“If all producers on a farm make an election to receive ARC, then ARC payments are required to be made to producers on the farm when the Secretary [of Agriculture] determines that, for any of the 2014 through 2018 crop years, actual crop revenue is less than the ARC guarantee for a crop year” (Agricultural Act of 2014 Managers’ Statements - http://tinyurl.com/nw9qqae).
The “ARC guarantee for a covered commodity in a crop year is 86 percent of the benchmark revenue, which for county coverage is the product obtained by multiplying the average historical yield for the most recent 5 crop years, excluding the high and the low [the Olympic average], by the [Olympic average of the] national average market price received by producers during the 12-month marketing year for the most recent 5 crop years.”
Payments for a crop for which ARC was chosen are paid on 85 percent of the farm’s base acres plus any former cotton base acres planted to the crop. These payments are capped at 10 percent of the benchmark revenue.
If the producers on a farm elect to receive ARC payments based on their individual farm revenue rather than county revenue, two things happen. Unlike those who choose the county revenue ARC, they cannot participate in the PLC for any crop. And, the payments are paid on 65 percent of the base acres plus former cotton base acres planted to a covered crop. This has the effect of reducing the number of farms in the top half of a county’s revenue earnings per acre that would choose to participate in the individual ARC.
The PLC program operates much like the previous counter-cyclical-payment program with a fixed reference price—known as the target price in the 2008 Farm Bill—for each covered crop. When the season average price for any covered crop falls below the reference price (see last week’s column for the numbers), farmers are paid the difference between that crop’s reference price and national season average price times the farm’s payment yield times 85 percent of the base acres for the covered crop and former cotton base acres planted to the covered crop. The farm’s payment yields can be updated to 90 percent of their average 2008-2012 yields.
While “all producers on the farm have a one-time opportunity to elect either PLC or ARC for each crop on the farm on a commodity-by-commodity basis, with the exception that if a producer elects individual-level ARC, the producer must elect individual level ARC for all crops on the farm, they must annually sign-up to participate in the program that was elected.”