January 6, 2014
Agriculture Risk Coverage-Individual (ARC-IC)
Agricultural Risk Coverage-County Option (ARC-CO) is a new program in the 2014 Farm Bill. ARC-CO payments are made when the average county revenue for a commodity falls below that county’s revenue guarantee per acre. The county revenue guarantee is set at 86% of the benchmark revenue established by the Olympic averages of the last five years of county yields and national marketing year average prices. ARC-CO per acre payments are limited to 10% of the benchmark revenue guarantee and payments are made on 85% of base acres.
- Program choice in the 2014 Farm Bill is referred to as program election. The ARC-IC program is a whole farm program meaning that all covered commodities planted that year will be part of the calculations for possible payments. Remember that for PLC and ARC-Co election is done on a crop by crop basis (see PLC and ARC-CO fact sheets).
- Election decisions must be made by March 31, 2015. Once an election is made for ARC-IC, the farm is in this program for the life of the farm bill (through 2018 crop year). Producers must still enroll each year and those electing ARC-IC will have to report planted acres and yields annually to USDA-FSA.
The acronym for the Agriculture Risk Coverage-Individual Coverage program, a new payment program in the 2014 farm bill.
The average per acre revenue for all covered commodities on a farm for a crop year. The farm’s current revenue is calculated as the national average marketing price multiplied by the farm’s yield for each crop.
A five year average revenue for the farm is used as the basis of establishing a whole farm guarantee revenue.
- Each commodity has a farm specific benchmark revenue calculated as the five year Olympic highest and lowest annual revenues are dropped) average of revenue for that commodity.
- Using the commodity benchmark revenues and the shares of planted acres for the current year, a whole farm benchmark revenue is established for the current year.
Eighty six percent of the benchmark revenue for the farm.
- Payments are made when current revenue falls below the guarantee.
- Payments increase as the current year revenue falls, until they reach a limit of ten percent of the benchmark revenue.
The land area of an FSA farm number that is eligible to receive payments. Each base acre is allocated to a specific commodity.
- A farm enrolled in ARC-IC receives payments on only 65% of its base acreage. This is a 35% reduction of the calculated per acre payment.
Calculating an ARC-IC Payment
The ARC-IC calculation depends on three measures of revenue defined on the first page. The ARC-IC payment is unique in the current farm bill for its use of planted acreage in determining the level of payment received. The ARC-IC is also unique in that it only allows for payments on 65% of a farm’s base acres.
- ARC-IC Pmt = 0.65 x minimum of the Guarantee Rev – Current Rev or 0.10 x Benchmark Rev
- Guarantee Rev = 0.86 x Benchmark Rev
- Benchmark Rev = Planting share weighted average of Crop Revenues
- Current Rev = Planting share weighted average of Current Revenues
Olympic average revenues are calculated for each commodity on the farm by averaging the last five years of revenue performance with the highest and lowest revenues dropped from the calculation. An example set of revenues for corn and soybeans is given below. A strike through in the table indicates a high or low that is omitted in the average).
In a new Purdue Ag Econ Policy Brief Series, Roman Keeney, associate professor of agricultural economics, breaks down the multiple aspects that will go into passing what will arguably be the most discussed bill in agriculture this year, the 2023 Farm Bill.READ MORE
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