Title XI: Crop Insurance



Title 11 of the Farm Bill is devoted to Crop Insurance. Crop insurance began as an experiment in 1938, becoming permanent with the passage of the Federal Crop Insurance Act of 1980. Limited participation and natural disasters through the 1980s and early 1990s required ad hoc passages of disaster insurance and ultimately led to the Federal Crop Insurance Reform Act of 1994. Participation has not been mandatory since 1996, but farmers who would like to be eligible for disaster benefits must purchase crop insurance.


Crop insurance works like any other insurance. A farmer and provider enter into a contract that can be canceled or annually renewed. These contracts are made on a crop-by-crop, county-by-county basis. The farmers are insured against losses, with deductibles. These losses could be due to market price, adverse weather or other unavoidable perils. 


On the federal level, the crop insurance industry is overseen by the Federal Crop Insurance Corporation, a part of the USDA's Risk Management Agency. Policies must be approved by FCIC, and it also provides subsidies to approved insurers. 


Source: USDA Risk Management Agency

Major Changes with the 2014 Farm Bill:


STAX: Stacked Income Protection Plan (STAX) has been created for producers of upland cotton, who are not eligible for PLC or ARC. STAX is a revenue-based insurance policy. STAX is a result of a long-running trade dispute with Brazil that has resulted in a World Trade Organization case. STAX's payouts happen when there are revenue losses on the county level.


SCO: Supplemental Coverage Option (SCO) covers the losses created by a producer's policy deductible, also known as "shallow losses." SCO's payouts can be triggered by county-level revenue losses or by an individual's losses; it depends upon the policy. SCO is primarily for those in the PLC program.


Source: Congressional Research Service April 2014 Report


The Congressional Budget Office has estimated the crop insurance program to cost $41.6 billion through FY 2018. 


Source: The CRS April 2014 Report and the CBO's January 2014 estimates.