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California farmers shifted to groundwater when drought reduced surface water availability

Tuesday, January 2, 2018

Prolonged drought generally results in large reductions in the quantity of surface water delivered, affecting farm production systems that depend heavily on surface water for irrigation. Groundwater may substitute as a source for irrigation water when the availability of surface water declines. For example, although most farmers in California’s main agricultural areas rely on surface water for the largest share of their irrigation needs, many parts of the State have sufficient groundwater reserves to provide a partial buffer against the impacts of drought. However, recurring drought and groundwater “overdraft”—when the amount of water extracted is greater than the amount of water entering the aquifer—have resulted in large declines in aquifer levels in some areas. This chart appears in the June 2017 Amber Waves feature, "Farmers Employ Strategies To Reduce Risk of Drought Damages."

Payments from Government farm programs have shifted to higher-income farm households to varying degrees, but with declines in some since 2013

Friday, December 1, 2017

USDA’s commodity, Federal crop insurance, and conservation programs provided about $16.9 billion in financial assistance to farm producers and landowners in 2015. Over time, as agricultural production shifted to larger farms, these programs’ payments shifted to higher-income households—which often operate larger farms. In 1991, half of commodity program payments went to farms operated by households with incomes over $60,717 (adjusted for inflation). By 2015, this midpoint value, at which half of payments went to households with higher incomes, was $146,126. Similar trends hold for other programs, though with variability across programs and over time. For example, the midpoint income level for crop insurance indemnity payments increased from 2010 to 2013, but by 2015 had dropped below the 2008 level, to $143,806. For context, the median U.S. household income shows little change over the period and in 2015 was $56,516. Payments from commodity programs reduce financial risks to specific commodity producers, while payments from federally subsidized crop insurance mitigate yield and revenue risks. Payments from conservation programs aim to conserve natural resources and reduce environmental impacts from farming. This chart appears in the ERS report The Evolving Distribution of Payments from Commodity, Conservation, and Federal Crop Insurance Programs, released November 2017.

Drought is typically the largest single driver of crop disaster assistance and indemnity payments

Tuesday, October 17, 2017

At any given time, some portion of the country faces drought conditions. In recent years, large areas of the United States have experienced prolonged drought, with significant impacts across entire agricultural sectors. A major drought can reduce crop yields, lead farmers to cut back planted or harvested acreage, reduce livestock productivity, and increase costs of production inputs such as animal feed or irrigation water. Since the Dust Bowl in the 1930s, drought has been an important focus of U.S. farm policy. Early Federal policy mitigated farmers’ drought-induced hardships primarily by providing ad hoc disaster assistance in response to a drought. With changes to the Federal crop insurance program in the 1990s, the emphasis of farm programs shifted from ad hoc disaster assistance to risk management, with a greater reliance on crop insurance to compensate farmers for drought losses. As a result, drought has been the largest individual driver of Federal indemnity payments and disaster assistance for over four decades. This chart appears in the June 2017 Amber Waves feature, "Farmers Employ Strategies To Reduce Risk of Drought Damages."

Different forms of outreach can increase farmer participation in County Committee elections

Friday, August 18, 2017

County Committees (COC) are critical to the delivery of farm support programs and make numerous program decisions, such as whether or not a producer is in compliance with the program’s eligibility requirements. However, participation in COC elections have declined over time. An ERS experiment tested the impact of using different forms of outreach on voter participation during the 2015 COC elections. Some voters received ballots with information about candidates printed on the outside. Other voters received postcards with deadlines and candidate information. A third group of voters received both, and a baseline group received neither. Compared to the baseline, the experiment found that printing candidate information on the outside of the ballot plus sending postcards increased voter participation by nearly 3 percent. This information may offer a relatively low-cost outreach strategy to encourage participation in future elections. This chart appears in the ERS report Economic Experiments for Policy Analysis and Program Design: A Guide for Agricultural Decisionmakers, released August 2017.

Agriculture contributed $992 billion to the U.S. economy in 2015

Thursday, April 6, 2017

Agriculture and agriculture-related industries contributed $992 billion to the U.S. gross domestic product (GDP) in 2015, a 5.5-percent share. The output of America’s farms contributed $136.7 billion of this sum—about 1 percent of GDP. The overall contribution of the agriculture sector to GDP is larger than this because related sectors rely on agricultural inputs like food and materials used in textile production in order to contribute added value to the economy. In 2015, farming’s contribution to GDP fell for the second consecutive year after reaching a high point of $189.9 billion in 2013. A major reason for this downward trend has been falling commodity prices like corn and soy, which peaked around 2013 and have since fallen by at least 30 percent. The category of food service, eating and drinking places has expanded over a similar timeframe and may be a beneficiary of the lower commodity prices at the farm level. This chart was updated in March 2017 and appears in the ERS data product, Ag and Food Statistics: Charting the Essentials.

ACRE payments for corn are concentrated in the Midwest

Monday, October 10, 2016

USDA's Average Crop Revenue Election Program (ACRE) is an alternative to price-based commodity programs. Begun in 2009, the program uses a combination of State- and farm-level revenue guarantees that are determined from recent historic prices and yields. The ACRE program makes payments to producers when both State average revenue and farm revenue for a crop fall below recent historic levels. The map shows expected ACRE payments, based on simulated crop revenue variability, per acre for representative farms (one per crop per county) relative to national average ACRE payments. For corn, ACRE payments would be high in Midwest areas with high average yields, even though these areas have low yield and revenue variability and strong negative price-yield correlations. ACRE payments also tend to be high along the Southeast and Middle Atlantic coast where average yields are low and yield and revenue variability are high. This map originally appeared in the December 2010 issue of Amber Waves.

Some conservation practices are more widely adopted than others

Wednesday, September 21, 2016

The environmental effects of agricultural production, e.g., soil erosion and the loss of sediment, nutrients, and pesticides to water, can be mitigated using conservation practices. Some practices are more widely adopted than other practices; no conservation practice has been universally adopted by U.S. farmers. Variation in conservation practice adoption is due, at least in part, to variation in soil, climate, topography, crop/livestock mix, producer management skills, and financial risk aversion. These factors affect the onfarm cost and benefit of practice adoption. Presumably, farmers will adopt conservation practices only when the benefits exceed cost. Government programs can increase adoption rates by helping defray costs. The potential environmental gain also varies—ecosystem service benefits (such as improved water quality and enhanced wildlife habitat) depend both on the practice and on the location and physical characteristics of the land. This chart is based on data from ARMS Farm Financial and Crop Production Practices.

Emergency haying and grazing on land in the CRP peaked in 2012

Thursday, September 1, 2016

USDA?s Conservation Reserve Program (CRP) engages farmers in long-term (10- to 15-year) contracts to establish conservation covers on environmentally sensitive land. As of June 2013, about 27 million acres of farmland were enrolled in the program. An important provision within CRP is that under certain circumstances, farmers can utilize their CRP lands for managed or emergency haying and grazing.?The haying and grazing of CRP land can provide important benefits to farmers, particularly during major droughts when other sources of livestock feed are scarce, and, if done correctly, can also improve the environmental value of the conservation covers. During the 2012 drought, farmers conducted emergency haying and grazing on almost 2.8 million acres and managed haying and grazing on another 700,000 acres. This chart is found in the Amber Waves article, ?The Role of Conservation Program Design in Drought-Risk Adaptation,? July 2013.

Crop insurance indemnities rise with drought

Thursday, September 1, 2016

Federal crop insurance has become a key component of producer risk management in the United States.? Producers participate by purchasing policies from private insurance companies to cover possible losses on the commodities they expect to harvest in a particular crop year, with premium rates set by the Federal Government.? Most producers choose revenue loss policies, which cover potential losses to both their average yield and the expected price of the commodity at harvest.? The Federal Government pays a share of the producer?s premium.? In most years, total premiums (including both the producer and government shares) have been above indemnities (outlays for losses).? Severe drought and other weather losses in 2011 and 2012 caused indemnities to rise above premiums in those years. In any given year, individual producers may pay more for their premium than they receive in indemnities, but even in years of low losses, total indemnities have been higher than the premiums paid by producers. For additional information, see the Risk Management topic pages.

Total Farm Bill commodity program payments vary with weather and markets

Thursday, September 1, 2016

The U.S. Farm Bill authorizes a number of distinct commodity programs, providing a range of program types that support crop, dairy, and livestock producers in different ways.? Since 2002, the primary programs have been Direct Payments, Counter-Cyclical Payments, Marketing Assistance Loans, and Milk Income Loss Contracts.? The 2008 Farm Bill added the Average Crop Revenue Election (ACRE) program and replaced nearly all annual ad hoc disaster programs with a set of permanent disaster programs for crop, livestock, orchard and nursery tree, aquaculture, and honeybee operations.? While Direct Payments provide historically based fixed payments that do not change from year to year, other program payments depend upon variable conditions like prices and weather, causing total commodity program support to fluctuate widely from year to year. This chart and additional explanation can be found on the?Farm and Commodity Policy?topic page.

Direct government payments to producers as a share of gross cash farm income (GCFI) have fallen in recent years

Thursday, September 1, 2016

GCFI (cash income to farm operations before accounting for expenses) comes from a number of different sources, including sales of crops and livestock, income generated through farm and equipment services to other operators, use of farmland for recreational activities, sales of forest products, crop insurance indemnities, and other farm-related income. Many producers also receive government payments from a variety of Federal farm programs. The share of government payments in total GCFI has varied widely over time, reflecting the effects of variable weather and prices, as well as changes in farm programs, on the sources of farm income. The share has been historically low in recent years, as relatively high commodity prices have reduced price-triggered payments. Government payments in this chart include only payments made directly to producers, and thus do not reflect government support of Federal crop insurance, which has played an increasing role in farm risk management? Producers participate in Federal crop insurance through private crop insurance companies, with the Federal Government covering a portion of the crop insurance premiums and other costs associated with providing this insurance. For more information, see the?Farm & Commodity Policy?topic page.

Expected falling crop receipts lead decline in 2014 forecast for net farm income

Thursday, September 1, 2016

USDA?s initial forecast for 2014 net farm income is $34.7 billion lower than current expectations for 2013, but is $8 billion higher than the average of the previous 10 years. Lower crop cash receipts, and, to a lesser degree, a change in the value of crop inventories and reduced government farm payments, drive the expected drop in net farm income. Crop receipts are expected to decrease more than 12 percent in 2014, led by an expected $11-billion decline in corn receipts and a $6-billion decline in soybean receipts. Elimination of direct payments under the Agricultural Act of 2014 and uncertainty about program enrollment during 2014 result in a projected $5.1 billion decline in government payments. On the other hand, total production expenses are forecast to decline $3.9 billion in 2014, which would be only the second decline in the last 10 years. Livestock receipts and value of inventory change also are expected to increase a combined $3.5 billion in 2014, largely due to higher dairy receipts and the potential for expansion of the beef cattle herd for the first time since 2007. This chart is based on the data available in Farm Income and Wealth Statistics, updated February 11, 2014.

U.S. dairy producers have faced increasing price and feed cost volatility

Thursday, September 1, 2016

Over the last 20 years, U.S. dairy producers have faced rapidly changing milk prices and input prices, primarily for feeds. The monthly average U.S. all-milk price has been highly volatile since 1990, particularly in more recent years. Factors that account for the increasing variability in milk prices include increased U.S. involvement in (and dependence on) export markets, and weather events in both the United States and other exporters that affected production and dairy stock levels. More recently, dairy producers also faced higher feed costs. Dairy producers generally have low adoption rates of traditional price risk management tools, such as forward contracting, and the use of futures and options markets and trading. The Livestock Gross Margin for Dairy (LGM-Dairy) insurance program is a relatively small and new public risk management program overseen by USDA?s Risk Management Agency (RMA) designed to protect margins between milk prices and input (feed) costs, rather than simply supporting prices.? Analysis of the LGM-Dairy program shows that it can be effective in reducing risks, but is unlikely to substantially change farmer?s production level decisions. ?Find this chart and more analysis in Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts.

ERS revises its farm typology

Thursday, September 1, 2016

Nearly 15 years have passed since ERS first released its farm typology to classify farms into relatively homogeneous groups based on their gross farm sales, the primary occupation of their operators, and family farm status. A recent update to the ERS farm typology reflects commodity price inflation and structural changes in production that have occurred over time. In response to these changes, ERS recalibrated the size thresholds used in its farm typology, reduced aggregation among large farms, and changed its sales measure to reflect the growth in production contracts. To better reflect income earned by farm operators, we now measure farm size by gross cash farm income (GCFI)—the total revenue received by a farm business in a given year; after adjusting inflation, the new size thresholds for small, midsize, and large farms are as specified in the graph. Using the updated typology, 91 percent of U.S. farms were classified as small in 2010, and accounted for about 29 percent of the value of U.S. farm production. Large-scale family farms under the new typology—less than 2 percent of all farms—accounted for a disproportionately large 34-percent share of the value of production. This chart is based on table 9 in the ERS report, Updating the ERS Farm Typology, EIB-110, April 2013.

Productivity drives agricultural output growth in most regions of the world

Thursday, September 1, 2016

Productivity growth in agriculture enables farmers to produce a greater abundance of food at lower prices, using fewer resources.? A broad measure of agricultural productivity performance is total factor productivity (TFP). Unlike other commonly used productivity indicators like yield per acre, TFP takes into account a much broader set of inputs?including land, labor, capital, and materials?used in agricultural production. ERS analysis finds that globally, agricultural TFP growth accelerated in recent decades, largely because of improving productivity in developing countries and the transition economies of the former Soviet Union and Eastern Europe. During 2001-2010, agricultural TFP growth in North America and the transition economies offset declining input use to keep agricultural output growing.? By contrast, declining input use in Europe offset growing TFP, resulting in a slight decline in agricultural output over the decade.? In most regions of the developing world, improvements in TFP are now more important than expansion of inputs as a source of growth in agricultural production. Sub-Saharan Africa is the only major region of the world where growth in agricultural inputs accounts for a higher share of output growth than growth in TFP.? This chart is based on the table found in ?Growth in Global Agricultural Productivity: An Update,? in the November 2013 Amber Waves online magazine, and the ERS data product on International Agricultural Productivity.

Many factors, including conservation payments, influence the adoption of conservation practices

Thursday, September 1, 2016

The Federal Government spent more than $6 billion in fiscal 2013 on conservation payments to encourage the adoption of practices addressing environmental and resource conservation goals, but such payments lead to additional improvement in environmental quality only if those receiving them adopted conservation practices that they would not have adopted without the payment. Some farmers have adopted specific conservation practices without receiving payments because doing so reduces production costs or preserves the long-term productivity of their farmland (e.g., conservation tillage). Many other farmers have not adopted conservation practices, presumably because the cost of doing so exceeds expected onfarm benefits, the value of which can vary based on many factors?soil, climate, topography, crop/livestock mix, producer management skills, and risk aversion. Since the value of onfarm benefits can vary widely across practices and farms, identifying which farmers will adopt a conservation practice only if they receive a payment is not straightforward, but research indicates that the likelihood a payment will result in additional environmental benefits increases as the implementation cost of the conservation practice increases and its impact on farm profitability declines. This chart is found in the ERS report, Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs, ERR-170, July 2014.

Use of crop insurance on U.S. farms continues to grow

Wednesday, August 10, 2016

The share of U.S. cropland insured has increased from less than 30 percent in the early 1990s to nearly 90 percent—299 million acres—in 2015. Passage of the Federal Crop Insurance Reform Act in 1994 led to a spike in the use of crop insurance, reflecting the introduction of low-coverage, fully subsidized Catastrophic Risk Protection Endorsement (CAT) insurance and a temporary requirement that producers obtain insurance coverage to be eligible for other commodity support programs. CAT insurance pays only 55 percent of the price of the commodity on crop losses in excess of 50 percent, and farmers have increasingly opted to purchase insurance with higher coverage levels—known as "buy-up" insurance—for greater protection against risk. Premiums for buy-up policies are also subsidized, and these subsidies were increased in the 1994 Act as well as under the Agricultural Risk Protection Act of 2000. While buy-up policies are not fully subsidized like CAT insurance—in 2015 producers paid, on average, 38 percent of the total cost of buy-up policies—they in some cases can protect more than 75 percent of the value of a crop. By 2015, buy-up policies covered 95 percent of insured cropland. This chart is from the ERS report, How Do Time and Money Affect Agricultural Insurance Uptake? A New Approach to Farm Risk Management Analysis, released on August 1, 2016.

While total acreage in the Conservation Reserve Program (CRP) continues to decline, land in "continuous signup" steadily increases

Thursday, June 25, 2015

The Agricultural Act of 2014 gradually reduces the cap on land enrolled in the Conservation Reserve Program (CRP) from 32 million acres to 24 million acres by 2017. CRP acreage declined 34 percent since 2007, falling from 36.8 million acres to 24.2 million by April 2015. Environmental benefits may not be diminishing as quickly as the drop in enrolled acreage might suggest. While initially enrolling mainly whole fields or farms (through periodically announced general signups), CRP increasingly uses “continuous signup” (which has stricter eligibility requirements than general signup) to enroll high-priority parcels that often provide greater per-acre environmental benefits. Conservation practices on these acres include riparian buffers, filter strips, grassed waterways, and wetland restoration. Riparian buffers, for example, are vegetated areas that help shade and partially protect a stream from the impact of adjacent land uses by intercepting nutrients and other materials, and provide habitat and wildlife corridors. Enrollment under continuous signup increased by about 50 percent, from 3.8 million acres in 2007 to 5.7 million acres in 2014. A version of this chart is found on the ERS web page, Agricultural Act of 2014: Highlights and Implications (Conservation).

Incentive payments often boost adoption of conservation practices

Wednesday, April 22, 2015

Under the Agricultural Act of 2014, Congress provided an estimated $28 billion in mandatory 2014-18 funding for USDA conservation program payments that encourage farmers to adopt conservation practices. If farmers would have adopted the practice even without financial incentive, however, the practices are not “additional,” and the payments provide income for farmers without improving environmental quality. Some farmers have adopted specific conservation practices without receiving payments because doing so reduces production costs or preserves the long-term productivity of their farmland (e.g., conservation tillage). Many other farmers have not adopted conservation practices, presumably because the cost of doing so exceeds expected onfarm benefits, the value of which can vary based on many factors, including soil, climate, topography, crop/livestock mix, producer management skills, and risk aversion. Since the value of onfarm benefits can vary widely across practices and farms, identifying which farmers will adopt a conservation practice only if they receive a payment is not straightforward. Additionality tends to be high for practices that are expensive to install, have limited onfarm benefits, or onfarm benefits that accrue only in the distant future (e.g., soil conservation structures, buffer practices, and written nutrient management plans). Practices that can be profitable in the short term are more likely to be adopted without payment assistance and tend to be less additional (e.g., conservation tillage). Research indicates that the likelihood a payment will result in additional environmental benefit increases as the implementation cost of the conservation practice increases (such as soil conservation structures) and its impact on farm profitability declines. This chart is based on data from the ERS report, Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs, ERR-170, July 2014.

Livestock Forage Disaster Program payments spike in 2014

Monday, March 16, 2015

The Livestock Forage Disaster Program (LFP) was initially authorized by the Food, Conservation, and Energy Act of 2008 to reimburse eligible farmers and ranchers for grazing losses due to a qualifying drought or fire through September 30, 2011 (the end of the period covered by the 2008 Act). The 2014 Farm Act made LFP a permanent program, and included payments retroactive to October 1, 2011. ERS’s farm income forecast for 2014 includes $4.4 billion in expected LFP payments, incorporated in the direct government payments category “ad hoc and disaster assistance payments.” The 2014 forecast is an over 700-percent increase over the sum of LFP payments made during the previous 5 years. This large spike—generally regarded as a one-time event—reflects large retroactive payments for 2012 and 2013, which account for 84.2 percent of the 2014 expected payout. The 2014 Farm Act included a number of changes that could raise future LFP payments, although not to 2014’s extraordinary level. This chart is found in the Amber Waves finding, “Livestock Forage Disaster Program Payments Increase in 2014.”

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