The following is an overview of the Senate-proposed Agriculture Risk Coverage (ARC) program, which could become a major part of the 2012 farm bill.

It was included as part of a recently-released study – Impacts of ARC and Payment Limit Provisions of the “Agriculture Reform, Food and Jobs Act of 2012” on Arkansas Representative Panel Farms -- by University of Arkansas agriculture economists.

For more on the study, see here.

  1. For the period 2013-2017, the producer makes a one-time irrevocable decision to receive:
    • An individual coverage, or
    • A county coverage(in counties with sufficient data).
  2. The decision to participate is binding to the producer, regardless of covered commodities planted, in a way that:
  • Acres brought under the operational control of the producer after the election is made are included.
  • Acres no longer under the operational control of the producer after the election are no longer subject to the election of the producer, but become subject to the election of the subsequent producer.

3. An ARC paymentin a given year for the crop of interest is received if the Actual Crop Revenue is less than the Agriculture Risk Coverage Guaranteefor that same crop-year combination.

4. The Actual Crop Revenuefor the crop of interest in a given year is:

  • In the case of an individual coverage: the Actual Average Individual Yieldmultiplied by the higher of the Midseason Priceand the National Marketing Assistance Loan Rate.
  • In the case of a county coverage: the Actual Average County Yieldmultiplied by the higher of the Midseason Priceand the National Marketing Assistance Loan Rate.

5. The Agriculture Risk Coverage Guaranteefor the crop of interest in a given year is equal to 89 percentof the Benchmark Revenue.

6. The Benchmark Revenue is determined as:

  • In the case of an individual coverage: the product of the 5-year Olympic average of Average Individual Yieldsand the 5-year Olympic averageof the Average National Marketing Year Average Price. A minimum price for rice is provided at $13/cwt.
  • In the case of a county coverage: the product of the 5-year Olympic averageof the Average Historical County Yieldand the 5-year Olympic average of the Average National Marketing Year Average Price. A minimum price for rice is provided at $13/cwt.

7. Transitional Yields. For a crop of interest, if the yield determined under section 6a:

  • For the year 2012 or any other earlier year is less than 60 percentof the applicable transitional yield, as determined by the Secretary, the Secretary shall use 60 percentof the applicable transitional yieldfor that crop year.
  • For the year 2013 and any other subsequent year is less than 70 percentof the applicable transitional yield, as determined by the Secretary, the Secretary shall use 70 percentof the applicable transitional yieldfor that crop year.

8. For a crop of interest in a given crop year, the ARC payment rateis equal to the lesser of the:

  • The difference between the Agriculture Risk Coverage Guaranteeand the Actual Crop Revenue.
  • 10 percentof the benchmark revenue.

9. For a crop of interest in a given crop year, the ARC payment amountis equal to the product of the payment rate and:

  • In the case of an individual coverage: 65 percentof the eligible acres that were planted to the covered crop and 45 percentof the eligible acres that were prevented from being planted to the covered crop.
  • In the case of a county coverage: 80percentof the eligible acres that were planted to the covered crop and 45 percentof the eligible acres that were prevented from being planted to the covered crop.

10. A payment limitof $50,000 is applied for a person or legal entity (in our analysis we assume two persons/legal entities for a total payment limit of $100,000 farm).