separate election for each eligible crop.
- Consider reviewing the expected prices and yields, as these will influence whether ARC or PLC is more beneficial for each crop.
Base Acres and Payment Yields:
- The program is based on historical base acres and payment yields.
- If there are any changes to your farming operation, make sure to update your base acres and yields with the FSA.
Payment Rates and Market Conditions:
- Payments under ARC are determined by comparing actual revenue to expected revenue.
- PLC payments occur when the market price falls below the reference price, which is set for each crop.
ARC/PLC Program Enrollment
Enrollment Period:
- The USDA typically begins enrollment for the ARC/PLC program each year in mid-October and it runs through March 2025.
- The exact deadline will be announced by the USDA, but it is usually in March.
- Producers should confirm the specific enrollment deadline with their local Farm Service Agency (FSA) office to ensure they meet the required timeline.
How to Apply for ARC/PLC Program ?
Producers that meet the requirements can apply for an ARC/PLC by getting in touch with their local USDA Service Center's Farm Service Agency (FSA) office. Applications may be submitted by mail, fax, delivery in person, or online.
As an alternative, producers having an eAuthentication account can submit an online application for ARCPLC. Through this online approach, applications will be filled out, electronically signed, and sent to your local USDA Service Center.
An eAuthentication account is necessary to log into ARC/PLC or any other program. Producers who are interested in learning more about setting up an eAuthentication account for online access should go to farmers.gov/sign-in.
Program year-specific data, including ARC/PLC payment rates, reference prices, and PLC substitute yields, are all provided in the Program Data section. To access the program data, click here.
Step by step guide to apply for ARC/PLC Program:
Visit Your Local FSA Office:
Find your nearest FSA office to get more details on your farm's eligibility and to enroll in the program.
Submit Documentation:
You will need to provide necessary farm operation details, including crop history, base acres, and payment yields.
Complete Annual Enrollment:
Enroll every year by the USDA’s specified deadline (usually around March/April) to receive potential benefits.
For More Information
Visit the ARC and PLC webpage or get in touch with your local USDA Service Center for further details.
Frequently Asked Questions
What do base acres mean?
Based on historical crop production averages, a farm's base area and program yield are used to determine some government payments, such as ARC and PLC.
How do I calculate ARC payments?
The difference between the estimated individual guarantee revenue and the actual individual crop revenue added across all covered commodities grown on the farm is equivalent to 65% of the farm's total base acres.
How to calculate PLC payment ?
When a covered commodity's effective price is less than the corresponding reference price for that commodity, PLC program payments are made. The market year average price (MYA) or the national average loan rate for the covered commodity, whichever is higher, is the effective price.
Which is better PLC or ARC?
PLC offers support at affordable rates. When income is shifting from a high income to a low income time, ARC offers assistance. When the US grain industry appears to have started a multi-year phase of rising income, the disparity in policy aims has become more significant.
Are payments for price loss coverage taxable?
These payments, which were made in response to a price drop or market disruption, will be taxed as regular income. Lines 4a and 4b of IRS Form 1040, Schedule F, are used to disclose payments made under government programs.
Exactly how are reference prices calculated?
Effective reference prices shall be determined in accordance with the 2018 Farm Bill modifications to allow for upward reference price fluctuation where historical price averages are greater than the established reference price for the covered product.