Crop Insurance, Premium Subsidies, and Soybean-Corn Disparity

By Jonathan Coppess and Nick Paulson

Relative to total premium, soybeans and corn receive smaller payments from the US crop insurance program than other large acreage US field crops.  Concern is growing over this disparity (for example, farmdoc daily, January 17, 2023 and September 4, 2024).  The disparity exists even after a major review of ratings implemented in 2011. Moreover, raising premiums subsidies, as has occurred historically several times with more proposed in the new farm bill (farmdoc daily, May 27, 2025 and June 10, 2025 farmdoc daily), will disadvantage soybeans and corn relative to other crops.  A new approach is needed, specifically, new products that reduce the total insurance premium (farmer paid plus subsidy), especially for soybeans and corn.  Joint soybean-corn insurance is one such product.  It is estimated that joint soybean-corn insurance has the potential to increase net indemnities paid to soybeans and corn by 13% with no increase in Federal premium subsidies.

Payment Performance, 1989 – 2024

Crop insurance data are available electronically for the 1989-2024 crops from the US Department of Agriculture, Risk Management Agency (USDA, RMA) Summary of Business.  Data were collected for individual farm yield and yield-price revenue products, the only ones offered before the Crop Insurance Act of 2000.  Crop insurance payment performance is measured as a ratio:  ((indemnities paid to farms minus premiums farms paid) divided by total premium).  Total premium, which is farm-paid premium plus Federal premium subsidy, is a monetary measure of the losses due to the risks being insured.

The 1989-2024 crop year ratios of net farm indemnity to total premium for soybean and corn individual farm insurance products averaged 23% and 31%, respectively.  The next lowest ratio is 53% for barley, creating a notable gap of at least 20 percentage points that underscores the difference between soybeans and corn and the other crops in this study.  The highest ratio is 114% for rice.

An Olympic average is also calculated.  Removing the low and high ratios in part addresses that large weather risk events occur differentially across crops.  Soybeans and corn continue to clearly have the lowest ratios.  As expected since downside yield impact of poor weather exceeds the upside yield impact of excellent weather, the Olympic average is less than the common average for all crops.  Illustrating the potential impact of individual years, the two averages for peanuts and rice differ by 11 and 8 percentage points, respectively.