ARC and PLC election discussion

Chris

Barron: And it all comes down to this.

Steve

Johnson: Two on, two out, bottom of the ninth. The Farmers lead by one.

Chris

Barron: Full count. Here comes the play at the plate, and it's the Ag View Pitch! Welcome everybody to another episode of the Ag View Pitch, and today we're going to have a conversation around the election between ARC and PLC. So the ARC or the PLC decision that we all have to make for the FSA office here coming up fairly soon. And we've got Steve Johnson, Iowa State University retired. Congratulations on that, Steve. How's it going today?

Steve

Johnson: It's going really well. I'll tell you, I like this retirement. I'm going to recommend to your listeners, mid-60s retirement, pretty cool. I just wish I could travel more right now, but I already done 12 um, different webinars, and we're going to increase in February. But this is the problem I'm attacking right now. It's a combination of ARC PLC election enrollment, crop insurance, and the importance of pre-harvest marketing. There's your big safety net— crop insurance and pre-harvest marketing.

Chris

Barron: Okay, so what we want to hit on in this, uh, discussion here, and we're going to be doing a discussion here kind of simultaneously in a different podcast, and these are both going to come out essentially at about the same time, But what we want to hit in this conversation first is the election between ARC and PLC at the FSA office. And I know the FSA office has been reaching out to a lot of our clients and saying, hey, come in and sign up, let's get going. And there's a lot of resistance. And I almost got to confess, I mean, I was kind of thinking that way too until I started talking to you offline. And I think you have a whole different take on this. So I'm interested in, you know, having you start out here, Steve, and kind of give your perspective on, on this election and some of the things that we need to think about at the farm level.

Steve

Johnson: Sure, I'd be glad to. I think farmers have got the priorities in the wrong order. The most important decision you're going to make in the next 6 weeks is crop insurance, likely in combination with pre-harvest marketing. The risk management tool that is a very poor risk management tool is called ARC. PLC. It only pays when we have really low prices. Again, corn below $3.70, that's the '21-'22 marketing year, soybeans below $8.40, and wheat below $5.50. I'm looking at the likelihood of zero PLC payments. So the reality is I'm thinking most all the bean-based acres are heading for our county. I'll be surprised that we don't shift some of those, uh, corn and wheat-based acres to ARC County, not because it's going to trigger a payment, it's because the likelihood is we're just not going to trigger PLC.

The '21 crop national average cash price by entire market year is just going to be too high. So again, I think we're chasing nickels and dimes in corn and wheat off the bottom of the market. Again, I just do not think ARC PLC should take that long. You should have already done this with the FSA office. You've got 6 weeks to either call the FSA or email them. Get her done.

Chris

Barron: So talk a little bit about the ARC then. It sounds like, you know, for a lot of producers— and again, we're not recommending anything specifically here as much as we are just trying to give perspective— and then from the ARC County, it sounds like for a lot of producers that's going to be probably the best option for them, for, you know, the corn, soybean, wheat growers. That kind of what I'm hearing?

Steve

Johnson: It's likely the only one that will trigger a payment for the '21 crop year. And if that's your goal, I want some government money and I want free money, then I'm saying probably our county is where most those base acres will go. But I'm taking PLC out of the equation because I just think that our national average cash prices are going to be above $3.70 corn $8.40 beans, probably $5.50 wheat. Let's get our PLC done and let's help out our FSA office, and then let's focus on what's really important, the two big strategies. And that, I believe, will be crop insurance decisions as well as pre-harvest marketing.

Chris

Barron: Yeah, I think there's been a lot of people with reservations, and again, like I said, I, I almost, I need to confess too here probably because You know, it's like there's a perception out here that we need more information before we do that. But like you said, I guess it does make a lot of sense, you know, and until, you know, until we get to that point, I mean, of the crop insurance, we're a little ways away from that. I think there'd be some pretty big lines and a lot of backup trying to get those decisions made. And it sounds like really it's not that big a decision at this point for a lot of us if we really sit down and think about it.

Steve

Johnson: I don't think so. I think it is a fairly easy decision for '21 crop, and this— but this is the first time that we've made a 1-year annual decision because in '15 we made a 5-year decision and last year we made a 2-year decision. So you can change this in '22 or you can change this in '23, but I think it's March 15th deadline. I'll be honest with you, I think that FSA intentionally created a March 15th deadline because they knew that most producers had a March 15th deadline for crop insurance and spring planted crops, and now farmers can procrastinate on both. And in a COVID age where you've got your crop insurance agents working from home and you've got your FSA staff that in Iowa you can't have more than 2 staff in the county office at once, I mean everybody's bottlenecked via phone and via email, and I don't even want to think about late February. And early March.

I'm going to call that March Madness, Chris, and it has nothing to do with college basketball.

Chris

Barron: Yeah, well, I think that's, uh, really good, um, advice. And is there anything else? You know, this does— this is a pretty short podcast here, but it's just really about the importance of going ahead and making that election, which I think we all need to hear on the farm side of things. Anything else that needs to be discussed around that decision?

Steve

Johnson: Yeah, I think there— the linkage between a crop insurance product called supplemental coverage ops, and here is why maybe some of your listeners are saying, well, I'm going to wait because I want to see the crop insurance. The only interaction between ARC and PLC election and enrollment is if you want to buy a county-based product called SCO, Supplemental Coverage Option, you need to be in PLC. You can't buy Supplemental Coverage Option, SCO, county-based, not farm-based, county-based product unless you elect and enroll in PLC. So make sure your crop insurance agent is aware of that. If you say, well, I want price SCO, that's up to that 86% coverage level. I want to add some cream to the cup of coffee. I'll buy 75 or 80% revenue protection, that's farm level coverage, but then I'll buy, if you would, 11% or 6% SCO coverage. Make sure that you understand the linkage.

You've got to be in PLC if you're going to buy SCO. There is probably the issue that plays out. There's very few crop insurance changes. Premiums are going up, but the premiums are going up because the February average price, the projected spring price, is going to be roughly 10 to 12% higher for corn and over 20% higher for soybeans. So we're going to see higher premiums for the '21 crop, but we're going to see higher revenue guarantees, and that's exciting. A lot of farmers in to be able to guarantee revenue at levels that we've not seen in 5 or 6 years.

Chris

Barron: Mm-hmm. Yeah. And as far as that decision goes, then going into the FSA office, if you're not— if that's not even on the plate as a potential option, then it just, like you said, it's kind of a no-brainer to get in there to the FSA office and get this election made and get it over with.

Steve

Johnson: Correct. And FSA does not want to know about your crop insurance. They don't care, right? They don't care if you're buying SCO or there's a new product called ECO, Enhanced Coverage Option, and ECO is disconnected from ARC PLC. FSA doesn't care. They just want to know by commodity crop, by FSA farm number, which of these programs do you want to elect and enroll. And if you don't make the decision by March 15th, which a lot of people will probably miss that deadline, you can still enroll for the '21 crop, but you can only enroll in program that you were in for '19 and '20. So I really think that you've got to be a great communicator and be patient in working with both FSA staff as well as your crop insurance agent. This is not going to be pretty, but this is going to require the fact that your listeners are focused. And Chris, I think that's the biggest issue.

You know, I always say give a farmer a deadline, they'll show you how close they can come to it. March 15th, the deadline for both crop insurance as well as ARC PLC election changes. So I'm concerned that if you wait into late February or March, don't plan on anybody returning your call or email too soon because they're going to be really busy.

Chris

Barron: Okay, well, you've got me talked into it. I'm, I'm going to make sure that in our operation that my brother gets on this and we get we get signed up, and I have a pretty good idea on ours already what we're gonna do and had a good idea before, but I think you got me talked into it. Any final things on the ARCC PLC election?

Steve

Johnson: No, like I said, I think it's probably the simplest decision we've made, and we've had 7 years of this whole ARCC PLC election and then enrollment, but rather than a 5-year election like we did in 2015, or a 2-year election like we did last year. It's just a 1 year. And remember, ARC PLC is your historic base acres. It has nothing to do with what you're planting in '21. It's your old base by commodity crop, and we're making these decisions by crop, by FSA farm number. So separate this whole idea of an FSA farm number from the unit structure that you are going to choose for crop insurance. I've seen a few phone calls and emails that farmers are thinking, my crop insurance agent's using my FSA farm number. Probably not. That FSA farm number is probably by ownership of that farm, and it got separated 20 years ago.

So make sure you can separate an FSA farm number from a farm unit either likely optional units where you are insuring a crop by the section line, or enterprise units, you're insuring your crops, you're combining all your cornfields together at the county line.

Chris

Barron: Gotcha. Well, I think this was good. This was a— this is the teaser for the crop insurance discussion to kind of emphasize the importance of getting this election figured out and getting things moving there so that we're not bottlenecking everything for all of us and making it a difficult situation for everybody. I think that was really good. Appreciate the conversation here. And this is the teaser for the crop insurance discussion, which is coming up next. So thanks everybody for listening, and we will talk to you on the Crop Insurance Podcast next. Thanks for listening.