As USDA is cutting programs that support sustainability and market access for smaller farmers, the Department has made a series of changes to crop insurance subsidies mostly benefiting large commodity farms, which are funneling billions of dollars directly to insurers.
In 2025 and 2026, many of the U.S. Department of Agriculture (USDA) programs that provided market access to predominantly small or underserved farmers have been cut or temporarily defunded. The Local Food Purchasing Assistance program, the Local Foods for Schools program, and the Increasing Land, Capital, and Market Access Program were all defunded by the USDA. Funding was frozen for the Partnership for Climate Smart Commodities program. These cuts come as farmers face a myriad of escalating challenges such as extreme weather increases, rising input costs, and trade tariffs. In support of farmers, the USDA will be spending $12 billion in economic assistance, though most of that will be paid to commodity farmers, and many specialty crop farmers are not applying for the aid for which they may be eligible.
More under the radar, a series of costly changes to crop insurance programs known as the Supplemental Coverage Option (SCO) and the Enhanced Coverage Option (ECO) were passed, with support from major commodity groups and the crop insurance industry. As shown in graph 1 below, our analysis of newly posted data implies what the Congressional Budget Office (CBO) and President Trump’s 2027 budget projections have already conceded. These changes will create cost increases that dwarf the savings from defunding most of the local farming programs, and they will be paid directly from the federal government to insurance companies, mostly to provide more risk protection for large farms who already have crop insurance. Based on actual 2025 data and preliminary 2026 policy count data, between 2025-2034 we estimate a 10-year increase of $38.1 billion in public money going directly to insurers for SCO and ECO plans attributable to these changes. These changes will only entrench the status quo and continue to hand billions of dollars to insurance companies.
Crop insurance is a bargain for the farmers who can afford it
The aim of crop insurance plans is to strengthen farmers’ financial resilience by allowing them to recoup a portion of losses they sustain. The two most common forms of crop insurance are Yield Protection (YP) plans, under which farmers receive payouts for reductions in yields caused by drought, excessive rain, flooding, or other natural disasters; and Revenue Protection (RP) plans, which protect against declines in crop prices. Most plans cover one individual crop, with only Whole-Farm Revenue Protection (WFRP) and Micro Farm Policies (MFP) allowing for all products to be covered under a single plan. These plans are administered as public-private partnerships, under which the federal government pays private insurers directly, lowering costs to farmers. With these subsidies, the average plan only requires the farmer to pay about 40% of the insurance cost, with the federal government funding the remaining 60%. Considering the size of these subsidies, the total payments farmers receive to cover losses are far greater than what they pay in costs.
Considering how much federal money is spent on crop insurance subsidies for farmers, it is worth analyzing the make-up of farmers who currently have crop insurance.
Farmers with crop insurance are disproportionately large, commodity growers
As of 2024, only 15% of farmers had crop insurance — fewer than one in every six. Here is a summary of what we know about those who had crop insurance in 2024 and how crop insurance benefits were disbursed, according to the USDA’s Economic Research Service:
- Within all row crop farmers, 62% had crop insurance. Among specialty crop growers and livestock producers, fewer than 20% had crop insurance.
- As shown in graph 2 below, small farms, defined as farms with annual gross cash farm income (GCFI) less than $350,000, made up 86.4% of all farms, yet they only received about 12% of crop insurance payouts in 2024.
- At the other end of the spectrum, very large farms, defined as having an annual GCFI of $5 million or more, made up 0.5% of all farms. They received about 11% of crop insurance payouts for the year, over $1.5 billion.
USDA ramped up SCO and ECO incentives, farmers responded
SCO and ECO plans are known as “shallow loss” plans, as they provide protection for losses as small as 5%. Both plans must be purchased in combination with another crop insurance plan. By adding a shallow loss plan, a farmer can increase the amount of revenue covered by insurance up to 95%, drastically limiting their risk exposure. Although this level of coverage is enticing, uptake of these plans through 2024 was limited by relatively high costs. In 2024, ECO plans covered a total of $871.4 million in revenue but cost farmers $238.7 million in premiums (27%), a substantial price to pay to limit risk.
In April of 2024, a legislative push was introduced with the goal of expanding shallow loss coverage by greatly increasing subsidy levels and expanding the amount of coverage provided. The Federal Agriculture Risk Management Enhancement and Resilience (FARMER) Act proposed these changes to the SCO program. The bill was led by Sen. John Hoeven (R-ND), with co-sponsors from states across the Midwest and South. The proposal received enthusiastic statements of support from most major commodity groups, the crop insurance industry, and other large farmer advocacy organizations, including the American Farm Bureau Federation, who is also affiliated with one of the 12 insurance companies approved to sell crop insurance in the U.S. by the USDA. These proposed changes to SCO were ultimately included in the One Big Beautiful Bill Act and passed in July 2025. On ECO, the Biden administration increased the premium subsidy substantially through an administrative action for the 2025 plan year, then the Trump administration increased the subsidy again beginning in 2026. The cost of shallow loss coverage has decreased dramatically: we estimate that the average cost of an ECO plan to a farmer will drop from 27% of revenue in 2024 to 10% of revenue in 2026.
The increased subsidies are extremely likely to result in expected payouts from SCO and ECO over time that will exceed the premiums paid by the farmer, especially considering increases in extreme weather events and market price fluctuations. Considering this increase and what we know about who currently has crop insurance, it makes sense that groups representing commodity farmers and other groups highly engaged with crop insurance were supportive of these changes. Within the span of about a year, insurance coverage for minimal losses went from somewhat expensive to affordable — and farmers noticed. Graph 3 below shows the increase in the total number of SCO and ECO policies from 2024 to 2026.
Many participants who already had crop insurance now have far greater coverage at a much lower price. However, there are structural barriers that may prevent smaller farmers or growers using agroecological or climate-friendly farming methods from obtaining one of these shallow loss coverage policies, including:
- SCO and ECO are area-level policies, generally paid out based on county-wide losses, as opposed to losses experienced on each individual farm. An individual farmer’s experience may not match the experience of others in their county.
- A farmer who practices agroecology may have outcomes that are highly uncorrelated to county-level outcomes. For example, a farmer may not be willing to use high levels of chemical additives to maintain yield levels.
- Since payments depend on county-level results, payments for losses on these plans are usually not made until at least June of the following year. A smaller farm may be less capable of managing losses for a year and a half prior to payment.
ECO results in 2025 foretell huge subsidy increases going forward
Since subsidies for ECO plans were increased substantially in 2025, data is available showing the impact of this change on total premiums paid, total acres insured, and the level of premium subsidies paid by the federal government to insurers. With just the initial subsidy increase, the number of acres insured by ECO plans increased from 15.6 million to 61.9 million in 2025, and the total amount of subsidies paid to insurance companies increased from $190.4 million to $1.23 billion. Although premium data is not yet available for 2026, we have projected 2026 payments based on the insurance policy count data available as of April 6 and the increased subsidy percentage. Graph 4 below shows the results of that projection. Despite almost three times as many plans in place, we estimate only a modest increase in the total insurance premiums paid by farmers in 2026, whereas the tax dollars paid to insurers jumps substantially once again, by $3.42 billion.
The CBO projects $29 billion more in subsidy increases
While these costs may be surprising, they are not much higher than projections completed by the CBO, who completes regular multi-year projections of selected programs. Their “USDA Mandatory Farm Programs” projections analyze total premium subsidies. Calculations were completed in June 2024 (prior to the first change to ECO subsidies), January 2025 (after the first change), and February 2026 (including all changes to SCO and ECO). Graph 5 below shows the increase in total projected premium subsidies from June 2024 to February 2026.
Over 10 years, February 2026 projections show an increase of $28.9 billion. While this amount includes other premium subsidy changes, those changes were valued by the CBO as costing $3 billion over 10 years. This leaves $25.9 billion attributable to the SCO and ECO changes. Although this is slightly lower than our results (we discuss unknown information below), it is clear, even according to the most recent CBO projections, that these changes will result in billions of additional dollars each year paid by the federal government directly to insurers.
Some consequential information is still to be determined
While there is no doubt that the massive increase in policies adopted will result in an influx of taxpayer money going to insurers to provide SCO and ECO coverage, there are some considerations to keep in mind when assessing the overall financial impact of these changes:
- More policies are being entered into the RMA data every week. The final number of policies will almost certainly be higher than the current number.
- These changes will likely lead to decreases in subsidies paid for RP and YP plans as some farmers replace some of their RP and YP coverage with SCO and ECO coverage. This offsetting amount could be a factor in the CBO projections that show a lower amount of increased spending from 2025-2034.
- With such a large increase in the number of policies in place, a key factor in the final costs will be the size of the farming operations adopting these plans. In 2025, the average revenue per ECO policy increased by 12% over 2024, meaning that ECO plans increased in size. The above calculations assume that average revenue per policy will be equal to 2025 in all future years.
Possible safety net changes would encourage a transition to climate-resilient farming
Allowing for flexibility and financial sustainability will be essential in cultivating a farming system that lets farmers and ranchers adapt their farming methods to the realities of climate change and encourages young people to pursue farming. Unfortunately, our current system is more likely to benefit larger, row crop growers than smaller farmers or specialty crop growers. Farmers are not rewarded through insurance programs for practices that build soil health, even though they could protect against yield loss and result in lower payouts.
To promote fiscal and environmental sustainability within the current crop insurance structure, the USDA should consider the following adjustments:
- Create greater opportunities for shallow loss coverage under WFRP plans for diversified farmers and MFP plans for small farmers.
- Incorporate conservation program participation and other climate-smart farming practices into levels of accessibility of crop insurance and the sizes of subsidies available. For example, an extra benefit to a farmer who does not grow on a portion of their land as part of the Conservation Reserve Program (CRP) could be an increased premium subsidy for crop insurance on land they are actively farming.
- Scale back crop insurance levels for large and very large farms, with subsidies phasing out as incomes increase.
A farmer once told me that they didn’t want crop insurance — they wanted a fence. Many farmers would prefer funding that would help them pursue the resilience and sustainability core to agroecological farming practices such as rotational grazing, rather than backstop payments to help withstand routine losses. Full funding and development for popular, over-subscribed programs like the Environmental Quality Incentives Program (EQIP), the Conservation Stewardship Program (CSP) and the Rural Energy for America Program (REAP) would provide stronger support for strengthening resilience on the farm and in our food system. A publicly financed farm safety net system should support the farmers who need it most.
