Congressional Budget Office Baseline
Price Loss Coverage (PLC) is a farm risk management tool found in Title 1 of the 2014 and 2018 farm bills. Protection is based solely on price and do not provide any coverage for yield loss. Payments are made when the lesser of the current MYA price or National Loan Rate falls below the Effective Reference Price which is statutory, or set by federal law. Projected PLC payment rates by crop for the 2022 growing season can be found here (see Column J).
Using USDA-NASS and USDA-FSA data, I provide figures (below) outlining a historical analysis of what PLC payment rates have been since the 2014 farm bill. I note cotton was not a covered crop in the 2014 farm bill, therefore the analysis prior to 2018 is purely illustrational.
Agriculture Risk Coverage - County, or ARC-CO, is a farm risk management tool found in Title 1 of the 2014 and 2018 farm bills. Payments are based on historical Marketing Year Average (MYA) prices and county yields differentiated by irrigation practice. When the realized county-level revenue falls below the revenue guarantee, a payment is made to make up the difference between realized revenue and the revenue guarantee but is subject to a payment limit (i.e. ARC-CO payments cannot be greater than 10% of benchmark revenue). The revenue guarantee for a specific county is found by taking the product of the Benchmark MYA price, Benchmark OA county yield, and the ARC-CO payment rate of 86%.
The Benchmark MYA price and county yield is found using the Olympic Average of each variable. The Olympic Average (OA) MYA price and OA county yield is found by considering five previous years of data which span two to six years prior to the current marketing year. For example, for marketing year 2022, the years used to calculate the OA MYA price and county yield are 2016-2020. The OA is found by dropping the highest and lowest MYA prices and county yields in the time span considered and averaging the remaining three years of data. For example, Jackson County (AR) irrigated soybeans had county yields of 40, 45, 43, 40, and 37 bushels per acre and across 2016-2020 resulting in an OA county yield of 41 bushels per acre. The OA MYA prices for 2016-2020 were $9.47/bu, $9.33/bu, $8.48/bu, $8.57/bu, and $10.80/bu resulting in an OA MYA price of $9.12/bu. The resulting revenue guarantee will be $321.57/ac and will only be paid on base acres devoted to soybeans which may differ from planted acres.
I have provided some maps below which give a snapshot of the county-specific revenue guarantees calculated across for counties in the U.S. for a few major row crops. Maps which focus on Arkansas are also available to gain a better idea of what each county's revenue guarantee looks like for 2022. These revenue guarantees will help give an idea of what ARC-CO payments may look like for a specific county. As you will notice, there may be a wide variation in payments across counties, and this is due to the variation in yields across counties since MYA prices are calculated at the national level. To get an idea of what a specific county's yield would need to fall to to receive a payment, take the revenue guarantee given in one of the maps below and divide it by the OA MYA price. A table of OA MYA prices can be found here (see Column K).