About This Episode
In part two of this series, Steve Johnson explains the PLC yield update that runs alongside the ARC PLC election. Farmers who updated in 2014 and 2015 used 2008 through 2012 yields; this round uses 2013 through 2017 actual bushels per acre by crop and farm. If you did not plant the crop in those years you skip it, and if you cannot document a yield you get a plug set at 75 percent of the county average.
The paperwork detail matters. Johnson pushes listeners to pull production records from their crop insurance agent now rather than in February or March, because the FSA farm number often does not match the crop insurance unit number and reconciling the two takes time. FSA enters the figures on form CCC-867. Both Iowa State and the University of Illinois publish PLC yield update spreadsheets that tell you whether updating is worth doing for the 2020 crop.
The second half connects PLC to crop insurance. Electing PLC on a crop makes that farm eligible for the Supplemental Coverage Option, a county-based revenue product subsidized at 65 percent. Johnson expects most Western Belt corn acres to go PLC and beans to go ARC County, so SCO is mainly a corn decision. He warns that SCO reduces prevented planting payments, pays out around June of the following year, and should complement rather than replace farm-level coverage.
“It should be used to complement your farm-level revenue protection, not to replace it.”
— Steve Johnson
Key Takeaways
The PLC yield update uses 2013 through 2017 actual yields by crop and farm; the earlier round used 2008 through 2012.
No documented yield means a plug at 75% of the county average, recorded by FSA on form CCC-867.
FSA farm numbers often do not match crop insurance unit numbers, so reconcile production records with your agent early.
Iowa State and the University of Illinois both publish PLC yield update spreadsheets to test whether updating pays.
SCO requires PLC election, is subsidized at 65%, and can be bought up to the 86% level on top of 80% farm-level revenue protection.
SCO cuts prevented planting payments and does not pay until roughly June of the following year; Johnson wants ARC PLC settled by January 15.
Full Transcript
Shay
Foulk: So it's part 2, jumping back into it here with Steve Johnson, Iowa State University Extension Farm Management Specialist. Steve, thanks again for joining us.
Steve
Johnson: Yeah, it's good to be back, and again, ARC PLC is going to be a hot topic, especially in January, February, March.
Shay
Foulk: So let's move into the second part, something a little bit more in-depth and maybe a little bit more complicated here. Let's talk about some of the PLC yield update and, you know, other things going on with the PLC program there.
Steve
Johnson: Yeah, as a part of the ARC PLC decision is the fact that you can update your PLC yield. That's what we call the old PLC yield, and many of your listeners I think did that probably in '14 and '15 using 8 through 12 actual yields on the farm. Well, you're going to get another chance to do this, and you're going to want to make sure you're working with your crop insurance agents now, not February and March, and see if you can get a copy of that actual production bushel per acre, uh, for that crop on that farm using '13 through '17. Now if you didn't plant that crop, you don't have to put any sort of production, but you are looking for a bushel per acre actual yield. And if you produce the crop, and then FSA will be looking for that, they will plug it in.
If you had a low yield or you can't find the yield associated for that crop on that farm, you get a 75% of the county average plug, and FSA knows that number. So you're definitely working with your crop insurance agents now to make sure you've got production, but in many cases the farm number for FSA might not match the unit number for crop insurance purposes. So you might want to spend a little bit of time with your crop insurance agent going over what would be associated with unit number crop insurance to the FSA farm number, but FSA is ready. Besides ARC PLC election enrollment, they're ready for you to provide that information. They're going to plug that into a, a form CCC 867.
You can see those online, they can print those off for you, and then both Iowa State University as well as University of Illinois have created what we call PLC yield update tools, and you can put that into an Excel spreadsheet and determine whether you ought to update your PLC yield effective for the '20 crop. That's why the PLC yield update is kind of trailing all of these ARC PLC election and enrollment decisions.
Shay
Foulk: Great, appreciate the points on that. You know, what else do we need to be considering there? What's, what's maybe a little different from what we've seen in the past, or that might catch people off guard outside of that?
Steve
Johnson: Well, there's going to be an interaction with PLC and crop insurance. And, you know, maybe a few of your listeners in the South might have seen this before, but if you elect PLC by crop on a farm, you can also purchase what we call Supplemental Coverage Option. So this is a crop insurance decision, but it is associated with a farm and a crop that elects PLC, and I can tell you in the Western Belt, most of the corn-based acres are probably going to go PLC because there likely won't be an ARC County payment, and the likelihood is the national cash prices will be lower in '20 than they were in '19 because of the additional planted acres that are coming in '20. But you've got to make that decision by Monday, March 16th, but the SCO decision probably is trailing your ARC PLC decision.
So it's not a coincidence that March 15th is going to be the annual deadline to elect and enroll in ARC PLC, but also to conclude your crop insurance decision. SEO is a county-based revenue product. It should likely be cheaper because it's subsidized at the 65% level, not at the 38% and 48% level like the 85% coverage And it should be used to complement your farm-level revenue protection, not to replace it. You're not taking all county revenue protection, you're just adding it on to your existing revenue protection. So I could see some farmers that might go from 85 to 80% revenue protection that want to add on SCO. They can purchase SCO up to the 86% level, so they're buying 6% county-based revenue, they're still keeping 80% of the farm-based revenue. Farm level. I think the crop insurance industry is going to struggle to teach this.
I'm concerned that the farmers are going to back up and procrastinate, try to push these ARC PLC decisions back into March with the crop insurance decision. So I think March Madness describes where we're heading this winter trying to make ARC PLC as well as crop insurance decisions.
Shay
Foulk: Absolutely. And where, where can listeners get more information on this? I know you talked about PLC calculator there, but also, you know, on this SCO, where, what resources are available?
Steve
Johnson: Your crop insurance agent, the same person that you turn your production evidence in for your '19 crop, is the same person that's going to be answering those SCO questions. This isn't a right or wrong. This is, are my yields on my farm highly correlated with the county? Am I going to take PLC If those answers are yes and yes, then maybe you do price SCO. You buy SCO on corn because you're going to take PLC on corn-based acres. You're not going to buy SCO on beans because you'll probably be in ARC County, and so SCO will primarily be a decision that will play out again late winter before the March 16th, the Monday date where you get an extra day, but you've got to start now. Don't wait. Work with your crop insurance agent now. Go ahead and price maybe what SCO would cost you. You know, maybe you're going to save $2 or $3 or $4.
Is that the best way to manage risk in '21, or would you be better off staying at 80 or 85% level of coverage with revenue protection, or maybe buying up a higher band, a 90 or 95% coverage And think of those that took prevent plant last year. You're not going to get paid as much if you take prevented planting in 2020 because you took SCO. You don't know what your county yields are going to be. In fact, if you collect on SCO, you probably won't collect till June of '21 for the '20 crop. So I think you've got to be a little cautious of just pricing SCO and thinking that it's cheaper than those higher levels of revenue protection. Do your homework, but become knowledgeable of how ARC PLC and the interaction with the PLC yield update as well as SCO works, because we're going to do this every year for the next 4 years.
ARC PLC will become an annual decision for '21, and then again in '22, and then again in '23, And the deadline is going to be March 15th, the same deadline as crop insurance.
Shay
Foulk: March Madness truly is kind of right around the corner here, Steve. Is there anything else that, you know, I haven't asked? I think the conversation here has been phenomenal, but anything else you'd like to pass along to the listeners or get message across here?
Steve
Johnson: Well, I think for many states, maybe there are some ARC PLC decisions that are still going on. Iowa, we're early. Illinois, online. So don't think Extension's going to be the one to give you these answers. A lot of these answers are going to probably be online. And read the magazines. I mentioned a couple of Successful Farming magazine articles that I'm referenced in. So I think getting started in January, my magic date is January 15th. By January 15th, I've pretty much got my head around ARC PLC. I've already talked to my crop insurance agent. I've got the information. I just need to walk in there and provide that to the FSA office. And then that group, I call these the early adopters, they're done. They are done with ARC PLC. They're done with their PLC yield update.
Now they're just working with their crop insurance agent and they can determine whether SCO is an important decision. But I am overly concerned about backing up FSA and crop insurance agents this winter. And it'll be those that just do not get their heads around these decisions that we're going to be making annually. Starting this winter, but again, those decisions will be made in a similar fashion each of the following 3 winters. March 15th deadline, ARC PLC election and enrollment, as well as crop insurance decisions on spring planted crops.
Shay
Foulk: Steve, we know you've been going nonstop here for the last little while. Hope to be able to take a rest here for a little bit, but really appreciate you joining us here on the Ag View Pitch and sharing this information with listeners. I think each time we've had you on, you, you've truly provided tremendous value, uh, and for that we thank you not only on a personal level but what you're doing with Extension and, and for farmers throughout the countryside. So thank you very much, Steve.
Steve
Johnson: I appreciate that. Thanks, and have a happy new year, and let's have a better 2020.
Shay
Foulk: We're hoping so. And thank you for everyone listening. We will catch you next time on the Ag View Pitch.