Potential Variability in Commodity Support: Agriculture Risk Coverage and Price Loss Coverage Programs

The Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, first authorized in 2014 and reauthorized in the Agriculture Improvement Act of 2018, provide countercyclical income support to farmers if county-level revenues or prices fall below either historical county benchmark levels or effective reference prices. The conditionality of these support programs creates uncertainty regarding the future levels of Government outlays. For example, in the first 4 years of the programs, producers received $22.5 billion, with income support ranging from $2.5 billion to $7.5 billion per year. This report estimates cost ranges for ARC and PLC over the next 10 years for the three largest covered commodities by area—corn, soybeans, and wheat. Simulating program costs at both the county and national levels indicate a wide variability of program expenditures due to uncertainty in commodity markets. The results explore how program costs are projected to unfold, given 2014 Farm Bill program election decisions, as well as a scenario with producers updating their election choices using 2018 Farm Bill projections made by the Congressional Budget Office. Simulations at the county level indicate producers are less likely to receive payments from ARC if their county yields are more closely correlated with national yields.