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USDA commodity-income support levels have increasingly varied since 2015

Monday, August 19, 2019

In the years leading up to 2015, USDA commodity-income support was predominantly from direct, unconditional payments, which paid farmers roughly the same amount each year. Although other conditional payment programs existed at the time, the rise in commodity market prices reduced the total amount of conditional payments paid by the U.S. Government. With mostly unconditional payment programs providing income support, payments remained reasonably constant across the years leading up to the 2014 farm bill. Under these unconditional programs, corn base acres received the largest amount of income support (larger than soybeans and wheat), in part because corn covered the largest number of acres. The 2014 farm bill created two new conditional programs called Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Under these programs, farmers receive commodity-crop income support only if revenues or prices fall below predetermined thresholds. The creation of ARC and PLC, in combination with a decline in prices from 2012 peaks, has increased the variability of payments in recent years. For example, in 2016, the combined expenses across these three crops and two programs was $6.6 billion. Just 2 years later in 2018, this number decreased by $4.7 billion to $1.8 billion. This chart appears in the August ERS Amber Waves article, “Changes in Commodity-Income Support Programs and Commodity Prices have Caused Increased Variability in Support Payments.”

Food safety actions by the produce industry and commercial buyers have moved food safety practices forward

Thursday, April 4, 2019

Errata: On April 4, 2019, the final sentence in the text of the Chart of Note “Food safety actions by the produce industry and commercial buyers have moved food safety practices forward” was corrected so that the date of its related ERS report was properly stated as April 2019.

The produce industry and commercial buyers (retailers, foodservice buyers, and produce processors) have been instrumental in pushing food safety practices forward. Retailers strive to ensure food safety while not having direct control over production practices. Many retail companies have turned to indirect means, using third-party audits, to make certain that the produce they buy is grown following certain food safety practices. In 1999, Safeway became the first U.S. grocery chain to require audits from its suppliers of “high risk” fresh produce. Many other retailers followed. Marketing orders—standards initiated by producers—began to emerge later as a means for specific commodity groups to provide assurance of safe practices to industry buyers and consumers. The California leafy greens industry in 2007 initiated the Leafy Greens Marketing Agreement (LGMA)—a voluntary program that requires participants to implement mandatory food safety practices, which include third-party audits—and many others followed. Retailer food safety requirements have shaped the current food safety landscape and will determine the extent to which the Food Safety Modernization Act’s recently implemented “Produce Rule” affects growers. This information grew out of ERS research, including the 2007 Amber Waves article, “Outbreak Linked to Spinach Forces Reassessment of Food Safety Practices.” This chart appears in the ERS report, “Food Safety Requirements for Produce Growers: Retailer Demands and the Food Safety Modernization Act,” released in April 2019.

Pasture, rangeland, and forage-area crops have driven the growth in insured acres since 2007

Tuesday, February 19, 2019

The 2018 Farm Act continues to emphasize support for farm risk management and to expand coverage within the Federal Crop Insurance Program (FCIP) that was established in the 2014 Farm Act. Since 2007, the largest growth in insured acres has come from the introduction of coverage for pasture, rangeland, and forage areas. The 2018 Farm Act introduces a catastrophic coverage option for these policies, which is likely to further increase the total acres insured for pasture, rangeland, and forage areas. Premiums for catastrophic coverage policies are fully subsidized (farmers pay no premium, only an administrative fee), while higher levels of coverage are only partially subsidized (farmers pay part of the premium). The availability of cheaper policies may induce additional participation in FCIP. However, the county base values that are used to assess the economic value of insured production covered by pasture, rangeland, and forage policies will be lower in the 2019 crop year than in previous years. In turn, this decrease lowers the value of insured hay and forage production and may reduce the demand for pasture, rangeland, and forage area policies. This chart appears in the ERS crop insurance topic page of The Agriculture Improvement Act of 2018: Highlights and Implications, published February 2019.

2018 Farm Act maintains conservation spending

Tuesday, February 12, 2019

Voluntary conservation incentive programs are the backbone of U.S. agricultural conservation policy. For fiscal years 2019 to 2023, the Congressional Budget Office (CBO) projects mandatory spending on conservation programs under the 2018 Farm Act would be $555 million higher than baseline (projected) spending if the previous 2014 Farm Act had remained in force. That represents an increase of about 2 percent. Nearly all of this spending will flow through five programs: the Conservation Reserve Program, Conservation Stewardship Program, Environmental Quality Incentives Program, Agricultural Conservation Easement Program, and Regional Conservation Partnership Program. For these programs and their predecessors, inflation-adjusted spending increased under both the 2002 and 2008 Farm Acts (2002-2013) but was lower under the 2014 Farm Act (2014-2018). CBO projections suggest that the 2018 Farm Act will provide slightly higher funding, on average, than the 2014 Farm Act. Although program funding is mandatory and does not require appropriations, spending in future years is subject to congressional review and has sometimes been reduced from levels specified in the Farm Acts. This chart appears in the ERS topic page The Agriculture Improvement Act of 2018: Highlights and Implications, updated February 2019.

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.

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

Thursday, August 11, 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.”

Half of U.S. cropland now on farms with 1,200 acres or more

Tuesday, February 17, 2015

The average (mean) number of acres on crop farms has changed little over 3 decades, with a slight increase from 241 acres in 2007 to 251 in 2012. However, the mean misses an important element of changing farm structure; it has remained stable because while the number of mid-size crop farms has declined over several decades, farm numbers at the extremes (large and small) have grown. With only modest changes in total cropland and the total number of crop farms, the size of the average (mean) farm has changed little. However, commercial crop farms, which account for most U.S. cropland, have gotten larger, aided by technologies that allow a single farmer or farm family to farm more acres. The midpoint acreage (at which half of all cropland acres are on farms with more cropland than the midpoint, and half are on farms with less) effectively tracks cropland consolidation over time. The midpoint acreage of total and harvested cropland has increased over the last three decades, from roughly 500-600 acres in 1982 to about 1,200 acres in the most recent census of agriculture data (2012). This chart is extended through 2012 from one found in the ERS report, Farm Size and the Organization of U.S. Crop Farming, ERR-152, August 2013.

U.S. crop insurance subsidies outpace ad-hoc disaster assistance payments

Friday, October 24, 2014

The Federal Crop Insurance (FCI) program and ad hoc crop disaster legislation both provide producer support when crop disasters occur. Participation in the Federal Crop Insurance Program (FCI) has grown steadily since the mid-1990s while outlays for ad hoc crop disaster payments have declined. Before the increase in participation in FCI, the FCI program was associated with widespread losses and poor enrollment and throughout the 1980s and into the 1990s, major crop losses were often associated with supplemental disaster legislation. FCI participation increased with the passage of the Federal Crop Insurance Reform Act in 1994, and again with enactment of the Agricultural Risk Protection Act (ARPA) in 2000. Ad hoc disaster assistance has subsequently declined with increased FCI participation. In 2012, with almost 80 percent of all cropland used for crops enrolled in the FCI program, no ad hoc disaster assistance was enacted despite the major U.S. drought and large associated crop losses. Find this chart and additional analysis in “The Importance of Federal Crop Insurance Premium Subsidies” in the October Amber Waves.

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

Tuesday, July 29, 2014

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.

Coverage of Federal crop insurance programs is expanding

Thursday, July 10, 2014

Producers of corn, soybeans, and wheat—the three largest crops produced in the United States—are the largest consumers of Federal crop insurance, although producers of other crops are a growing share of program enrollment. In 1997, corn, soybeans, and wheat crops accounted for 80 percent of all acres enrolled in the program; including cotton and sorghum raised the share to nearly 90 percent of all acres enrolled. Over the last 15 years, with new types of policies being offered and more crops added to the program, the share of enrolled acres attributed to these major crops fell as participation in the Federal crop insurance program continued to rise. Pasture, forage and range land have accounted for the bulk of recent gains in enrolled acres, expanding from zero in 1997 to 48 million acres in 2012. By 2012, corn, soybeans, and wheat made up roughly 68 percent of all acres enrolled, with cotton and sorghum accounting for an additional 7 percent. The share of acres enrolled in crop insurance varies by crop and region, but these differences decreased between 1990 and 2012 as coverage rates increased. For more data and analysis, see The Effects of Premium Subsidies on Demand for Crop Insurance, released July 2014.

New Farm Act links commodity program payments to market conditions

Monday, June 2, 2014

Changes enacted in the Agricultural Act of 2014 will shift future crop commodity payments away from the repealed Direct Payments (DPs) program, in which annual producer payments were based on fixed historical acreage and yields (base) and legislated payment rates, and toward new programs where payments are linked to variable market and production conditions. Over the last 5 years, fixed DPs made up the bulk of commodity program payments, because crop prices were generally above levels needed to trigger payments through other programs, such as Countercyclical Payments (CCP) (also repealed), and marketing assistance loans (which continue). Producers with historical base acres of covered commodities (wheat, feed grains, rice, oilseeds, and pulses) now have the option to enroll in new programs—Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC). Under both programs, payments are triggered by variable current conditions: PLC payments when market prices fall below legislated reference prices (similar to the repealed CCP program); ARC payments when revenues (affected by both prices and yields) fall below revenue benchmarks based on moving average revenues. Payments under these two new programs are projected to total from 3.8 to 4 billion dollars annually. Find this chart and additional information on crop commodity programs under the new Farm Act in Agricultural Act of 2014: Highlights and Implications: Crop Commodity Programs.

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