By Andi Anderson
The Price Loss Coverage (PLC) program saw significant updates in recent farm legislation, aiming to enhance support for producers. Many expected these changes would result in more frequent payments, especially during market downturns. But do the updates guarantee better payment coverage?
PLC payments are based on the market year average (MYA) price falling below a reference price. If that happens, PLC pays the difference. The 2018 Farm Bill added an escalator clause, adjusting the reference price using an Olympic average of past prices, capped at 115%.
Starting in 2025, the statutory reference price for corn rises from $3.70 to $4.10 and for soybeans from $8.40 to $10.00. The escalator clause also increases from 85% to 88%. In 2031, reference prices will rise by 0.5% annually, while the escalator cap lowers to 113%.
Historically, PLC rarely paid corn and soybean producers, even during price drops from 2022-2024. Despite steep losses, the program provided little relief, sparking demands for better protection.
When comparing past market data with new PLC rules, the outlook is mixed. Corn would have triggered a payment in 2019 only—something already covered under the old program. For soybeans, payments would have occurred in 2019 and 2024, but the amounts would be too small to offset actual losses.
Looking forward, USDA projections suggest PLC payments may occur from 2025 to 2027 due to the escalator clause boosting effective reference prices. However, after 2027, payments are unlikely unless market prices drop sharply again.
The escalator clause is helpful but reacts slowly to market shocks. This delay limits PLC’s effectiveness in protecting farmers when prices fall quickly.
Farmers are advised to monitor the 2025 season as a key test for PLC’s new structure. Since producers will automatically receive the better payment between PLC and ARC-CO in 2025, it’s a good opportunity to compare programs before the next decision point in 2026.
Photo Credit: usda
Categories: Michigan, General