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Weekly Farm Economics: Comparing 2024 Effective Reference and ARC Benchmark Prices

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  • Paulson, Nick
  • Coppess, Jonathan
  • Schnitkey, Gary
  • Zulauf, Carl

Abstract

In 2024, the effective reference price which determines payments for the Price Loss Coverage (PLC) program will be above the statutory reference price for many crops. At the same time, effective reference prices will be below Agriculture Risk Coverage (ARC) benchmark prices. Herein we make comparisons of effective reference prices to ARC benchmark prices, thereby providing indications of the probability of payments from PLC and ARC as we continue our analysis of the ARC/PLC decision for the 2024 program year (see farmdoc daily from January 16, 2024 and the Excel-based What-If Tool to aid in the ARC/PLC decision for 2024). Assuming the 2024 yield for a county equals its ARC trend-adjusted benchmark yield, a measure of relative price protection provided by the two programs becomes the ratio of a commodity’s effective reference price to its ARC trigger price (86% of the ARC benchmark price). For crops whose ARC trigger prices exceeds the effective reference price, ARC payments can be triggered at higher market price levels and vice versa. While today’s article focuses on price protection in comparing PLC to ARC for 2024, other factors should also be considered.

Suggested Citation

  • Paulson, Nick & Coppess, Jonathan & Schnitkey, Gary & Zulauf, Carl, 2024. "Weekly Farm Economics: Comparing 2024 Effective Reference and ARC Benchmark Prices," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 14(15), January.
    • Handle: RePEc:ags:illufd:358275
    DOI: 10.22004/ag.econ.358275
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    Keywords

    Agribusiness; Agricultural Finance;

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