- Risks and Risk Management Strategies
- Government Policy and Risk Management
- Federal Crop Insurance
- Farm Commodity Programs and Risk Management
Risks and Risk Management StrategiesAgricultural Contracting Update, 2005
A growing share of U.S. farm production is produced and sold under agricultural contracts. Contracts are far more likely to be used on large farms than on small ones. Marketing and production contracts covered 41 percent of the value of U.S. agricultural production in 2005, up from 39 percent in 2003 and 36 percent in 2001 (April 2008).Agricultural Contracting Update: Contracts in 2003
The share of production under contract grew from 11 percent in 1969 to 39 percent in 2003. For farm operators, contracts provide benefits from reduced risks, but also result in loss of managerial control and reduced autonomy (January 2006).
A variety of agricultural insurance products with different levels of government support are available to farmers in Europe, reflecting the variety of crops grown and growing conditions in various countries. Changes in economic and agricultural policies in Europe over the past 10 to 15 years appear to have created conditions conductive to the development of futures and options markets (February 2004).
A compilation of articles from Agricultural Outlook magazine covers topics such as farmers' views of risk, the effectiveness of various risk management strategies, commodity price variability, and tax-deferred savings accounts for farmers (February 2000).
Use of output marketing and production contracts, managerial ability, regional location, farm size, and specialization in cash grain production are all correlated with greater forward contracting of inputs among farmers (November 1999).Managing Risk in Farming: Concepts, Research, and Analysis
A comprehensive assessment of risk in agriculture, risk management strategies available to farmers, and the effectiveness of various risk management strategies (March 1999).Characteristics and Risk Management Needs of Limited-Resource and Socially Disadvantaged Farmers
Government Policy and Programs for Risk ManagementFederal Risk Management Tools for Agricultural Producers: An Overview
The report summarizes federal risk management programs for agriculture since the 2014 Farm Act, including enrollment numbers, support payment triggers, effects on producers' revenue, and government outlays (June 2018).How Do Time and Money Affect Agricultural Insurance Uptake? A New Approach to Farm Risk Management Analysis
This report presents a new approach to the analysis of demand for crop insurance. Farmers consider many crop seasons when making production and risk management decisions. When savings are considered, wealthier farmers will spend less on insurance and self-insure through savings, while limited-resource farmers with low farm income will use savings, if available, to increase insurance coverage. (August 2016)The 2014 Farm Act Agriculture Risk Coverage, Price Loss Coverage, and Supplemental Coverage Option Programs' Effects on Crop Revenue
This report presents an analysis of the Agriculture Risk Coverage (ARC), the Price Loss Coverage (PLC), and the Supplemental Coverage Option (SCO) programs in the 2014 Farm Act. The report is aimed at better understanding the underlying mechanics of the programs and how various combinations of the programs impact producer revenues, producer well-being, and expected program costs. (January 2016)Whole-Farm Approaches to a Safety Net
"Whole-farm revenue" programs have been proposed as a new form of income stabilization that would be available to all U.S. farms. This report looks at the risk management potential for such programs, which are not linked to production of particular commodities, and the obstacles to implementing such an approach (June 2006).The Value of Plant Disease Early-Warning Systems: A Case Study of USDA's Soybean Rust Coordinated Framework
This report examines USDA's system to provide real-time, county-level forecasts of soybean rust in the United States. The information provided by Federal, State, industry, and academic partners is estimated to have increased U.S. soybean producers' profits by between $11 million and $299 million in 2005, or between 16 cents and $4.12 per acre depending on assumptions, especially those concerning the accuracy of rust infection forecasts (April 2006).
Since the early 1980s, the U.S. Government has promoted crop insurance as a replacement for disaster payments as the primary form of risk management aid for farmers. Despite increased participation in crop insurance, ad hoc disaster assistance packages have continued to be enacted. This article discusses the government costs of crop insurance and how participation varies by type of farm and region (Amber Waves, June 2005).Risk, Government Programs, and the Environment
Private and public tools used to manage financial risk in agriculture may influence farmers' production decisions. These decisions then can influence environmental quality. This technical bulletin summarizes research and provides some perspective on private and public attempts to cope with financial risks and their environmental consequences (March 2004).A Safety Net for Farm Households
This report compares the benefits of four different farm assistance programs and finds that distribution of benefits varies widely across programs (October 2000).
Text of the legislation.
Federal Crop Insurance
The Federal Crop Insurance Program (FCIP) insures participating farmers against adverse production or market conditions. Under the FCIP, the U.S. Government pays the portion of farmers’ premiums that represent the program costs to the Government. The cost of administering the FCIP rises in years with adverse weather events, such as droughts, when insurance claims outpace premiums paid for insurance coverage. Recent ERS research used statistical, geophysical, and economic models to explore how climate change could affect yields and the cost of the FCIP. (Amber Waves, November 2019)Climate Change and Agricultural Risk Management Into the 21st Century
This study uses a combination of statistical and economic modeling techniques to explore how climate change could affect the cost of the Federal Crop Insurance Program (July 2019).Federal Crop Insurance Options for Upland Cotton Farmers and Their Revenue Effects
Two new insurance products for U.S. cotton growers reduce revenue risk. (October 2016)
Federal crop insurance (FCI) is a key component of U.S. farm policy. FCI provides farmers with subsidized insurance against unanticipated declines in market prices or yields. U.S. farm businesses that use FCI use more short-term debt (or operating loans) than farms without insurance, and this pattern holds even after accounting for other farm characteristics. (Amber Waves, October 2015)The Effects of Premium Subsidies on Demand for Crop Insurance
Premium subsidies are a major factor in the current success of the Federal crop insurance program. This study measures the change in crop insurance demand across multiple crops and regions following a legislated increase in subsidies. Findings reveal the influence of premium subsidies on participation in the program. (July 2014)Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts
Public risk management policies for dairy producers could induce expansion in milk supplies, which might lower farm-level prices and offset risk-reduction benefits. An evaluation of USDA's Livestock Gross Margin-Dairy insurance program finds economic downside risk significantly reduced, with potential to induce modest supply expansion if widely adopted. (March 2014)
Crop revenue insurance offers farmers a way to manage revenue variability that results from yield and price risks. Commodity-level revenue insurance, particularly for corn, soybeans, and wheat, has become a major part of the subsidized Federal crop insurance program. Whole-farm revenue insurance, based on combined revenue from all commodities produced on a farm, is a more broad-based approach, but is difficult to administer (Amber Waves, May 2007).
This analysis focuses on corn and soybean production in the Corn Belt and wheat and barley production in the Upper Great Plains. The results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases, though the response is very modest in every case (November 2004).
The paper outlines provisions of the SRA and analyzes how the SRA affects returns from underwriting crop insurance (Fall 2004).Asymmetric Information in the Market for Yield and Revenue Insurance
Farm Commodity Programs and Risk Management
A recent ERS analysis estimated the potential range of the Government’s cost for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs over the next 10 years for the three largest covered commodities—corn, soybeans, and wheat. Simulating program costs at both the county and national levels indicates program expenditures could vary widely due to uncertainty in commodity markets (August 2019).Potential Variability in Commodity Support: Agriculture Risk Coverage and Price Loss Coverage Programs
This report estimates the potential range of the Government’s cost for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs over the next 10 years for the three largest covered commodities—corn, soybeans, and wheat. Simulating program costs at both the county and national levels indicates program expenditures could vary widely because of uncertainty in commodity markets. (August 2019)Changes to the Noninsured Crop Disaster Assistance Program Under the Agricultural Act of 2014: Their Potential Risk Reduction Impacts
The Economic Research Service examines effects of the Buy-Up coverage addition to the Noninsured Crop Disaster Assistance Program (NAP) on expected payments, producers' risk reduction, and NAP enrollment by type of producer and crops. (May 2017)
The 2014 Farm Act introduced several new programs for crop and livestock producers. A recent Economic Research Service study analyzed how these programs provide options for risk management under different scenarios. (Amber Waves, February 2017)
- USDA Risk Management Agency. Extensive information on crop and revenue insurance programs, and educational materials on risk management.
- USDA Farm Service Agency. Information on emergency assistance and loan deficiency payment programs for farmers.
- USDA, National Agricultural Library, National Agricultural Library Digital Collections (NALDC). Online browsing of historical ERS Agricultural Economic Reports and Agriculture Information Bulletins.
- Weekly Weather and Crop Bulletin. Reports on current growing conditions and crop progress from USDA and the National Oceanic and Atmospheric Administration (NOAA).
- Commodity Futures Trading Commission. Information on futures markets and their regulation; educational materials and links to commodity exchange websites.