The US farm bill crop safety net targets two risks, said Carl Zulauf, Ohio State University agricultural economist, in a University of Illinois publication, farmdocdaily.
Crop insurance targets production-period low yield and revenue risk, while commodity programs target multiple-year low price and revenue risk, Zulauf said. A farm takes full advantage of this safety net when a planted acre is insured and is a base acre of the same crop. Only when this match occurs can per-acre crop insurance and commodity program payments be added.
RESULTS OVER TIME
Over the 2014-2024 crop years, crop insurance plus commodity program payments averaged $145 per acre per year for peanuts, rice and cotton and $24 per acre per year for sorghum, wheat, corn, barley, oats and soybeans, Zulauf said. Thus covering, respectively, roughly 15%, 10%, 5%, and 2% of average annual cost to produce cotton, peanuts and rice; sorghum and wheat; barley, corn and oats; and soybeans.
Those figures highlight the importance of being able to match an insured acre with a base acre, he said.
His calculations used base acres from the USDA, Farm Service Agency, insured acres from the USDA, Risk Management Agency, Agriculture Risk Coverage – County and Price Loss Coverage payments from the USDA, FSA and the University of Illinois at Urbana-Champaign, insurance indemnities net of farm paid premiums from the USDA, FSA, and cost of production from the USDA, Economic Research Service.
INSURED VS BASE ACRES
The question of how often an insured acre is a base acre can only be answered with individual farm data, Zulauf said. Such data are not publicly available, he said. A farm operation can involve many FSA farms. Its base acres are the sum of its FSA farms’ base acres.
US data can provide only a rough insight, Zulauf said. For the 2024 crop year, insured acres were less than ARC-CO plus PLC enrolled base acres for all crops considered in Zulauf’s calculations except for soybeans. Thus, at the US level, an insured acre could be matched with a base acre. This is an overstatement as differences can be substantial on individual farms.
However, base acres were acres planted to the crop at some time in the past and planted acres change relatively slowly from year to year, Zulauf said. Thus, crops planted on a farm today were likely planted on the farm in previous years.
This is particularly true for crops such as wheat, oats, barley and cotton with declining acres, he said. Their planted acres will tend to concentrate in areas with the highest competitive advantage.
While US data provides only a crude approximation, those two considerations imply a nontrivial likelihood that today’s insured planted acres can be matched with base acres of the same crop for a notable number of US acres, Zulauf said. For these acres, per-acre crop insurance net indemnities and commodity program payments can be added together, Zulauf said.
Last, for farmers, soybeans’ notably smaller base than insured acres is muted by US soybeans having a profit at harvest in 18 of 30 years since the 1996 Farm Bill authorized “freedom to farm.”.
The 2025 Farm Bill’s new base acre provision adds up to 30 million new base acres for current program crops, he said. Some of these new base acres will come from crops that are not program crops.
New base acres for current program crops increase the likelihood that a current program crop’s insured acres on a farm can be matched with base acres on the farm, Zulauf said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $233.33 per cwt to $234.05, compared with last week’s range of $230.68 to $237.92 per cwt. FOB dressed steers and heifers went for $362.97 per cwt to $368.61, compared with $361.74 to $377.75.
The USDA choice cutout Tuesday was up $2.92 per cwt at $369.65 while select was up $2.05 at $346.50. The choice/select spread widened to $22.15, from $22.28 with 99 loads of fabricated product and 20 loads of trimmings and grinds sold into the spot market.
The USDA-listed the daily weighted average wholesale price for fresh 90% lean beef as $462.77 per cwt, and 50% beef was $146.12.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.18 to $1.34 a bushel over the Sep corn contract, which settled at $4.42 a bushel, down $0.07 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $349.13 per cwt, up $2.24. This compares with Tuesday’s Aug contract settlement of $351.00 per cwt, up $3.17.