Overview
Uncertainty in prices, yields, government policies, and
foreign markets means that risk management plays an important
role in many farm business decisions. A number of risk
management tools are available, including yield and revenue
insurance, futures and options, contracting sales and
purchases, enterprise diversification, debt-level management,
credit availability, and off-farm employment. Government
programs addressing farm risk management have also played
a larger role in U.S. farm policy in recent years. Over
240 million acres are now covered by crop insurance, and
government insurance subsidies exceed $3 billion annually.
Feature
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 (May 2007).
Recommended Readings
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).
Valuing Counter-Cyclical
Payments: Implications for Producer Risk Management and
Program Administration. This study illustrates an
improved method for estimating counter-cyclical payment
rates by accounting for the variability in market price
forecast errors. Forecasters and producers can use the
model to calculate the probability of having to repay
advanced counter-cyclical payments (February 2007).
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 (June 2005).
See all recommended
readings...
Recommended Data Products
Farm Income Data. Farm
income forecasts, updated regularly, and farm income estimates,
released once a year.
Farm Balance Sheet
Data. Data on assets, debt, and equity, where equity
equals assets minus debt, and are used to assess wealth
in the farm sector.
Commodity Costs and
Returns Data. Data and analyses for major field crop
and livestock enterprises each year since 1975.
Glossary
Definitions of terms
used in this briefing room and links to another online
glossary that provide additional information about farm
risk management.
Questions and Answers
Frequently asked questions and
answers about farm risk management address the kinds
and causes of farm risk and government programs designed
to mitigate risk.
Related Briefing Rooms
Farm Income and Costs
Farm and Commodity
Policy
Agricultural Resource Management
Survey (ARMS)
Related Links
Further information on farm risk management is available
from other federal agencies and university sources.
See all related links...
Maps and Images Gallery
Maps and charts cover
yield variability, price variability, and crop insurance
participation and performance.
|
