Episode 90 - Rice Farmers Face Limited Adjustment Capacity Under the Expanding Access to Risk Protection (EARP) Rule

USDA's new Expanding Access to Risk Protection (EARP) rule eliminates the option for producers to purchase an additional 5 percentage points of prevented planting coverage. In this episode, Hunter Biram and Ryan Loy discuss what this change means for rice producers, how it affects flexibility within crop insurance decisions, and why Arkansas farmers may be particularly impacted given their reliance on prevented planting coverage. The conversation also explores trends in rice insurance participation, adjustment capacity, and potential implications for future risk management decisions. 

Transcript

00;00;00;13 - 00;00;32;12
Ryan Loy
USDA's Expanding Access to Risk Protection, or EARP rule, eliminates the ability for producers to purchase an additional five percentage points of prevented planting, or PP, buy up coverage. Rice producers may face limited adjustment capacity because many are already insured at high underlying coverage levels, where little room remains to increase coverage further. Over time, rice producers have shifted heavily toward 70 to 85% coverage levels, potentially reducing flexibility to offset loss PP buy up protection under EARP.

00;00;32;13 - 00;00;47;17
Ryan Loy
That, and much more on this episode of Morning Coffee and Ag Markets.

00;00;47;20 - 00;00;51;17
Ryan Loy
With me today is Dr. Hunter Biram. Hunter, how are you doing today?

00;00;51;21 - 00;01;11;04
Hunter Biram
I'm doing just dandy. It's May the 19th on this recording and the weather's been great. Some rain is on the horizon and I know that farmers are looking forward to that. But frankly, I'm looking forward to that because I've been trying to grow some grass in my front yard. And I got the sprinklers out and it was good.

00;01;11;04 - 00;01;26;10
Hunter Biram
It was good. We watered a lot, Reed got to play in the sprinklers. He had a great time. I sent you that video. I mean, he was having a ball, but that's expensive. And so I would really love for the good Lord to give us some rain and save me a little bit of money.

00;01;26;16 - 00;01;44;07
Ryan Loy
That's right. Well, good stuff. And yeah, I, like you mentioned those pictures you sent off Reed running around the sprinklers, it looked like a Hallmark Channel commercial. It was great. Those are awesome pictures. And he's getting so big. Well, Hunter, today we're going to be talking a little bit about EARP and adjustment capacity in rice insurance. So I'm just going to kick it off with a question for you.

00;01;44;08 - 00;01;55;20
Ryan Loy
What exactly changed under the USDA Expanding Access to Risk protection or EARP rule. And why is the elimination of prevented planting buy up coverage significant for rice producers in the Arkansas Delta?

00;01;55;21 - 00;02;19;27
Hunter Biram
Well, Ryan, I'm going to start off by just rehashing the EARP rules. So USDA, I believe this would have been at the end of January, finalized the expanding access to risk protection, or, as you're saying, the EARP rule. This included a major change to the prevented planting coverage provisions. The rule was put in force in November, I believe, 28th of last year.

00;02;19;27 - 00;02;50;19
Hunter Biram
And so that allowed about a 60 day period for public comments. And so just a quick 101 even before I go further than that on rulemaking. So the bill on Capitol Hill has to be passed into law. And so it doesn't just stop there like the lawmaking is done. Then the agencies have to implement the law. And so in the case of USDA, in the federal Crop Insurance Corporation, which is under the risk management agency, to even make this more confusing, has to implement rules.

00;02;50;19 - 00;03;09;14
Hunter Biram
So this most recent rule really focused mostly on provisions in the one big beautiful Bill act. So increasing the subsidy for beginning farmers that really, you know, a really big increase there. But something else that was in the rule that wasn't specifically stated in the One Big Beautiful Bill act is this change to prevent plant. So this is more of an operational change.

00;03;09;14 - 00;03;32;05
Hunter Biram
It's not really a statutory change. There's general guidance for the federal corporation and RMA to to administer the program. And so this prevent plant rule changes more of that operational change that doesn't really require statute to make any changes. So that's just kind of the quick 101 on rulemaking. So moving back to the rule that we're talking about that was finalized in January of this year.

00;03;32;05 - 00;03;58;13
Hunter Biram
So historically insured producers purchasing buy up crop insurance policies could elect to increase the preventive planting coverage by an additional five percentage points for an added premium cost. So, for example, in the case of rice, the standard PP coverage is 55% of expected liability. There the biopsy would be 60%. Well, that's gone now. It's just the 55%, which is separate from your other coverage level, your regular buy up, you know, which ranges from 50 to 85%.

00;03;58;13 - 00;04;20;08
Hunter Biram
So let's say a rice farmer gets 80% revenue insurance. They can still get the 55% prevent plant, but then their payment is equal to 55% times the 80% and then times whatever the expected revenue is. Now under this rule, that option has been removed. So the plus five, the 60%, that option: gone, okay. That's gone now under this new rule, the operational change.

00;04;20;08 - 00;04;44;23
Hunter Biram
As a result, many producers may attempt to substitute toward higher underlying buy up coverage levels within their YP or their yield protection, or their RP or revenue protection policies. However, the ability to make those adjustments depends on the producer's current coverage level election. Lower coverage level elections generally allow more room for adjustment, while higher coverage elections leave less remaining flexibility.

00;04;44;23 - 00;05;06;08
Hunter Biram
So we're going to call that today: adjustment capacity. So let's say a farm is at 50% buy up, not cap, buy up. They've essentially got 35 percentage points of adjustment capacity to go up to 85% max, whereas farmers at 80% right now they only have five percentage points to go up to for adjustment capacity. So if you're starting at a lower coverage level, you have more adjustment capacity.

00;05;06;08 - 00;05;10;22
Hunter Biram
If you're starting at a higher coverage level, you have less adjustment capacity.

00;05;10;24 - 00;05;26;18
Ryan Loy
That totally makes sense. And so is it fair to say that, you know, under this circumstance and this is genuinely just a question I have that, you know, having more adjustment capacity in this instance is a better thing, or is it kind of indifferent and doesn't really impact and It's all up to the single operation?

00;05;26;20 - 00;05;43;18
Hunter Biram
I'll say that it just removes flexibility. So not necessarily that it's a good or bad thing. It does remove flexibility. I would generally call flexibility a good thing, but just to give you some stats and we'll put this in the newsletter. So in 2025 about 60% or more rice farmers, because I do want to focus on rice today.

00;05;43;20 - 00;06;07;22
Hunter Biram
I should have mentioned that at the onset, we're going to focus on rice for this discussion. And so if you look at the participation data, this is going to be in our figure one, a little over 60% of insured rice farmers. This is across the US, a little over 60% are enrolled in 70% or higher coverage levels. Okay. That's going to be four coverage levels to the max.

00;06;07;22 - 00;06;29;26
Hunter Biram
So 70% 75, 80 and 85% okay. So half the coverage levels, you're in the top half of the coverage options. And that's over 60% of rice farmers. Do you want to go a little bit tighter 16%. So this is going to be nested within that 60%. 16% of those are going to be at 80 and 85%. So about 16% of farmers have essentially no adjustment capacity.

00;06;29;27 - 00;06;55;15
Hunter Biram
And this is going to be for rice farmers. So that means at about 44% have a little bit more adjustment capacity, but still not as much as if they were at 55 or 60% coverage. Something else that we observe in the participation data is around 2011. You know, you're looking at about 770,000 acres were enrolled in the catastrophic coverage. That has dwindled sharply since 2011 to 125,000 acres.

00;06;55;16 - 00;07;24;25
Hunter Biram
Okay, so a big shift down in cat coverage. This has also been in conjunction with a large decline in the insured acres in 50 and 55%. So what are we seeing over time? More buy up 70, 75, 80, 85%. So more acreage in those coverage levels, which are the top four. Less participation, less acreage in those bottom four coverage levels. So essentially over time, adjustment capacity in this case has declined because by up is going up.

00;07;24;27 - 00;07;45;28
Hunter Biram
Now, we'll say farmers, especially in Arkansas, really rely on prevent plant. You know, especially last year, Ryan, you know, you and I worked on that damage estimates for all the flooding that happened back in April. And we calculated about $100 million close to in losses. And I mean, farmers, they they were very reliant on prevented plant. I just recently looked at the FSA data.

00;07;45;28 - 00;08;07;13
Hunter Biram
I think it's the second highest prevent plant year on record that's been recorded, at least in the past ten years. The first highest might have been 2020. I was in PhD school then. I remember John Anderson was the department head and I remember seeing him on the news. I tuned into the local news and saw him on there because there was just so much water on the ground, and I think it came at a really bad time.

00;08;07;14 - 00;08;31;25
Hunter Biram
I think even worse than planting, I think the crop had already had a stand and it was looking pretty good and totally wiped out. So anyway, prevent plant - very valuable coverage in Arkansas. And so the removal of the plus five. Yes, it takes away flexibility. But what we really face in Arkansas, especially on this heavy clay ground better suited for rice, we have a higher we are more prone to flood risk.

00;08;32;00 - 00;08;47;26
Hunter Biram
So really long answer to your question. I mean, yes, it removes flexibility. Generally I associate that with a good thing. But in general, farmers in Arkansas really rely on prevent plant. And so in that regard I would say it's not so good of a thing.

00;08;47;28 - 00;09;11;00
Ryan Loy
Thank you sir. One question I've got kind of two part question here. One's more of a hypothetical and one is a little bit more direct. Speaking of, you know, the report that we put together last year, the buy up was available for farmers during that time. What do you think just in your research and your thoughts, the impact financially that would have been if this rule was instated during the generational flood last year?

00;09;11;02 - 00;09;30;15
Hunter Biram
That is that's a big question. So let's just think about it out loud. I mean, you're taking away 5%, five percentage points of coverage from prevent plant. And we we ensure almost every rice acre. So we'll go ahead and just say for the sake of the argument, don't know the the number specifically. I'll tell him I think it's about a million acres.

00;09;30;15 - 00;09;47;23
Hunter Biram
So if you got about a million acres. Okay. What did the price look like then? I think it was it wasn't good. The expected price wasn't good. I'm just kind of shooting from the hip, but I think 4.50. Yeah, that's about $10 a hundredweight. That's a pretty good estimate. So let's just say we're at a price of 4.50 a bushel.

00;09;47;23 - 00;10;15;12
Hunter Biram
And let's use I think the state average was around 160 bushels. Okay. So we're going to take a million acres, pull out the old trusty calculator here, a million acres times this 4.50, times a 160 bushel, and then take 5% of that. When you look at $36 million, about $36 million. And that seems pretty reasonable, honestly. So, I mean, you're looking at around $36 million that if the coverage wasn't there, wasn’t there.

00;10;15;13 - 00;10;22;23
Hunter Biram
That's kind of the opportunity cost of this rule in 2025, had it been in place, would be worth about $36 million.

00;10;22;25 - 00;10;44;19
Ryan Loy
Yeah. That's significant. I appreciate you doing the quick math on that one, because I think that that is just incredibly interesting. Kind of more so coming back to what you were talking about with the coverage levels. And I think we touched on this a little bit here. But, you know, what are some of those factors specifically in Arkansas or even just the southern region that have, you know, driven these rice producers towards the higher coverage level elections over time?

00;10;44;22 - 00;11;16;15
Hunter Biram
I think one is familiarity with the program. So when you think about crop insurance participation generally, the biggest jump happened in 1994. So in the I think it was the federal Crop Insurance Reform Act to participate in FSA programs. So in modern terms, to participate in ARC or PLC, which it wasn't there at the time, but, you know, the equivalence for the time to participate in those programs, you had to be enrolled in crop insurance, some level, any level.

00;11;16;16 - 00;11;44;10
Hunter Biram
Well, nobody in the South, obviously, Arkansas had much crop insurance. And so an option, the catastrophic coverage option was made available, and it was much cheaper than buying up in higher coverage levels. And so there was very little participation until then. Then it was catastrophic coverage. And literally it's like buying an option is the way I think about like in futures and options terms, like it's just like buying an option.

00;11;44;14 - 00;11;52;16
Hunter Biram
The farmer was paying cat coverage so that they could actually participate in the FSA program, which that would be an interesting paper to, to actually.

00;11;52;20 - 00;11;54;14
Ryan Loy
That would be. Jot that down.

00;11;54;15 - 00;12;14;11
Hunter Biram
Yes. You know, just write that down. But they were paying for that other stuff. They really weren't paying for the insurance. Yes, on paper they were. But really they were paying to participate in FSA programs. And so then over time you see participation increase in terms of liability, in terms of acreage. You know, one person could say, well, liability is gone up because prices have gone up because of inflation.

00;12;14;11 - 00;12;29;21
Hunter Biram
Yields have gone up over time because of changes in technology. Yes. But really what's driving a lot of that's going to be a career. So I mean you know, like we have in the newsletter just in the past ten years, you know, we've added nearly a million acres since since 2011, nearly a million acres in of at least for rice.

00;12;29;21 - 00;12;46;11
Hunter Biram
And so there's been changes to acreage prices and yields. But acreage is going to be driving most of this. And so with that in mind, I think just then the question is, okay, that's that's like at the extensive margin, did you get insurance or not? What about at the intensive margin with like getting into those higher coverage levels?

00;12;46;11 - 00;13;17;10
Hunter Biram
I think just observation would tell me that if you think about the math behind prevent plant and we do you know, this is a valuable coverage for Arkansas farmers. You think about 55% of one is 0.55, 55% of ten is 5.5, 55% of 100 is 55. Okay. So if we go from 50% to 70%, we've just added 20% points to the amount of coverage that I can actually get.

00;13;17;10 - 00;13;44;01
Hunter Biram
And what I find interesting about my conversations with farmers and stakeholders, crop assurance agents is rice farmers in particular. They like to get those underlying coverages so the downed rice endorsement, replant coverage, prevent plant. And so there's value in those those embedded coverages is what I would call it. And so as farmers I think have learned more about these embedded coverages and have found value in these embedded coverages.

00;13;44;01 - 00;14;00;15
Hunter Biram
I don't have a paper on this, but I think there's lots of papers being talked about in this episode that hopefully we can come back and say, yeah, we were right. But what I would expect is with the value of these embedded coverages over time, there's been more value in buying up because a lot of the embedded coverages are a function of whatever your buy

00;14;00;15 - 00;14;21;10
Hunter Biram
up coverage actually is, because when you think about rice, there's not a lot of yield risk there. I mean, the the yield risk. Let's just assume that the crops made a stand. We flooded it. We flooded the field okay. The yield risk is really in about a three week window at the very end of the season when the fields have been drained and, you know, you have that dry rice that's sitting out there.

00;14;21;10 - 00;14;38;28
Hunter Biram
And then what else happens toward the end of the year? Hurricanes typically happen. Now we're kind of coming out of this La Nina. So we've seen like zero hurricanes in recent years. That's great. That's awesome. Although we have seen a lot more wetter springs. Well now we're seeing this really dry spring. Now that this there's this talk of the El Nino.

00;14;38;28 - 00;15;00;05
Hunter Biram
And so with the El Nino, there's going to be higher sea surface temperatures, SSTs in the Gulf. And so with these warmer sea surface temperatures, that tends to increase the hurricane incidents. And so, you know, I think going forward we could see that happen. So all this to say, it's all about those embedded coverages and the fact that there's really not a ton of yield risk that rice faces, it's mostly price risk.

00;15;00;07 - 00;15;09;28
Hunter Biram
That also explains why we see a lot of rice farmers enrolling in PLC, because price risk is going to be the risk to manage more so than yield risk.

00;15;10;01 - 00;15;23;18
Ryan Loy
Absolutely. Well that's great. Thank you for going into detail about that. I know that I appreciate it. And our listeners do too, because like we were talking about before, crop insurance is a complicated topic. And, you know, even I still get tripped up talking to you on exactly how all this works.

00;15;23;19 - 00;15;25;09
Hunter Biram
Believe me, I'm tripping myself up half.

00;15;25;09 - 00;15;41;16
Ryan Loy
The time. Well, Hunter got one last question for you, and it's kind of looking into the future. You know, looking in, looking ahead. What are what do you think are the biggest implications of ERP for producer decision making, premium costs and future crop insurance participation specifically for rice producers?

00;15;41;17 - 00;16;07;11
Hunter Biram
I'm going to go back to the newsletter here and just say that in our newsletter, which, by the way, was coauthored by Doctor Francis Thibeault at North Dakota State University and Agricultural Research and Policy Center. Up there. We also reference our white paper through the Fryer Price Risk Management Center of Excellence. So there's the plug for that. So in the newsletter, you know, we suggest that producers will likely reevaluate their underlying coverage elections in response to the elimination of PPE by a given.

00;16;07;11 - 00;16;24;25
Hunter Biram
This was the first year for that implementation. And the participation data hasn't come out yet. I'd be really curious to see if we saw any changes in the last newsletter that we did on this rule, one year after the removal of the plus ten prevent plant coverage level. There really wasn't any change one year after, but two years after.

00;16;24;26 - 00;16;43;26
Hunter Biram
There was a big change into the 1,775% coverage levels. And then three and four years after the change was even more so into the 75 and 80% coverage levels. So in the near term, farmers are going to evaluate this. Did they have a lot of time to make changes for this year? Probably not, I wouldn't say, but next year, in the year after, I think we're going to see some changes to participation.

00;16;43;26 - 00;17;10;25
Hunter Biram
For those who do have the adjustment capacity to actually make these changes. Now, part of the downside with this, though, is that farmers are going to face higher premium costs associated with them into the higher coverage levels, while still not fully replacing the protection that's previously provided through about coverage. There's a lot of peas in that sentence. Over time, the rule may alter how producers evaluate management strategies and could influence participation patterns across coverage levels and unit structures within rice insurance programs.

00;17;10;25 - 00;17;35;25
Hunter Biram
So I'll say, at least in rice, you know rice as well. Why we're talking about rice wells because Arkansas. But if you look at the data, you look at the data. Rice has incurred quite a few prevent plant indemnities relative to other crops that are insured in the program. And so it kind of stands out. And there's a reference to a journal article that a coauthored with Francis, as well as his colleague Dylan Turner, and with Lawson Conner, who's up in Fayetteville at the U of A up there.

00;17;35;25 - 00;17;52;04
Hunter Biram
So we just focus on rice because it's a big coverage for rice. It's very important for us. It's one of those embedded coverages. And so I think there will be some changes to what degree. I'm not sure yet. But those changes are probably going to come with increased premium cost and still not necessarily getting that same coverage.

00;17;52;07 - 00;18;12;27
Ryan Loy
It was very interesting. Hunter. I have learned a lot and I hope our listeners have as well. For our listeners, if you're interested, you know, Doctor Byrum is going to link those references in our newsletter. I encourage you to go and read those resources if you're curious and want to learn more about this topic. Francis is a great researcher, and I know that him and Hunter have done some fantastic work in this space.

00;18;13;00 - 00;18;16;21
Ryan Loy
Well, Hunter, is there any last thoughts or anything you'd like to leave our listeners with?

00;18;16;22 - 00;18;37;16
Hunter Biram
Nothing that I can think of, nothing of value, I would say, you know, Ron, I am looking forward to we have a conference. You know, I have coming up in June with all of our colleagues across the southeast of Southeast Extension Economics Committee is going to be hanging out. And that's what's on my mind. This work is obviously on my mind, but I'm also looking forward to being with our colleagues and spending some time with them, getting to spend time with their families.

00;18;37;16 - 00;18;40;25
Hunter Biram
And I'm excited that you and your significant other are going to be there, too.

00;18;41;02 - 00;18;59;07
Ryan Loy
That's right. We're excited. We're really pumped to do that. It's always one of my favorite meetings of the year locations, just so great. So anyway, well, it was great talking to you today, Hunter, and thank you for giving kind of a breakdown of this new rule change, and we really appreciate it. For our listeners. Like I said, please feel free to reach out to us anytime.

00;18;59;07 - 00;19;03;17
Ryan Loy
If you have questions on this topic. And please stay tuned for the market report. Bye bye.

00;19;03;18 - 00;19;32;06
Evan Ware
Now back with your market report as of May 28th, 2026, Corn July 26 futures are $4.56 per bushel. That's down 4% from a month ago and up 2% from a year ago. Corn December futures are $4.82 per bushel. That's down 3% from a month ago, but up 9% from a year ago. Rice July futures are $12.93 per 100 wait.

00;19;32;06 - 00;20;00;07
Evan Ware
That's up 18% from a month ago, but down 3% from a year ago. Rice September futures are $13.31 per 100 wait. That's up 18% from a month ago and down 2% from a year ago. Soybeans July 26th futures are $11.95 per bushel. That's about the same from a month ago and up 14% from a year ago. Soybeans November 26th futures are $11.94 per bushel.

00;20;00;08 - 00;20;25;20
Evan Ware
That's up 2% from a month ago and up 15% from a year ago. Cotton July 26 futures are 76.7 $0.07 per pound. That's down 4% from a month ago, but up 18% from a year ago. Cotton December futures are 79.5 $0.03 per pound. That's down 2% from a month ago, but up 17% from a year ago. Wheat July futures are $6.24 per bushel.

00;20;25;22 - 00;20;53;02
Evan Ware
That's down 5% from a month ago and up 17% from a year ago. The US weekly average for peanuts is currently $464 per ton. That's up 3% from a month ago and down 9% from a year ago. Moving on to our fertilizer prices, urea is currently $732 per ton. A month ago, it was $835 per ton. Three months ago, it was $598 per ton, and a year ago $678 per ton.

00;20;53;03 - 00;21;19;16
Evan Ware
Ammonium nitrate is currently $575 per ton. A month ago, it was $594 per ton. Three months ago, it was $459 per ton, and a year ago it was $548 per ton. Ammonium sulfate is currently $512 per ton. A month ago, it was $553 per ton. Three months ago, it was $485 per ton, and a year ago it was $556 per ton.

00;21;19;17 - 00;21;46;06
Evan Ware
DAP is currently $872 per ton. A month ago it was $905 per ton. Three months ago it was $775 per ton, and a year ago it was $791 per ton. Triple Super Phosphate is currently $803 per ton. A month ago it was $820 per ton. Three months ago it was $680 per ton, and a year ago it was $656 per ton.

00;21;46;07 - 00;22;11;22
Evan Ware
Potash is currently $457 per ton. A month ago, it was $475 per ton. Three months ago, it was $451 per ton, and a year ago it was $458 per ton. Moving on to our fuel prices, Arkansas Farm Diesel is currently $3.85 per gallon. A month ago it was $4.17 per gallon, and a year ago it was $2.25 per gallon.

00;22;11;24 - 00;22;35;16
Evan Ware
Arkansas Highway Diesel is currently $5.07 per gallon. A month ago, it was $5.02 per gallon. A year ago it was $3.21 per gallon. The Mississippi River at Memphis current reading is 18.64ft. A year ago it was 18.24ft. Thanks for tuning in to another episode of Morning Coffee and Ag Markets. We hope that you have a great week!

00;22;35;18 - 00;22;46;18
Hunter Biram
If you would like to learn more about the Fryar Price Risk Management Center of Excellence, we encourage you to go to Fryar, F-R-Y-A-R  risk R-I-S-K center dot uada dot edu.

00;22;46;20 - 00;23;01;13
Hunter Biram
If you want to check out the newsletter is associated with this podcast. We encourage you to visit the website and check out podcast newsletters. When you go to podcast newsletters, you should be able to see the most recent newsletters that we published, and within each one of those newsletters, you should be able to click on a link to subscribe.

00;23;01;13 - 00;23;05;12
Hunter Biram
If you haven't subscribed, thank you for tuning in and we'll catch you next time. Bye bye now.