Farm Safety Net Proposals for the
2012 Farm Bill
Dennis A. Shields
Specialist in Agricultural Policy
Randy Schnepf
Specialist in Agricultural Policy
November 10, 2011
Congressional Research Service
7-5700
www.crs.gov
R42040
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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 House and Senate Agriculture Committees. Various proposals have
emerged that recommend lower federal spending, including cuts to agriculture programs ranging
from $10 billion to more than $80 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.
Other ideas have also been proposed but are not discussed here because of duplication or
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 five categories: (1)
minor policy changes, (2) revised revenue programs, (3) enhanced crop insurance, (4) whole-farm
insurance, and (5) other. The proposals may represent a starting point for developing the next
installment of farm programs when the 2008 farm bill expires in 2012.

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Contents
Introduction...................................................................................................................................... 1
Recent Developments of the Joint Committee................................................................................. 1
Legislative Process and Timeline of the Joint Committee......................................................... 2
House and Senate Agriculture Committees’ Leadership Proposal ............................................ 2
Concerns with the Joint Committee Fast-Track Process ........................................................... 2
Current Farm Safety Net Programs ................................................................................................. 3
Commodity Programs................................................................................................................ 3
Crop Insurance........................................................................................................................... 4
Disaster Assistance .................................................................................................................... 6
Policy Issues for Current Programs ........................................................................................... 6
Farm Bill Safety Net Issues ............................................................................................................. 8
Farm Bill Safety Net Proposals ....................................................................................................... 9
Group I: Downsize Current Policy .......................................................................................... 12
American Farm Bureau Federation’s Recommendations.................................................. 12
The Administration’s Deficit Reduction Plan ................................................................... 13
Senator Coburn’s Deficit Reduction Plan ......................................................................... 13
Growing Opportunities (Representative Blumenauer)...................................................... 14
Group II: Revised Revenue Program....................................................................................... 14
Aggregate Risk and Revenue Management or ARRM
(Senators Brown, Thune, Durbin, and Lugar)................................................................ 14
REFRESH (Senator Lugar and Representative Stutzman) ............................................... 15
Crop Revenue Guarantee Program (Senator Conrad) ....................................................... 16
Risk Management for America’s Farmers or RMAF
(American Soybean Association)................................................................................... 17
Group III: Enhanced Crop Insurance....................................................................................... 17
Stacked Income Protection Plan or STAX (National Cotton Council).............................. 17
Crop Risk Options Plan or CROP (Representative Neugebauer)...................................... 19
Farm Financial Safety Net (Crop Insurance Company) .................................................... 19
Group IV: Whole Farm Revenue Insurance ............................................................................ 20
U.S. Agriculture and Nutrition Policy Statement
(Chicago Council on Global Affairs) ............................................................................. 20
Local Farms, Food, and Jobs Act (Representative Pingree and Senator Brown).............. 21
Group V: Other Proposals........................................................................................................ 21
Farmer-Owned Reserves (National Farmers Union)......................................................... 21
Proposed Dairy Legislation............................................................................................... 22
Environmental Working Group (EWG) Proposal ............................................................. 23
California Recommendations (Coalition of CA Agricultural Interests) ............................ 23
Concluding Comment .................................................................................................................... 23

Tables
Table 1. Farm Safety Net Programs................................................................................................. 5
Table 2. Policy/Program Issues for Developing a Farm Safety Net ................................................ 9
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Table 3. Selected Farm Safety Net Proposals ................................................................................ 10
Table 4. Baseline for Mandatory Farm Bill Programs, FY2012-FY2021...................................... 12

Contacts
Author Contact Information........................................................................................................... 24

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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, ongoing budget deliberations by
the Joint Select Committee on Deficit Reduction 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 House and Senate Agriculture Committees.1 This concern is further heightened
by various federal budget proposals, which have emerged since late 2010, recommending lower
government-wide spending, including cuts to agriculture programs ranging from $10 to more than
$80 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 direct agricultural funding.2
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.
Other farm bill programs, including conservation and nutrition programs, also have been
recommended for budget reductions under some proposals.
Members of Congress and several prominent commodity and agricultural interest groups have
released their own proposals for U.S. farm policy in general, and commodity programs in
particular, with an eye towards influencing the joint committee’s recommendation to reduce total
government spending and apportion the share that the agriculture baseline will contribute to
deficit reduction. The proposals range from simply extending current farm programs at reduced
funding levels to program elimination and wholesale replacement.
Because the joint committee is ad hoc in terms of its authority and its process, a “Recent
Developments” section has been added to this report to briefly describe and update the status of
the joint committee’s recommendations on deficit reductions and their potential implications for
U.S. farm policy. This is followed by a brief description of current farm safety net programs,
which, in turn, is followed by a review of recent proposals for policy change and budget savings.
Recent Developments of the Joint Committee
Established under the Budget Control Act of 2011 (BCA; P.L. 112-25), the Joint Select
Committee on Deficit Reduction (or joint committee) is instructed to develop a bill to reduce the
federal deficit by at least $1.2 trillion over the 10-year period ending in FY2021.3 The joint
committee’s budget recommendations have significant implications for developing the next farm
bill.

1 Hereinafter referred to as the joint committee. See CRS Report R41965, The Budget Control Act of 2011, for
background information. The joint committee also is often referred to as the “super committee,” a label that has been
widely adopted by the news media, government watchers, and agricultural interest groups, and is intended to signify the
nearly unilateral decision-making power granted to the joint committee.
2 See CRS Report RS22131, What Is the “Farm Bill”?.
3 See CRS Report R41965, The Budget Control Act of 2011.
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Legislative Process and Timeline of the Joint Committee
Any legislation resulting from the joint committee recommendations will proceed under special
“fast track” procedures that prevent amendments and limit debate. The BCA allows both
chambers of Congress to pass the original legislation reported by the joint committee with no
amendments on a simple majority vote. For the proposal to be considered under the special,
expedited procedures, however, it must be approved by the joint committee by November 23,
2011, and passed by both chambers by December 23, 2011. If a joint committee proposal cutting
the deficit by at least $1.2 trillion is not enacted by January 15, 2012, then an automatic spending
reduction process that includes sequestration (the cancellation of budgetary resources) will ensue.
Congressional committees whose jurisdiction is likely to be impacted by a joint committee
proposal—for example, the House and Senate Agriculture Committees—are free to submit their
own recommendations to the joint committee. However, no specific policy restrictions or
requirements have been placed on the joint committee. Hence, it is under no formal obligation to
incorporate any recommended actions it receives.
House and Senate Agriculture Committees’ Leadership Proposal
On October 17, 2011, the leadership of the House and Senate Agriculture Committees4 offered a
letter to the joint committee recommending $23 billion in net deficit reduction from mandatory
programs in the agriculture committees’ jurisdiction.5 The unofficial consensus of those claiming
to have knowledge of committee intentions is that the $23 billion would be allocated by cutting
$13 billion from commodity support, $6 billion from conservation, and $4 billion from nutrition
programs.6 The leadership’s letter also said that they were finalizing the specific farm policies that
would achieve the $23 billion in deficit reduction and that a complete legislative package would
be provided by November 1, 2011. However, the November 1 deadline was not met and, as of
November 10, no legislative package had been forwarded by the agriculture committee leadership
to the joint committee. According to news sources, regional differences over the potential “farm
safety net” design appear to be the most prominent obstacle to an agreement.7
Concerns with the Joint Committee Fast-Track Process
Given the 10-year time frame of the joint committee’s budget recommendations, many within the
broader U.S. agricultural community are concerned that the joint committee’s budget
recommendations (whether influenced by the agriculture committee leadership’s proposal or not)
could provide the framework for the next farm bill, thus precluding the full congressional debate
that traditionally underlies the development of U.S. farm policy. As a result, certain agriculture-
related interest groups—such as nutrition, agricultural research, renewable energy, rural
development, and conservation—fear that they will be shut out of the process.

4 House Agriculture Committee Chairman Frank Lucas and Ranking Member Collin Peterson; Senate Agriculture
Committee Chairwoman Debbie Stabenow and Ranking Member Pat Roberts.
5 “Senate and House Agriculture Committees Offer Bipartisan, Bicameral Recommendations for Deficit Reduction to
the Joint Committee,” October 17, 2011; at http://ag.senate.gov/newsroom/press/release/senate-and-house-agriculture-
committees-offer-bipartisan-bicameral-recommendations-for-deficit-reduction-to-the-joint-committee.
6 “Conrad: Farm Bill Content Now Moving Target,” Hagstrom Report, Vol. 1, No. 206, November 8, 2011, at
http://www.hagstromreport.com.
7 “Still No Farm Bill Language for Lawmakers,” Chris Clayton, DTN Ag Policy Editor, November 8, 2011.
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Since the October 17th letter from the House and Senate Agriculture Committee leadership to the
joint committee, the news media and several issue-specific advocacy groups have spoken out
against the “secret nature” of the leadership’s policy recommendations and the subsequent joint
committee’s fast-track process, which they say circumvents the traditional open debate of farm
policy legislation.8 On November 3, 2011, Congressman Kind delivered a letter—co-signed by 26
other members of Congress and endorsed by several advocacy groups—to the joint committee
urging it to “resist any attempt to use the expedited deficit reduction process to create new farm
bill programs and entitlements that have not been reviewed by the Congress.”9
Current Farm Safety Net Programs10
The U.S. Department of Agriculture and the broader farming community often refer to the farm
safety net as:
1. farm commodity price and income support 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 which expired
on September 30, 2011.
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).11
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.12 Types of payments

8 Examples include “Super Committee Shapes the Next Federal Farm Bill,” Christine Souza, AgAlert, November 9,
2011, http://agalert.com/story/?id=3554; “Farm Bill Being Shaped Quickly, Behind Closed Doors,” Philip Brasher,
http://www.DesMoinesRegister.com, October 22, 2011; “Back Room Deals,” Ben Grossman-Cohen, Oxfam, October
30, 2011, at http://politicsofpoverty.oxfamamerica.org/; “Super Committee Me,” Ken Cook, Environmental Working
Group, October 17, 2011, at http://www.ewg.org/agmag/2011/10/super-committee-me/; and “The Not So Secret Farm
Bill,” Don Carr, EWG, November 8, 2011.
9 Available at http://kind.house.gov/uploads/11.3.11_%20Letter%20to%20SC_farm%20programs.pdf.
10 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.
11 CBO Budget Projections, March 2011.
12 Food grains include wheat and rice, and feed grains include corn, sorghum, barley, and oats. Oilseeds include
(continued...)
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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).
The current farm 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.13 The federal government pays about
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 2021.14

(...continued)
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.
13 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
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).
14 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 Avg. Outlays FY2012-FY2021: ($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 (CCPs) 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
CCPs 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)
CCPs (farmers receive either CCPs
revenue relative to crop benchmarks. Triggered by both low
or 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 Avg. Outlays FY2012-FY2021: ($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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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.
Policy Issues for Current Programs
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.15
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.16

15 See CRS Report R40152, U.S. Farm Income.
16 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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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.
Payment limits and Farm Size. Payment limits for the farm commodity programs, with the
exception of the marketing assistance loan program, either set the maximum amount of farm
program payments that a person can receive per year or set the maximum amount of income that
an individual can earn and still remain eligible for program benefits (a means test). The payment
limits issue is controversial because it directly addresses questions about what size farms should
be supported, whether payments should be proportional to production or limited per individual,
and who should receive payments. Some policymakers want limits to be tightened to save money,
respond to general public concerns over payments to large farms, and reduce the possibility of
encouraging expansion of large farms at the expense of small farms. Others say larger farms
should not be penalized for the economies of size and efficiencies they have achieved. Crop
insurance has no payment limits, a feature that some policymakers say makes crop insurance an
attractive centerpiece of farm policy because it helps small and large farms alike, with neither
apparently gaining at the expense of the other.
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
Agreement.17 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.18

17 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.
18 See CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program.
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Farm Bill Safety Net Issues
A major driver in developing the next farm bill is the current federal budget situation. Deficit
reduction is likely to continue, as evidenced by the mandate given to the Joint Select Committee
on Deficit Reduction, and agriculture is frequently mentioned as a target for cutting government
spending. From an agricultural policy perspective, many supporters, as well as some critics, of
farm subsidies have become increasingly interested in developing a safety net that reflects 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.19
More generally, several basic policy questions shape the discussion for revising the farm safety
net (Table 2). One is the extent to which government should help offset risks inherent in farming.
The problem of “shallow losses” (losses in excess of a crop insurance deductible) has received
considerable attention in policy discussions. Some policymakers and producers are concerned
about the level of deductible and the cost of purchasing additional coverage to reduce it. Several
proposed alternatives to address shallow losses, either through a new revenue program (similar to
ACRE) or through enhanced crop insurance are described below.
Given current relatively high price levels, another question raised during the debate is, should the
government provide additional downside price risk protection? Crop insurance covers only intra-
season price risk; and current program parameters for most farm programs are at levels that
generally do not provide much protection at current price levels. Many producer groups are
interested in protecting against multi-year price declines. However, using recent prices could
increase program outlays.
The issue of where the covered crop loss is determined (at the farm, county, district, state, or
national level) has implications for program costs and program integrity. A potential move for
commodity programs to a farm-based loss program (rather than a payment trigger based on a
national or otherwise aggregated geographic area) would likely require attention to moral hazard
issues—farmers deliberately taking actions that might increase their indemnities—because
farmers could directly affect program payments.

19 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. Policy/Program Issues for Developing a Farm Safety Net
Policy/Program
Program Design and
Question
Issue
Producer Concern
Cost Issues
To what extent should
Covering shallow loss v.
Crop insurance covers deep
A farm program could be designed
government help offset risks
deep loss
losses in crop revenue but
to cover a portion of this loss; or
inherent in farming?
deductible leaves producers with
additional crop insurance coverage
potential for out-of-pocket loss
could be provided through higher
(shallow loss).
subsidies for policies with lower
deductibles or with a separate
insurance policy. Farmers might take
actions that increase their
indemnities (moral hazard problem).
Given current relatively high
Multi-year price
Crop insurance covers only
Current market conditions could be
price levels, should the
protection
intra-season price risk; current
incorporated into program
government provide
program parameters for most
parameters by using average prices,
additional downside price
farm programs are at levels that
either in a revenue program (as
risk protection?
general y do not provide much
ACRE does now) or through crop
protection at current price
insurance. Using recent prices could
levels.
increase producer protection while
possibly increasing outlays.
Is a crop or income loss
An area-wide trigger can A trigger at a more aggregated
Triggers set only at the farm level
necessary to trigger a
result in payments to
level (above farm level) may not
can be more expensive because risk
payment? If so, how/where
farms with no losses.
result in payments to producers
of payout is higher. Farmers might
should the loss be
with losses.
take actions that increase their
determined?
Protect against
indemnities (moral hazard problem).
individual crop revenue

loss at farm level OR at
Historically, producers think
Whole-farm approach would
a more aggregate level
about farm subsidies,
address farm loss directly and
(county, district, state,
indemnities, and disaster
perhaps cost less but it might
or national).
payments on a crop basis. Also,
encourage more risky practices such
whole-farm payments may be
as monoculture (moral hazard
Protect against revenue
less due to offsetting crop
problem) because farm
loss at the whole-farm
revenues on the farm.
diversification may reduce likelihood
level (i.e., total revenue
of payment to farmer.
for all crops)
Source: CRS.
Farm Bill Safety Net Proposals
In advance of the join committee’s recommendation, Members of Congress, the Administration,
and a number of farm groups have put forward a variety of proposals to reduce government
expenditures on farm subsidies and revise farm programs. Nearly all of the proposals summarized
below and listed in Table 3 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 five categories:
(1) minor policy changes, (2) revised revenue programs, (3) enhanced crop insurance, (4) whole-
farm insurance, and (5) other.
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Table 3. Selected Farm Safety Net Proposals
Proposal

Description
Eliminations / Net savings
Group I. Downsize Current Policy

American Farm Bureau
No major program changes; continue direct payments, CCPs,
Eliminate SURE; reduce direct
Federation Proposal
ACRE, loans, and crop insurance. Add Systemic Risk
payments and ACRE.
Reduction Program (SRRP) to address multi-year price
declines.
Administration: Deficit
Reauthorize CCPs, ACRE, SURE, and the marketing loan
Eliminate direct payments.
Reduction Plan
program; reduce crop insurance expenditures by reducing
$33 billion savings over 10 years
producer subsidies and payments to insurance companies for
(including conservation savings).
expenses and risk-sharing.
Senator Coburn: Deficit
Maintain crop insurance and guaranteed farm loans.
Eliminate all farm commodity
Reduction Plan
programs; do not reauthorize
disaster programs; end direct
ownership and operating loans.
Saves $80+ billion over 10 yrs.
Representative Blumenauer
Two new limits on combined CCP, ACRE, and marketing loan
Eliminate direct payments and
benefit payments: Eligibility restricted to annual adjusted gross
cotton and peanut storage
income < $250,000; and cap on total annual payments of
payments.
$250,000.
Group II. Revised Revenue Programs

S. 1626, Aggregate Risk and
Crop revenue program—makes payments (by program crop)
Eliminate direct payments, CCPs,
Revenue Management (ARRM) when two triggers are met: (1) farm revenue is below
ACRE, and SURE. Congressional
by Senators Brown, Thune, Durbin, guarantee level, and (2) crop revenue at the crop reporting
Budget Office (CBO) estimates
and Lugar
district level is below guarantee. Both use historical crop
savings of $20 billion over 10
insurance prices.
years.
S. 1658/H.R. 3111, Rural
Five titles: I-Producer Safety Net (ARRM), II-Cons., III-
Eliminate direct payments, CCPs,
Economic Farm and Ranch
Nutrition, IV-Energy, and V-Research. Expands whole-farm
ACRE, SURE, and marketing loan.
Sustainability and Hunger Act
revenue insurance. Eliminates sugar program. Adds Dairy
All titles: $40 billion savings over
(REFRESH) by Senator Lugar and
Security Act. Reduces CRP.
10 years.
Representative Stutzman
Crop Revenue Guarantee
Whole-farm revenue program (for program crops only)—
Reduce direct payments by 50%,
Program by Senator Conrad
makes payments when total revenue declines below
eliminate CCPs, ACRE, and SURE
guarantee. Payment is 60% of difference between guarantee
(for program crops only).
and actual revenue. Price guarantee is higher of target price or
five-year Olympic farm price. Disaster programs for other
commodities.
Risk Management for
Crop revenue program—makes payments (by program crop)
Eliminate direct payments, CCPs,
America’s Farmers (RMAF) by
when revenue on farm is below guarantee based on APH or
ACRE, and SURE.
American Soybean Association
county yields and national farm prices.
Group III. Enhanced Crop Insurance

Stacked Income Protection
STAX is described for cotton producers only. Farmers could
Eliminate direct payments, CCPs,
Plan (STAX) by National Cotton
buy insurance coverage to protect against shallow losses
ACRE, and SURE. Modify
Council
under an area-wide insurance product with a fixed minimum
marketing loan (two-year average
harvest price; would be in addition to a farmer’s individual
of Adjusted World Price within
policy.
47 to 52 cents/lb. range).
H.R. 3107, Crop Risk Options
Enable producers to supplement farm-level with area-wide

Plan (CROP) by Representative
insurance to cover shallow losses. Change APH yield from 10-
Neugebauer
year average to 7-year Olympic average.
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Proposal

Description
Eliminations / Net savings
Farm Financial Safety Net
Crop insurance coverage would include a market-based
Eliminate direct payments, CCPs,
(FFSN) by private crop insurance
minimum harvest price (e.g., five-year average 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. Whole-Farm Insurance

U.S. Agriculture and Nutrition
Protects against declines in whole-farm revenue, not individual For Council, eliminate current
Policy Statement by Chicago
crop revenues. Loss payment is triggered when the gross
farm programs and current crop
Council on Global Affairs
income for an entire farm (all crop and livestock revenue) is
insurance premium subsidies; it
less than guarantee.
estimates savings of $2.5 bil/yr.
H.R. 3286/S. 1773, Local
Same as above.

Farms, Food, and Jobs Act, by
Representative Pingree and Senator
Brown
Group V. Other


Farmer-Owned Reserves
FOR, increased loan rates, and acreage set-asides. Payments
Eliminate direct payments and
(FOR) by National Farmers Union
limited to crops placed under FOR.
CCPs. Modify marketing loan.
H.R. 3062, Dairy Security Act
Voluntary margin insurance program and market stabilization
Eliminate current dairy programs.
of 2011 by Representative
(to reduce incentive to produce milk).
CBO estimates savings of $131
Peterson and others
million over 10 yrs.
Environmental Working
Replace current farm commodity programs and crop
Eliminate current farm programs
Group (EWG) Proposal
insurance subsidies with a free crop insurance policy that
and crop insurance subsidies.
covers yields losses of more than 30%. Revenue insurance
EWG expects a total savings of
policies and additional yield coverage would be available but
$80 billion over 10 years.
not subsidized.
California Proposal
Recommends a more-diversified farm bill refocusing away
No specific program eliminations
from row crops and encompassing specialty crops, human
cited; however, includes
plant and animal health, food safety, health and nutrition,
numerous funding expansion and
research, and other less-traditional facets of agriculture policy. new project requests.
Source: Compiled by CRS from proposal statements, news reports, and other sources.
Notes: Excludes proposals for changing the sugar program. If not indicated, costs estimates provided by authors
of proposals.
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, total budget authority for all mandatory farm bill programs is $915 billion during FY2012-
FY2021, according to the CBO March 2011 baseline (Table 4). Budget authority for farm safety
net programs is $146 billion over the 10-year period, including $65 billion for Title I (including
commodity programs) and $80 billion for Title XII (crop insurance). (Disaster programs do not
have baseline funding.)
Separately, 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 and interest/operating
expenses. (For crop insurance, outlay projections differ slightly from budget authority.) This
compares to average farm safety net program outlays of $15.7 billion/year during FY2003-
FY2010, with a high of $20.5 billion in FY2006 and a low of $12.2 billion in FY2008.
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Table 4. Baseline for Mandatory Farm Bill Programs, FY2012-FY2021
(budget authority in millions of dollars)
2008 Farm Bill Title and Program
FY2012-FY2016
FY2012-FY2021
Title I and XII - Farm Safety Net Programs
70,790
145,513
Title I - Commodity Programs
31,814
65,267
Title XII - Crop Insurance
38,976
80,246
Title II - Conservation
30,238
64,221
Title IV - Nutrition
371,553
699,849
All other titles
2,982
5,487
Total 475,563
915,070
Source: CRS, using the CBO baseline (March 2011).
Notes: Nutrition includes only the Supplemental Nutrition Assistance Program (SNAP) and related programs
because both House and Senate Agriculture committees have jurisdiction. Child nutrition programs (Senate
Agriculture Committee jurisdiction only) would add $247 billion over 10 years.
Group I: Downsize Current Policy
American Farm Bureau Federation’s Recommendations
The American Farm Bureau Federation (AFBF) supports continuation of the current farm safety
net, preferring to maintain all existing programs with the exception of SURE.20 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, counter-
cyclical 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 that this should be accomplished through lower payment
acres.
In response to proposals for revised revenue programs (below) designed to address multi-year
price declines and “shallow losses” (i.e., losses stemming from producer’s crop insurance
deductible), AFBF has proposed the Systemic Risk Reduction Program (SRRP).21 Its aim is to
protect against multi-year price declines but not shallow losses. AFBF has criticized “shallow
loss” programs, saying that they would encourage producers to take more risk knowing that the
government will cover a large share of it. The SRRP would function like a county-wide crop
insurance policy that is currently available called Group Risk Income Protection (GRIP). GRIP
indemnifies producers when county crop revenue drops below a guarantee level based on prices

20 American Farm Bureau Federation , “Policy Recommendations for the 2012 Farm Bill,” as submitted to Congress on
September 29, 2011, at http://www.fb.org/issues/FarmBureauRecommendations110928.pdf.
21 American Farm Bureau Federation “AFBF Proposes ‘Systemic Risk Reduction’ Farm Program,” press release,
October 21, 2011, http://www.fb.org/index.php?action=newsroom.news&year=2011&file=nr1021b.html.
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at planting time. It would differ from GRIP, though, by using three- or five-year price averages
instead of planting prices to protect against multi-year price declines. Coverage would be
provided at a minimal fee to producers and contain a deductible of 20% to 30% (thus, not
necessarily a shallow loss program, according to AFBF). Under SRRP, should producers wish to
protect against shallow losses or cover individual farm yield risk, they could purchase individual
policies with higher coverage (lower deductibles). AFBF expects that crop insurance premiums
(i.e., the cost to both producers and the government) would decline because individual polices
would “wrap around” the SRRP coverage, and hence have less liability and potential for
indemnities.
The Administration’s Deficit Reduction Plan
The Administration in September 2011 put forward its Plan for Economic Growth and Deficit
Reduction.22 Among suggestions for savings across the government, the Administration proposes
a net reduction in farm safety net programs of $33 billion over 10 years (including $2 billion from
conservation). 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. The Administration proposes that the suite of disaster programs, including SURE,
that expired September 30, 2011, be reauthorized for a cost of roughly $7 billion over five years.
On October 24, 2011, in response to the emergence of farm policy proposals from the various
advocacy groups, Secretary Vilsack described USDA’s priorities for the 2012 farm bill based on
three principles: maintain a strong safety net, support sustainable development, and promote
vibrant markets.23 Vilsack also listed four keys elements that should be a feature of any safety
net—first, it should provide assistance quickly in response to a natural disaster; second, it should
reflect the diversity of U.S. agriculture and not just focus on the major row crops; third, it should
be simple and easy to understand; and finally, it should be accountable and justifiable to the 98%
of Americans that do not farm. Vilsack described USDA’s role in sustaining agricultural
productivity as investing in agricultural research and creating ways to incent the private sector to
invest in conservation. Finally, Vilsack stressed that USDA has an important role with respect to
nutrition, rural development, and renewable energy programs.
Senator Coburn’s Deficit Reduction Plan
In July 2011, Senator Coburn issued a broad plan to reduce government spending.24 Among its
many government-wide provisions, the plan would maintain crop insurance and guaranteed loans
but eliminate all farm commodity programs. It also would end direct ownership and operating
loans and not reauthorize disaster programs. Total safety net savings would be more than $80+
billion over 10 years.

22 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.
23 “Agriculture Secretary Vilsack on Priorities for the 2012 Farm Bill,” USDA News Transcript, Release No. 0458.11,
October 24, 2011; at http://www.usda.gov/wps/portal/usda/usdahome?navid=TRANSCRIPTS_SPEECHES.
24 Office of Senator Tom Coburn, Back in Black—A Deficit Reduction Plan, July 2011, pp. 48-84,
http://coburn.senate.gov/public//index.cfm?a=Files.Serve&File_id=c6590d01-017a-47b0-a15c-1336220ea7bf.
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Growing Opportunities (Representative Blumenauer)
On October 26, 2011, Congressman Blumenauer, supported by environmental, taxpayer and free-
enterprise advocacy groups, introduced a proposal for new farm policy entitled “Growing
Opportunities: Family Farm Values for Reforming the Farm Bill.”25 The report outlines policy
changes in six specific areas: commodity programs, conservation, research and development,
beginning farmer programs, crop insurance, and nutrition. With respect to commodity programs,
the proposal would eliminate direct payments and peanut and cotton storage payments. It would
also place two limits on combined payments under the counter cyclical payment (CCP),
marketing assistance loan (MAL) benefits, and ACRE programs—first, combined payments
would be limited to entities with an adjusted gross income of under $250,000 per year, and
second, total payment receipts would be limited to $250,000 per entity per year. Concerning crop
insurance, it would link conservation compliance to participation in federally supported crop
insurance, and would cut “administrative burden” and eliminate “perverse incentives.” Funding
increases are proposed for conservation (which would be reoriented to a performance-based
program), nutrition, and research. Several measures intended to aid beginning farmers are also
recommended. Specific legislative language has not yet been produced for this proposal.
Group II: Revised Revenue Program
Aggregate Risk and Revenue Management or 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.26 It would eliminate commodity
programs (except the marketing assistance loan program) and replace them with a revised crop
revenue program.27 Subsequently, in early October, Senator Lugar and Representative Stutzman
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.28 ARRM is similar in
concept to a proposal by the National Corn Growers called the 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

25 Office of Representative Blumenauer, Growing Opportunities: Family Farm Values for Reforming the Farm Bill,
October 26, 2011; at http://blumenauer.house.gov/images/stories/2011/documents/
growing%20opportunities%20farm%20report.pdf.
26 “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.
27 “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.
28 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&.
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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 average29 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).30
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
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 payments, CCPs, 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
toward 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.

29 Throw out the high and low years, then average the remaining three years of data.
30 CBO score of ARRM compared to the CBO March 2011 baseline, September 19, 2011.
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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 the “Crop Revenue Guarantee
Program.”31 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 CCPs,
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.
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) 2010 target price or five-year Olympic average farm
price, whichever is higher.
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.

31 Jim Wiesemeyer, “How SURE Supporters Want to Change the Program via New Farm Bill,” Pro Farmer,
September 30, 2011.
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Risk Management for America’s Farmers or 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.32 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 (DPs), CCPs, and ACRE—be replaced with an area-wide, revenue-
based crop insurance program that would supplement existing crop insurance products.33 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.
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.34 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

32 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.
33 “National Cotton Council 2012 Farm Policy Statement,” NCC, August 26, 2011, at http://www.cotton.org/news/
releases/2011/farmstrat.cfm.
34 For details of the dispute, see CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program.
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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).35 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. The product would be delivered through crop insurance, providing
protection against shallow losses—for example, 10% to 20% loss of average revenue—by riding
on top of existing crop insurance policies. 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.36
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.37 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)38
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
below 47 cents/lb., then the proposed marketing loan for upland cotton would be set at 47
cents/lb.39 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 criterion cited by the WTO dispute
settlement panel.

35 Forest Laws, “NCC advocates change in course on farm policy direction,” Delta Farm Press, September 6, 2011.
36 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.
37 In the examples presented in their proposal, the NCC used a “fixed reference price” of 65 cents per pound.
38 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.
39 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.
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Crop Risk Options Plan or 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 7-year Olympic average.
Farm Financial Safety Net (Crop Insurance Company)
A U.S. crop insurance company has proposed the Farm Financial Safety Net (FFSN).40 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.41 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 CCP 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., five-year average 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 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.

40 Proposal developed by NAU Country Insurance Company.
41 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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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: Whole Farm Revenue Insurance
Several proposals advocate the use of whole farm insurance, which protects against declines in a
farm’s entire revenue and not individual crop revenues. For example, an expansion of whole-
farm insurance is included in S. 1658/H.R. 3111, the Rural Economic Farm and Ranch
Sustainability and Hunger Act of 2011 (see section on “REFRESH (Senator Lugar and
Representative Stutzman)).”
Currently, USDA offers whole farm revenue insurance in selected states through the Adjusted
Gross Revenue (AGR) and AGR-Lite policies. A loss payment is triggered when the gross income
for an entire farm (all crop and livestock revenue) is less than the approved income (based on the
5‑year average and the current year farm plan). Coverage is available for up to 80% of
guaranteed income.42
U.S. Agriculture and Nutrition Policy Statement
(Chicago Council on Global Affairs)
The Chicago Council on Global Affairs, an independent international affairs organization,
recommends merging all farm commodity support programs and crop insurance subsidies into a
single whole-farm revenue insurance program.43 The council states that whole-farm revenue plans
are less expensive to taxpayers than traditional support programs. Researchers have pointed out,
though, the difficulty in developing whole-farm insurance products, including complexity in
measuring and classifying risks that underlie the insurance contracts.44 The data needs can also be
substantial, which can hamper farmer participation. According to the organization, the proposed
changes to the safety net would save $2.5 billion per year.

42 USDA/Risk Management Agency, Adjusted Gross Revenue-Lite, Program Aid 1907, Washington, DC, November
2010, http://www.rma.usda.gov/pubs/rme/agr-lite.pdf.
43 The Chicago Council on Global Affairs, U.S. Agriculture and Nutrition Policy Statement: Transforming American
Food and Agriculture Policy, September 23, 2011, http://farmpolicy.com/wp-content/uploads/2011/11/FarmBill-
ChicagoCouncil.pdf.
44 Robert Dismukes and Ron L. Durst , Whole-Farm Approaches to a Safety Net, USDA/Economic Research Service,
EIB-15, Washington, DC, June 2006, http://www.ers.usda.gov/publications/EIB15/.
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Local Farms, Food, and Jobs Act (Representative Pingree and Senator Brown)
The Local Farms, Food, and Jobs Act of 2011 (H.R. 3286/S. 1773) was introduced in early
November 2011 by Representative Pingree and Senator Brown. The bill would require the
Federal Crop Insurance Corporation to offer nationwide a whole farm revenue risk plan that
allows a producer to qualify for an indemnity if actual gross farm revenue is below 85% of the
average gross farm revenue of the producer. Producers of any type of agricultural commodity
would be eligible. In addition, coverage is to include the value of any packing, packaging,
labeling, washing or other on-farm activities needed to facilitate sale of the commodity. The bill
also would eliminate premium surcharges on insurance policies for organic crops and offer
insurance at actual price levels received by growers for all organic crops produced in compliance
with standards issued by USDA.
Group V: 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.45 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—for
example, 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 counter-cyclical 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.
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 are 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.

45 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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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.
Proposed Dairy Legislation
In the 112th Congress, several Members have introduced legislation for alternatives to current
federal dairy programs, which expire in 2012. Proposed dairy legislation has the potential to
eliminate some dairy programs, modify others, or replace them with a new approach to dairy farm
support. For example, the Dairy Security Act of 2011 (H.R. 3062) was introduced in September
2011 by Representative Peterson and others.46 The bill parallels a concept developed by the
National Milk Producers Federation as an alternative to current dairy programs that critics say

46 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. 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).
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have not provided an adequate safety net for dairy producers. Alternative proposals were
subsequently introduced, including S. 1714, S. 1715, S. 1682, and S. 1640. These bills are
described in CRS Report R42065, Dairy Farm Support: Legislative Proposals in the 112th
Congress.
Environmental Working Group (EWG) Proposal
The Environmental Working Group (EWG), a nonprofit advocacy group that has long sought
changes in U.S. farm policy, issued a set of recommendations in early November 2011.47 EWG
advocates that taxpayers should not guarantee business income for anyone and the government
should provide agricultural assistance only when losses are incurred due to a natural phenomenon
such as bad weather, which is unique to agriculture. EWG proposes replacing current farm
commodity programs and crop insurance subsidies with a free crop insurance policy that covers
yield losses of more than 30%. Revenue insurance policies and additional yield coverage would
be available from private companies, but would not be federally subsidized. EWG expects a total
savings of $80 billion over 10 years.
California Recommendations (Coalition of CA Agricultural Interests)
In value terms, California is the largest, most diversified agricultural producer state in the nation.
As a result, California agricultural interests wanted to formally express their concern that a new
farm bill should better reflect that diversity. This request for a more diversified farm bill was
formally promulgated by the October 14, 2011, submission of a California farm policy proposal
to the joint committee.48 The California proposal includes over 70 specific recommendations
involving funding and new program development in the areas of (1) plant and animal health and
safety, (2) specialty crop promotion, (3) environment and natural resource protection,
(4) improving public health and nutrition, (5) rural development, (6) research and education,
(7) international market development, (8) farm and ranch safety net, (9) organic agriculture, and
(10) ensuring that all farmers and ranchers have access to farm bill programs.
Concluding Comment
Most proposals for altering the farm safety net 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 others, which
would essentially extend farm programs at reduced funding levels. Some proposals would
eliminate all commodity payments, but retain or revise crop insurance.
Several proposals would cut direct payments and other commodity payments, and create a new
crop revenue program by borrowing concepts from current programs such as ACRE or SURE.
Several other proposals focus on changes to crop insurance, such as providing an area-wide,

47 Bruce Babcock and Craig Cox, The Revenue Insurance Boondoggle: A Taxpayer-paid Windfall for Industry,
Environmental Working Group, November 3, 2011, http://static.ewg.org/pdf/Crop_Insurance.pdf.
48 “California and the Farm Bill: A Vision for Farming in the 21st Century,” California Department of Food and
Agriculture, October 14, 2011, at http://www.cdfa.ca.gov/farm_bill/pdfs/FarmBillCof12.pdf.
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revenue-based crop insurance program that would supplement existing crop insurance products to
cover shallow losses. Whole-farm revenue insurance has also been proposed.
Many of these proposals were unveiled in fall 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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