By Carl Zulauf and David Orden et.al
The US crop safety net is approaching its centennial. It has been a remarkably adaptive, evolutionary policy. But, 21st Century assistance is raising the question of excessive levels for barley, corn, cotton, oats, peanuts, rice, sorghum, soybeans, and wheat, the crops that USDA, ERS (US Department of Agriculture, Economic Research Service) computes an economic cost of production (COP). Since 2000, annual market net return on average fell 4.2% / year below economic cost of production for these nine crops, but safety net payments averaged 12.7% / year of costs, more than triple the level needed to cover losses.
Overview of Data and Procedures
Market return in this analysis is net of the economic cost of production, including opportunity cost for unpaid family labor and owned land. They are calculated at harvest. The crop safety net is commodity, crop insurance, and ad hoc & emergency programs. Insurance payment is net of farmer-paid premium. Data Notes 1 and 2 contain a detailed discussion of the data and calculations.
Market Returns Since 1975
Figure 1 reveals clear persistence in market net return at harvest for the COP crops as a group. If last year’s market net return was positive (negative), this year’s market net return is likely positive (negative). Thus, multiyear periods of positive and negative returns exist. We examine the relationship between market net return and crop safety net payment during these periods in sequential order from earliest to latest. The periods are: 1975-1980 (positive return), 1981-2006 (negative return), 2007-2013 (positive return), 2014-2020 (negative return), 2021-2022 (positive return), and 2023-2024 (negative return).
Source : illinois.edu