The Supplemental Coverage Option (SCO) requires farmers to choose Price Loss Coverage (PLC) over Agricultural Risk Coverage at the county level (ARC-CO). This presents a dilemma, especially as ARC-CO is expected to offer more substantial support payments for corn and soybeans in 2025. This article explores how revenue coverage from ARC-CO and SCO compares, helping farmers make informed decisions.

Understanding Revenue Guarantees: ARC-CO vs SCO

Both programs provide county-level revenue protection, but they differ significantly in how they calculate guarantees and actual revenues. Most farmers opt for high levels of revenue protection (RP), making the choice between ARC-CO and PLC less complicated for many. However, certain scenarios could make SCO valuable enough to influence the decision towards PLC.

ARC-CO and SCO both offer a band of county-based revenue coverage with support payments triggered if revenues fall below 86% of their respective guarantees. The key differences lie in how yields and prices are measured. ARC-CO uses an Olympic average of recent historical yields adjusted for trends, while SCO relies on USDA’s Risk Management Agency (RMA) calculations. Similarly, price components vary: ARC-CO employs national marketing year average (MYA) prices, whereas SCO uses futures prices. These discrepancies can lead to different outcomes, especially during periods of price volatility. For instance, during the ethanol boom from 2007 to 2013, SCO projected prices were higher than ARC-CO benchmarks. Conversely, lower market prices from 2014 to 2020 saw SCO projected prices decline while ARC-CO benchmarks continued to rise until 2016 before declining.

Choosing Between ARC-CO and SCO: Key Considerations

When deciding between ARC-CO and SCO, several factors come into play. Historical data indicates that ARC-CO tends to trigger larger payments, particularly during periods of price losses. Recent price levels and expectations suggest that ARC-CO will likely offer greater support payments than PLC in most scenarios. Producers using high RP coverage levels (80% or 85%) may find that SCO's coverage band is relatively small, making ARC-CO a more attractive option. Additionally, producers can enhance their coverage by adding Enhanced Coverage Option (ECO) if enrolled in ARC.

However, there are situations where SCO might be more beneficial. For producers purchasing RP or other individual plans at or below 75% coverage levels, the potential use of SCO could significantly influence the decision. SCO covers planted acres rather than base acres, making it more appealing for producers who have fewer base acres than planted acres. Furthermore, in the event of a major crop loss due to adverse weather conditions, SCO, when used with RP coverage, offers the valuable Harvest Price Option guarantee, which uses the higher price at harvest. In contrast, PLC would not provide support in such scenarios. Ultimately, while ARC-CO appears to be the better choice for most farmers in 2025, individual circumstances should guide the final decision.