ERS Charts of Note
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California leads States in the purchase of Federal Crop Insurance Program policies for specialty crops
Monday, November 7, 2022
The USDA offers various risk management products to specialty crop farmers through the Federal Crop Insurance Program (FCIP). FCIP policies can mitigate risks by providing payments if insured crops experience losses caused by naturally occurring events (such as weather-related conditions) and market conditions. Specialty crops are a commodity group which includes fresh or dried fruits; tree nuts; vegetables; pulse crops such as dry beans, peas, and lentils; and horticulture nursery crops. California led the country in FCIP policies for specialty crops in 2020 (19,433), followed by Florida (5,060), Washington (4,233), North Dakota (3,860), and Minnesota (2,526). These States also produce the most fruits and vegetables (California, Florida, and Washington) and specialty field crops (North Dakota and Minnesota). California’s policies reflect the variety of specialty crops produced in the State, including almonds, grapes, oranges, walnuts, and raisins. Most North Dakota policies cover field crops—dry beans and dry peas. In 2020, specialty crops accounted for 25 percent of the value of U.S. crop production. This chart appears in the USDA, Economic Research Service bulletin Specialty Crop Participation in Federal Risk Management Programs, published in September 2022.
North Carolina and New York lead U.S. in specialty crop applications to Noninsured Crop Disaster Assistance Program (NAP)
Tuesday, November 1, 2022
USDA operates various Federal crop insurance and disaster aid programs to help producers mitigate the risks of agricultural production such as weather, price, or pests. But when sufficient data is not available to create an actuarially sound insurance product (one in which premiums paid should approximately equal indemnity payments), then producers can apply to the USDA, Farm Service Agency’s Noninsured Crop Disaster Assistance Program (NAP). NAP covered about 115 million total acres in 2017. Specialty crops, which include fruits and vegetables, tree nuts, dried fruits, and horticulture nursery crops, are often grown in areas where there are suitable soil and weather conditions. In 2020, North Carolina and New York had the highest number of specialty crop NAP applications. Each State had more than 5,000 applications. Across the U.S., NAP applications were made for 147 different specialty crops in 2020. This chart appears in the Economic Research Service report Specialty Crop Participation in Federal Risk Management Programs, published in September 2022.
Monday, October 31, 2022
Spring wheat, a major class of U.S. wheat, annually accounts for about 25 percent of all wheat produced in the United States and is grown primarily in the U.S. Northern Plains States, mostly in North Dakota and Minnesota. Overly wet field conditions in spring 2022 delayed planting in both North Dakota and Minnesota resulting in 26 and 35 percent, respectively, of spring wheat acres being planted after June 5—USDA, Risk Management Agency’s (RMA) final planting date of all counties in those two States. That acreage was reported to USDA, Farm Service Agency as being prevented from on-time planting. If a farmer has not planted by the final planting date, most crop insurance policies offer compensation to offset expenses associated with preparing to plant, called a prevented planting payment. Alternatively, when commodity prices are high, some producers may choose to plant late because of field conditions and receive the market price for their harvest crop rather than take a prevented planting payment. RMA projected pre-season prices for spring wheat in North Dakota and Minnesota at $9.19 per bushel, the highest price in the last decade (2012–21), which may have contributed to acreage being planted later. This chart is drawn from the special article, "Factors Influencing Prevented Planting for Spring Wheat" in Economic Research Service’s Wheat Outlook, September 2022.
Corn, soybean farmers covered part of their production with futures, options, and marketing contracts in 2016
Monday, March 22, 2021
In 2016, corn and soybean producers accounted for about 93 percent of future and options contracts used by U.S. farmers and 60 percent of all production covered by marketing contracts. With a futures contract, a farmer can assure a certain price for a crop that has not yet been harvested. An options contract allows a farmer to protect against decreases in the futures price, while retaining the opportunity to take advantage of increases in the futures price. While futures and options contracts are usually settled without delivery, marketing contracts arrange for delivery of a commodity by a farmer during a specified future time window for an agreed price. Farmers who use these risk management options frequently use more than one contract type. On average, farms that used futures contracts covered 41 percent of their corn production and 47 percent of their soybean production in 2016. Shares were relatively similar for marketing contracts, which covered about 42 percent of corn and 53 percent of soybean production. By comparison, corn and soybean farmers covered a little more than 30 percent of their production with options contracts for both commodities. This chart appears in the Economic Research Service report, Farm Use of Futures, Options, and Marketing Contracts, published October 2020.
Friday, November 13, 2020
U.S. farmers can use a variety of market tools to manage risks. With a futures contract, the farmer can assure a certain price for a crop that has not yet been harvested. An option contract allows the farmer to protect against decreases in the futures price, while retaining the opportunity to take advantage of increases in the futures price. Futures and options usually do not result in actual delivery of the commodity, because most participants reach final financial settlements with each other when the contracts expire. In a marketing contract, by contrast, a farmer agrees to deliver a specified quantity of the commodity to a specified buyer during a specified time window. Corn and soybean farms account for most farm use of each of these contracts, and larger operations are more likely to use them than small. With more production, larger farms have more revenue at risk from price fluctuations, and therefore a greater incentive to learn about and manage price risks. Fewer than 5 percent of small corn and soy producers used futures contracts, compared with 27 percent of large producers. Less than 1 percent of small corn and soy producers used options, compared with 13 percent of large producers. And about 19 percent of small corn and soy producers used marketing contracts, compared with 58 percent of large producers. This chart is based on data found in the Economic Research Service report, Farm Use of Futures, Options, and Marketing Contracts, published October 2020. It also appears in the November 2020 Amber Waves feature, “Corn and Soybean Farmers Combine Futures, Options, and Marketing Contracts to Manage Financial Risks.”
Friday, September 11, 2020
Producers of some of the U.S. major field crops have struggled to cover total costs of production over the past decade. The Economic Research Service’s (ERS) Commodity Costs and Returns product estimates this gap or surplus in the calculation of the value of production less total costs, referred to here as net returns. Total costs comprise operating costs, which include expenses such as fertilizer, seed, and chemicals, and allocated overhead (economic) costs, which include unpaid labor, depreciation, land costs, and other opportunity costs. Although revenue from selling crops can typically cover operating costs each year, net returns have often been negative. This suggests that, in some cases, allocated overhead costs are not covered. Corn’s net returns increased early in the decade, primarily due to a boom in the production of corn-based ethanol. Corn yields and acreage remained high after the boom, leaving supply high and leading, in part, to lower prices and returns over time. Net returns for soybeans shadowed those for corn during the ethanol boom, remaining higher than those for corn up until 2018. Wheat prices and returns also declined, due to strong international competition and several high-yield domestic crops. This chart is derived from data collected from the ERS Commodity Costs and Returns data product. Its data can also be viewed via ERS’s interactive data visualization product, U.S. Commodity Costs and Returns by Region and by Commodity.
Payment formula differences led to varying Agricultural Risk Coverage and Price Loss Coverage selections for individual crops
Friday, August 10, 2018
The Federal Government operates a variety of programs that help crop producers manage risk due to unexpected changes in market prices and yields. These programs include Agriculture Risk Coverage-County (ARC-CO) and Price Loss Coverage (PLC), both introduced in the 2014 Farm Act. ARC-CO and PLC reduce the downside revenue risk facing producers of corn, soybeans, wheat, and other covered commodities. Differences in the two programs’ payment formulas can drive coverage selections for individual crops. For example, ARC-CO payment formulas update annually and account for county level yield and prices while PLC refers to a fixed reference price for the life of the farm bill. Farmers choose which program to enroll their crops in, but the one-time decision lasts the duration of the Farm Act. For this reason, farmers’ beliefs about future prices along with the programs’ different formulas likely explain the varying allocation of crops across the two programs. For example, higher corn and soybean prices around the time of the 2014 Farm Act likely led producers to enroll the vast majority of U.S. corn and soybean acres in ARC-CO, 93 percent and 96 percent of all base acres, respectively. Meanwhile, higher reference prices for rice and peanuts offered producers an incentive to enroll virtually all U.S. acreage of these crops in PLC. This chart appears in the August Amber Waves article, “Federal Commodity Programs Price Loss Coverage and Agriculture Risk Coverage Address Price and Yield Risks Faced by Producers.”
Tuesday, January 2, 2018
Prolonged drought generally results in large reductions in the quantity of surface water delivered, affecting farm production systems that depend heavily on surface water for irrigation. Groundwater may substitute as a source for irrigation water when the availability of surface water declines. For example, although most farmers in California’s main agricultural areas rely on surface water for the largest share of their irrigation needs, many parts of the State have sufficient groundwater reserves to provide a partial buffer against the impacts of drought. However, recurring drought and groundwater “overdraft”—when the amount of water extracted is greater than the amount of water entering the aquifer—have resulted in large declines in aquifer levels in some areas. This chart appears in the June 2017 Amber Waves feature, "Farmers Employ Strategies To Reduce Risk of Drought Damages."
Tuesday, October 17, 2017
At any given time, some portion of the country faces drought conditions. In recent years, large areas of the United States have experienced prolonged drought, with significant impacts across entire agricultural sectors. A major drought can reduce crop yields, lead farmers to cut back planted or harvested acreage, reduce livestock productivity, and increase costs of production inputs such as animal feed or irrigation water. Since the Dust Bowl in the 1930s, drought has been an important focus of U.S. farm policy. Early Federal policy mitigated farmers’ drought-induced hardships primarily by providing ad hoc disaster assistance in response to a drought. With changes to the Federal crop insurance program in the 1990s, the emphasis of farm programs shifted from ad hoc disaster assistance to risk management, with a greater reliance on crop insurance to compensate farmers for drought losses. As a result, drought has been the largest individual driver of Federal indemnity payments and disaster assistance for over four decades. This chart appears in the June 2017 Amber Waves feature, "Farmers Employ Strategies To Reduce Risk of Drought Damages."
Grass and forage crops lead applications for the Noninsured Crop Disaster Program, but vegetable crops lead for buy-up option
Monday, July 17, 2017
USDA operates a number of Federal crop insurance and disaster aid programs to mitigate the downside risks inherent to agricultural production (e.g., damaging weather, price, or yield disruptions). However, crop insurance is only available to certain commodities in specified areas. Producers have been able to enroll in the Noninsured Crop Disaster Assistance Program (NAP), which has been managed by the USDA, Farm Service Agency, since 1994. This program insures producers in situations when Federal crop insurance is unavailable to them due to their crop or location. Participants can choose from a basic option that provides catastrophic coverage for only a service fee, or they can pay a premium for higher coverage with the NAP Buy-Up program. Applications for NAP increased from 66,000 to 138,000 between 2014 and 2015. In 2015, the first year that NAP Buy-Up was offered, 16 percent of applicants purchased buy-up coverage. The majority of buy-up applications were for specialty crops like vegetables and fruits and tree nuts. This chart appears in the ERS Amber Waves article, "Applications for the Noninsured Crop Disaster Program Increased After the Agricultural Act of 2014," released in July 2017.
Thursday, August 11, 2016
The share of U.S. cropland insured has increased from less than 30 percent in the early 1990s to nearly 90 percent—299 million acres—in 2015. Passage of the Federal Crop Insurance Reform Act in 1994 led to a spike in the use of crop insurance, reflecting the introduction of low-coverage, fully subsidized Catastrophic Risk Protection Endorsement (CAT) insurance and a temporary requirement that producers obtain insurance coverage to be eligible for other commodity support programs. CAT insurance pays only 55 percent of the price of the commodity on crop losses in excess of 50 percent, and farmers have increasingly opted to purchase insurance with higher coverage levels—known as “buy-up” insurance—for greater protection against risk. Premiums for buy-up policies are also subsidized, and these subsidies were increased in the 1994 Act as well as under the Agricultural Risk Protection Act of 2000. While buy-up policies are not fully subsidized like CAT insurance—in 2015 producers paid, on average, 38 percent of the total cost of buy-up policies—they in some cases can protect more than 75 percent of the value of a crop. By 2015, buy-up policies covered 95 percent of insured cropland. This chart is from the ERS report, How Do Time and Money Affect Agricultural Insurance Uptake? A New Approach to Farm Risk Management Analysis, released on August 1, 2016.
Wednesday, July 6, 2016
The Margin Protection Program-Dairy (MPP-Dairy) is a risk management program introduced in the 2014 Farm Act. MPP-Dairy is designed to protect agricultural producers against adverse movements in the difference between milk and feed prices (the margin). Enrollees receive catastrophic coverage, for an annual $100 enrollment fee, that provides payments when a national-average margin falls below $4 (the average monthly margin was $8.30 in 2004-13). Farmers can purchase additional “buy-up” coverage, for margin thresholds ranging from $4 to $8 in 50-cent increments. Almost 25,000 farms—55 percent of licensed U.S. dairy operations, accounting for 80 percent of 2014 U.S. milk production—enrolled in the program for 2015 coverage. Forty-four percent of enrollees—with more than three-quarters of production covered by MPP—chose catastrophic coverage. Farms may change coverage annually, and many did so in 2016, as the shares of farms and production under catastrophic coverage rose, moving away from all levels of buy-up coverage. This chart is based on data found in the ERS report, Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry, March 2016.
Friday, January 23, 2015
The Federal Crop Insurance (FCI) program is the primary USDA program to help farmers manage risks of crop losses. The size and cost of the FCI has grown since the early 2000s; insured acreage expanded by almost 90,000 acres from 2000 to 2013—about a 45 percent increase—in large part due to higher subsidies introduced in the 2000 Agricultural Risk Protection Act (ARPA) and the 2008 Farm Act. Higher insured acreage, increased subsidy rates—especially for the more costly coverage levels—and higher crop prices have combined to boost the price of insurance premiums in recent years. The major costs of the FCI program—premium subsidies and loss claims (which can vary greatly from year to year)—are tied to the value of premiums. In 2012, the widespread U.S. drought led to a large increase in the government share of indemnities due to crop losses. Under the current premium subsidy structure, an average of 62 percent of total premiums is paid by the Federal Government on behalf of insured producers in 2013. Administrative and operating subsidies, which include subsidies paid to insurance companies for selling and servicing insurance policies, are relatively stable over time, but have increased from an average of $0.96 billion in 2003-05 to about $1.52 billion in 2011-13. Find this chart and additional information on the Risk Management topic pages.
Wednesday, December 17, 2014
In 2013, only about one-quarter of total farm household income came from farming. Because of the broad USDA definition of a farm (which includes places with the potential for as little as $1,000 in annual sales), more than half of farm operator households consistently incur a net loss from farming activities in any given year, and far more do not earn the equivalent of a market wage for their on-farm labor. As a result, most farm operator households rely heavily on off-farm income. Of the total off-farm income earned by all farm operator households, the majority comes from wages and salaries earned by household members through nonfarm jobs, followed by income transfers (e.g., Social Security) and profits from nonfarm businesses owned by farm household members. As a group, U.S. farm operator households earn their income from a wide range of activities, reflecting the diverse set of skills, knowledge, and economic goals held by farm operators and their families. This chart is found in the ERS topic page, Farm Household Well-Being, updated November 2014.
Tuesday, December 2, 2014
Participation in the U.S. Federal Crop Insurance (FCI) program has continued to expand since the early 1990s, in response to changes in laws that have broadened the number of crops covered and altered incentives for program participation. Enrollment in crop insurance grew sharply after the 1994 enactment of the Federal Crop Insurance Reform Act (FCIRA) increased premium subsidies and required producers to enroll in order to receive support from other Government programs. At that time, producers enrolled the majority of these new acres under a fully subsidized new policy called Catastrophic Risk Protection Endorsement (CAT) which provides low-level coverage (i.e., that only pays indemnities when losses are high), with the remaining acres enrolled in buy-up policies—those that are not fully subsidized. ERS research suggests that the increased premium subsidies introduced through the 2000 Agricultural Risk Protection Act did more to induce farmers to select higher levels of coverage than to enroll new acreage. Find this chart and additional analysis in The Importance of Federal Crop Insurance Premium Subsidies in the October Amber Waves.
Friday, October 24, 2014
The Federal Crop Insurance (FCI) program and ad hoc crop disaster legislation both provide producer support when crop disasters occur. Participation in the Federal Crop Insurance Program (FCI) has grown steadily since the mid-1990s while outlays for ad hoc crop disaster payments have declined. Before the increase in participation in FCI, the FCI program was associated with widespread losses and poor enrollment and throughout the 1980s and into the 1990s, major crop losses were often associated with supplemental disaster legislation. FCI participation increased with the passage of the Federal Crop Insurance Reform Act in 1994, and again with enactment of the Agricultural Risk Protection Act (ARPA) in 2000. Ad hoc disaster assistance has subsequently declined with increased FCI participation. In 2012, with almost 80 percent of all cropland used for crops enrolled in the FCI program, no ad hoc disaster assistance was enacted despite the major U.S. drought and large associated crop losses. Find this chart and additional analysis in “The Importance of Federal Crop Insurance Premium Subsidies” in the October Amber Waves.
Tuesday, July 22, 2014
The Federal crop insurance program has grown significantly over the last 20 years, expanding from about 82 million acres in 1992 to more than 282 million acres in 2012, but changes in coverage have varied by both state and commodity. Producers of corn, soybeans, and wheat—the three largest U.S. crops—remain the largest consumers of crop insurance, although the share enrolled in other crops has been rising as new programs and policies have been offered. Federal crop insurance enrollments for corn, the largest U.S. field crop by area, are indicative of the variation in enrollment changes across states. For example, in 1990, more than 60 percent of Iowa’s corn acres were enrolled in the program, with that share rising to 91 percent by 2012. In contrast, about 20 percent of Indiana’s corn acres were enrolled in 1990, climbing to about 74 percent by 2012. The variations likely reflect both differences in production risks across states and changes in federal program provisions, including subsidies for crop insurance premiums. Despite the variation among States, the differences in coverage between states shrank between 1990 and 2012. For corn, the lowest share of acres insured within a State rose from about 12 percent in 1990 (Michigan) to 70 percent in 2012 (Wisconsin). Find additional analysis in Premium Subsidies and the Demand for Crop Insurance, released July 2014.
Thursday, July 10, 2014
Producers of corn, soybeans, and wheat—the three largest crops produced in the United States—are the largest consumers of Federal crop insurance, although producers of other crops are a growing share of program enrollment. In 1997, corn, soybeans, and wheat crops accounted for 80 percent of all acres enrolled in the program; including cotton and sorghum raised the share to nearly 90 percent of all acres enrolled. Over the last 15 years, with new types of policies being offered and more crops added to the program, the share of enrolled acres attributed to these major crops fell as participation in the Federal crop insurance program continued to rise. Pasture, forage and range land have accounted for the bulk of recent gains in enrolled acres, expanding from zero in 1997 to 48 million acres in 2012. By 2012, corn, soybeans, and wheat made up roughly 68 percent of all acres enrolled, with cotton and sorghum accounting for an additional 7 percent. The share of acres enrolled in crop insurance varies by crop and region, but these differences decreased between 1990 and 2012 as coverage rates increased. For more data and analysis, see The Effects of Premium Subsidies on Demand for Crop Insurance, released July 2014.
Friday, June 27, 2014
Double-cropped acreage has varied from year to year. Because decisions about double cropping are made annually, fluctuations are likely as farmers respond to changing market and weather conditions. For example, higher commodity prices give farmers more incentive to intensify production and could offset revenue shortfalls from lower potential yields when double cropping. From 2004 to 2012, total double-cropped acreage roughly paralleled soybean, winter wheat, and corn prices. When commodity prices at the time of planting decisions were increasing or relatively high, total double-cropped acreage also increased. Total double-cropped acreage peaked at 10.9 million acres in 2008, when prices for soybeans, winter wheat, and corn also peaked. In 2005 and 2010, nearly every region witnessed declines in double-cropped acreage amid commodity price declines. This chart is found in the ERS report, Multi-Cropping Practices: Recent Trends in Double-Cropping, EIB-125, May 2014.
Tuesday, June 24, 2014
The 2014 Farm Act adds crop insurance premium subsidies to the list of benefits that could be withheld for noncompliance with conservation provisions, further supporting farmer incentives for environmental stewardship. Producers who fail to apply approved soil conservation plans on highly erodible cropland or who drain wetlands could become ineligible for all or part of a number of commodity programs, conservation programs, disaster assistance, and now crop insurance premium subsidies. In recent years, the value of such subsidies has increased as premium subsidy rates, crop insurance participation, and commodity prices all rose. On average, the Federal Government pays roughly 60 percent of crop insurance premiums, and about 80 percent of acreage for all major commodity crops is now covered by crop insurance. In 2012, crop insurance premium subsidies were roughly $6.7 billion or about 60 percent as large as commodity, conservation, and disaster assistance payments combined. This chart is found on the Conservation page in Agricultural Act of 2014: Highlights and Implications, on the ERS website.