This week's Cornhusker Economics, produced by the Department of Agricultural Economics, looks at the ARC and PLC programs—important components of the farm income safety net— and the outlook ahead for these programs.

Farmers and ranchers in Nebraska and elsewhere are currently facing a difficult period of tight operating margins and financial conditions. Commodity prices have fallen substantially since 2012 while production costs have been slower to adjust, leaving producers to manage tighter margins and greater financial risks. Federal farm programs have provided some protection and support to producers against these lower prices and margins, but an analysis of programs and projected payments suggests producers will need to quickly adapt to market conditions as program support falls over time.

The federal farm program support comes from commodity programs created in the 2014 Farm Bill. The legislation gave producers a choice of enrollment by commodity and by county in either a price-based program called Price Loss Coverage (PLC) or a revenue-based program called Agriculture Risk Coverage (ARC) at either the county level (ARC-CO) or the farm level called ARC-IC for “individual coverage.” As commodity prices have declined, both ARC and PLC have become important components of the farm income safety net and also substantial infusions of cash flow for producers. An analysis of programs and payments provides insight on the protection offered to producers and the outlook ahead.

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