Major Risk Management Programs
The U.S. Federal Government offers a suite of programs to help agricultural producers mitigate production and price risk. These programs are largely covered under Title I and Title XI of the Agricultural Improvement Act of 2018 (Public Law 115–334, 2018), many of which were extended through 2031 as part of the One Big Beautiful Bill Act (OBBBA; Public Law 119–21). The OBBBA also amended several provisions of existing risk management programs outside of the Farm Bill framework.
Title I Support Programs
The Agriculture Risk Coverage (ARC) program (first introduced in the Agricultural Act of 2014) provides income support payments to producers with historical base acres of wheat, feed grains, rice, seed cotton, oilseeds, peanuts, and pulses on a commodity-by-commodity basis when county crop revenue (actual average county yield times national farm price or effective reference price, if higher) drops below 90 percent of benchmark revenue, defined as the 5-year Olympic average – calculated by eliminating the highest and lowest value over the period and then averaging the remaining observations – county yield multiplied by the 5-year Olympic average national price (OBBBA raised this revenue guarantee from 86 percent to 90 percent).
Producers may also choose to participate in ARC based on individual farm revenue (instead of county-level revenues) through the ARC-IC option. In this case, the payment is based on the difference between an individual benchmark and actual individual revenues. The benchmark is calculated as the sum of average revenue for each covered commodity on all farms enrolled in individual ARC in which the individual has a financial interest, divided by the average acres planted to all covered commodities on all those farms. Payments under the ARC-IC are limited to 65 percent of the farm’s historical base acres. Producers must choose each crop year whether to participate in ARC or PLC. The OBBBA authorized a one-time exception to this annual election for the 2025 crop year. For 2025, producer payments were to be made based on the higher of PLC or ARC calculated payments on a covered commodity-by-covered commodity basis. The OBBBA also raised the combined payment-limitation per person or legal entity for ARC and PLC from $125,000 to $155,000. OBBBA stipulated that, starting from crop year 2025, the limit would be adjusted annually for inflation.
The Price Loss Coverage (PLC) program, (first introduced in the Agricultural Act of 2014) provides income support payments to producers with historical base acres of wheat, feed grains, rice, seed cotton, oilseeds, peanuts, and pulses on a commodity-by-commodity basis when market prices fall below a reference price. The payment rate is the difference between the reference price and the annual national-average market price (or marketing loan rate, if higher). The 2018 Farm Act introduced an “effective reference price” that allows the statutory reference price to increase up to 15 percent when 85 percent of the previous 5-year Olympic average (dropping the highest and lowest years) of market prices is above the statutory price.
The 2025 OBBBA made several changes to the PLC. First, the OBBBA raised the reference price escalator from 85 percent of the Olympic average up to 88 percent of the Olympic average. Second, OBBBA raised statutory reference prices for covered commodities by 10–21 percent and mandated that beginning from crop year 2031, statutory reference prices will grow by 0.5 percent annually, to be capped at 113 percent of their original value. The payment amount remains the payment rate multiplied by the historical acres of covered commodity up to 85 percent of the farm’s base acres for that commodity, multiplied by the payment yield. Producers must choose each crop year whether to participate in PLC or ARC. The OBBBA authorized a one-time exception to this annual election for the 2025 crop year, where producer payments were to be made based on the higher of PLC or ARC calculated payments on a covered commodity-by-covered commodity basis. The OBBBA also raised the combined payment limitation per person or legal entity for ARC and PLC from $125,000 to $155,000 and stipulated that from crop year 2025, the limit would be adjusted for inflation annually.
Marketing assistance loans allow farmers to obtain a short-term (usually up to 9 months) low-interest loan for their harvested commodity at the posted county loan rate, with the option of repaying at a lower rate with interest waived if the posted county market price falls below the loan rate (repayment rates for upland cotton and rice are based on international market prices). Producers also have the option to forfeit their commodities that are under loan as a full payment of their loan. Producers who choose not to take out a loan may receive the same benefit by collecting a direct loan deficiency payment (LDP) on their harvested commodity equal to the difference between the loan rate and the market price. Statutory marketing loan rates have been increased from levels established in 2014 Farm Act in both the 2018 Farm Bill and by the OBBBA in 2025. LDPs and marketing loan gains are not subject to payment limitations.
Noninsured Crop Disaster Assistance Program (NAP) offers risk management coverage for adverse weather and other natural hazards to producers of crops for which crop insurance is unavailable in their county. NAP was created by the 1994 Federal Crop Insurance Reform Act and has evolved under subsequent Farm Bills. NAP offers basic catastrophic coverage for losses that exceed 50 percent of expected production, at 55 percent of the average market price for the crop. Buy-up coverage is available at coverage levels from 50 to 65 percent of production (in 5 percent increments) at the actual average market price. Producers pay a service fee for each crop that is enrolled at all coverage levels (up to limits per producer per administrative county, but not to exceed an overall per producer limit). Purchasers of buy-up coverage also pay an additional premium. Payments under NAP cannot exceed $125,000 per individual or entity for a single crop year for basic coverage and $300,000 per crop year, per individual or entity for buy-up coverage.
Dairy margin coverage (DMC) offers protection to dairy producers when the difference between the U.S. all-milk price and a national feed-cost value falls below a certain dollar amount selected by the dairy farmer. DMC was authorized in the 2018 Farm Bill as a replacement for the Margin Protection Program for Dairy (MPP-Dairy), which was authorized in the 2014 Farm Bill. While there is an administrative fee to participate in DMC, the program offers catastrophic coverage at no additional cost, and coverage at higher levels is offered at an additional premium based on the coverage level and the farm’s production history. The 2025 OBBBA expanded DMC by raising Tier I coverage eligibility from 5 million to 6 million pounds (with Tier II covering production of more than 6 million pounds, if selected by the producer). There is no payment limitation for DMC.
Livestock Forage Disaster Program (LFP) offers assistance to livestock producers that graze forage and incur forage losses as a result of drought. LFP was permanently authorized as part of the 2014 Farm Bill. LFP payments are calculated based on the monthly feed cost for all covered livestock and the normal capacity of the grazing land experiencing the qualifying event on a per-acre basis, and are commensurate with the length of time the county in which the livestock are grazing has been in a drought of D2 severity or higher (as reported by the U.S. Drought Monitor) during the normal grazing period. Payments under LFP are limited to $125,000 per person or legal entity per crop year.
Livestock Indemnity Program (LIP) offers assistance to producers who experience abnormally high livestock death rates due to adverse weather, disease, and animal attack. LIP was permanently authorized as part of the 2014 Farm Bill. Through LIP, producers who suffer losses due to predation are eligible to receive payments that are equal to 100 percent of the market value of their animals, while payments for all other losses equal 75 percent of the market value of the animals. Producers who sell their livestock for a reduced price are also eligible for payments. The 2025 OBBBA expanded coverage under the LIP by authorizing additional payments for losses of unborn livestock. The Bipartisan Budget Act of 2018 (Public Law 115–-123) removed payment limitations for LIP, beginning with the 2017 program year.
Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) offers compensation to eligible producers of livestock, honeybees, and farm-raised fish for losses incurred due to diseases, most extreme weather events, and water shortages that are not covered by LFP or LIP. ELAP was permanently authorized as part of the 2014 Farm Bill. ELAP covers a variety of losses or additional costs due to: adverse events (including honey bee colony-loss payments), payments for farm-raised fish producers when excessive feed costs are incurred or for losses due to bird predation, assistance for livestock grazing losses, water transport costs, additional feed transport costs due to drought, and costs associated with gathering livestock to treat or inspect for cattle tick fever. The 2018 Farm Bill removed payment limitations on ELAP benefits.
Tree Assistance Program (TAP) offers assistance to eligible commercial orchardists and nursery growers for trees, bushes, and vines that have been damaged due to natural disasters or disease. TAP was permanently authorized as part of the 2014 Farm Bill. To qualify for assistance, eligible trees, bushes, or vines must have experienced losses that exceed normal mortality. The Bipartisan Budget Act of 2018 (Public Law 115–-123) removed the payment limitation on TAP (beginning with the 2017 program year), but growers may only receive assistance for eligible losses on up to 1,000 acres per program year.
Title XI Support Programs
Federal crop insurance was established in the 1930s to cover yield losses from most natural causes (multiple-peril crop insurance or MPCI). Crop insurance operated on a limited basis up through the early 1980s. Insurance availability was greatly expanded and premium subsidies were increased to raise participation in the program after the Disaster Payments Program was ended in 1981, making crop insurance the only program to compensate producers for crop losses that was available and in place before an adverse event. Major reforms were legislated in 1994 and 2000, which included the introduction of CAT (catastrophic) coverage and large increases in premium subsidies. In the mid-1990s, revenue insurance was introduced into the Federal Crop Insurance Program (FCIP) and has since become the most popular form of crop insurance. Whereas crop yield insurance covers only yield losses, crop revenue insurance pays when gross revenue (yield multiplied by price) falls below a specified level. The 2025 OBBBA made several changes to the Federal Crop Insurance Program—including raising premium support across different coverage levels and providing additional premium support for beginning farmers and ranchers. As of the 2024 crop year, approximately 543 million farm and ranch acres were insured under the Federal Crop Insurance Program.
In addition to traditional crop insurance policies, a number of endorsements and special provisions are available:
- The Supplemental Coverage Option (SCO) was first introduced in the Agricultural Act of 2014 and made available beginning with the 2015 crop year. SCO is an insurance product that offers producers additional insurance coverage for area-based losses that are smaller than those losses generally covered by standard crop insurance policies. The program allows producers to cover a portion of the their deductible (of the underlying crop insurance policy), with payments being determined on an area (generally county) basis. The threshold for these area-based losses was revised higher in the OBBBA. Beginning with crop year 2027, SCO will offer coverage on area-based losses below 90 percent. Prior to that time, SCO offers coverage on area-based losses below 86 percent. The OBBBA also raised the subsidy on producer SCO premiums from 65 percent to 80 percent. Although SCO was initially not available to producers who elected to participate in the Agriculture Risk Coverage (ARC) program, the OBBBA removed that restriction. Like traditional crop insurance, SCO is not subject to payment limitations or adjusted gross income eligibility limits.
- The Enhanced Coverage Option (ECO) was added for crop year 2021. Like SCO, ECO also offers protection for smaller losses than those generally covered by standard crop insurance policies. ECO must also be combined with a companion policy which determines the coverage type (yield or revenue) and has a payment trigger based on reductions in county revenue or yield. ECO offers a higher level of coverage for potential losses than SCO. Given changes to SCO under the OBBBA, from crop year 2027, ECO will offer coverage on losses between 90 and 95 percent of expected crop value. Prior to that time, ECO offers protection for losses between 86 percent and either 90 or 95 percent (depending on the level chosen by the producer) of the expected outcome. ECO cannot be combined with other area risk protection insurance, STAX, or a margin protection policy, but can be bundled with an SCO policy.
- The Stacked Income Protection Plan (STAX) was first introduced in the Agricultural Act of 2014. STAX provides county-based revenue insurance policies to producers of upland cotton, beginning with the 2015 crop year. Unlike SCO, STAX policies can be purchased on their own or be used to supplement insurance coverage that is available through the Federal Crop Insurance Program. STAX can protect against losses that fall within the range not generally covered by standard crop insurance policies—although on a county, rather than an individual, farm-revenue basis. Federal subsidies cover 80 percent of producers’ premiums. As with SCO, STAX is not subject to any payment or income limitations. Under provisions of the 2018 Farm Act, farms on which seed-cotton base acres are enrolled in the ARC or Price Loss Coverage (PLC) programs will be ineligible to purchase STAX policies for cotton production on that farm.
- The Hurricane Insurance Protection - Wind Index (HIP-WI) policy was introduced for the 2020 crop year and offers index-based coverage for producers in eligible counties that are in proximity to the Atlantic Coast or Gulf of Mexico. Producers opting for HIP-WI coverage can add the coverage as an endorsement to a policy defined under the FCIP basic provisions. HIP-WI provides coverage for losses between the underlying policy coverage limit and 95 percent of the expected crop value (known as the "hurricane coverage range"). Producers must also select a coverage level between 1 and 100 percent, which is multiplied by the hurricane coverage range to obtain their "hurricane protection amount". The full value of the hurricane protection amount is disbursed when sustained hurricane force winds from a named storm occur in the producer's county or an adjacent county.
Pasture, Rangeland, and Forage Insurance Plan (PRF) is an index insurance plan that provides protection for producers when a loss of forage for grazing or harvested for hay is experienced due to a single peril—lack of precipitation. PRF uses a rainfall index to determine precipitation for coverage purposes and does not measure the actual on-farm production or loss of production that the PRF protects. The index is based on National Ocean and Atmospheric Administration Climate Prediction Center (NOAA CPC) grid system data. If the final grid index falls below the policy’s “trigger grid index” level, the producer may receive a payment.