The 2014 Farm Bill represented a major overhaul of the core commodity programs, with the introduction of the Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs. The 2018 Farm Bill (the Agricultural Improvement Act (AIA) of 2018, Public Law 115–334) subsequently made incremental adjustments (rather than major changes) to the programs. These programs were then extended and modified under the One Big Beautiful Bill Act of 2025 (OBBBA; Public Law 119–21). On this page, we describe how these programs work and discuss some of the major changes to these programs under the OBBBA.
Three Major Commodity Programs:
The three main commodity programs are PLC, ARC, and the Marketing Assistance Loan Program. PLC and ARC were first authorized in the Agricultural Act of 2014. The Marketing Assistance Loan Program is the descendant of the commodity loan program, established under the Agricultural Adjustment Act of 1938, but with significant changes made beginning in 1985. Participants in these programs must be actively engaged in farming, must meet Adjusted Gross Income (AGI) eligibility limits, and, where payment limitations were adjusted in the OBBBA, may not receive payments above the established limit.
PLC Overview
PLC program payments are issued when the effective price of a covered commodity is less than the effective reference price for that commodity enrolled in PLC. The effective price equals the higher of the market year average price (MYA) or the national average loan rate for the covered commodity. PLC payments are issued to owners of historical base acres and are not tied to current production of covered commodities. Covered commodities include: wheat, corn, sorghum, barley, oats, seed cotton, long- and medium-grain rice, certain pulses, soybeans/other oilseeds, and peanuts.
ARC Overview
There are two types of Agriculture Risk Coverage: Agriculture Risk Coverage-County (ARC-CO) and Agriculture Risk Coverage-Individual (ARC-IC). The ARC-CO program provides income support tied to historical base acres—not current production—of covered commodities. ARC-CO payments are issued when the actual county crop revenue of a covered commodity is less than the county ARC-CO guarantee for the covered commodity enrolled in ARC. ARC-IC provides income support tied to a farm’s revenue from current production of covered commodities, compared with a benchmark average of that farm’s production of those commodities. However, payments are limited to a share of historical base acres on the farm. This page focuses on ARC-CO, as the ARC-IC program has not been widely adopted.
Marketing Loan Overview
The Marketing Assistance Loan program allows producers to use eligible commodities the producers have produced as collateral for government-issued loans at established rates. Eligible commodities include: wheat, corn, sorghum, barley, oats, upland and extra-long-staple cotton, long- and medium-grain rice, soybeans/other oilseeds, certain pulses, peanuts, sugar, honey, wool, and mohair.
ARC/PLC: The Effective Reference Price
For both PLC and ARC-CO, effective reference prices are a key component in calculating program benefits. The 2014 Farm Bill included a fixed reference price for each of the program commodities, with no adjustment mechanism. The 2018 Farm Bill introduced a variable effective reference price for purposes of calculating benchmark revenues under ARC and payment rates per unit under PLC (table 1). The OBBBA made additional changes to the formula used to calculate the effective reference price, while also increasing statutory reference prices.
The effective reference price is the greater of the statutory reference price or 88 percent of the average of the Market Year Average (MYA) price from the preceding 5 years, excluding the highest and lowest prices, capped at 115 percent of the statutory reference price. This method of calculating the PLC payment rates ensures that the effective reference price is greater than the statutory reference price if the historic average of MYA prices is greater than the statutory reference price for ARC payments. The change potentially increases the national price used in calculating the county benchmark revenue in cases where the MYA price is less than the effective reference price.
| Commodity | Unit | 2018 Farm Bill (U.S. dollars) |
2025 OBBBA (U.S. dollars) |
|---|---|---|---|
| Barley | $/bushel | 4.95 | 5.45 |
| Corn | $/bushel | 3.70 | 4.10 |
| Flaxseed | $/bushel | 20.15 | 23.75 |
| Grain sorghum | $/bushel | 3.95 | 4.40 |
| Oats | $/bushel | 2.40 | 2.65 |
| Soybeans | $/bushel | 8.40 | 10.00 |
| Wheat | $/bushel | 5.50 | 6.35 |
| Canola | $/cwt | 20.15 | 355 |
| Crambe | $/cwt | 20.15 | 23.75 |
| Dry peas | $/cwt | 20.15 | 23.75 |
| Large chickpeas | $/cwt | 21.54 | 25.65 |
| Lentils | $/cwt | 19.97 | 23.75 |
| Long grain rice | $/cwt | 14.00 | 16.90 |
| Medium/short grain rice | $/cwt | 14.00 | 16.90 |
| Mustard seed | $/cwt | 20.15 | 23.75 |
| Rapeseed | $/cwt | 20.15 | 23.75 |
| Safflower | $/cwt | 20.15 | 23.75 |
| Sesame seed | $/cwt | 20.15 | 23.75 |
| Small chickpeas | $/cwt | 19.04 | 22.65 |
| Sunflower seed | $/cwt | 20.15 | 23.75 |
| Seed cotton | $/lb | 0.367 | 0.420 |
| Peanuts | $/ton | 535 | 630 |
| Notes: Effective reference prices (used for PLC payments) may exceed statutory levels, based on 5-year Olympic average market prices; OBBBA also adds a future escalator mechanism (capped at 113 percent). 2025 OBBBA reference prices are effective beginning with the 2025 crop year. For the 2025 crop year only, producers receive the higher of ARC or PLC payments automatically. Flaxseed's price is statutorily equivalent in dollar value to the $/cwt price of other oilseeds, despite the different unit. Cwt=hundredweight. Source: Agriculture Improvement Act of 2018 (Public Law 115–334, Title 1, Subtitle A, section 1106, as amended by Public Law 115–123, Section 60101), and the One Big Beautiful Bill Act (H.R. 1, 2025, Title I, Subtitle C, Section 10301). |
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PLC Payment Yield
For a producer to receive PLC payments, a payment quantity must be established. The two components of a payment quantity are payment yield and payment acres. Where the landowner has previously participated in base acre commodity programs, payment yield for those acres has been established with previous participation and producers were given the opportunity to update yields most recently in 2020.
Base Acres and ARC/PLC Election
Base acres, which are tied to historical production of covered commodities on the farm, not to current production, represent the number of acres eligible to receive program payments. Base acres derive from historical production of covered commodities, according to provisions of the "1996, 2002, 2008, 2014, and 2018 Farm Bills, and the 2025 OBBBA." Unless farmers opt out, the 2025 OBBBA updates and increases the base acreage on their farm, beginning with the 2026 crop year. Updated base acreage will have a farmer’s new base calculated as the 5-year average of planted and prevent-planted acreage of covered commodities from the 2019 through 2023 crop years, plus either 15 percent of total acres on the farm or a 5-year average of noncovered crop acreage (whichever is less). The nationwide increase in base acres is capped at 30 million acres. If the increase exceeds 30 million acres, an across-the-board pro-rata reduction will be applied to the number of eligible acres.
Each crop year, producers must choose whether to participate in ARC or PLC on a covered commodity-by-covered commodity basis; however, for the 2025 crop year, producers will be automatically enrolled into the program with the highest payment.
ARC/PLC Enrollment
Once producers have made elections for their base acres, the producers must enroll those acres each year in ARC or PLC to be eligible for payments. When producers are enrolling land in ARC or PLC, the producers are enrolling covered commodity base acres. Neither PLC nor ARC payments are dependent upon current planting of the base crop. In fact, producers are not required to plant any crop on base acres to be eligible for a payment. For example, a producer may be receiving ARC or PLC payments on wheat-base acres while not planting any wheat. And a producer may not be receiving ARC or PLC corn payments despite having planted corn each recent year (but not in the years used to establish the producer’s base acres). If a producer decides to enroll base acres for a covered commodity, he or she must annually enroll 100 percent of base acres for that covered commodity to be eligible for ARC or PLC payments.
An important change to the 2014 ARC/PLC programs was made in 2018 through provisions of the Bipartisan Budget Act (BBA) and was continued in the OBBBA. Upland cotton-base acres had been made ineligible for ARC or PLC payments in the 2014 Farm Bill. That base had been designated as a “generic” base, allowing for program payments linked to current production of covered commodities on those generic-base acres. Under provisions of the BBA, producers were required to allocate that generic base either to seed cotton (unginned raw cotton) or to other covered commodities for which the producers had a planting history.
ARC-CO Payments:
ARC payments are made when the Actual County Crop Revenue of a covered commodity is less than the county ARC Revenue Guarantee for the commodity. These parameters are based on national Marketing Year Average (MYA) price and county-level yield data for the county where the base acres are located. The county ARC Revenue Guarantee is calculated as 90 percent of the county ARC Benchmark Revenue—the 5-year Olympic average MYA multiplied by the 5-year Olympic average county yield (OBBA raised this revenue guarantee from 86 to 90 percent). A 5-year Olympic average is calculated by taking five numbers in a series, dropping the highest number and the lowest number, then averaging the remaining three numbers. Benchmark yields and MYAs use the 5 years preceding the year prior to the program year. The ARC Actual Crop Revenue is calculated by multiplying the actual county yield for the program year by the MYA price for the program year. The ARC payment is equal to 85 percent of a farm’s base acres of the covered commodity, multiplied by the difference between the county ARC Revenue Guarantee and (if less) the county Actual Crop Revenue for the covered commodity. For the 2014 through 2024 crop years, payment rates could not exceed 10 percent of the ARC Benchmark Revenue. OBBBA raised the rate to 12 percent of the ARC Benchmark Revenue for the 2025 through 2031 crop years.
PLC Payments:
PLC Payments are made when market prices fall below the effective reference price set in the 2025 OBBBA (see the table above). The payment rate is the difference between the effective reference price and the annual national-average market price (or marketing-assistance loan rate, if higher). For each covered commodity enrolled on the farm, the payment amount is the payment rate, times 85 percent of base acres of the commodity, times payment yield. PLC payments will be made on base acres of a covered commodity when the commodity’s effective price (the national price or loan rate, whichever is greater) is less than its effective reference price. The payment rate will be the dollar amount by which the effective price is less than the effective reference price. This means that the difference between the effective reference price and the loan rate is the maximum payment rate. When the effective price is above the effective reference price, no payment is made.
Figure 1. Effective price above effective reference price: no payments
_________ MYA price = $6.00
_________ Commodity loan rate = $3.00
_________ Effective price = $6.00
_________ Effective reference price = $5.00
Payment rate = $5.00 - $6.00 = negative
Figure 2. Effective price below effective reference price and above loan rate
_________ MYA price = $4.00
_________ Commodity loan Rate = $3.00
_________ Effective price = $4.00
_________ Effective reference price = $5.00
Payment rate = $5.00 - $4.00 = $1.00
Figure 3. Effective price below effective reference price and at loan rate = maximum pay rate
_________ MYA price = $3.00
_________ Commodity loan rate = $3.00
_________ Effective price = $3.00
_________ Effective reference price = $5.00
Payment rate = $5.00 - $3.00 = $2.00
Figure 4. Effective price below effective reference price and below loan rate = maximum pay rate
_________ MYA price = $2.00
_________ Commodity loan rate = $3.00
_________ Effective price = $3.00
_________ Effective reference price = $5.00
Payment rate = $5.00 - $3.00 = $2.00
Marketing Assistance Loan Program (MALP)
The MALP is a post-harvest-nonrecourse commodity loan program with marketing loan provisions for producers of: wheat, corn, grain sorghum, barley, oats, upland cotton, extra-long staple (ELS) cotton, long- and medium-grain rice, soybeans, other oilseeds, peanuts, wool, mohair, honey, dry peas, lentils, and small and large chickpeas.
These loans allow producers of eligible crops to borrow at a commodity-specific rate per unit of production by pledging their harvested production of that commodity as collateral. A producer may obtain a loan for all or part of new commodity production and hold that loan until the commodity is sold or until the loan matures, usually after 9 months.
| Commodity | Unit | 2018 Farm Bill | 2025 OBBBA |
|---|---|---|---|
| Barley | $/bushel | 2.50 | 2.75 |
| Corn | $/bushel | 2.20 | 2.42 |
| Flaxseed | $/bushel | 10.09 | 11.10 |
| Grain sorghum | $/bushel | 2.20 | 2.42 |
| Oats | $/bushel | 2.00 | 2.20 |
| Soybeans | $/bushel | 6.20 | 6.82 |
| Wheat | $/bushel | 3.38 | 3.72 |
| Canola | $/cwt | 10.09 | 11.10 |
| Crambe | $/cwt | 10.09 | 11.10 |
| Dry peas | $/cwt | 5.00 | 6.20 |
| Large chickpeas | $/cwt | 14.00 | 15.40 |
| Lentils | $/cwt | 13.00 | 14.30 |
| Long grain rice | $/cwt | 7.00 | 7.70 |
| Medium/short grain rice | $/cwt | 7.00 | 7.70 |
| Mustard seed | $/cwt | 10.09 | 11.10 |
| Rapeseed | $/cwt | 10.09 | 11.10 |
| Safflower | $/cwt | 10.09 | 11.10 |
| Sesame seed | $/cwt | 11.10 | 11.10 |
| Small chickpeas | $/cwt | 10.09 | 11.10 |
| Sunflower seed | $/cwt | 10.09 | 11.10 |
| Extra-long staple cotton | $/lb | 0.95 | 1.00 |
| Upland cotton | $/lb | 0.45–0.52 | 0.55 |
| Peanuts | $/ton | 355 | 390 |
| Note: Rates under the 2018 Farm Bill are from statutory provisions (Section 1202) and applied consistently for eligible crop years (with some county/posted adjustments; national averages shown here). OBBBA rates apply starting with the 2025 crop year (and are set uniformly for 2026–31 in many cases), providing a stronger minimum price floor via the nonrecourse loans. The 2018 Farm Bill loan rate for upland cotton is set by statutory formulas and cannot be less than $0.45 per pound or more than $0.52 per pound. Source: Agriculture Improvement Act of 2018 (Public Law 115–334, Title I, Subtitle A, Section 1202), and the One Big Beautiful Bill Act (P.L. 119–21, Title I, Subtitle C, Section 10309 and related MAL provisions). |
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Commodity loans may be settled in three ways:
- Repayment at the loan rate plus interest (commodity loans are made at below-market interest rates);
- Repayment at the alternative loan repayment rate when market prices fall below the loan rates; or
- Forfeit of the pledged crop to USDA at loan maturity and retain the loan.
When market prices are below the statutory loan rate, farmers can repay their commodity loans at a lower repayment rate. Statutory loan rates were first set in the 2014 Farm Bill and were most recently revised in the 2025 OBBBA. The OBBBA revised the repayment provisions for extra-long staple cotton by establishing a repayment mechanism based on a calculated adjusted world price (similar to upland cotton and rice). Marketing loan repayment rates are based on local prices for wheat, feed grains, oilseeds, and pulses or on the prevailing world market prices for rice and upland cotton. The world market price for rice is determined by a formula adjusted for U.S. quality and location. A quality adjustment for upland cotton is made based on cotton of comparable quality delivered to a definable and significant international market. The repayment rate for peanuts is determined by the U.S. Department of Agriculture.
When a farmer repays a loan at a lower loan repayment rate, the difference between the loan rate and the loan repayment rate—called a marketing loan gain—represents a program benefit to producers. In addition, any accrued interest on the loan is waived.
Loan program benefits can also be taken directly as loan deficiency payments (LDP), a cash payment equal to the difference between the loan rate and (if lower) the loan repayment rate. The LDP option allows the producer to receive the benefits of the marketing loan program without having to take out, and later repay, a commodity loan.
The LDP rate is the amount by which the loan rate exceeds the loan repayment rate or prevailing world market price and is thus equivalent to the marketing loan gain that could be obtained alternatively for crops under loan.
Just as when a marketing loan gain is received on a given collateralized quantity, that quantity is not eligible for further loan benefits.
Eligibility Requirements and Payment Limitations
Producers must meet certain eligibility conditions in order to receive commodity program payments. To receive program payments through ARC and PLC, individuals must meet eligibility requirements that are based on the level of their participation in farming activities and on their income. Once individuals are eligible, payment limitations cap the total amount they can receive. Requirements and limitations include:
- Must Be Actively Engaged in Farming. Producers who participate in the PLC or ARC programs are required to provide significant contributions to the farming operation, as defined by the U.S. Secretary of Agriculture, to be considered as “actively engaged in farming.”
- Must Meet Adjusted Gross Income (AGI) Limit. The 2018 Farm Bill continues the single AGI limit, under which any individual with an annual AGI above $900,000 (including both farm and nonfarm income) is ineligible to receive farm program payments under commodity or conservation programs.
- Payment Limitations. The 2025 OBBBA raises the limits on producer payments from PLC and ARC to $155,000 for a person or legal entity and ties future adjustments to inflation. The OBBBA also adds a provision to allow pass-through entities (such as partnerships and LLCs) to be treated separately when determining payment limitations. Payments from marketing loan gains and loan deficiency payments are not subject to payment limitations.
Links
Agricultural Act of 2014. Public Law 113-79—Feb. 7, 2014. 128 Stat. 649.
Agriculture Improvement Act of 2018. Public Law 115-334—Dec. 20, 2018. 132 Stat. 4491.
Compilation of Statutes. Agricultural Act of 2014 (as Amended through P.L. 115-334, Enacted December 20, 2018.
Congressional Research Service. The 2018 Farm Bill (P.L.115-334): Summary and Side-by-Side Comparison. Updated May 7, 2024.
2025 One Big Beautiful Bill Act Public Law Number: 119–21.
Economic Research Service. 2018 Farm Bill.
Farm Service Agency. Programs and Services. ARC/PLC Programs.