Looking at Adding ECO and SCO Policies
OMAHA (DTN) -- With the March crop insurance deadline approaching, economists at the University of Illinois say farmers should take a hard look at adding Supplemental Coverage Option (SCO) or Enhanced Coverage Option (ECO) policies in 2026, arguing recent policy changes have made the coverage some of the most cost-effective risk protection available.
The crop insurance price protection for corn is $4.62, while the soybean price is $11.09, both of which were set at the end of February. Coverage is required to be locked in by March 16.
SCO and ECO are county or area policies covering county yields and revenue. Congress enhanced SCO in the One Big Beautiful Bill Act, boosting the premium subsidy to 80%. USDA then made a similar change to ECO.
The difference between ECO and SCO in 2026 is the coverage level. SCO covers up to 86% of county yields and revenue for the 2026 crop year, while ECO offers policies at 90% and 95% levels.
"Every farm should consider SCO and ECO in 2026," said Gary Schnitkey, an agricultural economics professor at the University of Illinois.
Going further, Schnitkey said farmers should "strongly consider" adding ECO coverage at 95% for both corn and soybeans. The rationale is that it is easier to trigger a 5% loss than a 10% loss.
Schnitkey also recommended farmers consider lowering farm-level Revenue Protection (RP) policies. That approach does come with tradeoffs, he explained.
"There are situations where the farm level could pay and the county won't," he said.
A producer could also stack both SCO and ECO coverage.
Farmdoc economists looked at the various options, such as lowering RP coverage from 85% down to 80% or 75% but covering a wider band at the county level with SCO and the 95% ECO option.
"The big bang for the buck is adding ECO at 95%," Schnitkey said.
Typically, farms with a high Actual Production History (APH) may not have generated an insurance indemnity in recent years under RP products.
If a farmer tracks closely to the county yields, it is an attractive option to lower the RP coverage down to 70% or 75% and tack on the SCO and ECO.
In states such as Illinois and Iowa, an RP 75% with SCO and ECO 95% is also slightly cheaper than RP 85% alone.
Farmdoc has an insurance evaluator tool that looks at insurance options in Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio and Wisconsin. (See below for the link.)
DTN looks at a scenario using Farmdoc's insurance evaluator tool for an Iowa county with a corn APH of 200 bushels and a farm trend-average yield of 211 bushels:
-- A 75% RP policy with 95% ECO will cost $13.42 per acre but has an average indemnity payment at $41.29 an acre with a payment frequency of 51.7%. Worst-case net revenue is $728.58 an acre. Adding SCO bumps up the premium to $17.76 an acre but boosts the net revenue possibility by $33.28 an acre to $761.86.
-- An 85% RP policy with no SCO or ECO will cost $20.98 per acre with an average indemnity payment of $22.22 and a payment frequency of 24.1%. Worst-case net revenue is $720.99 an acre.
-- An 80% RP policy with SCO and 95% ECO will cost $21.53 per acre with an average indemnity projected at $58.41 an acre and a payment frequency of 52.1%. Worst-case net revenue is $768.51 an acre.
So, among those three RP scenarios, there's an $8.11 difference in premiums per acre, but also the potential increase in average indemnity of $36.19, and the frequency of payments roughly doubles. The worst-case net revenue projection also increases by $47.52 per acre.
As economists noted, farmers are giving up a little more risk protection at the farm level, but they are projected to make more money over time.
One thing to keep in mind with SCO and ECO: They also won't pay out until June 2027, which is a factor to consider.
SOME RISKS TO CONSIDER
Farmers with a smaller correlation to county yields will bring down the payment opportunities under SCO and ECO.
Farmers also need to consider their basis risk and the impact that changing RP coverage levels could have on prevented-planting coverage. Areas with a greater risk of prevented planting might not want to risk lowering those RP levels.
Schnitkey noted there is a "probability of regret" that comes into play when lowering RP coverage. There are scenarios where an 85% RP plan is going to generate a higher indemnity than a 75% plan with SCO and ECO.
"There is always a chance that 10% farm level revenue range from 85% to 75% would have triggered and generated a larger payment," he said.
The regret probability has a range. In Illinois, it's about a 6.4% chance for corn, with a range by region from 4.4% in the north to 8.9% in the south. Statewide, it's a 6.1% chance for soybeans in Illinois. For areas with higher yield variability, that regret probability also increases.
As DTN highlighted in early February, there will be cases where lowering that RP coverage is simply not a good idea.
OTHER FACTORS
SCO and ECO are typically tied to individual county yields, but in some areas for certain crops, the policies could group yields from as many as 25 counties and sometimes across state lines. A University of Nebraska webinar last month highlighted the risk for sorghum farmers in parts of Nebraska.
Also, in a state like Nebraska, the Risk Management Agency (RMA) has different yields for irrigated and non-irrigated practices. Yet, in some counties, both the irrigated and non-irrigated yields are listed as equal. RMA may have different risk rates for yields in those same counties. It's important to check with your crop insurance agent about those scenarios.
Both farm and county size matter with SCO and ECO plans. Basically, a small farm in a large county is less likely to trigger an SCO or ECO payment. Conversely, a farm that has acres distributed around the county has a higher likelihood of triggering a payment from an area-based plan.
Full Farmdoc webinar on YouTube: https://www.youtube.com/…
Farmdoc Crop Insurance Evaluator Tool: https://fd-tools.ncsa.illinois.edu/…
Also see "Breaking Down SCO, ECO Coverage Options" here: https://www.dtnpf.com/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on social platform X @ChrisClaytonDTN
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