Implications of Hurricane Michael on the Seed Cotton ARC/PLC Selection Decision

Download the PDF version of the factsheet.

We recently released a factsheet which compares between the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) for this year after Hurricane Michael. We conducted the analysis based on some representative counties in GA.  With the hurricane causing tremendous damages to our cotton industry, a lot of counties suffer from tremendous yield losses. For some heavily-impacted counties, the yield loss might trigger for ARC payments. Below are the main points from this factsheet.

  • Many producers were expecting very high yields for both irrigated and non-irrigated, especially non-irrigated compared to average. Some producers report little difference in yield between irrigated and non-irrigated.
  • For 2018, ARC is most likely going to be the way to go for producers in a county with 50 to 60% or more yield loss—“loss” being measured relative to the yield that was expected pre-Michael.
  • ARC vs PLC also depends on the farms seed cotton PLC payment yield.  Landowners can update the payment yield but if this can’t be done and/or if the PLC payment yield is low compared to county yields used for ARC, then PLC may already be at a disadvantage or have less of an advantage than it otherwise have.
  • There are uncertainties.  Any PLC payment for 2018 is a moving target.  The Seed Cotton (SC) Marketing Year Average (MYA) Price is yet to be determined.  This will also effect ARC because the 2018 SC MYA Price partially determines 2018 Actual Revenue.  The 2018 SC county yield is also TBD.  We used estimates provided by UGA county Extension agents.  There is also the uncertainty of another ARC/PLC election opportunity for any farm bill extension.  Both House and Senate versions call for another election in a new farm bill.

 

Good luck and let us know if we can help,

Don Shurley and Yangxuan Liu

Department of Agricultural and Applied Economics

University of Georgia

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