JULIA DEBES
Kansas Wheat
ARC/PLC deadline is April 15
More than half of the base acres in Kansas are assigned as wheat base, meaning what’s going on with wheat has a major impact on the commodity programs established under the Farm Bill. K-State Research and Extension has new resources available and advises producers to carefully consider their selection choice this year between the two primary programs in Kansas — Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC).
“With another extension of the 2018 Farm Bill, farmers are now able to make an election decision between commodity programs on their base acres for 2025,” Kansas State University farm economist Robin Reid stated in an extension publication on January 24. “The decision between ARC or PLC needs to be made by April 15, 2025, and will be for the crop harvested in 2025, with payment (if any) being made in October of 2026.”
According to Reid in a webinar on Wednesday, February 12, Kansas wheat producers are now evenly split across the two programs with 54 percent enrolling in PLC in 2024, compared to 46 percent in ARC. This trend is a big difference from the first years of the program — 2019 and 2020 — when 93 percent of producers elected for PLC coverage. This year’s selection may not be as quick and easy as prior years; however, primarily due to a higher reference price for PLC and higher benchmark prices for ARC. This week’s edition of Wheat Scoop breaks down the basics and decision factors with resources from K-State’s resources through AgManager.info.
Price Loss Coverage (PLC)
Price Loss Coverage (PLC) is catastrophic price protection. For this program, producers should know two important numbers — the effective reference price and the national marketing year average price.
The effective reference price is laid out in the Farm Bill. For 2025, the new effective reference price for 2025 is $5.56 for wheat.
A payment is triggered when the national marketing year average price falls below this reference price. The national marketing year average price is set by the USDA National Agricultural Statistics Service (NASS). Each month’s price is weighted at the end of the marketing year based on the amount of grain sold in that month to determine a single national price for the entire marketing year. Two considerations are specific to wheat. First, the marketing year runs June 1 through May 31 with the most heavily weighted months in June through September when the most wheat is sold. Second, there is a single price set for all wheat in the United States, regardless of the class of wheat a producer may plant in their fields.
That means the national marketing year average price will not be finalized until after the 2025 marketing year concludes on May 31, 2026. However, because NASS publishes data monthly, producers can track actual and projected prices as the marketing year progresses.
The difference between these two numbers is the payment rate. If a payment is triggered, the payment rate is multiplied by the farm’s established yield (PLC yield), which producers see on their USDA Farm Service Agency (FSA) paperwork and then multiplied by 85 percent of the base acres for that commodity. The payment under this program is not capped until the national marketing year average price falls below the national loan rate, which is $3.38 for wheat.
The takeaway here is that if the national marketing year average price for wheat falls below $5.56, a payment would be triggered, and producers would receive a payment in October 2026.
Agricultural Risk Coverage (ARC)
The Agricultural Risk Coverage (ARC) is a shallow revenue loss program. Nationally, there are two different options for ARC — based on either county or individual benchmarks — but only ARC-CO (county-based) is commonly selected by Kansas producers.
ARC-CO payments under this program are based on county yields, not those of individual producers. This means the county could have a revenue loss, a farmer not, and the farmer would still receive a payment. The inverse is also true — a farmer could have a loss, but the county does not, and no payment is triggered.
County benchmark revenue is based on a five-year Olympic average of the national marketing year average price multiplied by the five-year Olympic average county yield.
For reference, a five-year Olympic average takes five years, removes the high and the low and then averages the remaining three years. Using an Olympic average means that the county’s benchmark revenue will change on an annual basis as new years are added to the data set and the oldest are removed. There is also a lag year, meaning that the five-year calculation for the 2025 marketing year is based on 2019 to 2023 county-level data.
An ARC-CO payment is triggered when the county revenue falls below 86 percent of the county’s benchmark revenue. It’s important to remember that these payments differ from crop to crop and from county to county, which producers can track at AgManager.Info.
“If the current year revenue (national marketing year average price multiplied by actual county yield) falls below the guarantee, payment is made in the amount of the difference,” Reid wrote, cautioning producers that these payments are capped at 10 percent of the county’s benchmark revenue. “The payment being capped at 10% of the benchmark revenue is really the downfall of this program and in years of low prices can make PLC the better choice.”
Here’s how ARC-CO works in practice. The 2025 ARC-CO benchmark price for wheat is set at $6.72. This benchmark price does not change from county to county.
Reid used an example from Rooks County to run the scenario, which has a five-year Olympic average county yield of 46.75 bushels. As a result, average yields (rounded up to 47 bushels per acre) in Rooks County would trigger a payment if the price falls under $5.78, which is 86 percent of the benchmark price.
However, producers also need to run scenarios where county yields exceed or fall below average. A 10 percent yield loss would trigger a payment at a higher price — $6.42. In contrast, however, a 10 percent yield gain would result in a much lower price threshold needed to trigger a payment — $5.25.
Reid noted that under current conditions, ARC-CO may trigger payments at a slightly higher price and could have higher payments, but producers must keep track of that maximum county payment rate and their own payment limitations.
Don’t Forget About Supplemental Coverage Option (SCO)
A final consideration for producers is whether or not to use the Supplemental Coverage Option (SCO) on crop insurance. This option provides coverage from the individuals’ crop insurance level up to 86 percent of the projected revenue. The premiums are subsidized at 65 percent, meaning producers pay 35 percent of the premium. According to Reid, these policies are likely to pay out over time, but there the higher premiums from the additional coverage could have sticker shock for producers considering it for the first time.
Also, SCO payouts are triggered on a county loss compared to an individual farm loss. As such, if the farm has a crop loss, but the county does not, no payment would trigger. Producers cannot enroll in SCO if they have enrolled base acres in ARC-CO for that commodity.
“While it is county-based coverage and not individual, the subsidy level would lead a person to believe it should pay off in the long-run (assuming the product is properly rated),” Reid wrote. “However, the premiums may still be cost-prohibitive for many farmers.”
Deciding Between PLC and ARC-CO
Ultimately, commodity programs are complex, and the final marketing year average prices and yields are only forecasts at this point. But, wheat base acres — at least those planted to winter wheat — have a leg up on spring-planted crops — the 2025 crop has been planted and producers know how much moisture they have or have not received to date.
“The one advantage we have with winter wheat is that the crop is already in the ground,” Reid said. “Although it’s a long time until harvest, we do have some knowledge of the crop’s condition. Is it going to be a complete failure? Is everything looking great? So that is something we can gauge a little bit on wheat versus other crops.”
It’s also important to note that the marketing year for wheat does not start until June 1, 2025. So while producers have to choose one of the two commodity programs by April 15, 2025, there is still a lot of time for prices to fluctuate before being included in the official calculations.
“Current projections are near or even slightly below these ‘trigger’ prices for both PLC and 86 percent of the ARC benchmark,” Reid wrote. “ARC-CO will pay at higher prices in the event of yield losses at the county level, and vice versa, where higher county yields will require lower prices to trigger an ARC-CO payment. But, the overall price risk is really high right now with the current uncertainty in the market.”
K-State does have a free, online trade-off tool to aid producers in making their decisions for this year. The tool allows producers to look up their county averages, apply their own program yields, determine when ARC payments will max out and, most importantly, determine at what price level PLC payments will exceed the maximum ARC-CO payments. Find the trade-off tool and the latest information and recommendations as they prepare to make their decisions at https://www.agmanager.info/ag-policy/2018-farm-bill.