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US Acres Insured in Federal Crop Insurance Programs

Written by Krista Swanson.

Krista SwansonPlanning for the upcoming crop year begins months before the calendar flips at year-end. Still, the dawn of the new year has a way of shifting focus to remaining farm preparations and pre-plant decisions. For spring planted crops, crop insurance is among the remaining decisions.

The modern crop insurance offerings are a valuable risk management tool for United States farmers. In 2022, crop insurance protected a record 494 million acres, more than double acres of two decades ago. Program growth is a reflection of several elements. But notably, the Federal Crop Insurance Program has gone through numerus changes since the last major overhaul of the program in the Agriculture Risk Protection Act of 2000. This evolution has resulted in growth in the program and expanded use of the crop insurance offerings. (See chart on below for details.)

Improving Adequate Coverage

Crop insurance adaptations have improved the program’s ability to provide adequate coverage. For examples, the Yield Exclusion (YE), Quality Loss Option (QLO) and Trend Adjustment (TA) all adjust yield history to be as relevant as possible for the crop year the farmer is entering. Without these options, coverage would be based on more historical yields on the farm, not accounting for the demonstrated upward trend in field crops over time or outlier years. 

Expanded Commodities Included 

Although impact in Missouri is fairly small, coverage has expanded to commodities and practices not previously included, mostly in forage and specialty crops, fruits and vegetables. United States Department of Agriculture Risk Management Agency (RMA) Summary of Business data indicates more than thirty commodity offerings available in 2022 weren’t available in 2000. Whole Farm Revenue Protection, first available in 2014, is a good option for farmers growing small acreages of many different crops. Though not a crop, Livestock Risk Protection (LRP) is another example of RMA efforts to expand insurance coverage. Available since 2003, enhancements and improvements since 2018 have made these an increasingly desirable option or Missouri livestock producers.

Options and Add-Ons

Supplemental area plans of insurance can be paired with an eligible underlying policy to expand coverage beyond the maximum individual coverage level. Supplemental Coverage Option (SCO) was first available for the 2015 insurance year. Enhanced Coverage Option (ECO) was first available for the 2021 insurance year. Given the pairing requirement, SCO and ECO do not result in more covered acres, but are instead a reflection of expanded coverage offerings. Other relatively new crop insurance options can be paired with an underlying policy or as a stand-alone policy, which is an appealing alternative for some farmers. One example is Margin Protection (MP), first available in 2017 for corn, soybeans, wheat, and rice. MP provides coverage against unexpected decrease in operating margin but has a sales closing date, 9/30/22, that has already passed for the 2023 year. 

Expansions in 2023

Along with other factors, the war in Ukraine has resulted in a reduced supply of important food and feed grains available in the world market. In effort to mitigate supply challenges and reduce risk for farmers planting a double crop, the RMA has expanded the standard coverage area for double crop insurance and reduced barriers for attaining insurance in other areas. In Missouri, crop insurance coverage on double crop soybeans is available in 26 counties. In an additional 81 counties, farmers can apply for coverage through a written agreement even if they have not planted double crop soybeans before. For double crop sorghum, crop insurance is available in 7 counties and no history is needed for written agreement in another 44 counties.

Farmers who apply all or some Nitrogen after planting should keep their eye on the latest endorsement, the Post-Application Coverage Endorsement (PACE), that protects against crop yield loss when intended post-plant nitrogen applications are prevented due to adverse weather. Though not available in Missouri for 2023, coverage may expand further in coming years. Anyone who farms across state lines will find the endorsement is available in select counties of Kansas, Nebraska, Illinois, and Iowa.

Managing Risk in 2023

Layers of economic elements contribute to the distinct period of the past year: from inflation and rising interest rates, to COVID-era supply chain bottlenecks and European war, to drought and domestic transportation concerns. These, and other dynamics, combine to indicate 2023 may present greater farm risk and increased volatility in prices and costs. Farmers who have already purchased or locked price on 2023 inputs have a clearer picture of costs than returns. Prior year harvest prices generally provide reasonable indicator of projected prices in the following year. Projected prices for 2023 at 2022 harvest price levels would provide significant risk protection for farmers, but much can change quickly in this economic environment. As the crop insurance projected prices are set next month, we will have greater clarity on the revenue side. 

Total US Acres Insured in Federal Crop Insurance Programs

Krista Swanson is a consultant and speaker for her business AgSCOPE, and a research analyst for the Department of Agriculture & Consumer Economics at the University of Illinois where her work is frequently published in articles on farmdoc. Krista and her husband actively farm with his family where they raise corn, soybeans, and four kids on the farm.

Disclaimer: The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views, opinions or positions of FCS Financial.

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