Farm Safety Net Proposals for the
2012 Farm Bill
Dennis A. Shields
Specialist in Agricultural Policy
Randy Schnepf
Specialist in Agricultural Policy
October 6, 2011
Congressional Research Service
7-5700
www.crs.gov
R42040
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Farm Safety Net Proposals for the 2012 Farm Bill
Summary
Ongoing budget deliberations by the Joint Select Committee on Deficit Reduction have generated
concerns that a farm bill to reauthorize farm programs expiring in 2012 may be written by budget
negotiators rather than by the respective House and Senate Agriculture Committees. Various
federal budget proposals have emerged that recommend lower federal spending including cuts to
agriculture programs ranging from $10 billion to $40 billion over 10 years.
In response, Members of Congress, the Administration, and a number of farm groups have put
forward proposals to reduce government expenditures on farm subsidies and revise farm
programs. Many of these farm program proposals were unveiled in September 2011 as the Joint
Select Committee on Deficit Reduction began its deliberations on government-wide budget cuts.
The proposals discussed here might be a starting point for developing the next installment of farm
programs when the 2008 farm bill expires in 2012. Other ideas have also been proposed but are
not discussed here because of duplication or due to insufficient information at time of publication.
Many proposed cuts and policy changes have been directed at commodity programs and crop
insurance because these programs account for the bulk of agricultural funding (excluding
conservation and nutrition programs, which are also considered part of the agricultural budget).
Commodity programs, crop insurance, and the recently expired farm disaster programs comprise
the so-called “farm safety net”—the federal government’s suite of programs designed to support
farm income and help farmers manage risks associated with variability in crop yields and prices.
To generate budget savings and provide funding for proposed changes to the farm safety net,
nearly all of the proposals either reduce or eliminate direct and counter-cyclical payments. Most
proposals either leave the marketing loan program unchanged or retain it with modest
modifications; however, it would be eliminated under two proposals.
To facilitate comparisons, the various proposals are loosely grouped into four categories: (1)
minor policy changes, (2) revised revenue programs, (3) enhanced crop insurance, and (4) other.
Proposals offering the least amount of policy change include those by the Administration and by
the American Farm Bureau, both of which would essentially extend farm programs at reduced
funding levels. In contrast, three proposals—the Aggregate Risk and Revenue Management
(ARRM) Act of 2011 (S. 1626), and separate proposals by Senator Conrad and the American
Soybean Association—would cut direct and other commodity payments and create a new crop
revenue program by borrowing concepts from current programs.
Three proposals—one by the National Cotton Council, one by Representative Neugebauer, and
another by a private crop insurance company—focus on modifications to crop insurance
programs. The National Farmers Union proposes to replace existing farm programs with a
combination of farmer-owned-reserves, increased loan rates, and set asides. A proposed new dairy
program—the Dairy Security Act—would provide a voluntary margin insurance program and
market stabilization activities in place of current dairy programs. Finally, the proposed REFRESH
Act (Senator Lugar) would eliminate most commodity programs (including the sugar program),
and incorporate ARRM, the Dairy Security Act, and expanded whole-farm revenue insurance in
their place.
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Farm Safety Net Proposals for the 2012 Farm Bill
Contents
Introduction...................................................................................................................................... 1
Farm Safety Net Programs............................................................................................................... 1
Commodity Programs................................................................................................................ 2
Crop Insurance........................................................................................................................... 2
Disaster Assistance .................................................................................................................... 3
Policy Issues .................................................................................................................................... 5
Farm Safety Net Proposals .............................................................................................................. 6
Group I: Minor Policy Changes................................................................................................. 8
American Farm Bureau Federation’s Recommendations.................................................... 8
The Administration’s Deficit Reduction Plan ..................................................................... 8
Group II: Revised Revenue Program......................................................................................... 8
ARRM (Senators Brown, Thune, Durbin and Lugar) ......................................................... 8
REFRESH (Senator Lugar and Representative Stutzman) ................................................. 9
Crop Revenue Guarantee Program (Senator Conrad) ....................................................... 10
RMAF (American Soybean Association).......................................................................... 11
Group III: Enhanced Crop Insurance....................................................................................... 11
Stacked Income Protection Plan or STAX (National Cotton Council).............................. 11
CROP (Representative Neugebauer)................................................................................. 13
Farm Financial Safety Net (Crop Insurance Company) .................................................... 13
Group IV: Other Proposals ...................................................................................................... 14
Farmer-Owned Reserves (National Farmers Union)......................................................... 14
Dairy Security Act (Representative Peterson and Others) ................................................ 15
Concluding Comment .................................................................................................................... 16
Tables
Table 1. Farm Safety Net Programs................................................................................................. 4
Table 2. Selected Farm Safety Net Proposals .................................................................................. 7
Contacts
Author Contact Information........................................................................................................... 17
Congressional Research Service
Farm Safety Net Proposals for the 2012 Farm Bill
Introduction
Most of the provisions of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246; the
2008 farm bill) do not expire until the end of FY2012. However, on-going budget deliberations
by the Joint Select Committee on Deficit Reduction1 have generated concerns that a new farm bill
may be “written” or severely constrained from a budgetary perspective by budget negotiators
rather than by the respective House and Senate Agriculture Committees. This concern is further
heightened by various federal budget proposals—that have emerged since late 2010—that
recommend lower government-wide spending including cuts to agriculture programs ranging
from $10 billion to $40 billion over 10 years.
Many proposed cuts and policy changes have been directed at commodity programs and crop
insurance because these programs account for the bulk of agricultural funding (excluding
conservation and nutrition programs, which are also considered part of the agriculture budget).
Commodity programs, crop insurance, and the recently expired farm disaster programs comprise
the so-called “farm safety net”—the federal government’s suite of programs designed to support
farm income and help farmers manage risks associated with variability in crop yields and prices.
As a result, Members of Congress and several prominent commodity and agricultural interest
groups have released their own proposals for U.S. farm policy in general, and Title I commodity
programs in particular, with an eye towards influencing the Joint Select Committee’s
recommendation to reduce overall government spending and apportion the share that the
agriculture baseline will contribute to deficit reduction.
This report describes current farm safety net programs and reviews proposals for policy change
and budget savings. The proposals range from simply extending current farm programs at reduced
funding levels to program elimination and wholesale replacement.
Farm Safety Net Programs2
The U.S. Department of Agriculture and the broader farming community often refer to the farm
safety net as:
1. commodity programs under Title I of the 2008 farm bill,
2. federal crop insurance (permanently authorized) under the Federal Crop
Insurance Act of 1980, and
3. disaster assistance programs under Title XII of the 2008 farm bill.
1 See CRS Report R42013, The Budget Control Act of 2011: Effects on Spending Levels and the Budget Deficit.
2 See CRS Report R41317, Farm Safety Net Programs: Issues for the Next Farm Bill. While many critics of farm
subsidies take issue with what does and does not constitute a safety net and whether current farm programs actually
perform as such, the term safety net is used here for all farm commodity and risk management programs as a catchall
descriptor rather than an assessment of the merits. Several current farm programs contain elements of a safety net and
are intended to protect farmers against risks or ensure a minimum level of economic well-being. For example, crop
farmers and landowners receive counter-cyclical payments when the crop price or revenue declines below a certain
level. In contrast, “direct payments” deliver nearly $5 billion every year to owners of agricultural base acres
irrespective of the level of farm prices or production.
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Each of these three components is covered in the sections below and summarized in Table 1. The
Congressional Budget Office (CBO) projects the total cost of farm safety net programs in FY2011
at $13 billion ($5.6 billion for commodity programs, $5.5 billion for crop insurance, and $1.9
billion for disaster assistance).3
Commodity Programs
The mandatory commodity provisions of Title I of the 2008 farm bill provide support for 26 farm
commodities. Producers of program commodities (food grains, feed grains, oilseeds, upland
cotton, peanuts, and pulse crops) are eligible for a variety of payments.4 Types of payments
include “direct,” “counter-cyclical” or “Average Crop Revenue Election (ACRE),” and
“marketing loan benefits” as described in Table 1. Producers of other so-called “loan
commodities” (including extra long staple, or ELS cotton, wool, mohair, and honey) are eligible
only for nonrecourse marketing assistance loans and marketing loan benefits. In the 2008 farm
bill, benefits for producers of dry peas, lentils, and chickpeas, were expanded to include counter-
cyclical payments (but not fixed “direct” payments).
Current farm bill law also mandates that raw cane and refined beet sugar prices be supported
through a combination of limits on domestic output that can be sold, nonrecourse loans for
domestic sugar, and quotas that limit imports. Dairy product prices are supported by guaranteed
government purchases of nonfat dry milk, cheese, and butter at set prices, and quotas that limit
imports. Additionally for dairy, Milk Income Loss Contract (MILC) payments are made directly
to farmers when farm-level milk prices fall below specified levels.
In contrast to producers of traditional farm bill commodities, producers of specialty crops (e.g.,
fruits, vegetables, horticulture crops) and livestock generally have received little or no direct
government support through commodity programs. Instead, these farms may manage risks
through business diversification, purchase of federal crop insurance, and participation in federal
disaster assistance programs.
Crop Insurance
The federal crop insurance program provides risk management tools to address losses in revenue
(accounting for about 75% of total policy premiums) or crop yield (25%). Federally-subsidized
policies protect producers against losses during a particular season, with price guarantee levels
established immediately prior to the planting season. This is in contrast to commodity programs,
where protection levels are specified in statute (e.g., counter-cyclical payments) or use average
farm prices from previous years (e.g., ACRE).
Federal crop insurance has grown in importance as a farm risk management tool since the early
1990s due, in large part, to federal subsidy intervention.5 The federal government pays about
3 CBO Budget Projections, March 2011.
4 Food grains include wheat and rice, and feed grains include corn, sorghum, barley, and oats. Oilseeds include
soybeans, sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, and sesame seed. Pulse crops
include dry peas, lentils, small chickpeas, and large chickpeas. Commodity programs are financed through USDA’s
Commodity Credit Corporation (CCC). See CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill.
5 Insurance policies are serviced through approved private insurance companies. Independent insurance agents are paid
sales commissions by the companies. The insurance companies’ losses are reinsured by USDA, and their administrative
(continued...)
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60%, on average, of the farmer’s crop insurance premium. Thus, as participation in crop
insurance programs has grown over time, so too has the absolute level of federal premium
subsidies. CBO projects that the current crop insurance program would cost, on average,
$7.7 billion per year (Table 1) through 2021.6
Crop insurance has perhaps the widest commodity and regional coverage of any agricultural
program. In 2010, crop insurance policies covered 256 million acres or approximately 74% of
acres planted. Major crops are covered in most counties where they are grown. Policies for less-
widely produced crops are available in primary growing areas. In total, policies are available for
more than 100 crops, including coverage on fruit trees, nursery crops, pasture, rangeland, and
forage.
Disaster Assistance
In an attempt to avoid ad hoc disaster programs that had become almost routine, and to cover
additional commodities, the 2008 farm bill included authorization and funding for five new
disaster programs. However, these programs were authorized only for losses for disaster events
that occur on or before September 30, 2011, and not through the entire life of the 2008 farm bill
(which generally ends on September 30, 2012). As a result of this early expiration, funding for
these programs is not included in future baseline estimates.
The largest of the disaster programs is the Supplemental Revenue Assistance Payments Program
(SURE), which is designed to compensate eligible producers for a portion of crop losses not
eligible for an indemnity payment under the crop insurance program. The program departs from
both traditional disaster assistance and crop yield insurance by calculating and reimbursing losses
using total crop revenue for the entire farm (i.e., summing revenue from all crops for an
individual farmer). The whole-farm feature and the use of 12-month season-average prices—
while perhaps fiscally responsible—have made SURE complicated, data dependent, and slow to
respond to disasters.
The 2008 farm bill also authorized three new livestock assistance programs and a tree assistance
program. The Livestock Indemnity Program (LIP) compensates ranchers for livestock mortality
caused by a disaster. The Livestock Forage Disaster Program (LFP) assists ranchers who graze
livestock on drought-affected pastureland or grazing land. The Emergency Assistance for
Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) compensates producers for
disaster losses not covered under other disaster programs. Finally, the Tree Assistance Program
(TAP) assists growers with the cost of replanting trees or nursery stock following a natural
disaster.
(...continued)
and operating costs are reimbursed by the government. Separately, the Noninsured Crop Disaster Assistance Program
(NAP) attempts to fill in the gaps in catastrophic coverage in counties where crop insurance policies are not offered.
The program is administered by the USDA’s Risk Management Agency (RMA) and financed through USDA’s Federal
Crop Insurance Corporation (FCIC).
6 CBO Budget Projections, March 2011.
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Table 1. Farm Safety Net Programs
(authorized under the 2008 Farm Bill and other legislation)
Program Instrument
Commodity Coverage
Program description and outlays ($15.2 billion/yr.)
Commodity Programs
Projected average outlays FY2012-21:
($5.7 billion/yr.)
1. Direct payments (DP)
Wheat, corn, grain sorghum, barley,
Fixed annual payment based on land’s production history.
oats, upland cotton, rice, soybeans,
Income transfer; not tied to current market prices or yields.
sunflower, rapeseed, canola,
($4.9 billion/yr.)
safflower, flaxseed, mustard seed,
crambe, and sesame seed, and
peanuts.
2. Counter-cyclical payments (CCP)
Above crops plus pulse crops (dry
Variable annual payment—varies inversely with market price
peas, lentils, small chickpeas, and
relative to “target price” in statute. Based on historical yield
large chickpeas).
and acreage, and national season-average farm price of
commodity. ($0.2 billion/yr.)
3. Marketing Assistance Loan
Same crops as those eligible for
Variable payment—varies inversely with market price relative
benefits (loan deficiency
CCP plus extra long staple cotton,
to “loan rate” in statute. Based on actual production. Farmer
payments, marketing loan gains,
wool, mohair, and honey.
chooses timing. Al ows loan to be repaid at possibly lower
and certificate exchanges)
market price, or cash payment. ($0.1 billion/yr.)
4. Average Crop Revenue Election
Same crops as those eligible for
Variable annual payment—varies inversely with state-level
(ACRE)
CCP (farmers receive either CCP or revenue relative to crop benchmarks. Triggered by both low
ACRE payments, not both)
farm and state revenues. ($0.4 billion/yr.)
5. Non-recourse loans and
Sugar
Price guarantee for refined beet sugar and raw cane sugar;
marketing allotments
limits on sales of domestically-produced sugar. Import quotas.
($0, no net cost).
6. Milk Income Loss Program (MILC) Milk (MILC); nonfat dry milk,
Variable payment—varies inversely with national farm milk
and Dairy Product Price Support
cheese, and butter (DPPSP)
price (MILC); dairy product prices supported at certain
Program (DPPSP)
minimums (DPPSP). Import quotas. ($0.1billion/yr.)
Risk Management
Projected average outlays FY2012-21:
($7.8 billion/yr.)
7. Crop insurance
More than 100 crops, including
Subsidized insurance premiums. Indemnities paid when yield or
major crops, many specialty crops,
revenue drops below guarantees established prior to planting.
and some livestock.
Coverage level selected by producer and based on expected
prices, farm yield, farm revenue, and/or area yield.
($7.7 billion/yr.)
8. Noninsured Crop Disaster
Crops not covered by crop
Payments for severe crop yield losses in regions where crop
Assistance Program (NAP)
insurance
insurance is not available. ($0.1 billion/yr.)
Disaster Assistance (authority ended 9/30/11)
Average annual losses:
($1.7 billion/yr.)
9. Supplemental Revenue Assistance
All crops
Payment based on whole-farm crop revenue shortfall not
Payments Program (SURE)
covered by crop insurance.
10. Four additional disaster
Livestock, forages, honey bees, farm-
Payment for losses due to adverse weather or other conditions
programs
raised fish, fruit tree, vines.
(e.g., wildfire).
11. Ad hoc disaster payments
Policymakers’ discretion
Payment and eligibility determined by each disaster bill.
Source: Congressional Research Service. Outlays are based on the March 2011 CBO baseline.
Notes: The term “safety net” is used broadly here and does not assess the merits of the various programs. Not
shown is additional support for dairy and sugar producers through import restrictions. Additional disaster
programs include Livestock Indemnity Program (LIP); Livestock Forage Disaster Program (LFP); Emergency
Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP); Tree Assistance Program (TAP).
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Policy Issues
The current tight federal budget situation and the general global economic recession since 2008
contrast sharply with the economic success experienced by the U.S. farm sector in recent years.7
The U.S. agricultural sector has been thriving financially since the mid-2000s as rising
commodity prices and land values have pushed farm incomes to record levels and reduced debt-
to-asset ratios to historically low levels. Over the past decade, farm household incomes have
surged ahead of average U.S. household incomes. With this economic backdrop, several critical
policy issues have emerged in recent years that are likely to play a role in shaping the next U.S.
farm bill.8 These include the following.
Budget Concerns. The current federal budget situation is likely to limit overall spending on a
2012 farm bill. Deficit reduction, as evidenced by the mandate given to the Joint Select
Committee on Deficit Reduction, and the frequency that agriculture is mentioned as a target for
cutting government spending is likely to continue.
Effectiveness of the Current Farm Safety Net. From a farmer perspective, commodity programs
have generated criticism that they are not well integrated, are too slow to respond to disasters, or
do not provide adequate risk protection. In contrast, others have long questioned the need for
farm subsidies, contending that government funding could be better spent advancing
environmental goals or improving productivity. Others cite economic arguments against the
programs—that they distort production, capitalize benefits to the owners of the resources,
encourage concentration of production, harm smaller domestic producers and farmers in lower-
income foreign nations, and pay benefits when there are no losses or to high-income recipients.
Overlap in Farm Risk Programs. Farm policy observers have identified apparent overlap
among farm safety net programs. For example, the ACRE program and crop insurance
both address revenue variability. Also, the current farm program mix has several
variations of “counter-cyclical-style” payments, including marketing loan benefits,
traditional (price) counter-cyclical payments, ACRE (revenue) payments, revenue-type
crop insurance, and whole-farm insurance. Some believe that a simplified approach might
be more effective and less expensive.
Commodity Coverage Limited to Major Row Crops. The extent of the current
commodity coverage is primarily a result of the historical and evolving nature of farm
policy. Producers of major commodities have benefited the most from farm programs
because farmers and policymakers representing those commodities shaped the programs
from their inception. Since then, other commodity advocates have not had the interest or
sufficient political power to add their commodities to the mix. Commodity coverage
could be increased by adding commodities to the program mix or by developing a whole-
farm program.
Farm policy alignment with U.S. trade commitments. As a World Trade Organization (WTO)
member, the United States has committed to operate its domestic support programs within the
parameters established by the Agreement on Agriculture as part of the Uruguay Round
7 See CRS Report R40152, U.S. Farm Income.
8 These policy issues are discussed in detail in CRS Report R41317, Farm Safety Net Programs: Issues for the Next
Farm Bill.
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Agreement.9 The United States also faces pressure to modify certain “trade-distorting” elements
of its upland cotton programs due to an unfavorable WTO dispute settlement ruling.10
Farm Safety Net Proposals
Members of Congress, the Administration, and a number of farm groups have put forward
proposals to reduce government expenditures on farm subsidies and revise farm programs. Many
of the proposals reflect the goal, at least to some degree, of:
making the farm program safety net more effective, efficient, and defensible by reallocating
baseline funding to improve risk management and complement crop insurance. Currently,
marketing loan rates and target prices are too low to provide effective price and income support.
The ACRE program has too many disincentives to participation. The SURE disaster program has
not made timely payments and is expiring, and there is concern about how to protect against
shallow losses. Direct Payments are increasingly difficult to defend as farm prices remain at
historically high levels.11
Nearly all of the proposals summarized below and listed in Table 2 either reduce or eliminate
direct and counter-cyclical payments to generate savings and provide funding to change the farm
safety net so it better addresses farm revenue risk for producers. Most proposals either leave the
marketing loan program unchanged or retain it with modest modifications; however, two
proposals—the Farm Financial Safety Net (FFSN) and REFRESH Act—would eliminate the
marketing loan program.
To facilitate comparisons, the various proposals are loosely grouped into four categories: (1)
minor policy changes, (2) revised revenue programs, (3) enhanced crop insurance, and (4) other.
Not all of the proposals specify how much budgetary savings would occur and, even if they do,
few have official comparable scores by the Congressional Budget Office (CBO). As a reference
point, CBO projects average outlays for safety net programs for FY2012-FY2021 at about $135
billion over the 10-year period or $13.5 billion/year, excluding combined outlays of $3 billion in
2012 and 2013 from disaster programs that expire in 2011. This compares to average farm safety
net program outlays of $15.7 billion/year during FY2003 to FY2010, with a high of $20.5 billion
in FY2006 and a low of $12.2 billion in FY2008.
9 See CRS Report RS20840, Agriculture in the WTO: Limits on Domestic Support, and CRS Report RL32916,
Agriculture in the WTO: Policy Commitments Made Under the Agreement on Agriculture.
10 See CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program.
11 From the American Soybean Association, “Risk Management for America’s Farmers and Meeting Agriculture’s
Share of Deficit Reduction,” September 29, 2011, http://www.soygrowers.com/policy/ASA-RMAF.pdf.
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Table 2. Selected Farm Safety Net Proposals
Proposal
Description
Eliminations / Net savings
Group I. Minor Policy Changes
American Farm Bureau
No major program changes; continue direct payments,
Eliminate SURE; reduce direct
Federation Proposal
CCP, ACRE, loan program, and crop insurance.
payments and ACRE.
Administration: Deficit
Reauthorize CCP, ACRE, SURE, and the marketing
Eliminate direct payments.
Reduction Plan
loan program; reduce crop insurance expenditures by
$33 billion savings over 10 years
reducing producer subsidies and payments to insurance (including conservation savings).
companies for expenses and risk-sharing.
Group II. Revised Revenue Programs
Aggregate Risk and Revenue
Crop revenue program—makes payments (by program
Eliminate direct payments, CCP,
Management (ARRM) by
crop) when two triggers are met: (1) farm revenue is
ACRE, and SURE. $20 billion
Senators Brown, Thune, Durbin
below guarantee level, and (2) crop revenue at the
savings over 10 years.
and Lugar
crop reporting district level is below guarantee. Both
use historical crop insurance prices.
Rural Economic Farm & Ranch Five titles: I-Producer Safety Net (ARRM), II-Cons., III-
Eliminate direct payments, CCP,
Sustainability and Hunger Act
Nutrition, IV-Energy, and V-Research. Expands whole-
ACRE, SURE, and marketing loan.
(REFRESH) by Senator Lugar and
farm revenue insurance. Eliminates sugar program.
All titles: $40 billion savings over
Rep. Stutzman
Adds Dairy Security Act. Reduces CRP.
10 years.
Crop Revenue Guarantee
Whole-farm revenue program (for program crops
Reduce direct payments by 50%,
Program by Senator Conrad
only)—makes payments when total revenue declines
eliminate CCP, ACRE, and SURE
below guarantee. Payment is 60% of difference
(for program crops only).
between guarantee and actual revenue. Price guarantee
is higher of target price or 5-yr. Olympic farm price.
Disaster programs for other commodities.
Risk Management for
Crop revenue program—makes payments (by program
Eliminate direct payments, CCP,
America’s Farmers (RMAF) by
crop) when revenue on farm is below guarantee based
ACRE, and SURE.
American Soybean Association
on APH or county yields and national farm prices.
Group III. Enhanced Crop Insurance
Stacked Income Protection
STAX is described for cotton producers only. Farmers
Eliminate direct payments, CCP,
Plan (STAX) by National Cotton
could buy insurance coverage to protect against
ACRE, and SURE. Modify
Council
shallow losses under an area-wide insurance product
marketing loan (2-yr. ave. of
with a fixed minimum harvest price; would be in
Adjusted World Price within 47
addition to a farmer’s individual policy.
to 52 cents/lb. range).
Crop Risk Options Plan
Enable producers to supplement farm-level with area-
(CROP) by Rep. Neugebauer
wide insurance to cover shallow losses. Change APH
yield from 10-year average to 7-year Olympic average.
Farm Financial Safety Net
Crop insurance coverage would include a market-
Eliminate direct payments, CCP,
(FFSN) by private crop insurance
based minimum harvest price (e.g., 5-yr. ave. of crop
marketing loans, and SURE.
company
insurance projected prices times 80%); add 5%
coverage (paid by government) to the farmer’s
purchased coverage for shallow losses.
Group IV. Other
Farmer-Owned Reserves
FOR, increased loan rates, and acreage set-asides.
Eliminate direct payments and
(FOR) by National Farmers Union
Payments limited to crops placed under FOR.
CCP. Modify marketing loan.
Dairy Security Act of 2011 by
Voluntary margin insurance program and market
Eliminate current dairy programs.
Rep. Peterson and others
stabilization (to reduce incentive to produce milk).
$131 million savings over 10 yrs.
Source: Compiled by CRS from proposal statements, news reports, and other sources.
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Group I: Minor Policy Changes
American Farm Bureau Federation’s Recommendations
The American Farm Bureau Federation (AFBF) has proposed no major policy changes to the
farm safety net, preferring to maintain all existing programs with the exception of SURE.12
AFBF’s view is that the current “multi-legged stool” for commodity programs is the best
approach. Moreover, it has concluded, based on its diverse membership, that a combination of
direct payments, CCPs, ACRE, the marketing assistance loan program, and crop insurance will
provide a better safety net than only relying on one or two of those options. AFBF wants
Congress to avoid adopting any safety net program that only works well for one or two
commodities, and is willing to make changes in them to fit into the current budget environment.
AFBF says the SURE program does not work, and assigns a low priority to any revision of it. As
for cutting costs, AFBF proposes that among safety net programs, only direct payments and the
ACRE programs should be reduced, and accomplished through lower payment acres.
The Administration’s Deficit Reduction Plan
The Administration in September 2011 put forward its Plan for Economic Growth and Deficit
Reduction.13 Among numerous suggestions for savings across the government, the Administration
proposes a net reduction in safety net programs of $33 billion over 10 years (including $2 billion
in conservation cuts). The plan would continue most farm commodity programs except for direct
payments, which would save about $30 billion. Another $8 billion in savings would be generated
from changes to the crop insurance program, including reduced producer subsidies (by 2
percentage points) and lower payments to insurance companies for administrative expenses and
risk-sharing. Importantly, the Administration proposes to reauthorize the suite of disaster
programs, including SURE, that expired September 30, 2011, for a cost of roughly $7 billion over
five years.
Group II: Revised Revenue Program
ARRM (Senators Brown, Thune, Durbin and Lugar)
The Aggregate Risk and Revenue Management (ARRM) Act of 2011 (S. 1626) was introduced in
September 2011 by Senators Brown, Thune, Durbin, and Lugar.14 It would eliminate commodity
programs (excepting the marketing assistance loan program) and replace them with a revised crop
revenue program.15 Subsequently, in early October, Senator Lugar and Representative Stutzman
12 AFBF, “Policy Recommendations for the 2012 Farm Bill,” as submitted to Congress on September 29, 2011; at
http://www.fb.org/issues/FarmBureauRecommendations110928.pdf.
13 Office Of Management And Budget, “Living Within Our Means and Investing in the Future: The President’s Plan for
Economic Growth and Deficit Reduction,” September 19, 2011, pp. 17-19, and Table S-5, p. 59; at
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf.
14 “Aggregate Risk and Revenue Management Act of 2011,” S. 1626, referred to Senate Agriculture Committee,
September 23, 2011; at http://www.gpo.gov/fdsys/pkg/BILLS-112s1626is/pdf/BILLS-112s1626is.pdf.
15 “ARRM: Overview and Background,” at http://www.agri-pulse.com/uploaded/ARRM_Background_FINAL.pdf;
“ARRM: Program Specifications,” at http://www.agri-pulse.com/uploaded/ARRM_Specifications_FINAL.pdf.
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introduced S. 1658 and H.R. 3111, the Rural Economic Farm and Ranch Sustainability and
Hunger Act (REFRESH), a broad-based farm bill that incorporates ARRM.16 ARRM is similar in
concept to a proposal by the National Corn Growers called Agriculture Disaster Assistance
Program (ADAP).
The 2008 farm bill included the Average Crop Revenue Election (ACRE) program to help
farmers manage their revenue risks (not just price risk as under other farm programs) and protect
against losses from multi-year price declines. ACRE payments for an eligible crop require
meeting two separate price triggers: first, state-level revenue must fall below a state-level
guarantee, and second, actual crop revenue on the individual farm must fall below the farm-level
guarantee. While the revenue aspect has been conceptually attractive for many, some have
criticized the current program’s use of state crop yields to determine guarantee and payment
levels. They point out that a crop problem in one part of a state might be offset by better yields in
another part, resulting in minimal or no risk protection at a more local level. Another criticism is
that, because ACRE payments are determined with season-average prices calculated by USDA at
the conclusion of the marketing year, payments arrive at least a year after harvest.
ARRM addresses these issues by using a five-year, Olympic average17 revenue trigger based on
yields in crop reporting districts (CRDs), which are multi-county areas, rather than state-wide
yields. This change is designed to shift the program’s risk protection closer to the farm. Secondly,
the program uses harvest prices from the crop insurance program (which are based on current
futures market prices for harvest-time contracts) for calculating actual and guarantee levels of
revenue. This would speed up the payment delivery because crop insurance prices are available
many months before season-average farm prices can be calculated.
Like ACRE, the program has two triggers: a CRD-level revenue trigger and a farm-level revenue
trigger. If both triggers are met, the per-acre payment is the difference between the actual revenue
and the CRD revenue guarantee (90% times CRD Revenue), subject to maximum payment (15%
of the guarantee). Losses below 75% of the guarantee (i.e., 90% minus 15%) are expected to be
covered by crop insurance polices.
Payments would be made on 85% of planted acreage, with an adjustment for farm yields relative
to CRD yields. ARRM would also eliminate restrictions on planting fruits and vegetables on
program acres.
Under ARRM, several existing programs would be eliminated, including direct payment, counter-
cyclical payments, and ACRE payments. The Congressional Budget Office has scored $20 billion
in net savings over 10 years for ARRM (which itself would cost $28 billion over 10 years).18
REFRESH (Senator Lugar and Representative Stutzman)
The Rural Economic Farm and Ranch Sustainability and Hunger (REFRESH) Act of 2011 (S.
1658 and H.R. 3111) proposes more comprehensive changes to current U.S. farm policy as it
16 Office of Senator Richard G. Lugar, “Lugar, Stutzman Target $40 billion in USDA Cuts to Help Meet Federal
Deficit Reduction Goals ,” press release, October 5, 2011, http://www.lugar.senate.gov/record.cfm?id=334391&.
17 Throw out the high and low years, then average the remaining three years of data.
18 CBO score of ARRM compared to the CBO March 2011 baseline, September 19, 2011.
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includes five distinct titles broadly spanning the range of USDA activities. According to the bill
summary, the REFRESH act would result in savings of $40 billion over 10 years.
Title I (Producer Safety Net) would eliminate direct, CCP, and ACRE payments as well as
marketing loan benefits, and replace them by incorporating the ARRM proposal (see above), the
Dairy Security Act proposal (see below), and expanded whole-farm revenue insurance. In
addition, REFRESH’s Title I would repeal the U.S. sugar program. According to the bill
summary, Title I changes would save $16 billion over 10 years.
Title II (Conservation) would shift conservation funding away from land set-aside/retirement and
towards working lands. Maximum enrollment in the Conservation Reserve Program (CRP) would
be lowered from 32 million acres to 24 million acres by 2014, with no penalty for early opt out.
Title II would also consolidate various easement programs into a single easement program, and
various working lands programs into a single working lands program.
Title III (Nutrition) would close SNAP eligibility loopholes and eliminate apparent overlap to
score $14 billion in savings over 10 years. Title IV (Energy from Rural America) would preserve
the Biobased Markets Program, the Biorefinery Assistance Program, the Rural Energy for
America Program (REAP), and the Biomass Crop Assistance Program (BCAP); however, for
most programs funding emphasis would be shifted away from grants and towards loans and loan
guarantees. Title V (Technical Improvements to Research) would move the Biomass Research
and Development Initiative (BRDI) from the energy title to the research title. In addition, it would
offer new flexibility to federally-funded research institutions to attract private funding in lieu of
matching funds for research and extension activities.
Crop Revenue Guarantee Program (Senator Conrad)
Press reports have highlighted a proposal by Senator Conrad called “Crop Revenue Guarantee
Program.”19 Patterned after the SURE program, the proposal is designed to protect against
declines in whole farm revenue. It would cut direct payments by 50% and eliminate CCP, ACRE,
and SURE. It would not require a county to receive a disaster designation to trigger producer
eligibility. Also, unlike SURE, payments would not be based on the amount of crop insurance
purchased by the producer. However, producers would still be required to purchase at least
catastrophic crop insurance (or a policy under the Noninsured Crop Disaster Assistance
Program—NAP).
The primary program is limited to current program crops. For other commodities, a new disaster
program would be developed for specialty crop production, and the recently expired livestock and
fruit tree disaster programs would be re-authorized with slightly lower payment percentages to
reduce overall costs.
The Crop Revenue Guarantee Program would provide payments to producers when their whole
farm revenue (including net crop insurance indemnities) for all program crops falls below their
revenue guarantee level calculated for the entire operation. The farm payment would be 60% of
the difference between the guarantee and the actual farm revenue (a maximum per-acre payment
applies). Total eligible acres could not exceed historical program crop base acres.
19 Jim Wiesemeyer, “How SURE Supporters Want to Change the Program Via New Farm Bill,” Pro Farmer,
September 30, 2011.
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The guarantee level would be 90% (i.e., a 10% deductible) times the sum of all program crop
revenue. Each crop revenue would be the product of the farm-level: 1) planted acreage (subject to
a base acre limitation), 2) crop insurance yield (higher of the Actual Production History (APH) or
the five-year Olympic average APH), and 3) higher of 2010 target price or five-year Olympic
average farm price.
Actual revenue for each crop would be the farm’s actual yield times the national farm price
calculated by USDA for the first four months of the market season (or the loan rate if it is higher)
plus net indemnities. (The national price could be adjusted for quality losses.) This would speed
up payments compared to the SURE program, which requires using full marketing-year average
prices. Focusing the new revenue program on only program crops would reduce the
administrative resources needed to calculate whole farm revenue for crops other than program
crops.
RMAF (American Soybean Association)
The American Soybean Association (ASA) has proposed a revenue-based program designed to
improve farm risk management as a complement to crop insurance.20 As a replacement for current
commodity programs, the Risk Management for America’s Farmers (RMAF) program would
make payments for each program crop when crop revenue on farm is below a guarantee level that
is based on producer’s APH or county yields and national farm prices. In other words, there is a
single revenue trigger to release payments.
For each program crop, the revenue guarantee would be 90% (95% for irrigated crops) times a
producer’s revenue benchmark, which is the five-year Olympic average national farm price times
the farm yield (higher of the producer’s APH yield, the producer five-year Olympic average APH
yield, or 80% of county yield). A producer’s actual revenue for a commodity is the national
average farm price for the first four months of the market year times the farm’s actual yield, plus
net crop insurance indemnities received. The payment amount would equal 85% of the difference
between the producer’s revenue guarantee and actual revenue for the commodity. Payments
would not be made on losses below 75% of the benchmark (i.e., losses typically covered by crop
insurance).
Group III: Enhanced Crop Insurance
Stacked Income Protection Plan or STAX (National Cotton Council)
The National Cotton Council (NCC) recommends that the current U.S. upland cotton programs—
including Direct Payments (DP), Counter-Cyclical Payments (CCP), and ACRE—be replaced
with an area-wide, revenue-based crop insurance program that would supplement existing crop
insurance products.21 In addition, and unlike most other proposals, the NCC proposes adjustments
to the upland cotton marketing loan program that would make it compatible with World Trade
Organization (WTO) domestic support commitments.
20 American Soybean Association, “Risk Management for America’s Farmers and Meeting Agriculture’s Share of
Deficit Reduction,” September 29, 2011; at http://www.soygrowers.com/policy/ASA-RMAF.pdf.
21 “National Cotton Council 2012 Farm Policy Statement,” NCC, August 26, 2011; available at http://www.cotton.org/
news/releases/2011/farmstrat.cfm.
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The NCC policy proposal, which is directed exclusively toward U.S. upland cotton programs,
appears to respond to two factors. The first factor involves current federal budget issues. The
second factor motivating the NCC to propose new cotton policy is trade retaliation authority
granted to Brazil against the United States by the WTO in a long-running WTO dispute settlement
case (DS267) against specific provisions of the U.S. cotton program.22 Among other things, a
WTO dispute settlement panel ruled that U.S. payments to cotton producers under the marketing
loan and CCP programs were inconsistent with WTO commitments and should be brought into
compliance. To avoid retaliation the United States signed (June 17, 2010) a framework
agreement—the Framework for a Mutually Agreed Solution to the Cotton Dispute in the WTO
(WT/DS267)—with Brazil. As a result, Brazil has suspended trade retaliation pending U.S.
compliance with the framework agreement measures. A key aspect of the framework agreement is
quarterly discussions on potential limits of trade-distorting U.S. cotton subsidies (recognizing that
actual changes will not occur prior to the 2012 farm bill). These U.S. commitments are intended
to delay any trade retaliation until after the 2012 farm bill, when potential changes to U.S.
domestic cotton subsidies will be evaluated.
The NCC refers to their proposed revenue-based insurance program as the Stacked Income
Protection Plan (STAX).23 It involves using an area-wide revenue product such as a modified
Group Risk Income Protection (GRIP) program where losses are determined at the county level
rather than the farm level, delivered through crop insurance, to provide protection against shallow
losses—e.g., 10% to 20% loss of average revenue—by riding on top of existing crop insurance
programs. GRIP is an insurance product designed to protect farms against revenue losses that
occur at the county level rather than at the individual farm level.24 Area-wide policies such as
GRIP are generally cheaper than farm-level policies since the risk of loss is pooled at a more
aggregate level. However, unlike crop insurance, which uses a projected price based on pre-
planting time prices for harvest-time futures contracts, the NCC proposal would also include a
minimum “fixed reference” price to act as a floor price guarantee when the projected harvest
price falls below the fixed reference price.25 Participation in STAX would be voluntary, however,
the NCC proposes that producer premiums be offset to the maximum extent possible by using
available upland cotton program spending authority under the DP, CCP, and ACRE programs.
With respect to NCC’s proposed marketing loan adjustments, the WTO panel that reviewed the
dispute settlement case (DS267) recommended that the U.S. upland cotton marketing loan rate
should be more reflective of market conditions. In an attempt to accomplish this, the NCC
proposes using a two-year moving average of USDA’s calculated Adjusted World Price (AWP)26
for the most recently completed marketing years to serve as the marketing loan provided that it
stays within a tight price band of 47 to 52 cents per pound. If the moving average AWP moves
22 For details of the dispute see CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program.
23 Forest Laws, “NCC advocates change in course on farm policy direction,” Delta Farm Press, September 6, 2011.
24 For more information, see “Group Risk Plan (GRP) and Group Risk Income Protection (GRIP),” William Edwards,
Iowa State University, updated February 2011, at http://www.extension.iastate.edu/agdm/crops/html/a1-58.html.
25 In the examples presented in their proposal, the NCC used a “fixed reference price” of 65 cents per pound.
26 As part of the upland cotton marketing assistance loan program, USDA calculates and publishes a loan repayment
rate, on a weekly basis, known as the adjusted world price. The AWP is the prevailing world price for upland cotton,
adjusted to account for U.S. quality and location. Producers who have taken out USDA marketing assistance loans may
choose to repay them at either the lesser of the established commodity loan rate for upland cotton, plus interest, or the
announced AWP for that week.
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below 47 cents/lb., then the proposed marketing loan for upland cotton would be set at 47
cents/lb.27 The current marketing loan rate for upland cotton is set at 52 cents/lb.
According to the WTO retaliation authority granted Brazil under case DS267, and under the terms
of the agreement reached between the United States and Brazil, Brazil retains substantial
privileges in determining whether any proposed changes to the U.S. cotton program (including
the NCC’s proposed changes) would bring U.S. cotton programs into compliance with WTO
commitments. A key measure will likely be the extent to which the proposed changes bring the
U.S. cotton programs into line with market conditions—a key criteria cited by the WTO dispute
settlement panel.
CROP (Representative Neugebauer)
Similar to STAX, the Crop Risk Options Plan (CROP) Act (H.R. 3107) would amend the Federal
Crop Insurance Act to enable producers to supplement existing insurance coverage on farm-level
yield and loss with additional coverage that uses a county-level trigger to insure crops against
shallow losses that are not covered by the individual policies (i.e., the deductible portion). The
CROP Act would also change the way RMA determines yield histories, moving from a 10-year
average to a seven-year Olympic average.
Farm Financial Safety Net (Crop Insurance Company)
A U.S. crop insurance company has proposed the Farm Financial Safety Net (FFSN).28 The
proposal would eliminate all government commodity programs (except possibly ACRE) and is
designed to turn the federal crop insurance program into a more complete farm safety net,
primarily by enhancing revenue insurance and offering revenue products for all commodities
where feasible.
Revenue insurance is the most popular form of crop insurance. Under revenue insurance
programs, participating producers are assigned a target level of revenue for a particular crop
based on market (futures) prices immediately prior to planting season and the producer’s yield
history. A farmer who opts for revenue insurance receives an indemnity payment when his actual
farm revenue (typically crop-specific) falls below a certain percentage of the target level of
revenue, regardless of whether the shortfall is caused by low harvest prices or low production
levels.29 As such, revenue insurance protects against revenue losses within the crop season (i.e.,
between planting and harvest) and not across seasons. Risk protection across multiple seasons is
currently provided by the Counter-Cyclical Program and ACRE programs.
To protect against more than just within-season price declines, the FFSN would introduce a
minimum price into the crop insurance program. The minimum price (e.g., 5-yr. ave. of crop
insurance projected prices times 80%) would substitute for the projected price in an insurance
guarantee when the projected price is below the minimum. The additional cost of this liability
27 According to CRS calculations, during the 15-year period from August 1997 through August 2011, the monthly
market price received for upland cotton was below the NCC’s proposed marketing loan 38% of the time.
28 Proposal developed by NAU Country Insurance Company.
29 Another major type of crop insurance is the yield-based policy, whereby a producer receives an indemnity if there is
a yield loss relative to the farmer’s historical yield (actual production history or APH).
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would be paid with higher insurance premiums (paid by farmers and the government). Proponents
of the proposal suggest that such minimums could replace the need for loan rate (and marketing
loan benefits) or counter cyclical payments. They say the impact on premiums would be minimal
because potential losses for the government and insurance companies would be kept in check by
the possibility that farm revenue may be little changed if higher yields offset lower prices.
The FFSN would also alter how individual farmers’ APH yields are determined so that they better
reflect expected yields, a change proponents say is needed for crop insurance to become a true
safety net. Currently, the APH calculation uses 10 years of historical data, which may include
multiple years of poor weather, possibly overstating the likelihood of re-occurrence and
depressing protection levels. The new approach would exclude some low-yield years in the
calculation when certain conditions are met.
As a replacement for SURE and to address the issue of “shallow losses” (those paid by the
producer through the policy deductible), farmers would be given added revenue coverage on each
policy that is 5% greater than their purchased coverage. For example, a farmer who purchases
75% coverage (i.e., 25% deductible) and pays the premium rate for 75% coverage level would be
given an additional coverage of 5% or 80% total coverage.
In an attempt to make crop insurance more affordable in all areas and for crops where it is not
popular, the proposal would limit the farmer-paid premium to only 15% of total dollars of
coverage for an enterprise unit (i.e., an insured area covering all land of a single crop farmed by a
producer in a specific county). Producer subsidy levels would increase only for those producers
affected by the 15% maximum. The proposal would essentially shift the entire farm safety net to
the crop insurance program.
Group IV: Other Proposals
Farmer-Owned Reserves (National Farmers Union)
On September 13, 2011, the National Farmers Union (NFU) unveiled a study by the University of
Tennessee of an alternative farm policy proposal that would replace the existing farm programs—
Direct Payments, Counter-Cyclical Payments, and the marketing loan benefits program—with a
combination of farmer-owned-reserves, increased loan rates, and set asides.30 The stated goal of
the proposed program is to provide an effective safety net for family farmers, improve the
efficiency of existing programs, and reduce overall costs.
In the newly released study, the NFU proposal is analyzed for the major program crops—e.g.,
corn, soybeans, wheat, rice, barley, sorghum, and oats—over the recent 13-year period of 1998
through 2010. Key elements of the NFU proposal include the following. Direct payments, along
with the marketing loan and countercyclical payment programs are eliminated. A farmer-owned
reserve (FOR) is established for each of the major program crops. Producers may elect to place
their holdings in a crop’s FOR whenever the market price falls below the loan rate for that crop.
30 NFU News Release, “NFU Unveils Study to Present Policy Options to Reduce Farm Bill Costs,” September 13,
2011, at http://nfu.org/news/current-news. Key study findings and URL links to the study are available at
http://www.nfu.org/study.
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Each crop’s annual loan rate is pegged to the corn loan rate based on the ratio between corn and
other crops, as found in the 1996 Farm Bill, with the two exceptions of grain sorghum, which is
increased to the same price as corn, and soybeans which is raised to $6.32. The corn loan-rate is
set as the midpoint between the variable cost of production and full cost of production for the
1998 crop (as calculated by USDA). Thereafter, annual loan rates for 1999 to 2010 are raised or
lowered based on the change in the rolling three-year average of the USDA chemical input index
of prices paid by farmers. For corn, that calculation resulted in a loan rate of $2.27 in 1998,
increasing to $2.60 by 2010—this compares with $1.95 under the current program. The various
FOR loan rates approximate the historical ratio between the price of corn and the other crops,
facilitating the arbitrage of crops to the most profitable mix for each farm, with minimal influence
from the loan rate. Farmers are free to select their mix of crops based on the profitability of the
crops.
Producers are paid $0.40 per unit (e.g., bushel, cwt, lb.) per year as a storage payment for all
crops placed in the FOR. Commodity payments would only be paid for quantities actually placed
in the reserve and not for every bushel produced, as in the case of the current marketing loan
program. As a result, the level of government payments is significantly reduced.
Each crop’s FOR is capped: corn at 3 million bushels, wheat at 800 million bushels, soybeans at
400 million bushels, etc. A crop placed in the FOR must remain there until its market price
exceeds 160% of its loan rate (referred to as the FOR release trigger) when it is released to the
market. When a crop’s FOR reaches its cap and its market price remains between the loan rate
and the FOR release trigger, then no further FOR placements may occur and no FOR release is
triggered. When a crop’s FOR reaches its cap and the market price falls below the loan rate, then
a voluntary paid set-aside is triggered.
The farm-level set-aside is based on whole-farm acreage and not allocated crop-by-crop as in the
past. Set-asides would be allocated at the county level, and farmers would have the opportunity to
bid acreage into the set-aside. Participation in the set-aside by any given farmer would not be
mandatory, but all farmers would have the opportunity to offer a bid on acreage they would be
willing to put in the set-aside. As in the past, farmers would be required to maintain an
appropriate cover crop on the land.
According to the study results, the proposed farmer-owned-reserves program would address the
lack of timely market self-correction when crop prices plummet, while permitting farmers to
receive the bulk of their revenue from market receipts. Study results found that government
payments for crops during the 13-year study period (1998 to 2010) would have been $95.8 billion
under the FOR program proposal—40% less than the actual $152.2 billion spent under existing
programs; the value of U.S. crop exports would have been $4.9 billion higher, and crop prices
would have averaged substantially higher including $0.26 per bushel for corn, $0.48 for wheat,
and $1.09 for soybeans. The value of crop production would have averaged slightly lower by
about $2.6 billion annually.
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Dairy Security Act (Representative Peterson and Others)
The Dairy Security Act of 2011 (H.R. 3062) was introduced in September 2011.31 The bill has
been developed with the National Milk Producers Federation over the last 18 months as an
alternative to current dairy programs that critics say have not provided an adequate safety net for
dairy producers. The bill consists of three components – a Dairy Producer Margin Protection
Program, a Dairy Market Stabilization Program, and reforms to the Federal Milk Marketing
Order system. Dairy producers would have the option to sign up for the margin program, which
would make payments to producers when the gap (“margin”) between milk prices and feed costs
drops below certain levels. Producers that sign up for the margin program would then
automatically be enrolled in the stabilization program, which is designed to discourage milk
production for program participants (and raise overall milk prices). When the stabilization
program is activated during times of low margins, participating producers receive payment on
only a portion of their base (historical) milk marketings. Under the bill, current dairy programs
would be eliminated, including the Dairy Product Price Support Program (DPPSP), Milk Income
Loss Contract (MILC) program, and Dairy Export Incentive Program (DEIP).
Concluding Comment
Most proposals for altering the farm safety have recommended reducing or eliminating direct
payments for budgetary savings and as a way to fund revisions to other programs. Proposals
offering the least amount of policy change include those by the Administration and by the
American Farm Bureau, both of which would essentially extend farm programs at reduced
funding levels.
Three proposals would cut direct payments and other commodity payment, and create a new crop
revenue program by borrowing concepts from current programs. The Aggregate Risk and
Revenue Management (ARRM) Act of 2011 (S. 1626) by Senators Brown, Thune, Durbin, and
Lugar would create a modified ACRE program with a double trigger (farm level and crop
reporting district level) that is designed to better protect farm income risk on a crop-by-crop
basis.32 A proposal by Senator Conrad is a whole-farm revenue approach patterned after the
expired SURE program (with only a single farm-level trigger), plus provisions to extend disaster
programs for specialty crops and livestock producers. Finally, the American Soybean Association
recommends a crop revenue program that would make payments (by crop) when revenue on farm
is below a guarantee level that is based on producer’s APH or county yields and national farm
prices (farm-level trigger only).
Three proposals focus on crop insurance. The National Cotton Council is advocating an area-
wide, revenue-based crop insurance program that would supplement existing crop insurance
products, plus changes to the marketing loan program. Similarly, Representative Neugebauer’s
proposal would enable producers to purchase supplementary area-wide insurance to cover
shallow losses. A proposal by a crop insurance company would insert a minimum price into crop
insurance policies, among other changes, to protect against multi-year price declines.
31 House Committee on Agriculture Press Release, “Peterson, Simpson Introduce The Dairy Security Act of 2011,”
September 23, 2011, at http://democrats.agriculture.house.gov/press/PRArticle.aspx?NewsID=1126.
32 In early October 2011, Senator Lugar and Representative Stutzman introduced the Rural Economic Farm and Ranch
Sustainability and Hunger Act (REFRESH), a broad-based farm that incorporates ARRM.
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The National Farmers Union would replace existing farm programs with a combination of
farmer-owned-reserves, increased loan rates, and set asides.
Many of these proposals were unveiled in September 2011 as the Joint Committee on Deficit
Reduction began its deliberations on government-wide budget cuts. The proposals may represent
a starting point for developing the next installment of farm programs when the 2008 farm bill
expires in 2012.
Author Contact Information
Dennis A. Shields
Randy Schnepf
Specialist in Agricultural Policy
Specialist in Agricultural Policy
dshields@crs.loc.gov, 7-9051
rschnepf@crs.loc.gov, 7-4277
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