Risks and Risk Management Strategies

Agricultural Contracting Update, 2005

A growing share of U.S. farm production is produced and sold under agricultural contracts. Contracts are far more likely to be used on large farms than on small ones. Marketing and production contracts covered 41 percent of the value of U.S. agricultural production in 2005, up from 39 percent in 2003 and 36 percent in 2001 (April 2008).

Agricultural Contracting Update: Contracts in 2003

The share of production under contract grew from 11 percent in 1969 to 39 percent in 2003. For farm operators, contracts provide benefits from reduced risks, but also result in loss of managerial control and reduced autonomy (January 2006).

Risk Management Tools in Europe: Agricultural Insurance, Futures, and Options

A variety of agricultural insurance products with different levels of government support are available to farmers in Europe, reflecting the variety of crops grown and growing conditions in various countries. Changes in economic and agricultural policies in Europe over the past 10 to 15 years appear to have created conditions conductive to the development of futures and options markets (February 2004).

Managing Farm Risk: Issues and Strategies

A compilation of articles from Agricultural Outlook magazine covers topics such as farmers' views of risk, the effectiveness of various risk management strategies, commodity price variability, and tax-deferred savings accounts for farmers (February 2000). 

Forward Contracting of Inputs: A Farm-Level Analysis

Use of output marketing and production contracts, managerial ability, regional location, farm size, and specialization in cash grain production are all correlated with greater forward contracting of inputs among farmers (November 1999).

Managing Risk in Farming: Concepts, Research, and Analysis

A comprehensive assessment of risk in agriculture, risk management strategies available to farmers, and the effectiveness of various risk management strategies (March 1999).

Characteristics and Risk Management Needs of Limited-Resource and Socially Disadvantaged Farmers

These farmers tend to specialize in livestock production, which is not covered by federally subsidized insurance and is eligible for few other government supports (April 1997).

Government Policy and Programs for Risk Management

Federal Risk Management Tools for Agricultural Producers: An Overview

The report summarizes federal risk management programs for agriculture since the 2014 Farm Act, including enrollment numbers, support payment triggers, effects on producers' revenue, and government outlays (June 2018).

How Do Time and Money Affect Agricultural Insurance Uptake? A New Approach to Farm Risk Management Analysis

This report presents a new approach to the analysis of demand for crop insurance. Farmers consider many crop seasons when making production and risk management decisions. When savings are considered, wealthier farmers will spend less on insurance and self-insure through savings, while limited-resource farmers with low farm income will use savings, if available, to increase insurance coverage. (August 2016)

The 2014 Farm Act Agriculture Risk Coverage, Price Loss Coverage, and Supplemental Coverage Option Programs' Effects on Crop Revenue

This report presents an analysis of the Agriculture Risk Coverage (ARC), the Price Loss Coverage (PLC), and the Supplemental Coverage Option (SCO) programs in the 2014 Farm Act. The report is aimed at better understanding the underlying mechanics of the programs and how various combinations of the programs impact producer revenues, producer well-being, and expected program costs. (January 2016)

Whole-Farm Approaches to a Safety Net

"Whole-farm revenue" programs have been proposed as a new form of income stabilization that would be available to all U.S. farms. This report looks at the risk management potential for such programs, which are not linked to production of particular commodities, and the obstacles to implementing such an approach (June 2006).

The Value of Plant Disease Early-Warning Systems: A Case Study of USDA's Soybean Rust Coordinated Framework

This report examines USDA's system to provide real-time, county-level forecasts of soybean rust in the United States. The information provided by Federal, State, industry, and academic partners is estimated to have increased U.S. soybean producers' profits by between $11 million and $299 million in 2005, or between 16 cents and $4.12 per acre depending on assumptions, especially those concerning the accuracy of rust infection forecasts (April 2006).

Why Hasn't Crop Insurance Eliminated Disaster Assistance?

Since the early 1980s, the U.S. Government has promoted crop insurance as a replacement for disaster payments as the primary form of risk management aid for farmers. Despite increased participation in crop insurance, ad hoc disaster assistance packages have continued to be enacted. This article discusses the government costs of crop insurance and how participation varies by type of farm and region (Amber Waves, June 2005).

Risk, Government Programs, and the Environment

Private and public tools used to manage financial risk in agriculture may influence farmers' production decisions. These decisions then can influence environmental quality. This technical bulletin summarizes research and provides some perspective on private and public attempts to cope with financial risks and their environmental consequences (March 2004).

A Safety Net for Farm Households

This report compares the benefits of four different farm assistance programs and finds that distribution of benefits varies widely across programs (October 2000).

The Agricultural Risk Protection Act of 2000 (May 2000)

Text of the legislation.

Federal Crop Insurance

Climate Change Projected To Increase Cost of the Federal Crop Insurance Program due to Greater Insured Value and Yield Variability

The Federal Crop Insurance Program (FCIP) insures participating farmers against adverse production or market conditions. Under the FCIP, the U.S. Government pays the portion of farmers’ premiums that represent the program costs to the Government. The cost of administering the FCIP rises in years with adverse weather events, such as droughts, when insurance claims outpace premiums paid for insurance coverage. Recent ERS research used statistical, geophysical, and economic models to explore how climate change could affect yields and the cost of the FCIP. (Amber Waves, November 2019)

Climate Change and Agricultural Risk Management Into the 21st Century

This study uses a combination of statistical and economic modeling techniques to explore how climate change could affect the cost of the Federal Crop Insurance Program (July 2019).

Federal Crop Insurance Options for Upland Cotton Farmers and Their Revenue Effects

Two new insurance products for U.S. cotton growers reduce revenue risk. (October 2016)

Federal Crop Insurance Is Associated with Higher Levels of Short-Term Farm Debt

Federal crop insurance (FCI) is a key component of U.S. farm policy. FCI provides farmers with subsidized insurance against unanticipated declines in market prices or yields. U.S. farm businesses that use FCI use more short-term debt (or operating loans) than farms without insurance, and this pattern holds even after accounting for other farm characteristics. (Amber Waves, October 2015)

The Effects of Premium Subsidies on Demand for Crop Insurance

Premium subsidies are a major factor in the current success of the Federal crop insurance program. This study measures the change in crop insurance demand across multiple crops and regions following a legislated increase in subsidies. Findings reveal the influence of premium subsidies on participation in the program. (July 2014)

Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts

Public risk management policies for dairy producers could induce expansion in milk supplies, which might lower farm-level prices and offset risk-reduction benefits. An evaluation of USDA's Livestock Gross Margin-Dairy insurance program finds economic downside risk significantly reduced, with potential to induce modest supply expansion if widely adopted. (March 2014)

Managing Risk With Revenue Insurance

Crop revenue insurance offers farmers a way to manage revenue variability that results from yield and price risks. Commodity-level revenue insurance, particularly for corn, soybeans, and wheat, has become a major part of the subsidized Federal crop insurance program. Whole-farm revenue insurance, based on combined revenue from all commodities produced on a farm, is a more broad-based approach, but is difficult to administer (Amber Waves, May 2007).

An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program

This analysis focuses on corn and soybean production in the Corn Belt and wheat and barley production in the Upper Great Plains. The results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases, though the response is very modest in every case (November 2004).

Economic Analysis of the Standard Reinsurance Agreement

The paper outlines provisions of the SRA and analyzes how the SRA affects returns from underwriting crop insurance (Fall 2004).

Asymmetric Information in the Market for Yield and Revenue Insurance

Differences in yield and revenue risk help explain farmers' choice of insurance product or coverage level (April 2001).

Farm Commodity Programs and Risk Management

Changes in Commodity-Income Support Programs and Commodity Prices Have Caused Increased Variability in Support Payments

A recent ERS analysis estimated the potential range of the Government’s cost for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs over the next 10 years for the three largest covered commodities—corn, soybeans, and wheat. Simulating program costs at both the county and national levels indicates program expenditures could vary widely due to uncertainty in commodity markets (August 2019).

Potential Variability in Commodity Support: Agriculture Risk Coverage and Price Loss Coverage Programs

This report estimates the potential range of the Government’s cost for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs over the next 10 years for the three largest covered commodities—corn, soybeans, and wheat. ​Simulating program costs at both the county and national levels indicates program expenditures could vary widely because of uncertainty in commodity markets. (August 2019)

Changes to the Noninsured Crop Disaster Assistance Program Under the Agricultural Act of 2014: Their Potential Risk Reduction Impacts

The Economic Research Service examines effects of the Buy-Up coverage addition to the Noninsured Crop Disaster Assistance Program (NAP) on expected payments, producers' risk reduction, and NAP enrollment by type of producer and crops. (May 2017)

Managing Agricultural Risk Under Different Scenarios: Selected 2014 Farm Act Programs

The 2014 Farm Act introduced several new programs for crop and livestock producers. A recent Economic Research Service study analyzed how these programs provide options for risk management under different scenarios. (Amber Waves, February 2017)


Federal Agencies