Southern Ag Today

Author: Hunter Biram

  • November 2025 WASDE Report is Relatively Quiet Despite Surprises in Production and Exports

    November 2025 WASDE Report is Relatively Quiet Despite Surprises in Production and Exports

    The November 2025 WASDE report is the first since September to be released due to the government shutdown taking place from October 1, 2025, to November 12, 2025. This month’s report was a relatively quiet one with few significant changes to the balance sheets for southern crops. Season-average farm prices for corn and soybeans were revised upward from the September report, while the prices for rice and cotton were revised downward. Despite the increases in corn and soybeans, futures markets responded with sharp declines in the nearby futures contracts. This was likely driven by production being higher than industry expectations for corn and soybean exports falling short of expectations. We provide a detailed breakdown of the changes to each crop’s respective balance sheet below.

    Long-Grain Rice: 

    This month’s 2025/26 outlook for U.S. long-grain rice includes lower supplies, unchanged domestic use and exports, and decreased ending stocks. Long-grain production was reduced by 1 million hundredweight (cwt.) this month to 152.7 million.  Yields were lowered in all Midsouth states, with Louisiana, Mississippi, and Missouri all seeing average yields reduced by 100 pounds per acre this month.  Arkansas’ average yield was lowered by 50 pounds per acre.  With no adjustments to demand, long-grain ending stocks were lowered by 1.1 million to 36 million cwt., down 3.5 percent from last year. The 2025/26 season-average farm price (SAFP) was lowered by 23 cents per bushel this month to $5.18 per bushel—the lowest since 2018.  This further increases the outlook for sizeable 2025/26 PLC payments, with the current projected payment rate for long-grain at $2.44 per bushel—up 23 cents from September.

    Cotton:

    The November outlook for 2025/26 U.S. cotton supply and demand included higher production, exports, and ending stocks compared to September.  There were no changes to domestic mill use and imports. USDA projected the 2025/26 U.S. crop to reach 14.12 million bales, up roughly 897,000 bales from the September report. The national average yield per acre increased by 58 pounds this month to 919 pounds.  This would be the second-highest yield on record, behind 2022’s 953 pounds.

    U.S. exports were raised 200,000 bales to 12.2 million bales while mill use was unchanged from September at 1.70 million bales. This generates a total 2025/26 offtake of 13.90 million bales. Ending stocks for 2025/26 are projected at 4.30 million bales for an ending stocks-to-use ratio of 30.9%.  This month’s projected average farm price for 2025/26 is 62.00 cents/lb, down 2 cents/lb from September.

    Corn:

    The November report for 2025/26 U.S. corn showed an increase in total supply, exports, and carryover. Production was revised downward 62 million bushels from 16.814 to 16.752 billion bushels based on a reduction of 0.7 bushels per acre in the national yield. On the demand side of the balance sheet, total use is increased 100 million bushels based on an increase in exports of the same amount. Beginning stocks were increased by 207 million bushels from 1.325 to 1.532 billion bushels. Taken together, these changes represent an increase in total supply of 144 million bushels, which is larger than the 44 million bushel increase in total use. Interestingly, this results in a 10-cent increase in the 2025/26 projected season-average price to $4.00/bushel, likely driven by the reduction in national yield and a record large export forecast of 3.075 billion bushels.

    Soybeans:

    The November report for 2025/26 U.S. soybeans showed decreases across the board. Production was revised downward 48 million bushels from 4.301 to 4.253 billion bushels based on a reduction of 0.5 bushels per acre in the national yield. On the demand side of the balance sheet, total use decreased by 51 million bushels based on a decrease in exports of the same amount, driven by lower domestic supplies and increased exports by Brazil and Argentina. While a trade deal between the U.S. and China has been announced, which guarantees soybean purchases through 2028, the announcement also increased the price of U.S. soybeans by 90 cents since October 30th, making the relative price of soybeans lower for Brazil. Beginning stocks decreased by 14 million bushels from 330 to 316 million bushels. Taken together, these changes represent a decrease in total supply of 61 million bushels, which is larger than the 51 million bushel decrease in total use. This 10-million-bushel net reduction in ending stocks results in a 50-cent increase in the 2025/26 projected season-average price to $10.50/bushel.

    Thoughts on USDA’s November Reporting

    Ahead of USDA’s November WASDE and Crop Production reports, concerns arose that NASS might not have sufficient time to conduct an adequate survey of fields and producers, given the recent government shutdown. The November 2025 Crop Production survey had 6,692 participants compared to 5,838 last year. Regarding the field surveys, NASS enumerators visited the fields in October and early November, despite the shutdown. NASS provided the objective corn and soy yield data for November. One might argue there is no reason to believe that the November yield estimates are any less (or more) reliable than in previous years.  

    However, USDA did note “some U.S. data sources that are typically used were not available for the November 2025 WASDE.”  Further noting, USDA mentioned changes to the U.S. balance sheets reflected all U.S. government data available at the time of publication.  Over the past month, information such as the weekly Export Sales and daily export “flash” reporting was unavailable, as well as government reporting on ethanol production and consumption.  

    The next WASDE is scheduled for December 9th.  USDA normally makes no crop production adjustments until the NASS Crop Production Annual Summary is released in January.  In the near term, the major crop markets will be focused on actual Chinese demand for US soybeans and cotton as well as South American weather. These will be primary drivers of price discovery for the balance of 2025.

    Biram, Hunter D., and H. Scott Stiles. “November 2025 WASDE Report is Relatively Quiet Despite Surprises in Production and Exports.” Southern Ag Today 5(47.3). November 19, 2025. Permalink

  • Margin Crop Insurance Available Across the Southern Region 

    Margin Crop Insurance Available Across the Southern Region 

    As harvest progresses and crop prices stay at historical lows, it is difficult to consider risk management for 2026. The federal crop insurance program offers a tool that can currently provide a form of county-level revenue protection. Margin Protection (MP) crop insurance was made available for a variety of crops across the southeast region in 2024. MP is an area-level (i.e., county-level) crop insurance product designed to provide risk protection against the risk of thin margins using a combination of county yields, futures prices, and region-specific input usage. Coverage levels range from 70% to 95% and may be purchased with any individual insurance, such as Yield Protection (YP) or Revenue Protection (RP). It may not be purchased with Supplemental Coverage Option (SCO) or Enhanced Coverage Option (ECO) (see Biram and Connor, 2023). Additionally, there is a new product offering similar to ECO and MP called Margin Coverage Option (MCO), which I will provide more details on below.

    For certain crops/regions the sales closing date (SCD) for MP coverage is similar to other traditional products, However, in some cases there is an early SCD and price discovery window. This early window offers the opportunity to lock in prices sooner if you think that might be an advantage to the normal spring price discovery. Check here for MP SCD’s and price discovery windows. The earlier price discovery window offered by MP (August 15, 2025, to September 14, 2025), provides corn and soybean producers with the option to buy MP and lock in futures prices, if they think that might be an advantage over the normal price discovery window (January 15, 2026, through February 14, 2026). For example, the current USDA, Risk Management Agency (RMA) projected price for MP purchased for corn is $4.55/bushel, which implies a price guarantee of $4.32/bushel assuming county yields and costs remain constant.  The risk of cost of production portion of MP provides protection from price volatility for Urea, Diammonium Phosphate (DAP), Diesel, and the Interest Rate on a farmer’s production loan. These prices also face projected price discovery periods similar to crop futures prices but have different windows of harvest price discovery (see Chattha and Biram, 2024).

    Another decision variable in the MP coverage decision is the Protection Factor (PF). The PF ranges from 80% to 120% and offers higher (lower) protection at a higher (lower) premium cost and largely functions as a farm-level production adjustment. That is, if a farmer perceives their yield to be higher than the county average, they may select a PF higher than 100% at an additional premium cost. Alternatively, if a farmer perceives their yield to be lower than the county average, they may select a PF less than 100% and pay a lower premium.

    The University of Arkansas, Cooperative Extension Service offers a fully web-based Margin Protection decision aid. The decision aid allows the user to input information such as state, county, crop, and irrigation practice to determine Margin Losses (i.e., indemnities) net of producer paid premiums across all coverage levels. Additionally, the tool offers a feature that calculates a breakeven price, which is a harvest time crop futures price that results in a Zero Net Indemnity, or a Margin Loss equal to the producer paid premium. Breakeven prices vary by coverage level and harvest county yields input by the user. 

    An example output showing net indemnities across different harvest crop futures prices, including a breakeven price of $4.13/bushel at the 95% coverage level, is provided in Figure 1 below. This figure suggests that Margin Losses at or above the producer paid premium are experienced if the 2026 December corn futures price has a 30-day average below $4.13/bushel at harvest (i.e., from August 15, 2026, through September 14, 2026). You may access the Margin Protection Payment Estimator (2026 Crop Year) at this link. Fact sheets which provide all of the details of MP, including counties eligible for enrollment, may be found at the following links: Margin Protection Crop Insurance and Determining Expected Cost and Premium Rates.

    Figure 1. Example Breakeven Price Figure from Margin Protection Payment Estimator Tool 

    This is an example of net indemnities across various harvest time crop futures prices for corn in Arkansas County, Arkansas assuming county yield remains unchanged. Intuitively, as the harvest price increases the net indemnity decreases.

    Margin Coverage Option (MCO)

    Like MP, MCO provides area-based coverage against an unexpected fall in operating margin. This could be driven by a fall in the county-level yield average, a fall in the harvest-time futures price, or an increase in the futures prices of select inputs or any combination of these perils. MCO faces the same projected and harvest price discovery periods for crop futures and input future prices as MP. MCO uses the same expected and final county-level yields as SCO and ECO and covers a band from 86% to either 90% or 95% of expected county-level revenue. Figure 2 provides a visual comparison of MP and MCO and their eligibility to be enrolled with other federal crop insurance products.  Currently, the subsidy rate for MCO is the same as the updated subsidy rates for SCO and ECO, which is 80% of the actuarially fair premium, meaning farmers will pay 20% of the total premium expense. For a full list of crops and MCO pilot areas, visit www.margincoverageoption.com. The Sales Closing Date (SCD) for the 2026 crop year for MCO on cotton and sorghum is September 30, 2025, while the SCD for MCO on Rice in Arkansas is February 28, 2026, like MP and other major crop insurance plans (e.g., YP, RP, SCO, and ECO). 

    Figure 2. Comparing Coverage Bands of MP and MCO and Eligible with Other Federal Crop Insurance Products

    Source: www.margincoverageoption.com

    MCO Resources

    USDA, Risk Management Agency Frequently Asked Questions on ECO

    USDA, Risk Management Agency Fact Sheet on MCO

    Watts and Associates Website for MP

    Watts and Associates Website for MCO

    References

    Biram, H.D. and Connor, L. (2023). Types of Federal Crop Insurance Products: Individual and Area Plans. University of Arkansas System Division of Agriculture, Cooperative Extension Service Fact Sheet No. FSA75.

    Biram, H.D. and Stiles, S. (2022). Margin Protection Crop Insurance: A Way to Manage the Risk of High Input Costs. University of Arkansas System Division of Agriculture, Cooperative Extension Service Fact Sheet No. FSA66.Chattha, K.A. and Biram, H.D. (2024). Determining Expected Cost and Premium Rates in Margin Protection Crop Insurance. University of Arkansas System Division of Agriculture, Cooperative Extension Service Fact Sheet No. FSA87.

    Biram, Hunter D. “Margin Crop Insurance Available Across the Southern Region.” Southern Ag Today 5(42.1). October 13, 2025. Permalink

  • The Mississippi River is Set to Fall to Severe Levels for the Fourth Year in a Row

    The Mississippi River is Set to Fall to Severe Levels for the Fourth Year in a Row

    The Mississippi River level measured by the U.S. Geological Survey at Memphis, TN, may drop to severe lows for the fourth year in a row (USGS, 2025). The Mississippi River has fallen below the agreed-upon zero reference point of the USGS stream gage during harvest (i.e., August 1 through November 30) eight of the last ten years, underscoring the impacts drought can have on river levels. We discussed what is meant by a river level below the zero reference point in a previous article (Biram, Mitchell, and Stiles, 2024; National Weather Service, 2024). Further, the level has now fallen to the “low” stage, defined by the National Weather Service as -5 feet, five times (2015, 2017, 2022, 2023, and 2024). These historically low river levels carry serious implications for cash basis, or the local cash price offered by a grain elevator less the futures price traded on a global market (Biram and Mitchell, 2025). 

    Figure 1 plots the Mississippi River level measured at Memphis, Tennessee, for the period August 11, 2022, through August 20, 2025. This figure also provides the weekly average freight, as well as the expected barge freight rate measured by the non-drought three-year average freight rate (i.e., 2019-2021). Barge freight rates are established by the U.S. Inland Waterway System using a percent of tariff system and have been discussed in a prior article (Biram, Mitchell, and Stiles, 2024). Since the 2022 drought event, we have observed that when the gage height falls, barge freight rates increase, and vice versa. However, it appears that barge operators have adjusted as the weekly average freight rate has declined since the drought event of 2022.

    Figure 1. The relationship between the Mississippi River level and barge freight rates for moving cargo from Cairo, IL or Memphis, TN (August 2022 – August 2025)

    Nonetheless, midsouth soybean basis is not only weaker than the non-drought five-year-average (i.e., 2017-2021) but is also weaker than the average basis observed over the last three drought years (i.e., 2022, 2023, and 2024). Basis can change abruptly due to economic or environmental events, such as low river levels. Changes in basis reflect changes to local market conditions. Local cash bids offered by elevators on the Mississippi River tend to be influenced by river level in periods of drought as described by previous SAT articles (Biram, et al., 2022; Biram, 2023; Gardner, Biram, and Mitchell, 2023; Biram, Mitchell, and Stiles, 2024). This is because it is more expensive to ship the same amount of grain in more loads to reduce barge draft.

    Figure 2 shows the soybean basis response to low river levels in Helena, Arkansas in 2022-2024 with current basis for 2025 well below average as of August 20, 2025. The green line in Figure 2 provides the most recent basis for new crop soybeans and is well below both the averages for non-drought and drought years. The dashed vertical line denotes the basis most recently reported (-15) on August 20, 2025, and is 41 cents below the average non-drought-event basis of 26 cents and 25 cents below the average drought-event basis of 10 cents.

    Figure 2. Daily Soybean Basis at Helena, AR in Harvest Window

    The economic impacts of marketing in this window are clear. Mitchell and Biram (2025) determined that in 2022, alone, Arkansas farmers faced nearly $300 million in losses due to widening basis driven by low river levels, with a similar impact in Mississippi. A potential option farmers might have is to store grain in the bin and market it during the post-harvest window as described in previous Southern Ag Today articles (Gardner, 2023; Gardner and Maples, 2023; Gardner, 2024; Smith, 2024). Historically, futures and basis tend to recover in the months when there is little domestic production to buy, and stocks are drawn down. However, we recognize that not all farmers have the infrastructure in place (i.e., 48% of expected total crop production in 2024 was held in storage (USDA-NASS, 2025a and 2025b)) to store grain and market in the post-harvest window, which has implications for 2025 returns and 2026 loan renewal.

    References

    Biram, Hunter, John Anderson, Scott Stiles, and Andrew McKenzie. “Low Water Levels in the Mississippi River Result in Abnormally Weak Soybean Basis“. Southern Ag Today 2(45.1). October 31, 2022. Permalink

    Biram, Hunter. “Flooding in the Upper Mississippi River is Associated with Relatively Weak Soybean Basis in the Midsouth.” Southern Ag Today 3(21.1). May 22, 2023. Permalink

    Biram, Hunter, James L. Mitchell, and H. Scott Stiles. “Low Rivers Levels on the Mississippi River: Not the Three-Peat We Want.” Southern Ag Today 4(39.3). September 25, 2024. Permalink

    Biram, Hunter, and James L. Mitchell. “Estimating the Impact of Low Mississippi River Levels on Soybean Basis in the Midsouth.” Southern Ag Today 5(12.3). March 19, 2025. Permalink

    Gardner, Grant, Hunter Biram, and James Mitchell. “Low River Levels, Barge Freight, and Widening Basis.” Southern Ag Today 3(39.1). September 25, 2023. Permalink

    Gardner, Grant. “Interest Rates and Grain Storage.” Southern Ag Today 3(26.1). June 26, 2023. Permalink

    Gardner, Grant. “To Store or Not to Store? Old Crop Exit Strategies.” Southern Ag Today 4(35.1). August 26, 2024. Permalink

    Gardner, Grant, and William E. Maples. “River Levels and Off-Farm Storage Disbursement.” Southern Ag Today 3(43.1). October 23, 2023. Permalink

    Mitchell, J. L., & Biram, H. D. (2025). The effects of extreme weather on rural transportation infrastructure and crop prices along the Lower Mississippi River. Applied Economic Perspectives and Policy.

    National Weather Service. “How can a river stage be negative?” National Oceanic and Atmospheric Administration, National Weather Service. Accessed September 16, 2024. Permalink

    Smith, Aaron. “Storing corn or soybeans: what is the futures market incentivizing?” Southern Ag Today 4(33.1). August 12, 2024. Permalink

    United States Geological Survey. 2025.  Monitoring location, Mississippi River at Memphis, Tennessee. Available at: https://waterdata.usgs.gov/monitoring-location/USGS-07032000/#dataTypeId=continuous-00065-0&period=P7D  

    USDA-NASS. 2025a.  August 2025 Crop Production Report. Available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/tm70mv177/6m313n48h/bk12b9684/crop0825.pdf

    USDA-NASS. 2025b.  QuickStats Query. Available at: https://quickstats.nass.usda.gov/#E31D1B9E-04B3-3954-939A-273CD6380DF9

    USDA-AMS. 2025.  Grain Transportation Reports. Available at: https://www.ams.usda.gov/services/transportation-analysis/gtr

    Biram, Hunter D., James Mitchell, and H. Scott Stiles. “The Mississippi River is Set to Fall to Severe Levels for the Fourth Year in a Row.” Southern Ag Today 5(35.3). August 27, 2025. Permalink

  • How can crop marketing and crop insurance go together?

    How can crop marketing and crop insurance go together?

    Agriculture is inherently risky, with producers facing a complex array of production, market, and financial risks. These risks can significantly impact farm profitability, necessitating robust risk management strategies. Risk management in agriculture has become a complex system of financial instruments and strategies, with crop insurance and forward contracting serving as two key components.

    Forward contracting allows producers to mitigate price risk by securing a predetermined price and buyer for their grain. This approach can be especially attractive due to the potential weather risk premium embedded in forward contract grain prices. Buyers are often willing to pay higher prices to hedge against weather-related uncertainties affecting crop production, which allows farmers to lock in favorable prices and potentially increase their revenue. However, it’s crucial to note that while forward contracting addresses market risk, it does not directly mitigate production risk. Aggressive use of forward contracting can expose farmers to unexpected yield risk as farmers may be unable to meet contracted quantities, leading to non-delivery penalties imposed by elevators and potentially substantial financial losses.

    Farmers can also purchase crop insurance as a complementary risk management tool to address the production risk associated with forward contracting. The federal crop insurance program offers various products, with yield (YP) and revenue protection (RP) accounting for 71% of the $158.6 billion of liability in 2024 (USDA-RMA, 2024). YP provides production risk management using a farm-specific Actual Production History (APH), while RP additionally provides price risk management using futures prices. Pairing forward contracting with either insurance product could potentially help offset non-delivery penalties and reduce the financial burden on farmers who experience yield shortfalls. The combination of forward contracting and insurance protection allows farmers to confidently engage in more aggressive marketing strategies. By protecting against both price and yield risks with RP and yield risk with YP, this integrated approach could potentially lead to a more stable farm income and improved overall risk management.

    We provide a visual example of how these two risk management tools can work together in Figure 1 below. The red bar is the potential revenue generated from corn production by locking in a price of $4.50/bushel via a forward contract at a farm yield expectation of 200 bushels/acre. If a farmer booked 80% of expected production, the expected revenue from forward contracting would be $720.00/acre. The blue bar behind the red bar shows an RP crop insurance policy at 80% coverage that is layered underneath the expected revenue from forward contracting which guarantees $744.00/acre.

    Figure 1. Layers of Protection Provided by Simultaneously Using Revenue Protection (RP) Crop Insurance and Forward Contracting in the Local Cash Market 

    NOTE: The purpose of this figure is to show two different “layers” of revenue coming from two different revenue risk management tools: forward contracting and RP crop insurance. The forward contracted revenue is in red while the crop insurance revenue guarantee is in blue behind the forward contracted revenue.

    To illustrate the importance of this “layering” strategy, consider when a yield shortfall occurs leaving only 150 bushels/acre to sell at the forward price of $4.50/bushel rather than the 160 bushels/acre promised for delivery. This leaves a 10 bushel/acre shortfall. The local grain elevator is offering a cash delivery price of $4.00/bushel with a $0.05/bushel non-delivery penalty resulting in a non-delivery price of $4.05/bushel, and therefore, a total penalty of $40.50/acre. The resulting harvest revenue is about $635.00/acre (see table 1). Despite the penalty, the RP policy – which is in blue underneath the forward priced grain – provides an indemnity of $121.00/acre at a producer-paid premium of $56.00/acre. This results in a final cash revenue of about $700.00/acre rather than $635.00/acre, showing how the RP policy was able to pull crop revenue almost completely back to the expected amount of $720.00/acre despite the inability to fully deliver the promised amount (see table 2). This finding highlights the benefit of locking in prices during spring time as part of a pre-harvest marketing plan.

    Table 1. Calculating Crop Revenue Using a Forward Price and Non-Delivery Penalty

    Expected Yield (a) 200 bpa
    Booked Yield (b = 80% x  a)160 bpa
    Realized Yield (c)150 bpa
    Yield Shortfall (d = b – c)10 bpa
      
    Forward Price (e)$4.50/bushel
    Harvest Price (f)$4.00/bushel
    Non-Delivery Fee (g)$0.05/bushel
    Non-Delivery Price (h = f + g)$4.05/bushel
      
    Forward -Priced Revenue (i= c x e)$675.00/acre
    Non-Delivery Penalty (w = d x h)$40.50/acre
    Revenue with Penalty (i– w)$634.50/acre
    Note: bpa = bushels per acre

    Table 2. Including Crop Insurance in the Crop Revenue Using a Forward Price and Non-Delivery Penalty

    Revenue with Penalty (a)$634.50/acre
    Crop Insurance Indemnity (b)$121.00/acre
    Revenue + Indemnity (c = a + b)$755.50/acre
      
    Producer Premium (w/subsidy) (d)$56.00/acre
      
    Revenue + Indemnity – Premium (c – d)$699.50/acre

    Biram, Hunter, Andrew M. McKenzie, and Chanda Bhattrai. “How can crop marketing and crop insurance go together?” Southern Ag Today 5(24.3). June 11, 2025. Permalink

  • STAX and PLC: A Tale of Price Risk Protection in Two Markets

    STAX and PLC: A Tale of Price Risk Protection in Two Markets

    Commodity programs in Title I of the Farm Bill and the Federal Crop Insurance Program (FCIP) are the primary risk management tools available to agricultural producers. In a previous SAT article, Fischer and Biram (2025) discussed the suite of risk management tools available to cotton producers, the intention of Title I programs to supplement tools in the FCIP, and the different combinations allowed for producers to use in a risk management strategy. Notably, they discuss how base acres enrolled in either Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) cannot be enrolled in the Stacked Income Protection (STAX) program. Since 87% of historical seed cotton base acres have been enrolled in PLC (USDA-FSA, 2025), with nearly all base acres enrolled in 2019 and 2020, this discussion focuses on the complementary nature of STAX and PLC.

    On the surface, STAX and PLC may appear to be similar programs authorized under different pieces of legislation. However, a closer look reveals stark differences. STAX is a tool in the FCIP which provides protection against revenue losses based on a chosen coverage level, a cotton lint futures price, and a county cotton lint yield. PLC is a counter-cyclical target price program under Title I in the Farm Bill which provides only price downside protection determined by the effective reference price (ERP) and a Marketing Year Average Price (MYAP) for seed cotton. The ERP is a function of the statutory reference price determined by federal law and historical market conditions. More specifically, the seed cotton price is a production-weighted average of upland cotton lint and cotton seed prices (see Shurley and Rabinowitz, 2018and Liu, Rabinowitz, and Lai, 2019a). STAX requires a premium to be paid by the producer while PLC requires no out-of-pocket cost for enrollment. STAX pays indemnities based on planted acres and county cotton lint yield and price, while PLC payments are based on base acres and MYAP for seed cotton.

    While STAX and PLC both provide price risk protection, it is in different markets and under different conditions. STAX provides price risk protection against declines in the futures market between planting and harvest with different regions of the country facing different price determination periods – and only to the extent that those declines are not offset by yield gains (see Liu, Chong, and Biram, 2024). PLC provides price risk protection against declines in the cash market within a crop marketing year which is August 1st through July 31st of the following calendar year (USDA-FSA, 2023). PLC protection is triggered when the MYAP falls below the ERP with the PLC payment rate being the difference between the ERP and MYAP.

    Since these two risk management tools provide different forms of price protection, it is no surprise that STAX indemnities based on price losses (i.e., in excess of any offsetting yield gains) differ from PLC payment rates. In the period authorized for risk protection in the 2018 Farm Bill (i.e., 2018-2024P), there was only one year in which both programs triggered, with 2024 projected to trigger at current prices. In 2019, the PLC payment rate for seed cotton was $0.0612/lb (see Figure 1) while the cotton lint STAX indemnity for price loss would have been $0.0310/lb (see Figure 2) which only would be for the 90% coverage level. There were three years when one program would have triggered when the other did not (2018, 2020, and 2022). The remaining two years saw no payments triggered by either program. 

    We acknowledge that these payment rates are based on different triggers (i.e., weighted average seed cotton price versus cotton lint price) and refrain from discussing the magnitude of the differences. Instead, we emphasize the fact that these programs often do not trigger in the same year, reinforcing the idea that these differences imply the need for risk protection in both the cash and futures markets, mitigating basis risk (see University of Arkansas fact sheet). As a result, Congress may wish to consider making both PLC and STAX available for a producer to use in the same crop year since they meet different risk management needs.

    Figure 1. Historical Performance of Price Loss Coverage (PLC) for Seed Cotton (2018-2024P) This figure shows the years in which a seed cotton PLC payment triggered. The orange bars show the MYAP, while the yellow dashes show the ERP. The triangles denote the PLC payment rate recorded that year. When the orange bar is the below the yellow dash, a PLC payment triggers, and the triangle depicts the payment rate.

    Figure 2. Historical Performance of Stacked Income Protection (2018-2024P) This figure shows the years in which a STAX payment would have triggered in a county with constant yields. That is, if the county yield did not fall, it depicts what the Harvest Price would have to fall to in order for an indemnity (i.e., insurance payment) to trigger. The blue and green bars show the price guarantee based on 85% and 90% coverage levels of STAX, respectively, while the red dashes show the RMA Harvest Price. The blue and green triangles denote the STAX indemnity recorded for the 85% and 90% coverage levels, respectively, in a given year. When the blue or green bar is below the red dash, a STAX indemnity triggers, and the triangles depict the payment rate.

    References

    Biram, H.D. and Connor, L. (2023). Types of Federal Crop Insurance Products: Individual and Area Plans. University of Arkansas System Division of Agriculture, Cooperative Extension Service Fact Sheet No. FSA75. https://www.uaex.uada.edu/publications/pdf/FSA75.pdf

    Fischer, Bart L., and Biram, H.D. “STAX and PLC: Should Cotton Producers Have to Choose?” Southern Ag Today 5(15.4). April 10, 2025. Permalink

    Liu, Y., F. Chong, and Biram, H.D. “Cotton Crop Insurance: Unveiling Regional Differences in Projected and Harvest Prices.” Southern Ag Today 4(4.3). January 24, 2024. Permalink

    Liu, Y., Rabinowitz, A. N. & Lai, J. H. (2019). Understanding the 2018 Farm Bill Effective Reference Price. Department of Agricultural and Applied Economics, University of Georgia. Report No. AGECON-19-02PR. July 2019.

    Liu, Y., Rabinowitz, A. N. & Lai, J. H. (2019). Computing the PLC and ARC Safety Net Payments in the 2018 Farm Bill. Department of Agricultural and Applied Economics, University of Georgia. Report No. AGECON-19-13PR. November 2019.

    Shurley, D. & Rabinowitz, A. N. (2018). MYA Prices and Calculating Payments with the Seed Cotton PLC. Department of Agricultural and Applied Economics, University of Georgia. Report No. AGECON-18-03. February 2018.

    U.S. Department of Agriculture, Farm Service Agency. (2023). Agriculture Risk Coverage (ARC) & Price Loss Coverage (PLC). December 2023. https://www.fsa.usda.gov/sites/default/files/2024-12/fsa_arc_plc_factsheet_1223.pdf

    U.S. Department of Agriculture, Farm Service Agency. (2025). ARC and PLC Data. Date accessed: May 5, 2025. https://www.fsa.usda.gov/resources/programs/arc-plc/program-data

    U.S. Department of Agriculture, Risk Management Agency. (2023). Stacked Income Protection Plan (STAX) for Upland Cotton. January 2024. https://www.rma.usda.gov/sites/default/files/2024-02/STAX-Upland-Cotton-Fact-Sheet.pdf

    Biram, Hunter, Bart L. Fischer, Yangxuan Liu, Will Maples, and Amy Hagerman. “STAX and PLC: A Tale of Price Risk Protection in Two Markets.” Southern Ag Today 5(19.4). May 8, 2025. Permalink