Weekly Farm Economics: County Yield Variability and ARC-CO

Recent articles have focused on comparing the price protection provided by the Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs (see farmdoc daily from January 16, 2024, January 23, 2024 and January 30, 2024). Today we shift focus to the yield component of the county-level ARC (ARC-CO) program, providing an historical perspective on the variability of county-level yields and how it might contribute to ARC-CO payments being triggered in 2024. If current USDA price projections hold for the 2024/25 marketing year ($4.50 for corn and $11.30 for soybeans), county yield losses exceeding 7% for corn and 15% for soybeans would be required to trigger ARC-CO payments. Prices higher than current forecasts would imply even greater yield losses would be required to trigger ARC-CO payments. Prices lower than current forecasts would imply lower yield losses required to trigger ARC-CO payments. If prices are low enough, ARC-CO can trigger payments even when yields are above county benchmark levels. Below we illustrate the price and yield combinations that would result in ARC-CO payments and provide some examples for corn and soybeans for counties in Illinois. Counties that exhibit more yield variability (higher yield risk areas) will tend to trigger larger and more frequent ARC-CO payments, potentially making it a more attractive option for producers in higher yield risk counties compared to those in lower yield risk counties.