For the 2022 crop year, producers will have several decisions to make over the next few months. For example, the U.S. Department of Agriculture’s Farm Service Agency (FSA) has announced that producers will have until March 15, 2022, to make their Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) elections and enrollments for the 2022 crop year. In addition, many of the sales closing dates for crop insurance for spring-planted crops are rapidly approaching.
For the ARC-County (ARC-CO) and PLC decision, the Agricultural & Food Policy Center (AFPC) at Texas A&M University provides a decision tool to evaluate the trade-offs between the two programs on a crop-by-crop and farm-by-farm basis. AFPC also offers a spreadsheet calculator for producers who are considering ARC-Individual (ARC-IC). Given the current price outlook – where producers may expect to receive little (or no) assistance from ARC and PLC – it arguably makes the crop insurance coverage decisions even more important.
To that end, we offer the following “rules of thumb” for you to consider as you make farm safety net decisions for the 2022 crop year:
- Similar to the 2021 crop year, ARC and PLC are less likely to pay. That’s okay! Most producers tell us they would rather get their income from the market than the government anyway.
- Rather than focusing on expected ARC/PLC payments (when neither may trigger), consider instead where you are most vulnerable. Is it lower prices due to trade disruptions or slow economic recovery? Is it lower yields due to persistent drought?
- Talk to your crop insurance agent to make sure you’ve evaluated all yield enhancement options (e.g., Yield Exclusion) and unit structures.
- With current price elections on crop insurance, perhaps now is the time to focus more on adding area-wide tools like the Stacked Income Protection Plan (STAX) for upland cotton, the Supplemental Coverage Option (SCO), and the Enhanced Coverage Option (ECO).
o You can have STAX on a farm if the seed cotton base on the farm is not enrolled in ARC/PLC.
o You can purchase SCO for a crop on a farm as long as it’s not enrolled in ARC.
o You can purchase ECO on the farm regardless of ARC/PLC enrollment.
- At a minimum, on farms with little (or no) seed cotton base, be sure to take a close look at area-wide policies like STAX.
- If your APH is relatively higher than the county average yields, then be sure to compare STAX against both SCO and ECO. Because of the 10% limitation in ARC, you may find SCO to be a more attractive alternative (and PLC can be utilized as well, providing some downside price protection, even if you do not expect to need it.)