It is no secret that agricultural commodity prices have been hit hard in recent months. This low-price environment is due to a variety of factors, including favorable crop condition ratings that are driving expectations of another large crop, as well as uncertainty surrounding trade issues that threaten key markets for America’s farmers and ranchers. These price declines have farmers searching for which farm bill tools can help mitigate the impacts of trade tensions on their financial bottom line.
Two farm bill commodity assistance programs, Agriculture Risk Coverage and Price Loss Coverage, are designed to make payments to producers when national marketing year average crop prices, or crop revenue, falls below certain thresholds. Payment rates under ARC-CO depend on national average crop prices, county average crop yields, and five-year Olympic moving average smoothing of the product of these variables. PLC payment rates depend on the difference between marketing year average crop prices and a target reference price. This Market Intel update is the first article in a two-part series and focuses on the potential support offered under the ARC-CO in Title I of the farm bill.