ERS Charts of Note

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2022 Census of Agriculture: More cropland covered by crop insurance

Wednesday, June 26, 2024

U.S. cropland is increasingly being covered by crop insurance, according to data from the 2022 Census of Agriculture published by USDA, National Agricultural Statistics Service. From 2017 to 2022, the share of cropland acres covered by any Federal, private, or other crop insurance program grew, particularly among small- to medium-sized farms. While percent share of cropland acres with crop insurance across all farms has risen by almost 9 percent, smaller farms have experienced higher growth rates. Farms operating 70 to 99.9 acres saw the largest gains in coverage, with the share of insured acres rising by more than 20 percent from 2017 to 2022. This trend is consistent across other small to medium-sized farm sizes, notably those between 10 to 69.9 acres, which on aggregate saw growth rates in coverage surpassing 15 percent. Rising participation rates indicate expanding use of crop insurance products to manage risks faced by smaller agricultural operations. For more information, see the USDA, Economic Research Service topic page, Crop Insurance at a Glance.

Emergency Relief Program payments aiding U.S. crop producers concentrated in North Dakota and Texas

Wednesday, January 24, 2024

In 2020 and 2021, the United States experienced 42 disaster events that each resulted in damages of at least $1 billion, including hurricanes, drought, and wildfires. The Emergency Relief Program (ERP) provides funds to assist commodity growers who suffered losses from natural disasters in 2020 and 2021. As of January 2023, cumulative payments made through the ERP totaled $7.3 billion. USDA disbursed a large portion of this total, $1.16 billion, to North Dakota producers of corn ($322 million), soybeans ($309 million), and wheat ($268 million) who experienced flooding in 2020 and drought in 2021. Texas producers also received a sizable portion of payments, with cotton farmers receiving $510 million of the $909 million disbursed in that State. Producers in North Dakota and Texas received most ERP payments for losses in revenue, quality, or production as a result of moisture and drought that occurred during the 2020 and 2021 crop years. The remaining top States receiving ERP payments were South Dakota ($567 million), Minnesota ($463 million), and Iowa ($408 million), which, together with North Dakota and Texas, represented approximately 48 percent of the total ERP payments disbursed as of January 2023. In early 2023, USDA launched a second phase of the ERP program, but disbursements from this phase are not included in these totals. This chart first appeared in the USDA, Economic Research Service report U.S. Agricultural Policy Review, 2022, published in November 2023.

Large family farms faced less risk in 2021 based on the operating profit margin ratio

Thursday, July 13, 2023

Large family farms were more likely to have stronger financial performance than other farms, according to USDA, Economic Research Service (ERS) researchers reporting data from the 2021 Agricultural Resource Management Survey (ARMS). ERS researchers measured financial performance using operating profit margin (OPM), the ratio of operating profit to gross farm income. They categorized farms as low risk if they had an OPM larger than 25 percent. Large-scale family farms, defined as those with gross cash farm income (GCFI) of $1 million or more, were the most likely to have low-risk operating profit margins compared with nonfamily and family farms of other sizes. The share of large-scale family farms considered low risk was 54 percent in 2021, an increase from 48 percent in 2020. The large-scale category includes very large farms, with GCFI of $5 million or more. Large-scale family farms make up 3 percent of U.S. farms but contributed 46 percent of the value of production in 2021. Small family farms, those with GCFI less than $350,000, were less likely to have an operating profit margin over 25 percent. Small family farms represent 89 percent of U.S. farms and contributed 18 percent of the value of production. This chart appears in the ERS report America’s Farms and Ranches at a Glance, published in December 2022, and Examining Financial Risk Measures on Family and Nonfamily Farms, published in Amber Waves in June 2023.

Hurricanes in 2017 cut Puerto Rico’s agricultural sector revenue by 19 percent

Thursday, April 27, 2023

In September 2017, Hurricanes Irma and Maria caused major destruction across Puerto Rico’s agricultural sector. The destruction of infrastructure, operations, and crops led to an exodus of farmworkers, which further hampered the farm sector’s ability to recover. Data from the USDA, National Agricultural Statistics Service (NASS), Census of Agriculture, conducted every 5 years, show how the hurricanes impacted Puerto Rico’s farm income and expenses. Between 2012 and 2018, the number of farms declined by nearly 38 percent. Gross cash receipts—the sum of the sale of agricultural commodities, cash from farm-related income, and participation in Government farm programs—fell 19 percent in inflation-adjusted dollars from $718 million to $585 million. Cash expenses for Puerto Rican farms also decreased, falling 16 percent from $594 million to $500 million. Puerto Rico Planning Board’s data for net agricultural farm income, which includes non-cash income and expenses such as inventory changes, show a similar decline over the span of time that includes years not captured by NASS census data. From 2012 to 2020, net agricultural farm income (not adjusted for inflation) fell by $101 million. This chart first appeared in the USDA, Economic Research Service report, Puerto Rico’s Agricultural Economy in the Aftermath of Hurricanes Irma and Maria: A Brief Overview, April 2023.

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.

Large share of 2022 spring wheat planted after final crop insurance planting dates

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.

Larger corn and soybean farms used more futures, options, and marketing contracts in 2016

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.”

Producers see negative net returns for corn, soybeans, and wheat in recent years

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.

California farmers shifted to groundwater when drought reduced surface water availability

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."

Drought is typically the largest single driver of crop disaster assistance and indemnity payments

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.

Use of crop insurance on U.S. farms continues to grow

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.

Dairy farmers shifted to catastrophic coverage under the MPP-Dairy Program in 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.

Federal Crop Insurance costs vary with enrollment, subsidy rates, and crop losses

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.

Most nonfarm income of farm households comes from wages & salaries

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.

U.S. crop insurance participation grows

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.

U.S. crop insurance subsidies outpace ad-hoc disaster assistance payments

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.