When Should Farm Losses Be Covered by the Crop Safety Net

By Andi Anderson

These crops include barley, corn, cotton, oats, peanuts, rice, sorghum, soybeans, and wheat. Production costs also include unpaid family labor and owned land expenses.

Before 2007, the crop safety net generally worked as a support system that offset most market losses. During the 1981-2006 period, it covered about 88% of cumulative losses.

Since 2007, the situation has changed. The safety net has not only covered losses during difficult years but has also added to profits during profitable periods.

Several programs make up the crop safety net, including commodity programs, crop insurance, and ad hoc or emergency assistance programs. Crop insurance has become a major source of payments, especially during profitable years. Emergency and ad hoc payments have also grown significantly in recent years.

Research identified several multiyear periods of profits and losses. Loss periods occurred from 1981-2006, 2014-2020, and 2023-2025. Profit periods were recorded during 2007-2013 and 2021-2022. In recent loss periods, support programs completely covered market losses and still generated profits for the farm sector. During profit periods, safety net payments further increased earnings.

These findings have led to important policy discussions. One key question raised is, “What share of sector market losses should the safety net cover?” Another important question asks, “Is this the intended outcome of the US crop safety net?”

Experts note that additional payments may increase spending on farm inputs, which can raise production costs over time. This may benefit input suppliers, landowners, lenders, insurance providers, and other businesses connected to agriculture.

The study also suggests that future farm policy should focus more on multiyear financial trends rather than single-year results. As agriculture continues to face changing economic conditions, policymakers may need to carefully examine how support programs operate during both profitable and challenging years.

Photo Credit: karolina-grabowska