What ARC and PLC Actually Do
PLC (Price Loss Coverage) pays when the national marketing-year average price for a covered commodity falls below its statutory reference price — for corn, that reference price has been $3.70 under recent farm bills. It is a deep-decline backstop tied to a fixed number.
ARC (Agriculture Risk Coverage), in its common county form, pays when actual county revenue falls below 86% of a benchmark built from five-year Olympic-average yields and prices. It responds to shallower declines but caps payments at 10% of the benchmark. You elect one program per crop per farm with FSA, and the election is a genuine decision with no universally right answer.
Why Programs Do Not Replace Marketing
Three gaps keep ARC and PLC from being a price strategy. First, timing: payments, when they trigger, arrive the following fall — roughly a year after the marketing year ends. Your bills arrive monthly. Second, the base: payments flow from base acres and program yields, which may not match what you actually plant or grow today. Third, the trigger level: in a $4.50 corn market that drifts to $3.90, neither program may pay meaningfully, yet that decline is the difference between profit and loss on many operations.
Programs are a floor under a collapse, with lag. Marketing — forward contracts, HTAs, hedges — is what sets the price your operation actually lives on this year.
Fitting the Pieces Together
- Make the ARC/PLC election on its own merits — expected price paths, county yield variability, and payment limits — not as a substitute for a sale.
- Layer crop insurance for the current-year yield and revenue risk programs do not cover.
- Market the crop separately: set price targets above your cost of production and execute with contracts or hedges when the market offers them.
One honest caveat: program participation can breed complacency. A reference price feels like a floor, but it is a floor on a national average, paid late, on base acres. Producers who market as if that floor were their sale price regularly sell below cost. Futures hedging involves substantial risk of loss and is not suitable for all investors — but done within insured bushels, it is the tool that converts policy floors into actual prices.