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Cotton STAX and Modified Supplemental Coverage Option: Concerns with Moving Crop Insurance from Risk Management to Income Support

Author

Listed:
  • Schnitkey, Gary
  • Coppess, Jonathan
  • Paulson, Nick
  • Zulauf, Carl
  • Sherrick, Bruce

Abstract

The Farm Bill version reported by the House Agricultural Committee would modify Supplemental Coverage Option (SCO), a crop insurance policy that provides county-level coverage. Because the modifications proposed for SCO would make it very similar to the STAX insurance program for cotton, we evaluate the historical performance of STAX to provide indications of how modified SCO could operate. Since it was first available in 2015, STAX has paid over 50% of the time and has averaged $37 per insured acre more in insurance payments than farmer-paid premiums, making STAX more like an income support program rather than a crop insurance program. Income supports often increase cash rents and land values, thereby negating a portion of the risk protection offered by crop insurance. Moreover, STAX and the modified SCO could influence planting decisions, adding distortions to the market that decrease prices and lower farm income.

Suggested Citation

  • Schnitkey, Gary & Coppess, Jonathan & Paulson, Nick & Zulauf, Carl & Sherrick, Bruce, 2025. "Cotton STAX and Modified Supplemental Coverage Option: Concerns with Moving Crop Insurance from Risk Management to Income Support," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 14(111).
    • Handle: RePEc:ags:illufd:358495
    DOI: 10.22004/ag.econ.358495
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    References listed on IDEAS

    as
    1. Coppess, Jonathan & Paulson, Nick & Schnitkey, Gary & Zulauf, Carl, 2018. "Farm Bill Round 1: Dairy, Cotton and the President's Budget," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 8, February.
    2. Coppess, Jonathan & Schnitkey, Gary & Paulson, Nick & Zulauf, Carl, 2017. "Beneath the Label: A Look at Generic Base Acres," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 7, April.
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