A Crop Insurance Backgrounder

Protecting America's Food Supply

In 2009, the Federal crop insurance program protected $80 billion of America's food supply, providing a safety net against the inherent risks and potential for widespread catastrophic losses associated with agricultural production. Crop insurance has been called the linchpin of the Federal safety net for America's farmers and ranchers.

In 2009, 82 percent of insurable farmland in the U.S. was protected by 1.2 million policies on more than 100 individual crops.

In addition to reducing risk and protecting their own investments, crop insurance enables farmers to borrow money to expand and improve their businesses. Bankers rely on crop insurance to reduce the risk of their loans to farmers. Crop insurance also provides the security that enables farmers to forward market their crops.

Crop insurance helps make America's farmers and ranchers world leaders in agriculture, allowing producers to stay competitive and be more innovative. It also helps them sleep better at night knowing that should the unexpected happen, they will have the financial security to stay in business and go on to plant the next season.

More than ever before, our farmers are being asked to produce more products and achieve higher yields. Agricultural crops for food, feed, fiber and fuel are in great demand both domestically and abroad. New technology, innovation, access to capital and affordable risk management have allowed America's farmers to meet the demands placed upon them. A vibrant Federal crop insurance program is a key component to the tremendous success of our country's agricultural economy.

There are many other components of the Federal safety net for America's farmers such as direct payments, disaster assistance and programs designed to support particular crops and special initiatives. But none has the universal significance of the Federal crop insurance program, which is relied upon by a vast majority of today's farmers and ranchers.

The Federal Crop Insurance Program Milestones... At A Glance:

1938: Congress approved the Federal Crop Insurance Act which established the first Federal crop insurance program.

1980: Congress passed legislation that was designed to increase participation in the Federal crop insurance program and make it more affordable and accessible. This modern era of crop insurance was marked by the introduction of a public-private partnership between the U.S. government and private insurance companies. Bringing the efficiencies of a private sector delivery system together with the regulatory and financial support of the Federal government formed the basis of a new and innovative approach to solving a long-standing problem.

1994: The Federal Crop Insurance Reform Act of 1994 dramatically restructured the program, creating incentives designed to dramatically increase participation.

1996: The Risk Management Agency (RMA) was created in the U.S. Department of Agriculture to administer the Federal crop insurance program.

1998: More than 180 million acres of farmland were insured under the program, representing a three-fold increase over 1988.

2000: Congress approved the Agricultural Risk Protection Act (ARPA). The provisions of ARPA made it easier for farmers to access different types of insurance products including revenue insurance and protection based on historical yields. ARPA also increased premium subsidy levels for farmers to encourage greater participation and included provisions designed to reduce fraud, waste and abuse.

2007: Eighty-two percent of insurable farmland in the U.S. worth $67 billion in crop value was protected through the 1.3 million Federal crop insurance policies, insuring more than 100 individual crops on more than 271 million acres.

2008: Due to the rising prices of commodities such as corn, soybean and wheat, the value of all crops insured under the Federal crop insurance program in 2008 reached a record $90 billion. Because premium prices are directly related to crop values, the crop insurance industry will experience greater increased potential risk exposure.

2009: Even though the industry was just beginning to deal with the consequences of the $6.4 billion cut in program funding from the 2008 Farm Bill, the program paid out over $5.2 billion in indemnity payments to insured farmers in 2009. Once again, the public-private partnership worked together to protect rural America’s farmers and ranchers.