"The best year they ever had (financially) would have been their worst year in terms of drought," said Babcock.

The Environmental Working Group works to gain more funding for conservation and small-farmer programs.

There would be a "substantial" SCO payout this year due to lower market prices and yield damage in the western Corn Belt and U.S. Plains, he said, although the corn crop is forecast to be record-large and soybeans the fourth-largest ever.

EWG said the SCO could cost more than the $5 billion-a-year direct-payment subsidy that it would replace. Farm-state lawmakers said they would end the direct payment as part of farm subsidy reform. 

FARM COUNTRY SUPPORTS CROP INSURANCE

Farm groups gave priority to strengthening crop insurance  in the pending farm bill. Farmers pay premiums every year but collect only in bad times, say defenders of the taxpayer-subsidized system.

The House and Senate still must agree on a final compromise version of the Farm Bill.

"Yet another one-sided and slanted 'report,'" said the trade group National Crop Insurance Services about the EWG report.

It said the report used "the extreme and unrepresentative" 2012 drought along with unrealistic commodity prices to arrive at an inflated price tag, rather than look at likely performance over good and bad years. 

Crop insurance is the largest part of the farm safety net. Crop insurance spending was forecast to increase by up to 10 percent over the coming decade, to around $10 billion a year, in farm bills passed by the Senate and House of Representatives.

The SCO would be a county-based revenue policy that would cover the gap between a farm's individual insurance coverage and 90 percent of projected crop revenue. The government would pay 65 percent of the premium and there would be no limit on payments.

The Senate would require growers to practice conservation to qualify for crop insurance subsidies and have growers with more than $750,000 a year in adjusted gross income pay a larger share of the premium. Neither proposal is in the House bill.

SCO would trigger payments more often than other so-called revenue programs proposed in the new farm bill, said analysts Keith Collins and Harun Bulut in the economics journal Choices.

Iowa State's Babcock said a simple reform would improve SCO dramatically. Revenue guarantees should be based on prices expected at planting time rather than harvest, he said. Prices rise sharply when crops are bad, creating an offset for poor yields.