Farm Bill Primer: PLC and ARC Farm Support Programs

Farm Bill Primer: PLC and ARC Farm Support Programs

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May 16, 2022
Farm Bill Primer: PLC and ARC Farm Support Programs
The Agriculture Improvement Act of 2018 (2018 farm bill,
Price Loss Coverage
P.L. 115-334) reauthorized the Price Loss Coverage (PLC)
PLC payments augment farm revenues during periods of
and the Agriculture Risk Coverage (ARC) programs for
low market prices. The PLC program makes payments
crop years 2019-2023. These programs were created by the
when the national average market price of an eligible
Agricultural Act of 2014 (2014 farm bill, P.L. 113-79). The
commodity falls below an effective reference price. The
PLC and ARC programs provide income support to
effective reference price adjusts annually based on
producers of certain eligible commodities (Table 1). The
historical market conditions, and is limited by statute to be
amount of support varies by commodity and from year-to-
between 100% and 115% of the statutory reference price
year based on program enrollments and market conditions
(Table 1). Payments are proportional to an individual
(Figure 1 and Figure 2).
producer’s base acres and payment yields.
Figure 1. Total PLC and ARC Payments by Crop Year
Table 1. PLC Statutory Reference Prices and 2020-
2021 Average Market Prices
PLC
2020-2021
Statutory
Average
Reference
Market Year
Commodity
Unit
Price
Price
Corn
bu.
$3.70
$4.53
Soybeans
bu.
$8.40
$10.80
Wheat
bu.
$5.50
$5.05
Sorghum
bu.
$3.95
$5.04

Barley
bu.
$4.95
$4.75
Source: CRS using USDA Farm Service Agency (FSA) program data.
Data for 2014-2018 as of March 12, 2020. Data for 2019 as of January
Oats
bu.
$2.40
$2.77
21, 2021. Data for 2020 as of December 22, 2021.
Peanuts
cwt.
$26.75
$21.00
Figure 2. PLC and ARC Payments by Commodity
Ricea
cwt.
$14.00
Various
2020 crop year
Dry peas
cwt.
$11.00
$9.84
Lentils
cwt.
$19.97
$18.20
Chickpeas, large
cwt.
$21.54
$23.30
Chickpeas, small
cwt.
$19.04
$20.20
Seed cotton
cwt.
$36.70
$33.93
Other minor
cwt.
$20.15
Various
oilseedsb
Source: CRS using 7 U.S.C. §9011(19) and USDA FSA Market Year
Average Prices, Table 1, updated February 9, 2022.

Notes: bu. = bushel; cwt. = hundredweight.
Source: CRS using USDA FSA program data, updated as of
a. Rice includes long grain, medium grain, short grain, and
December 22, 2021. Total payments for al commodities equaled
temperate japonica varieties.
$2.158 bil ion.
b. Other minor oilseeds include canola, crambe, flaxseed, mustard

seed, rapeseed, safflower, sesame seed, and sunflower seed.
The PLC and ARC programs receive mandatory
appropriations of “such sums as necessary,” and are funded
Agricultural Risk Coverage
through the Commodity Credit Corporation (CCC). The
ARC payments augment farm revenues during periods of
programs do not charge any participation fees. Producers
declining crop revenues. There are two types of ARC
must meet eligibility requirements to participate and are
program coverage: county-level coverage (ARC-CO) and
subject to annual payment limits. PLC coverage cannot be
individual-level coverage (ARC-IC). ARC-CO makes
combined with ARC coverage for the same commodity.
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Farm Bill Primer: PLC and ARC Farm Support Programs
payments to farmers when county-level revenue falls below
than other commodities given the market prices that
a guaranteed level that adjusts annually based on historical
prevailed in 2018 and the payment triggers specified in
county revenues. ARC-IC makes payments to farmers when
statute. Congress may consider reassessing the PLC
farm-level revenues fall below guaranteed levels that adjust
payment triggers in relation to recent commodity prices and
annually based on historical farm revenues. The per-acre
goals for commodity coverage.
payment rate is capped at 10% of the guaranteed level.
Payments are proportional to base acres enrolled.
ARC and PLC payments are delivered to farmers at least
one year after farmers harvest the crop due to technical
Base Acres and Payment Yields
requirements for calculating average prices over the crop
Base acres and payment yields are units of production
marketing year. The delay in payments may reduce the
allocated to eligible farms in accordance with 7 U.S.C.
usefulness of the payments in addressing farmers’ cashflow
§9011. Originally, farms received base acres and payment
needs during low-price years. The delay in payments may
yields in proportion to their historical average plantings and
also lower the farm bill’s budget score by shifting one year
yields of eligible crops from as far back as the 1980s.
of payments outside of the 10-year scoring window.
Various farm bills have given farmers the opportunity to
update their base acres and payment yields over time.
The PLC and ARC programs limit (1) the maximum
payments that an individual person or legal entity can
Providing PLC and ARC payments per base acre and
receive per year and (2) the maximum income that an
payment yield—as opposed to per planted acre or per
individual can earn and still remain eligible for program
harvested quantity—decouples payments from annual
benefits. The programs also have a separate limit for peanut
production, which has been a goal of agricultural policy
payments. Some policymakers want to tighten limits to
since the 1990s and helps fulfill U.S. commitments under
lower program costs, to respond to concerns about
the World Trade Organization’s Agreement on Agriculture.
payments to large farms, and to reduce potential incentives
to expand large farms at the expense of small farms. Others
2018 Farm Bill Changes to the Programs say larger farms should not be penalized for the economies
The 2018 farm bill retained the PLC reference prices from
of size and efficiencies they have achieved.
the 2014 farm bill, but introduced the effective reference
price to allow the trigger for program payments to adjust
Since the enactment of the 2018 farm bill, USDA created
upwards under certain market conditions. Under the 2014
additional farm support programs using funds appropriated
farm bill, the trigger for program payments was fixed at the
by Congress and CCC funds to respond to retaliatory tariffs
statutory reference price.
imposed by some major trading partners in 2018 and 2019,
and the outbreak of the COVID-19 pandemic in 2020.
The 2018 farm bill retained most features of ARC from the
These programs provided price and revenue support for the
2014 farm bill, but directed USDA to prioritize use of data
commodities eligible for PLC and ARC, and at higher
from the federal crop insurance program for calculating
levels than PLC and ARC combined. Congress could
county yields where available. Under the 2014 farm bill,
consider whether to modify the PLC and ARC programs to
USDA prioritized the use of data from the National
reduce the need for future supplemental commodity support
Agricultural Statistics Service where available.
taking into account that any expansion in these programs
under the existing farm bill baseline may require funding
The 2018 farm bill made certain changes that apply to both
reductions for other farm bill priorities.
programs, including allowing producers to update certain
base acre holdings and payment yields, and allowing
For addition background, see the following CRS reports:
producers to change crop enrollments annually between
PLC and ARC. Under the 2014 farm bill, farmers had to
 CRS Report R45730, Farm Commodity Provisions in
maintain the same program enrollments for the 2014-2018
the 2018 Farm Bill (P.L. 115-334)
crop years.
 CRS Report R46248, U.S. Farm Programs: Eligibility
The 2018 farm bill included seed cotton as eligible for PLC
and Payment Limits
and ARC program payments, which was previously
authorized by the Bipartisan Budget Act of 2018 (P.L. 115-
 CRS Report R45143, Seed Cotton as a Farm Program
123). The 2014 farm bill excluded all types of cotton from
Crop: In Brief
PLC and ARC program eligibility in response to a WTO
dispute settlement case brought by Brazil. However, cotton
 CRS Report R46577, U.S. Farm Support: Outlook for
producers were eligible to receive PLC and ARC payments
Compliance with WTO Commitments, 2018 to 2020
for other eligible commodities.
 CRS In Focus IF11289, Farm Policy: Comparison of
Issues for Congress
2018 and 2019 MFP Programs
Historically, Congress has considered the distribution of
support payments across eligible commodities when writing
 CRS In Focus IF11764, U.S. Agricultural Aid in
a farm bill. Different regions tend to produce different
Response to COVID-19
mixes of commodities, which raises the potential for
geographic disparities in support payments. Also, certain
Stephanie Rosch, Analyst in Agricultural Policy
commodities were more likely to receive PLC payments
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Farm Bill Primer: PLC and ARC Farm Support Programs

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