Examining Alternative Farm Program Selection on Louisiana Cotton Farms Using a Risk Return Framework

Beginning with the 2018 crop year, cotton producers became eligible to participate in the seed cotton price loss coverage (PLC) or agriculture risk coverage program (ARC). Most producers elected the PLC option, citing that the need to mitigate cotton lint and cottonseed price risk was paramount in their risk management strategy. The 2018 farm bill, covering crops from 2019 through 2023, extends ARC/PLC program participation for the seed cotton program. Evaluation of the performance of the ARC program for a representative farm is warranted as to measure the effectiveness in mitigating revenue risk while the PLC program is modeled to determine its effectiveness in mitigating price risk.