Given all the discussion in Washington these days focused on updating crop base acres, it made me wonder whether farm program yields (PFC payment yields) have kept pace with actual crop yields. Most people refer to the mid-1980s as when crop bases as we currently know them were set based off of a producer’s planting during the early 1980s. It made sense to start with the U.S. average payment yields from the target price/deficiency payment program from 1985. The 1985 yields were compared to PFC payment yields from 2021 for the major crops. As seen in the table, corn (35.2%), rice (26.6%) and wheat (19.7%) experienced the highest percent change in payment yields over the 1985 to 2021 period. Seed cotton, soybeans, and peanuts all became normal program commodities after 1985 so there isn’t a comparison yield for that time period.
The percent changes in actual yields were evaluated from 1985 to 2021 for all of the listed commodities with upland cotton replacing seed cotton in the actual yield evaluation. Several commodities (corn, soybeans, upland cotton, rice, and peanuts) all experienced a significant increase in actual yields.
While this is only evaluating 2021 relative to 1985 it does indicate that nationwide, corn, wheat, and rice producers have done a good job of using yield updating opportunities to increase payment yields. On the other hand, both actual and payment yields for grain sorghum have largely stayed the same over the period.
In previous updates, we have talked about the likelihood of Congress passing a new farm bill “on time” which means by September 30th of this year. Through the middle of July, neither the House nor the Senate agriculture committee leadership have released their farm bill drafts. If they don’t release their drafts next week, it appears that this will likely happen during the August recess or when they return in September.
Looking at the calendars for both the House and Senate indicates the Senate is in session 17 days in September and the House is in session 12 days. While we are certain getting the entire farm bill completed by September 30th would be welcomed by House and Senate agriculture committee members and staff, we feel that a more realistic goal would be to have bill completed before the members leave for the Christmas holidays. The Senate is in session 44 days from October to December, while the House is in session 24 days during that period.
Getting the farm bill completed by the end of the year would still be considered somewhat of a surprise as, to date, there hasn’t been a significant new source of funds provided to agricultural committee leadership to develop the new farm bill. During farm bill hearings in both the House and Senate this spring and summer, the near unanimous request by commodity groups testifying was for higher reference prices that would protect a meaningful amount of their production costs. Our estimate is that a 20 percent increase in reference prices for all 23 covered commodities will cost between $55 and $60 billion over 10 years. The increase doesn’t have to be for all covered commodities nor does it have to be the same percent for each commodity, although doing so might be politically easier.
Over the past 15 years, several states have passed laws regarding the amount of space that specific types of farm animals must be given. One such law – California’s Proposition 12 –imposes certain animal welfare requirements such as pen size and space on pork sold in California. These requirements apply not only to California producers but also to anyone selling products into the California market.[1] Proposition 12 was challenged in both state and federal court, and on May 11, 2023, the Supreme Court issued its opinion in National Pork Producers Council v. Ross, ultimately upholding California’s Proposition 12.[2] This raises the inevitable question of what impact, if any, the ruling will have on farm bill deliberations. To help address this question, we provide an overview of the historic federal legislative response to Proposition 12 and initiatives like it over the past decade.
Several of the early federal legislative attempts to push back on these state initiatives came from former Rep. Steve King (R-IA-4).
On July 11, 2012, at the House Agriculture Committee markup of the 2012 Farm Bill (H.R. 6083), King offered an amendment (Amendment No. 45) that was ultimately adopted as Sec. 12308 in H.R. 6083. The amendment prohibited a state or local government from imposing a standard or condition on the production or manufacture of any agricultural product sold or offered for sale in interstate commerce if the production or manufacture occurs in another State and the standard or condition is in addition to Federal standards and the laws of the State and locality in which production or manufacture occurs. Ultimately, that bill expired at the end of the Congress.
On May 15, 2013, at the House Agriculture Committee markup of the 2013 Farm Bill (H.R. 1947), King again offered his amendment (Amendment No. 71) that was ultimately adopted as Sec. 12314 in H.R. 1947 and as Sec. 11312 in H.R. 2642, the version of the 2013 Farm Bill that passed the House and was sent to conference with the Senate. Ultimately, the provision was dropped by the conference committee and was not included in the final version of the 2014 Farm Bill.
Rep. King introduced his amendment as the Protect Interstate Commerce Act in 2015 (H.R. 687) and 2017 (H.R. 3599). In 2018, he reintroduced the act as the Protect Interstate Commerce Act of 2018 (H.R. 4879), this time also including a private right of action to challenge state or local regulations relating to agricultural goods sold in interstate commerce.
On April 18, 2018, at the House Agriculture Committee markup of the 2018 Farm Bill (H.R. 2), King again offered his amendment, including the private right of action from H.R. 4879. The amendment passed on voice vote and was adopted in H.R. 2 as Sec. 11701 (prohibition against interference by State and local governments with production or manufacture of items in other States) and Sec. 11702 (federal cause of action to challenge State regulation of interstate commerce). The provision was ultimately included in the House-passed version of the 2018 Farm Bill but again was dropped by the conference committee and was not included in the final version of the 2018 Farm Bill.
On January 8, 2019, King again introduced the Protecting Interstate Commerce Act (H.R. 272), yet again including the private right of action provision.
Rep. King was ultimately defeated in the June 2020 Republican primary. Following his defeat, others have picked up the mantle.
On August 5, 2021, Sen. Roger Marshall (R-KS) and several other Senate co-sponsors introduced the Exposing Agricultural Trade Suppression (EATS) Act (S. 2619). On August 10, 2021, Rep. Ashley Hinson (R-IA-1) and several other House co-sponsors introduced the House companion (H.R. 4999). Both closely track the Protecting Interstate Commerce Act.
Following the Supreme Court’s ruling, Senator Marshall and others again introduced the EATS Act, this time as the Ending Agricultural Trade Suppression (EATS)Act (S. 2019). Substantively, the bill would again (1) prohibit interference by state and local governments with production of items in other states and (2) provide a private right of action to challenge state regulation of interstate commerce.
While these legislative efforts over the past 10 years attempted to challenge the patchwork of state laws, they were largely dismissed while numerous legal challenges were making their way through the courts. While Dr. Tiffany Dowell Lashmet recently noted that others may lodge additional challenges seeking to prove that Proposition 12 does impose a substantial burden, the Supreme Court’s recent ruling makes it hard to imagine a scenario where this issue is not front and center in the upcoming farm bill debates. In fact, key leaders in the House have identified finding a solution as a priority. This time around, “let’s wait and see how the Supreme Court rules” will no longer be a reason for kicking the can down the road.
[1] Rumley, Elizabeth. “U.S. Supreme Court to Hear Proposition 12 Case“. Southern Ag Today 2(29.5). July 15, 2022.
[2] Lashmet, Tiffany. “United States Supreme Court Upholds Proposition 12.” Southern Ag Today 3(20.5). May 19, 2023.
[1] Rumley, Elizabeth. “U.S. Supreme Court to Hear Proposition 12 Case“. Southern Ag Today 2(29.5). July 15, 2022.
[2] Lashmet, Tiffany. “United States Supreme Court Upholds Proposition 12.” Southern Ag Today 3(20.5). May 19, 2023.
The U.S. federal crop insurance program has experienced substantial growth over the past three decades. This expansion has led to an increase in the number of insured acres, greater overall liability, and higher subsidies for insurance coverage. Crop insurance aims to help farmers and ranchers effectively manage the risks associated with potential decreases in crop yields and revenue. The program is jointly managed by the USDA Risk Management Agency (USDA-RMA) and the Federal Crop Insurance Corporation. The Agency’s role is to determine the premium rate for crop insurance, considering various factors, such as the risk associated with the insured crop in a specific county, the chosen coverage level for the farm, the type of insurance product, and farm-specific practices like irrigation. The agency strives to establish actuarially fair premium rates, ensuring that the rates accurately reflect the expected indemnities per dollar of liability.
The subsidy for crop insurance premiums has witnessed a remarkable expansion, reaching about $11.6 billion in 2022, compared to $205 million in 1989 (USDA-RMA, 2023). This noteworthy surge is concurrent with the broadening array of crop insurance alternatives made available to farmers. Nevertheless, the allocation of the subsidy among farmers exhibits significant disparities across distinct levels of crop insurance coverage (Bullock & Steinbach, 2023). In our study, we evaluate the distribution of the farmer premiums to liability ratio across diverse levels of crop insurance coverage, drawing comparisons between the number of insured enterprise units and the amount of insured liabilities. Furthermore, we investigate the potential economic ramifications of capping the premium-to-liability ratio of 4.0% for different categories of crop insurance offered within the federal crop insurance program.
Figure 1 illustrates the distribution of the farmer premium-to-liability ratio for crop insurance coverage levels below 65%, between 65% and 75%, and above 75%. We compare the distribution based on the insured enterprise units (blue) and insured liability (red) for the Southern United States in 2022. For approximately 96.9% of the insured liability, the ratio is less than 4.0% at the <65% coverage levels. Moving to the 65% to 75% coverage levels, the ratio drops to 73.5% and falls further to 68.1% at the >75% coverage levels. Notably, there is a disparity in the number of insured units. While 90.8% of the enterprise units at the <65% coverage level have a farmer premium to liability ratio below 4%, this number falls to 75.5% at the 65% to 75% and 42.1% at the >75% coverage levels. This imbalance implies that fewer and larger enterprise units have a farmer premium-to-liability ratio below 4.0% at higher crop insurance coverage levels. This share is significantly higher and favors smaller enterprise units at lower coverage levels.
We now investigate the potential economic implications of capping the premium-to-liability ratio at 4.0% for different categories of crop insurance offered within the federal crop insurance program. Limiting the farmer premium to liability ratio to 4.0% would require 6.1% or $89.5 million in additional subsidies. Of these supplementary payments, 81.1% would be allocated to enterprise units with crop insurance coverage levels ranging from 65% to 75%. The distribution of the extra subsidies would primarily favor cotton, receiving approximately 73.2% of the additional payments, followed by wheat (9.9%), corn (6.0%), and soybeans (5.9%). The crop-specific subsidies would experience an increase ranging from 1.9% for soybeans to 9.8% for cotton.
Our findings indicate that the current allocation of farmer premiums per liability in the federal crop insurance program exhibits inequities across various levels of coverage. The suggested modifications to the program would particularly benefit farmers with a coverage level exceeding 70%, which holds significance considering the elevated vulnerability of these farmers to crop or revenue losses. Additionally, our findings emphasize the need to consider the consequences of program adjustments on different commodities and states. Furthermore, the analysis implies that the proposed change could incentivize farmers to allocate more acreage to higher coverage levels, enhancing their risk management options. All in all, this study offers insights into the distributional implications of the federal crop insurance program. Furthermore, it underscores the potential advantages of program modifications to foster equity for farmers and ranchers.
Figure 1: Distribution of the Farmer Premium to Liability Ratio for Different Crop Insurance Coverage Levels.
Note. Data for this analysis come from the USDA Risk Management Agency (2023). The analysis focused on the 2022 APH, RPHPE, RP, and YP insurance plans, considering different unit structures such as enterprise units, enterprise units separated by cropping practice, and enterprise units separated by irrigation practice in the Southern United States. The ratio was calculated by subtracting the subsidy from the total premium and dividing it by the liability at the enterprise unit level. We constructed the distribution using the number of insured units and the insured liability as analytical weights. All farmer premium to liability ratios above 10% were grouped into the “>10” category.
Learn More
Bullock, D. & Steinbach, S. (2023). “Capping the Farmer Premium-to-Liability Ratio for the Major Federal Crop Insurance Coverages: An Evaluation of the Potential Economic Implications,” AAE Staff Paper 2023-01, North Dakota State University. https://ageconsearch.umn.edu/record/333994
U.S. Department of Agriculture, Risk Management Agency. (2023). Summary of Business (SOB) online database. Available at: http://www.rma.usda.gov/data/sob.html.
Every July at the Southern Extension Committee Meetings, Southern Ag Today likes to take the opportunity to recognize our authors for all their hard work. We look at all the articles written over the past year May 2022 – April 2023 and decide which were read, viewed, and shared the most using our analytics. We are pleased to announce our 2022-2023 winners.
