Farmers and ranchers bought crop insurance policies on more than 500 million acres of land last year, the largest amount ever, driven by the surging popularity of forage policies. Overall enrollment in crop insurance was up 85 percent in the seven years from 2016, according to USDA data.
Taxpayer-subsidized crop insurance is the largest USDA support for agriculture, with outlays projected by CBO at $125 billion over 10 years, compared to $61 billion for traditional crop subsidies. The government pays roughly 62 cents of each $1 in premium and farmers pay the rest. Some $16 billion has been paid to date in indemnities on 2023 production.
Farm bill fireworks have exploded over proposals, most prominently by House Republicans, to increase the so-called reference prices that trigger crop subsidy payments while crop insurance has been a secondary issue. All sides call for a stronger insurance program although disagreeing on what to bolster. The bill approved by the House Agriculture Committee would offer larger premium subsidies on higher levels of coverage and allow premium assistance to beginning and veteran farmers for 10 years. Senate Agriculture chairwoman Debbie Stabenow says she would make crop insurance more affordable and accessible, particularly for beginning farmers and specialty crops.
“There are many provisions there [crop insurance] that we agree on,” said Stabenow last week.
A decade ago, crop insurance covered around 290-295 million acres annually and field crops accounted for more than 75 percent of insured acres. “Forage crops now make up an increasing portion,” wrote economists Dylan Turner and Francis Tsiboe in USDA’s digital magazine Amber Waves. “Increasing participation in this plan has contributed to the majority of growth in…increased acreage over the last several years.”
In 2021, insured acreage had grown to 444.5 million acres and 40 percent of it was covered by a forage policy. Enrollment rose to 493.8 million acres in 2022 and to 539.5 million acres in 2023. There are nearly 880 million acres in U.S. farms.
The Pasture, Rangeland and Forage plan, originated in 2007, is the dominant form of forage insurance and is based on a rainfall index for segments of land roughly 17 miles square. Farmers choose the level of coverage for at least two periods of two months each and a productivity factor. If the final rainfall index for the area is below the level chosen by the farmer, a payment may be issued.
“Forage crops, despite representing a large share of total insured acreage, have relatively low monetary value and represented only 1.6 percent of total liability from 2014 to 2021,” said an Economic Research Service report last December on risk management programs.
Also growing in volume was farmer participation in insurance programs for livestock. Insured liability through Livestock Risk Protection, Livestock Gross Margin, and Dairy Revenue Protection plans, at $32 million so far this year, was more than double the 2021 total of $14 million in 2021. Some $1.2 billion was paid in indemnities in 2023, compared to $150,269 in 2021.