What's Happening?
The One Big Beautiful Bill (OBBB) Act, passed in July 2025, has significantly increased the premium support for Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO) crop insurance policies from 65% to 80%. This legislative change, announced
by the Risk Management Agency of the USDA, aims to reduce the cost of insurance premiums for farmers starting in 2026. The act also allows farmers to choose the Agriculture Risk Coverage (ARC) program without affecting their eligibility for SCO, providing more flexibility in their insurance options. The coverage level for SCO has been increased from 86% to 90%, although this will not take effect until the 2027 crop year. These changes are expected to lower farmer-paid premiums and increase federal outlays for these insurance products.
Why It's Important?
The increase in premium support for SCO and ECO is significant for U.S. farmers as it reduces their financial burden in securing crop insurance. By lowering the cost of premiums, farmers are more likely to receive insurance payments that exceed what they pay, providing a financial safety net against crop losses. This change is particularly beneficial in regions where historical loss experiences have not matched the premium subsidy rates, such as the Midwest. The policy adjustments are expected to enhance income for farmers by providing additional revenue through insurance payments, especially in years with significant yield or price declines. This could lead to more stable financial planning and risk management for farmers across the country.
What's Next?
Farmers will need to evaluate their insurance options for the 2026 crop year, considering the new premium support levels and coverage options. The USDA's Risk Management Agency will continue to assess and set premiums to ensure they align with expected losses, maintaining the financial viability of the insurance programs. As these changes take effect, farmers and agricultural stakeholders will likely monitor the impact on their net revenues and adjust their insurance strategies accordingly. The effectiveness of these changes will depend on accurate premium rating and the actual loss experiences in different regions.
Beyond the Headlines
The increased premium support for SCO and ECO could lead to broader implications for the agricultural insurance market. By making these insurance products more accessible and financially viable, the USDA is encouraging wider adoption, which could influence the overall stability and resilience of the agricultural sector. Additionally, the changes may prompt discussions on the sustainability of federal subsidies in crop insurance and their long-term impact on farming practices and risk management strategies.
