Farm Safety Net Proposals in the
112th Congress

Dennis A. Shields
Specialist in Agricultural Policy
Randy Schnepf
Specialist in Agricultural Policy
April 18, 2012
Congressional Research Service
7-5700
www.crs.gov
R42040
CRS Report for Congress
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epared for Members and Committees of Congress

Farm Safety Net Proposals in the 112th Congress

Summary
In advance of the expiration of the 2008 farm bill (P.L. 110-246), numerous proposals have been
offered to revise the “farm safety net” for producers of crops covered by farm commodity support
programs. Farm safety net proposals by Members of Congress, the Administration, and a number
of farm and interest groups surfaced mostly during fall 2011, when budget deliberations by the
Joint Select Committee on Deficit Reduction generated concerns that a new farm bill might be
“written” or severely constrained from a budgetary perspective by budget negotiators, rather than
by the House and Senate Agriculture Committees.
Ultimately, the joint committee failed to reach a bipartisan consensus on deficit reduction.
Nevertheless, the joint committee process generated substantial movement toward reshaping the
policy framework underlying the farm safety net and other major farm bill issue areas, such as
conservation and nutrition. In early 2012, legislation for the next farm bill appears to be following
a more traditional process, starting with committee hearings prior to expiration of the 2008 farm
bill (generally September 2012, but for commodity program crops, prior to the 2013 harvest).
Many proposals with policy changes and proposed cuts 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,
many 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. Several proposals would make changes in crop insurance, including cuts in
producer subsidies.
Three major issues are embedded in nearly all farm safety net proposals: (1) how price (or
revenue) protection is established (i.e., within-year versus averaging across multiple years or
fixed in statute); (2) at what geographic level—the farm level or a more aggregated regional
level—program benefits are triggered; and (3) whether the proposal addresses “shallow losses,”
those not covered by federally subsidized crop insurance but paid by the producer via the policy
deductible. Additional issues include whether program benefits should be based on current
plantings (“re-coupled”) rather than tied to historical plantings (as done since 1996 under direct
payments), and to what extent a revised farm safety net program is applicable to crops outside of
the traditional farm program mix.


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Farm Safety Net Proposals in the 112th Congress

Contents
Note to Readers................................................................................................................................ 1
Introduction...................................................................................................................................... 1
Report Overview ....................................................................................................................... 1
Baseline Funding for the Farm Bill ........................................................................................... 2
Current Farm Safety Net Programs ................................................................................................. 3
Commodity Programs................................................................................................................ 3
Crop Insurance........................................................................................................................... 5
Disaster Assistance .................................................................................................................... 5
Policy Issues for Farm Safety Net Programs ................................................................................... 6
Issues Related to Current Programs........................................................................................... 6
Budget and Funding ............................................................................................................ 6
Effectiveness of the Current Farm Safety Net..................................................................... 7
Overlap in Farm Risk Programs.......................................................................................... 7
Commodity Coverage of Farm Programs ........................................................................... 7
Payment Limits and Farm Size ........................................................................................... 7
Farm Policy Alignment with U.S. Trade Commitments ..................................................... 8
Issues Related to Farm Safety Net Proposals ............................................................................ 8
Fixed Price vs. Market Formula Protection......................................................................... 9
Individual Farm Protection vs. Area-Wide Trigger ............................................................. 9
Shallow Loss vs. Deep Loss.............................................................................................. 11
“Recoupling”..................................................................................................................... 11
Is a Loss Necessary to Trigger a Federal Farm Program Payment?.................................. 11
Additional Issues............................................................................................................... 11
Safety Net Proposal Descriptions .................................................................................................. 12
Administration Plan for Economic Growth and Deficit Reduction (Sponsor: the
Administration) .................................................................................................................... 14
Senator Coburn’s Deficit Reduction Plan (Sponsor: Senator Coburn).................................... 16
Revised Counter-Cyclical Price Program (Sponsor: Unspecified; General Interest
from Rice and Peanut Producers)......................................................................................... 17
Aggregate Risk and Revenue Management
(ARRM)(Sponsors: Senators Brown, Thune, Durbin, and Lugar)....................................... 18
Revenue Loss Assistance Program (RLAP) (Sponsors: Senators Conrad, Hoeven, and
Baucus)................................................................................................................................. 20
Risk Management for America’s Farmers (RMAF)
(Sponsor: American Soybean Association) .......................................................................... 22
Stacked Income Protection Plan (STAX)(Sponsor: National Cotton Council) ....................... 23
Total Coverage Option or TCO (H.R. 3107) (Sponsor: Representative Neugebauer) ............ 25
Safety Net by EWG (Sponsor: Environmental Working Group)............................................. 26
Deep Loss Program, formerly known as Systemic Risk Reduction Program, or SRRP
(Sponsor: American Farm Bureau Federation)..................................................................... 27
Farmer-Owned Reserves (FOR)(Sponsor: National Farmers Union) ..................................... 29
Additional Proposals ............................................................................................................... 31
Proposed Dairy Legislation............................................................................................... 31
Proposals for Whole Farm Insurance ................................................................................ 31
Growing Opportunities (Representative Blumenauer)...................................................... 32
California Recommendations (Coalition of California Agricultural Interests) ................. 33
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Tables
Table 1. Baseline for Mandatory Farm Bill Programs, FY2013-FY2022........................................ 2
Table 2. Farm Safety Net Programs................................................................................................. 4
Table 3. Policy Issues for Developing a Farm Safety Net ............................................................... 8
Table 4. Selected Farm Safety Net Proposals ................................................................................ 10
Table 5. Selected Farm Safety Net Proposals ................................................................................ 13

Appendixes
Appendix A. Current Farm Safety Net Programs Evaluated by Key Criteria ............................... 34
Appendix B. Joint Select Committee on Deficit Reduction and Agriculture Policy ..................... 41

Contacts
Author Contact Information........................................................................................................... 43

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Farm Safety Net Proposals in the 112th Congress

Note to Readers
This report provides an overview of farm safety net proposals for the next farm bill, as advocated
by the Administration, Members of Congress, and various interest groups. It updates material
from a previous version of this report (entitled Farm Safety Net Proposals and the Joint Select
Committee on Deficit Reduction
) and from a CRS general distribution memorandum dated
February 10, 2012, entitled “Summary of Selected Farm Safety Net Proposals.” It does not
include any legislative proposals from either the Senate or House Agriculture Committees, as
none has yet been made public. Any committee proposals will be reviewed in a separate report
after the proposals are released to the public.
Introduction
In advance of the expiration of the 2008 farm bill (P.L. 110-246), numerous proposals have been
offered to revise the “farm safety net” for producers of crops covered by farm commodity support
programs. Farm safety net proposals surfaced mostly during fall 2011, when budget deliberations
by the Joint Select Committee on Deficit Reduction generated concerns that a new farm bill
might be “written” or severely constrained from a budgetary perspective by budget negotiators,
rather than by the House and Senate Agriculture Committees. Prior to the joint committee’s
deadline of November 23, 2011, the Administration, Members of Congress, and several
prominent commodity and agricultural interest groups released proposals for U.S. farm policy in
general, and for commodity programs in particular. The proposals ranged from simply extending
current farm programs at reduced funding levels to program elimination and wholesale
replacement.
In October 2011, leadership of the House and Senate Agriculture Committees, drawing on various
proposals that had emerged, sought to develop new farm policy that would fit within proposed
budgetary guidelines. The leadership’s proposal was not publically released, and ultimately the
joint committee failed to reach a bipartisan consensus on deficit reduction. As a result,
development of the farm bill is now following a more traditional legislative process, beginning
with committee deliberations. Both the House and the Senate held hearings in early 2012 to
solicit views from producers and others in advance of developing committee bills.
Report Overview
This report provides a context for understanding and comparing the farm safety net proposals
against current farm programs. The first section briefly describes the current farm safety net
programs designed to support farm income and manage risk. The second section identifies issues
and tradeoffs that might affect various policy approaches in the development of a new farm safety
net. The third section compares each of the major safety net proposals with respect to the
following criteria: program type, commodity coverage, type of losses covered, program
mechanics, payment limits, conservation compliance, cost to producers and taxpayers, and
proposal sponsor’s rationale. Finally, Appendix A compares current farm safety net programs to
the same set of criteria (and reporting status for the World Trade Organization), while Appendix
B
contains a description of the so-called “super-committee” process which occurred in the fall of
2011 and which precipitated the public presentation of many of the farm safety net proposals.
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Baseline Funding for the Farm Bill1
Funding to write the next farm bill will be based on the Congressional Budget Office’s (CBO’s)
March 2012 baseline projection of the cost of mandatory farm bill programs, and on varying
budgetary assumptions about whether programs will continue. Total budget authority for all
mandatory farm bill programs under current law is $995 billion during FY2013-FY2022 (Table
1
). Of this amount, budget authority for farm safety net programs is $153 billion over the 10-year
period, including $63 billion for Title I (including commodity programs) and $90 billion for Title
XII (crop insurance). Disaster programs do not have baseline funding.
The CBO baseline projection is an estimate at a particular point in time of what federal spending
on mandatory programs likely would be under current law. The March 2012 CBO baseline
projection is the “scoring baseline” against which farm bill proposals would be measured for the
remainder of the second session of the 112th Congress.
From a budget perspective, programs with a continuing baseline are assumed to go on under
current law. These amounts can be used to reauthorize the same programs, reallocated among
these and other programs, used as savings for deficit reduction, or used as offsets to help pay for
other provisions.
Table 1. Baseline for Mandatory Farm Bill Programs, FY2013-FY2022
(budget authority in millions of dollars)
10-Year

5-Year Baseline
Baseline
2008 Farm Bill Title and Program
FY2013-FY2017
FY2013-FY2022
Title I and XII - Farm Safety Net Programs
74,476
152,761
Title I - Commodity Programs
31,143
62,944
Title XII - Crop Insurance
43,333
89,817
Title II - Conservation
30,956
65,275
Title IV - Nutrition
399,567
771,773
All other titles
2,423
4,819
Total 507,422
994,628
Source: CRS analysis based on the CBO baseline (March 2012).
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 $238 billion over 10 years.

1 For more information on the budget and the next farm bill, see CRS Report R42484, Budget Issues Shaping a 2012
Farm Bill
.
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Current Farm Safety Net Programs2
The federal government supports farm income and helps farmers manage risks associated with
variability in crop yields and prices through a collection of programs. The broader farming
community often refers 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 2. The
Congressional Budget Office (CBO) currently estimates the total cost of farm safety net programs
for FY2011 at $13.8 billion. Projected budget authority for farm safety net programs averages
$15.3 billion per year over FY2013-FY2022, including $6.3 billion per year for Title I (including
commodity programs) and $9 billion per year for Title XII (crop insurance). Disaster programs do
not have baseline funding.3
Commodity Programs
The mandatory commodity provisions of Title I of the 2008 farm bill provide support for 26 farm
commodities—food grains, feed grains, oilseeds, upland cotton, peanuts, and pulse crops.4 The
major farm programs under which payments can be received include direct payments (DP),
counter-cyclical payments (CCP), Average Crop Revenue Election (ACRE) payments, and
special benefits (including loan deficiency payments, marketing loan gains, and certificate
exchanges) under the Marketing Assistance Loan program, as described in Table 2.5 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 CCP but not fixed direct payments).6

2 While many critics of farm subsidies take issue with what constitutes a safety net and whether current farm programs
actually perform as such, the term safety net is used here 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.
3 CBO Budget Projections, March 2012, http://cbo.gov/publication/43053.
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. An eligible producer (for purposes of farm program
benefits) is an owner-operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is
entitled to a share of the crop produced on the farm. Commodity programs are financed through USDA’s Commodity
Credit Corporation (CCC). See CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill.
5 For more information on direct and counter-cyclical payments, and the ACRE program, see USDA factsheets at
http://www.fsa.usda.gov/Internet/FSA_File/dcp_0112.pdf and http://www.fsa.usda.gov/Internet/FSA_File/
acre_2012_fact_sheet.pdf.
6 In Appendix A, current farm programs (DP, CCP, Marketing Assistance Loan benefits, and ACRE) are evaluated
against the same set of criteria used to evaluate the new farm safety net proposals later in this report.
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Table 2. Farm Safety Net Programs
(authorized under the 2008 farm bill and other legislation)
Program Instrument
Commodity Coverage
Program Description and Outlays
Commodity Programsa

Projected Avg. Outlays FY2013-FY2022:
($5.7 bil./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, safflower,
($4.96 billion/yr.)
flaxseed, mustard seed, crambe, and
sesame seed, and peanuts
2. Counter-cyclical payments (CCPs)
Above crops plus pulse crops (dry peas, Variable annual payment—varies inversely with market price
lentils, small chickpeas, and large
relative to “target price” in statute. Based on historical yield
chickpeas)
and acreage, and national season-average farm price of
commodity. ($0.10 billion/yr.)
3. Marketing Assistance Loan benefits
Same crops as those eligible for CCPs
Variable payment—varies inversely with market price relative
(loan deficiency payments, marketing
plus extra long staple cotton, wool,
to “loan rate” in statute. Based on actual production. Farmer
loan gains, and certificate exchanges)
mohair, and honey
chooses timing. Al ows loan to be repaid at possibly lower
market price, or cash payment. ($0.08 billion/yr.)
4. Average Crop Revenue Election
Same crops as those eligible for CCPs
Variable annual payment—varies inversely with state-level
(ACRE)
(farmers receive either CCPs or ACRE
revenue relative to crop benchmarks. Triggered by both low
payments, not both)
farm and state revenues. ($0.51 bil ion/yr.)
5. Non-recourse loans and marketing
Sugar
Price guarantee for refined beet sugar and raw cane sugar;
allotments
limits on sales of domestically produced sugar. ($0, designed
to be no net cost)
6. Milk Income Loss Program (MILC)
Milk (MILC); nonfat dry milk, cheese,
Variable payment—varies inversely with national farm milk
and Dairy Product Price Support
and butter (DPPSP), indirectly
price (MILC); dairy product prices supported at certain
Program (DPPSP)
supporting farm milk price
minimums (DPPSP). ($0.04 billion/yr.)
Risk Management

Projected Avg. Outlays FY2013-FY2022:
($9.0 bil./yr.)
7. Crop insurance
More than 100 crops, including most
Subsidized insurance premiums. Indemnities paid when yield
major crops, many specialty crops, and
or revenue drops below guarantees established prior to
some livestock
planting. Coverage level selected by producer and based on
expected prices, farm yield, farm revenue, and/or area yield.
($8.95 billion/yr.)
8. Noninsured Crop Disaster Assistance Crops not covered by crop insurance
Payments for severe crop yield losses in regions where crop
Program (NAP)
insurance is not available. ($0.1 bil ion/yr.)
Disaster Assistance (authority ended 9/30/11)
Average Annual Losses (2008-2011):
($1.5 bil./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 programs
Livestock, forages, honey bees, farm-
Payment for losses due to adverse weather or other
raised fish, fruit tree, vines
conditions (e.g., wildfire).
11. Ad hoc disaster payments
Policymakers’ discretion
Payment and eligibility determined by each disaster bill.
Source: Congressional Research Service, using outlays from March 2012 CBO baseline for FY2013-FY2022.
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. The four additional disaster
programs cited above include the Livestock Indemnity Program (LIP); the Livestock Forage Disaster Program (LFP);
the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP); and the Tree Assistance
Program (TAP).
a. See Appendix A for a comparison of commodity programs (DP, CCP, ACRE, and Marketing Assistance
Loan benefits) compared against selected key criteria.
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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 and nonrecourse loans for domestic
refined sugar, backed up by 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 program 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
or crop yield. Revenue-based policies account for about 75% of total policy premiums, and yield-
based policies account for 25%. Federally subsidized policies protect producers against losses
during a particular season, with price guarantee levels established immediately prior to the
planting season.7 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 risk management tool since the early 1990s,
due in large part to substantial federal support. The federal government pays about 60%, on
average, of the farmer’s crop insurance premium, plus the administrative costs of delivering the
products. 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 crop insurance program in its
current form would cost, on average, $9.0 billion per year (Table 2) through 2022.8
In 2011, crop insurance policies covered 264 million acres. Major crops such as corn, soybeans,
wheat, and cotton are covered in most counties where they are grown, and policies cover at least
80% of planted acreage of each crop. Crop insurance is also available for over 80 specialty crops.
In 2009, specialty crop policies covered more than 7 million acres, or up to 75% of specialty crop
area. In total, policies are available for more than 100 crops, including coverage on fruit trees,
nursery crops, and dairy and livestock margins, as well as 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 funding for five new disaster programs.

7 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. The program is administered by the USDA’s Risk Management
Agency (RMA) and financed through USDA’s Federal Crop Insurance Corporation (FCIC). Separately, the Noninsured
Crop Disaster Assistance Program (NAP), administered by USDA’s Farm Service Agency, attempts to fill in the gaps
in catastrophic coverage in counties where crop insurance policies are not offered.
8 CBO Budget Projections, March 2012.
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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, CBO does not include program
funding 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. Unlike traditional disaster
assistance and crop yield insurance, losses are calculated 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.
Policy Issues for Farm Safety Net Programs
Issues Related to Current Programs
The current tight federal budget situation and the global economic difficulties since 2008 contrast
sharply with the financial success experienced by the U.S. farm sector in recent years.9 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 general policy issues
have emerged in recent years that are likely to play a role in shaping the next farm bill.10
Budget and Funding
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, at
least to some degree, the following goal as expressed by one advocate:
[M]aking 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

9 See CRS Report R40152, U.S. Farm Income.
10 These policy issues are discussed in CRS Report R41317, Farm Safety Net Programs: Issues for the Next Farm Bill.
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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Effectiveness of the Current Farm Safety Net
Some producers have criticized farm safety net programs for being too slow to respond to
disasters, not being well integrated, or not providing adequate risk protection. In contrast, long-
time farm program critics question the need for any 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.12 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 of Farm Programs
The number and type of commodities currently covered by farm programs are primarily the result
of the historical and evolving nature of farm policy. Producers of staple 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 in farm programs could be increased beyond current levels by developing a
whole-farm program, or by revising the current whole farm insurance product so that it would be
more widely accepted by producers.
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 the size of farms that 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, to respond to general
public concerns over payments to large farms, and to 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 to some policymakers makes crop insurance an attractive
centerpiece of farm policy because it helps small and large farms alike, but to others makes it a
target for payment limit application.

12 Erik J. O'Donoghue et al., Identifying Overlap in the Farm Safety Net, U.S. Department of Agriculture, Economic
Research Service, Economic Information Bulletin Number 87, November 2011, http://www.ers.usda.gov/Publications/
EIB87/EIB87.pdf.
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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.13 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.14
Issues Related to Farm Safety Net Proposals
Several broad policy issues affect potential tradeoffs for revising the farm safety net. These
include:
1. how price (or revenue) protection is established,
2. the geographic level at which program benefits are triggered, and
3. whether or not a proposal addresses “shallow losses” (i.e., losses not covered by
federally subsidized crop insurance because of the policy deductible).
Each of these issues is discussed below and summarized in Table 3.
Table 3. Policy Issues for Developing a Farm Safety Net
Issue
Producer Concern
Program Design and Cost Issues
Fixed Price vs. Market
Crop insurance covers only intra-season
Current market conditions could be incorporated into
Formula Protection
price risk; successive years of market
program parameters by using multi-year average prices,
price declines would lower price
either in a revenue program (as ACRE does now) or
protection; most current program
through crop insurance. Using recent prices could
parameters are at levels that generally
increase protection while possibly increasing outlays
do not provide much protection in
and leading to potential disputes under WTO rules if
current high-price markets.
the payment formula is too generous.
Individual Farm Protection
A trigger at a more aggregated level
Triggers set only at the farm level can be more
vs. Area-wide Trigger (above farm level) may result in no
expensive because likelihood of payout is higher.
payments to producers with losses. Farmers might take actions that increase their
indemnities (moral hazard problem).
Protect against revenue
Historically, producers think about farm
Whole-farm approach would address farm loss directly
loss at the whole-farm
subsidies, indemnities, and disaster
and perhaps cost less but approach is historically not
level (i.e., total revenue
payments on a crop basis. Also, whole-
popular with producers; it might encourage more risky
for all crops)
farm payments may be less than crop-
practices (moral hazard problem) such as planting only
specific payments due to offsetting crop
one crop because farm diversification may reduce
revenues on the farm.
likelihood of payment to farmer.
Covering shallow loss vs.
Crop insurance covers deep losses in
A farm program could be designed to cover a portion
deep loss
crop revenue but deductible leaves
of this loss; or additional crop insurance coverage could
producers with potential for out-of-
be provided through higher subsidies for policies with
pocket loss (shallow loss).
lower deductibles or with a separate insurance policy.
Farmers might take actions that increase their
indemnities (moral hazard problem).
Source: CRS.

13 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.
14 See CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program.
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Farm safety net proposals offered to date by Members of Congress and interest groups can be
analyzed using these same three issues as points of comparison. A matrix in Table 4 arranges
each proposal accordingly. The left column is price (revenue) protection determination; the top
row is the geographic trigger; and shallow loss programs are italicized within the table. A brief
description of each of the proposals is provided in the section on “Safety Net Proposal
Descriptions” and summarized in Table 5.
Fixed Price vs. Market Formula Protection
Given current relatively high price levels and agricultural market volatility, many ask how the
government might best protect producers against lower prices and/or revenue. 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 high
prices as fixed references, without adjusting them downward, could increase program outlays and
lead to potential World Trade Organization (WTO) disputes.
In general, fixed price guarantees, if set at a relatively high level, can provide the most market
protection for farmers but at a relatively high potential cost for taxpayers, as well as at increased
risk for WTO trade disputes. In contrast, more market-oriented program parameters can reduce
potential for overproduction and high taxpayer costs, but may provide less support to farmers
when prices decline rapidly, particularly if the guarantee is based on current prices.15 Price
protection based on historical average prices may be more attractive for producers following a
high price period because it would establish a higher protection than current prices.
Individual Farm Protection vs. Area-Wide Trigger
A program’s geographic trigger determines at what level a loss must occur before producers
receive a benefit: farm, county, state, or national, or a combination. Farm-level compensation is
usually preferred by producers because it is specific to their loss, but it can be more expensive for
taxpayers. Also, a farm-specific program would need provisions (e.g., an insurance deductible) to
avoid moral hazard problems—farmers deliberately taking actions that might increase their
indemnities—or adverse selection, whereby only farms with high risk of loss participate. For an
area-based program (such as county or district), farms might suffer a loss but not receive payment
if the program payment trigger also requires a loss at the area level. Also, some say the lack of
county data might make program administration difficult. National-level programs can be easier
to administer (e.g., less data and fewer calculations required) but benefits might not match
individual needs if national-level payments do not correspond to local farm losses.
By design, a trigger based on individual farm loss would provide better farm-level yield
protection than an area trigger. However, a lower payment rate (or limiting factor on payments)
might be needed for budgetary purposes, since farm yield variability is greater than for a larger
geographic area and hence the program could trigger payments more often. In contrast, an area-
wide plan would provide less protection against individual yield risk while perhaps offering more
price protection, depending on how the program is constructed. In any case, payment adjustment
factors can be used to reduce eligible acreage so that a program fits under a predetermined cost
constraint when scored by CBO.

15 Some farm groups are concerned that support levels do not keep up with rising input prices. The economic argument
against tying government support to input costs is that if support increases farm profits, it can lead to overinvestment in
the agricultural sector, high public expenditures, and a misallocation of resources within the general economy.
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Table 4. Selected Farm Safety Net Proposals
(shallow-loss programs are in italics)
At what geographic level are program benefits triggered?
How is price
Farm
County Crop
Reporting
District National
(or revenue)
protection
Compensation matches a
portion of farm loss, but
Can be less expensive than Farm may suffer loss but not National program is easier to
established?
costs can be high and certain
farm level program but
receive payment if loss does
administer but benefits might
rules might be required for county loss may not match not occur in Crop Reporting not match need if payments do
program integrity.
farm loss.
District (CRD).
not correspond with farm loss.
1. Current market
Environmental
Total Coverage


price
Working Group
Option or TCO (Rep.
(EWG)—free crop
Neugebauer)—new
Farmers plant according
insurance coverage for
area yield insurance policy
to market incentives, but yield losses greater than
available to pay for a
price protection might
30%; no subsidies for
producer’s deductible
not be enough if crop
revenue policies or higher
when area yield losses are
prices drop sharply or
coverage levels; guarantee
greater than 10%;
trend lower.
based on current prices.
guarantee based on
current prices.

2. Multi-year average
Revenue Loss Assistance
Deep Loss Program
Aggregate Risk and

historical price
Program or RLAP
(American Farm
Revenue Management or
(Senator Conrad et al.)—
Bureau Federation)
ARRM (Senator Brown
Price protection is based
revenue payment for each
—new county revenue
et al.) (S. 1626)—revenue
on historical prices,
program crop when triggered
insurance policy for
payment for each program
which is attractive for
by farm revenue losses
losses greater than 20%
crop when triggered by losses
producers fol owing a
greater than 12%; guarantee
or 30%; guarantee based
greater than 10% at both
high price period, but it
based on higher of historical
on historical prices
district and farm level;
might be costly or not
farm prices or target prices.
(current insurance
guarantee based on historical
provide enough price
policies use only within
crop insurance prices.
protection if crop prices
Risk Management for
season prices).
trend lower over time.
America’s Farmers or
RMAF (American
Soybean Association)—
revenue payment for each
program crop when triggered
by losses greater than 10%;
guarantee based on historical
farm prices.

3. Fixed in statute

Stacked Income

Farmer-Owned Reserve
Protection Plan or
(FOR) by National
Depending on parameters,
STAX (National
Farmers Union—acreage
legislated guarantee price
Cotton Council) for
set-aside and storage
might provide the highest
cotton only—new county
programs; increase loan rates.
amount of price
insurance policy with a
Revised Counter-Cyclical
protection but might also
price guarantee fixed in
Price Program—make
encourage overplanting
statute and low deductible.
payments on planted acreage
and/or result in high
rather than base acres;
federal outlays if target
increase target prices.
prices are set too high
relative to the market.
Source: CRS based on proposal descriptions.
Notes: Programs in italics are designed to address “shallow losses” (i.e., out-of-pocket losses incurred by the
producer via the crop insurance deductible). Advocates say a shallow-loss program is needed to better protect
producers, while opponents argue that it would remove too much risk, encourage overproduction, reduce crop
prices, and drive up federal outlays. These and other proposals are summarized in the section on “Safety Net
Proposal Descriptions” and in Table 5.
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Shallow Loss vs. Deep Loss
The issue of “shallow losses” (i.e., losses not covered by federally subsidized crop insurance but
absorbed by the producer via the policy deductible) has received considerable attention in policy
discussions. While shallow losses vary widely from year to year based on what can be minor
deviations from normal weather or modest market price changes, some producers contend that the
insurance deductible leaves them with too much out-of-pocket cost. Others say such losses do not
necessarily threaten the commercial viability of a business and are part of the cost of doing
business.
Some policymakers and producers are concerned about the level of deductible and the cost of
purchasing additional coverage to protect against shallow losses. Several entities have proposed
alternatives to address shallow losses through a new revenue program (similar to ACRE). In
contrast, others advocate that federal farm programs should focus only on “deep losses” that
would otherwise drive a producer out of business and let individual operators use existing risk
management tools to deal with year-to-year shallow losses. They argue that a shallow loss
program would remove too much risk for producers and would encourage overproduction, which
could reduce crop prices and drive up federal outlays. Yet others have commented that offering
inexpensive deep loss coverage might encourage production of certain crops in more risky
production areas if policies are made available in those areas or the coverage level is too high.
“Recoupling”
Another choice when designing a farm program is whether to tie the benefits to current plantings
or to historical plantings. Under the 1996 farm bill, payments were “de-coupled,” meaning
producers were no longer required to plant a specific crop in order to receive a payment (counter-
cyclical program payments were added in 2002). Congress chose this method to encourage
farmers to plant according to market signals and not for potential government payments. If under
the next farm bill, payments are made on planted acres instead of historical base acres
(“recoupling”), benefits would be more closely tied to producer loss. The tradeoff is that it could
create the potential for market-distorting behavior by encouraging producers to plant for the
program rather than the market, which could lead to overproduction, lower crop prices, and
higher federal outlays. Also, programs using current plantings are less WTO-compliant.
Is a Loss Necessary to Trigger a Federal Farm Program Payment?
The recent surge in U.S. farm income has brought into question the need for nearly $5 billion in
direct payments that are paid to agricultural land owners whether or not a loss was incurred.
Additional Issues
Besides the general issues described above, several specific policy directions, issues, and
questions have emerged in recent months.
1. Apparent consensus for the elimination of direct payments would leave crop
insurance to serve as the primary safety net policy.
2. Multiple commodity programs (i.e., different programs for different
commodities) raise the issues of fairness and equity for payment distribution.
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3. Using pre-determined target/reference prices might alter producer behavior, with
implications for potential shifts in planted area and WTO obligations.
4. Should restrictions on growing fruits, vegetables, and wild rice be removed as a
condition for receiving program benefits, to give producers increased planting
flexibility?
5. Federal programs need to address the potential for losses following successive
years of downward trending prices (multi-year price protection).
6. Should conservation compliance16 be maintained if direct payments are
eliminated, and if so, how? Would it be attached to crop insurance or some other
program?
7. The level and applicability of payment limits remain contentious.
8. Under sequestration, cuts of approximately $15 billion might be required for
mandatory farm programs. Will committee leadership retain the $23 billion
reduction goal previously announced?
9. How will sequestration be incorporated into the budget scoring of any new farm
bill?
Safety Net Proposal Descriptions
In fall 2011, the Administration, Members of Congress, and a number of farm groups put forward
a variety of proposals to reduce government expenditures on farm subsidies and revise farm
programs. Selected proposals are summarized in the sections that follow and are listed in Table 5.
The proposals are grouped into four categories: (1) proposals that modify current policy, (2) new
revenue programs, (3) crop insurance proposals, and (4) other. The order of proposals is based on
these groupings.
Most proposals either reduce or eliminate direct and counter-cyclical payments to generate
savings and provide funding to change the farm safety net so it addresses concerns pertaining to
farm revenue risk for producers. Also, most either leave the marketing loan program unchanged
or retain it with modest modifications.
Several proposals would reduce or eliminate 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, revenue-based crop insurance program that would supplement existing crop insurance
products to cover shallow losses. 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.

16 For more information on conservation compliance, see CRS Report R42459, Conservation Compliance and U.S.
Farm Policy
.
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Table 5. Selected Farm Safety Net Proposals
Proposal

Description
Eliminations / Net savings
Group I. Modify Current Policy

Administration: Deficit
Reauthorize CCP, ACRE, SURE, and marketing loan program;
Eliminate DP. $33 billion savings over 10
Reduction Plan
lower crop insurance expenditures by reducing producer
years (including separate conservation
subsidies and company payments for expenses/risk-sharing.
savings).
Senator Coburn: Deficit
Maintain crop insurance and guaranteed farm loans.
Eliminate all farm commodity programs.
Reduction Plan
Revised Counter-Cyclical Price Modify the current CCP program by making payments on
Cost not available.
Program
planted acreage (not base) and raising target prices.
Group II. New Revenue Programs

S. 1626, Aggregate Risk and
Crop revenue program—makes payments (by program crop)
Eliminate DP, CCP, ACRE, and SURE.
Revenue Management (ARRM) on 85% of planted acres when two triggers are met: (1) farm
CBO previously estimated $20 billion
by Senators Brown, Thune, Durbin, revenue is below guarantee, and (2) crop revenue at crop
savings over 10 years. Payments capped
and Lugar
reporting district level is below guarantee. Both use historical
at 15% of CRD guarantee.
crop insurance prices.
S. 2261, Revenue Loss
Crop revenue program—makes payments (by program crop)
Eliminate DP, ACRE, and SURE.
Assistance Program (RLAP) by
on plantings when farm revenue is below guarantee (88% of
Reauthorize marketing loans and CCP.
Senators Conrad, Hoeven, and
historical revenue). Losses below 75% are not covered. Price
Cost not available.
Baucus
is higher of target price or 5-yr Olympic ave. farm price.
Risk Management for
Crop revenue program—makes payments (by program crop)
Eliminate DP, CCP, ACRE, and SURE.
America’s Farmers (RMAF) by
on planted acres when actual crop revenue is below
Cost not available.
American Soybean Association
guarantee. Guarantee based on APH or county yields and
higher of target price or 5-yr Olympic average farm price.
Group III. Crop Insurance

Stacked Income Protection
STAX is described for cotton producers only. Farmers could
Eliminate DP, CCP, ACRE, and SURE.
Plan (STAX) by National Cotton
buy insurance coverage to protect against shallow losses
Modify marketing loan (2-yr ave.
Council
under an area-wide insurance product with a fixed minimum
Adjusted World Price within 47 to 52
harvest price; would be in addition to a farmer’s individual
¢/lb. range). Cost of $400 to $500 million
policy.
per year.
Total Coverage Option (TCO)
Enable producers to supplement farm-level with area-wide
Cost not available.
contained in H.R. 3107 by
yield insurance to cover shallow losses.
Representative Neugebauer
Environmental Working
Replace current farm commodity programs and crop
Eliminate current farm programs and
Group (EWG) Proposal
insurance subsidies with a free crop insurance policy that
crop insurance subsidies. EWG expects a
covers yields losses > 30%. Revenue policies and additional
total savings of $80 billion over 10 years.
yield coverage would be available but not subsidized.
Deep Loss Program by
Replaces current programs and catastrophic crop insurance
Eliminate DP, CCP, ACRE, and SURE.
American Farm Bureau Federation
with an area-wide (e.g., county) revenue insurance policy.
Insurance deductible and premium
Guarantee would be based on historical prices to address
subsidy rates to be determined by budget
multi-year price declines. Farmers could purchase additional
cost implications.
subsidized insurance to cover shallow losses.
Group IV. Other


Farmer-Owned Reserves
FOR, increased loan rates, and acreage set-asides. Payments
Eliminate DP, CCP, and marketing loan
(FOR) by National Farmers Union
limited to crops placed under FOR.
benefits.
Source: Compiled by CRS from proposal statements, news reports, and other sources.
Notes: If not indicated, costs estimates provided by authors of proposals. Proposals not appearing in this table are
described briefly in the section on “Additional Proposals.” DP = direct payment, CCP = counter-cyclical payment,
CRD = crop reporting district, APH = actual production history (crop insurance yield). The Olympic average
excludes high and low years.
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Administration Plan for Economic Growth and Deficit Reduction
(Sponsor: the Administration)17

Program type:
Modify current policy so as to reduce budget costs.
Programs eliminated:
DP.
Commodity coverage:
Current program crops: wheat, feed grains (corn, grain sorghum,
barley, oats), rice, soybeans, upland cotton, minor oilseeds,
peanuts, and pulse crops (dry peas, lentils, chickpeas).
Loss coverage:
No change from current programs.
Program description:
Reauthorize CCP, ACRE, marketing loan program, and the suite
of disaster programs, including SURE, that expired September
30, 2011; reduce crop insurance expenditures by reducing
producer subsidies (by 2 percentage points) on those policies in
which premiums are subsidized at above a 50% rate, reduce
company average return on investments (ROI) to a 12%
average, and reduce payments to companies for expenses and
risk-sharing.
Price/revenue protection:
No change from current farm and crop insurance programs (NC).
Geographic loss trigger:
NC.
Eligible acres:
NC.
Payment calculation:
NC.
Payment limit:
NC.
Conservation compliance:
NC.
Cost to producer:
Higher crop insurance premiums.
Budget cost estimate:
Administration estimates net savings of $33 billion over 10
years, including $2 billion in savings from better targeting of
conservation programs; $30 billion from DP; and $8 billion from
changes to the crop insurance program. Reauthorization of the
suite of disaster programs, including SURE, would cost roughly
$7 billion over five years.
Rationale: The Administration is concerned that both the level of federal support directed to the
crop insurance industry, as well as the crop insurance industry’s return on investment (ROI), are

17 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.
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artificially inflated by the high market-price setting of recent years rather than by a change in risk.
This is because both premiums and subsequent federal support levels rise with market prices. To
support its argument, the Administration points to a study that found that average ROI was 14%
for crop insurance companies compared to an average of 12% for other types of insurance
companies. As a result, the Administration proposes lower federal support so as to help bring the
ROI more into line with the insurance industry average ROI. To achieve this, the Administration
proposes capping administrative expense reimbursements based on 2006 premiums rather than
the recent high-priced 2010 premiums. Also, the Administration proposes to more accurately
price the premium for catastrophic (CAT) coverage policies, which will slightly lower the
reimbursement to crop insurance companies. Farmers would not be impacted by the change to
CAT since the farmer portion of the CAT premium remains fully subsidized.
For many crop insurance policies, over half of the premium is paid by the federal government.
The original rationale for high federal premium subsidies was to encourage greater producer
participation. Today participation rates average near 83%. As a result, the Administration argues
that the rationale for such high premium subsidy rates has weakened. The Administration
proposes cutting federal premium subsidy rates by two percentage points on those policies that
are subsidized in excess of 50%.



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Senator Coburn’s Deficit Reduction Plan
(Sponsor: Senator Coburn)18

Program type:
Part of broad plan to reduce government spending by eliminating
most farm programs, but maintaining crop insurance programs
and guaranteed farm loans.
Programs eliminated:
All farm programs including DP, CCP, ACRE, and SURE. It also
would end direct ownership and operating loans and not
reauthorize disaster programs that expired September 30, 2011.
Commodity coverage:
No change from current crop insurance program (NC).
Loss coverage:
NC.
Program description:
Among its many government-wide provisions, the plan would
maintain crop insurance and guaranteed loans.
Price/revenue protection:
NC.
Geographic loss trigger:
NC.
Eligible acres:
NC.
Payment calculation:
NC.
Payment limit:
NC.
Conservation compliance:
None.
Cost to producer:
NC.
Budget cost estimate:
Total safety net savings would be more than $80 billion over 10
years (sponsor estimate).
Rationale: Senator Coburn’s proposal states that the farm safety net should be reformed to serve
solely as a risk management tool intended to promote the capitalization of farmers; income
support programs, such as direct payments, ACRE, and marketing assistance loans should be
ended.

18 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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Revised Counter-Cyclical Price Program (Sponsor: Unspecified;
General Interest from Rice and Peanut Producers)

Program type:
Expand current CCP program.
Programs eliminated:
DP, ACRE, and SURE.
Commodity coverage:
Current program crops: wheat, feed grains (corn, grain sorghum,
barley, oats), rice, soybeans, upland cotton, minor oilseeds,
peanuts, and pulse crops (dry peas, lentils, chickpeas).
Loss coverage:
No change from current CCP and crop insurance programs.
Program description:
Modify CCP program two ways. First, make payments on
planted acreage (rather than base acres) when the national
average farm price during first several months (TBD) of
marketing year drops below a reference (target) price. Second,
increase target prices to more closely align with current market
prices (formula TBD).
Price/revenue protection:
Increases under CCP modifications relative to current CCP
program.
Geographic loss trigger:
National.
Eligible acres:
All planted acres.
Payment calculation:
Same as under current CCP program.
Payment limit:
Unspecified.
Conservation compliance:
Unspecified.
Cost to producer:
None.
Budget cost estimate:
No estimate available.
Rationale: Producer groups supporting these CCP modifications say current program parameters
are no longer relevant and do not provide meaningful price protection. Switching from base acres
to planted acres would align the CCP payment more closely with price risk associated with a
producer’s production (as provided under the current ACRE program but not the current CCP
program). Using only partial-year data rather than the entire year for determining the payment
would speed up payment delivery. The portion of the marketing year to be used has yet to be
determined.

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Farm Safety Net Proposals in the 112th Congress

Aggregate Risk and Revenue Management (ARRM)
(Sponsors: Senators Brown, Thune, Durbin, and Lugar)19

Program type:
Shallow-loss crop revenue program.
Programs eliminated:
DP, CCP, ACRE, and SURE.
Commodity coverage:
Current program crops: wheat, feed grains (corn, grain sorghum,
barley, oats), rice, soybeans, upland cotton, minor oilseeds,
peanuts, and pulse crops (dry peas, lentils, chickpeas).
Loss coverage:
Covers losses from 10% to 25% of crop-reporting-district (CRD)
revenue guarantee. The first 10% of losses are not covered.
Losses greater than 25% are expected to be covered by crop
insurance polices.
Program description:
Makes crop-specific payments when two triggers are met:
(1) actual farm revenue < farm guarantee, and (2) actual CRD
revenue < CRD revenue guarantee. Both loss triggers use crop
insurance harvest prices.
Price/revenue protection:
Multi-year: both revenue guarantees (farm and CRD) are based
on five-year Olympic average of yield (APH and CRD) times
crop insurance harvest price.
Geographic loss trigger:
Two triggers must be met—farm level and CRD level.
Eligible acres:
Planted or intended to be planted acres. ARRM eliminates
restrictions on planting fruits and vegetables on program acres.
Payment calculation:
Payment on 85% of planted acres with adjustment for farm yield
relative to CRD yield. Per-acre payment rate equals 100% of
difference between 90% of CRD revenue guarantee and actual
CRD revenue (CRD yield x RMA harvest price). Payment rates
capped at 15% of CRD guarantee.
Payment limit:
Subject to adjusted gross income (AGI) limitation of $500,000
non-farm average income and a payment limit of $65,000.
Conservation compliance:
Eligibility subject to conservation compliance rules.
Cost to producer:
None.

19 “Aggregate Risk and Revenue Management Act of 2011,” S. 1626, referred to Senate Agriculture Committee,
September 23, 2011. Subsequently, in early October, Senator Lugar and Representative Stutzman introduced S.
1658/H.R. 3111, the Rural Economic Farm and Ranch Sustainability and Hunger Act (REFRESH), a broad-based farm
bill that incorporates ARRM.
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Budget cost estimate:
The elimination of several existing programs would score
substantial savings, which are partially offset by the cost of the
ARRM program (estimated at $28 billion over 10 years). CBO
has scored $20 billion in net savings over 10 years for ARRM.20
Rationale: ARRM was designed to address several criticisms that emerged regarding the 2008
farm bill’s Average Crop Revenue Election (ACRE) program. ACRE was intended 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. Under ACRE, payments for an eligible crop
required meeting two separate revenue triggers at both the state and farm levels. While the
revenue aspect has been conceptually attractive for many, some have criticized ACRE’s use of
state crop yields to determine guarantee and payment levels. They point out that a crop loss
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 average revenue trigger based on
yields in crop reporting districts (CRDs), which are multi-county areas, rather than statewide
yields. This change is designed to shift the program’s risk protection closer to the farm. In
addition, 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 revenue triggers at both the CRD and farm levels.




20 CBO score of ARRM relative to the CBO March 2011 baseline, September 19, 2011.
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Revenue Loss Assistance Program (RLAP)
(Sponsors: Senators Conrad, Hoeven, and Baucus)21

Program type:
Shallow-loss crop revenue program.
Programs eliminated:
DP, ACRE, and SURE.
Commodity coverage:
Current program crops: wheat, feed grains (corn, grain sorghum,
barley, oats), rice, soybeans, upland cotton, minor oilseeds,
peanuts, and pulse crops (dry peas, lentils, chickpeas).
Loss coverage:
At the farm level, covers commodity-specific revenue losses
greater than 12% but not to exceed 25% on planted/prevented
planted program crop acreage.
Program description:
Makes payment when actual farm revenue for one or more
program crops is less than the adjusted historic revenue
guarantee for each crop (defined as 88% of historic revenue for
each crop). CCP continues with 2012 target prices and payments
made on 75% of base acres (down from current level of 85%).
Target prices are no longer reduced by direct payment rates as
under the 2008 farm bill.
Price/revenue protection:
Multi-year; for each crop, the per-acre revenue guarantee is 88%
times historic revenue; historic revenue equals the higher of the
five-year Olympic average farm price or 2012 target price times
producer yield (higher of the farm (1) APH, (2) five-year
Olympic average APH, or (3) CCP or DP yield). Losses below
75% of historic revenue are not covered.
Geographic loss trigger:
Farm level.
Eligible acres:
Planted or intended-to-be-planted acres. A payment factor of
65% is used for planted acreage and 45% for prevented planted
acres. Total eligible acres cannot exceed historical program crop
base acres. Farmers must comply with requirements for planting
flexibility.
Payment calculation:
Per-acre payment rate equals the difference between the revenue
guarantee and the actual crop revenue per acre for the current
year. For each crop, actual revenue is actual yield times national
average farm price for the first four months of the marketing
year plus net crop insurance indemnities and noninsured crop
disaster assistance payments. (The national price could be
adjusted for quality losses.)

21 “Revenue Loss Assistance and Crop Insurance Enhancement Act of 2012,” S. 2261, referred to Senate Agriculture
Committee, March 29, 2012.
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Payment limit:
Subject to a payment limit of $105,000 for payments under the
Revenue Loss Assistance Program and CCP. A person is
ineligible for any benefits if average adjusted gross income
(AGI) exceeds $999,000.
Conservation compliance:
Eligibility subject to conservation compliance rules.
Cost to producer:
None.
Budget cost estimate:
CBO score has been requested.
Rationale: The proposal is designed to address shallow losses by combining the ACRE and
SURE programs into a single program. It would not require a disaster designation to trigger
producer eligibility. The primary program is limited to current program crops. In the payment
calculation, using the national farm price for the first four months of the market season would
speed up payment delivery compared to the SURE, ACRE, and CCP programs, which requires
using full marketing-year average prices. Inclusion of net crop insurance indemnities in the actual
revenue calculation helps prevent overlap of RLAP and crop insurance payments.
Among other provisions, the proposal would reauthorize for FY2012 to FY2021 the expired
livestock and fruit tree disaster programs, with slightly lower payment amounts to reduce overall
costs. SURE would be authorized for FY2012 only. Additional provisions would make available a
supplemental crop insurance policy based on area-wide losses.

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Farm Safety Net Proposals in the 112th Congress

Risk Management for America’s Farmers (RMAF)
(Sponsor: American Soybean Association)22

Program type:
Shallow-loss crop revenue program.
Programs eliminated:
DP, CCP, ACRE, and SURE.
Commodity coverage:
Current program crops.
Loss coverage:
Covers losses from 10% to 25% of farm revenue guarantee (5%
to 20% for irrigated crops). The first 10% (5% for irrigated
crops) of losses are not covered. Losses greater than 25% are
expected to be covered by crop insurance polices.
Program description:
Makes crop-specific payments when one trigger is met: actual
farm revenue < farm guarantee.
Price/revenue protection:
Multi-year; farm revenue guarantee is 5-yr. Olympic average
farm price times higher of: producer’s APH, producer’s 5-yr.
Olympic average APH, or 80% of the county yield.
Geographic loss trigger:
Farm level.
Eligible acres:
Planted or intended-to-be-planted acres.
Payment calculation:
Per-acre payment rate equals 85% of difference between the
farm guarantee and actual farm revenue (actual yield times
national farm price for the first four month of year only plus net
crop insurance indemnities). Payment rates capped at 25% of
guarantee.
Payment limit:
Subject to adjusted gross income (AGI) limitation of $500,000
non-farm AGI and $750,000 farm AGI.
Conservation compliance:
Eligibility subject to conservation compliance rules.
Cost to producer:
None.
Budget cost estimate:
Not available.
Rationale: The American Soybean Association (ASA) has proposed a revenue-based program
that they say improves farm risk management as a complement to crop insurance and serves as a
replacement for current commodity programs. It features a single, farm-level loss trigger.

22 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.
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Farm Safety Net Proposals in the 112th Congress

Stacked Income Protection Plan (STAX)
(Sponsor: National Cotton Council)23

Program type:
Shallow-loss, area-wide revenue insurance (described below)
and a modified marketing loan program.
Programs eliminated:
DP, CCP, ACRE, and SURE as applied to cotton.
Commodity coverage:
STAX is described for cotton producers only.
Loss coverage:
Loss coverage to be determined but likely in the range of 10% to
20% of revenue guarantee such that the first 10% of losses are
not covered, and losses greater than 20% would be covered by
crop insurance polices.
Program description:
Voluntary program whereby farmers could supplement existing
revenue insurance with an area-wide insurance product
subsidized at 80%.
Price/revenue protection:
The revenue guarantee has “floor protection” since the standard
RMA projected harvest-time price (i.e., pre-planting time price
for harvest-time futures contracts) is “cupped” by a minimum
fixed reference price of $0.65 per pound that acts as a floor price
guarantee when the projected harvest price falls below the fixed
reference price. Producer prices have floor protection from the
modified marketing loan—the upland cotton marketing loan rate
is determined in the fall prior to planting the crop and would be
set equal to the average of the Adjusted World Price for the two
most recently completed marketing years within a bounded range
of $0.47 and $0.52 per pound.24
Geographic loss trigger:
Area-wide insurance policies are determined at the county level.
Eligible acres:
No change from current crop insurance programs (NC).
Payment calculation:
NC.
Payment limit:
NC.
Conservation compliance:
NC.
Cost to producer:
Producer premiums for the supplementary shallow-loss coverage
would be offset to the maximum extent possible by using the

23 “National Cotton Council 2012 Farm Policy Statement,” NCC, Aug. 26, 2011, at http://www.cotton.org/news/
releases/2011/farmstrat.cfm; and Forest Laws, “NCC advocates change in course on farm policy direction,” Delta
Farm Press
, Sept. 6, 2011.
24 Under the 2008 farm bill, the upland cotton marketing loan rate is set at $0.52 per pound.
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available upland cotton program spending authority under the
eliminated DP, CCP, ACRE, and SURE programs.
Budget cost estimate:
National Cotton Council (NCC) reports an annual cost of $400 to
$500 million.
Rationale: The “stacked” feature of the program is that it would provide shallow-loss coverage
that would sit on top of the producer’s individual crop insurance deep-loss product. 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.25 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.
The NCC claims that adjustments to the upland cotton marketing loan program would make the
program compatible with World Trade Organization (WTO) domestic support commitments and
address the long-running WTO dispute settlement case by Brazil against specific provisions of the
U.S. cotton program.26


25 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.
26 For details of the dispute, see CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program. 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) 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. The current marketing loan rate for upland
cotton is set at 52 cents/lb.
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Farm Safety Net Proposals in the 112th Congress

Total Coverage Option or TCO (H.R. 3107)
(Sponsor: Representative Neugebauer)

Program type:
Shallow loss, area-wide yield insurance.
Programs eliminated:
None.
Commodity coverage:
Potentially all crops covered by yield insurance.
Loss coverage:
Shallow losses greater than 10%.
Program description:
Producers can supplement their individual farm-level yield
policy with a new policy that pays an indemnity when area (e.g.,
county) yield is below 90% of expected level. Payment is
designed to cover some or all of the deductible under an
individual policy.
Price protection:
Guarantee is based on current prices (pre-planting time).
Geographic loss trigger:
Area level (e.g., county).
Eligible acres:
Planted acreage.
Payment calculation:
TCO payment made on eligible acres. Per-acre payment rate
equals RMA price times the difference between area yield
guarantee—90% times normal (historic) area yield—and actual
area yield.
Payment limit:
None.
Compliance issues:
Unspecified.
Cost to producer:
Crop insurance premium (subsidized at not less than 60%).
Budget cost estimate:
Not available.
Rationale: A producer would purchase an individual policy under the current crop insurance
program and receive an indemnity when actual production or revenue is less than the policy’s
guarantee. A producer who also purchases a TCO policy would receive a second indemnity that
covers all or part of the deductible, depending upon the level of loss for the entire area (e.g.,
county). Under the TCO, the farmer would receive the full value of the individual policy
deductible when the actual area yield as a percent of normal is the same or less than the individual
policy guarantee coverage selected by the producer. For example, if a producer purchases 75%
yield coverage for individual yield policy, the policy’s entire deductible is covered by TCO if the
actual area average yield is no more than 75% of normal. The TCO coverage would be triggered
only if the losses in the area exceed 10% of normal levels. The federal subsidy for TCO would be
not less than 60% of the premium, which is similar to average subsidy level for the current crop
insurance program.
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Farm Safety Net Proposals in the 112th Congress

Safety Net by EWG (Sponsor: Environmental Working Group)27
Program type:
Deep-loss yield insurance.
Programs eliminated:
DP, CCP, ACRE, Marketing Loan Program, and SURE.
Commodity coverage:
Potentially all crops covered by yield insurance.
Loss coverage:
Deep yield losses of more than 30%.
Program description:
Replace current farm commodity programs and all crop
insurance subsidies with a free crop insurance policy that covers
yield losses of more than 30%.
Price protection:
Guarantee is based on current prices (planting time).
Geographic loss trigger:
Farm level.
Eligible acres:
Planted acreage.
Payment calculation:
Payment made on eligible acres. Per-acre payment rate equals
crop insurance price times the difference between a farm’s yield
guarantee (e.g., 70% times APH yield) and actual farm yield.
Payment limit:
None.
Conservation compliance:
Require producers to meet a basic standard of conservation
practices.
Cost to producer:
Basic policy is free. Producer could purchase additional
coverage including revenue policies at full market price (i.e., no
subsidies).
Budget cost estimate:
The Environmental Working Group (EWG) expects a total net
savings of $80 billion over 10 years.
Rationale: 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.

27 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. See also Babcock
and Cox, Giving It Away Free—Free Crop Insurance Can Save Money and Strengthen the Farm Safety Net,
Environmental Working Group, April 2012, http://static.ewg.org/reports/2012/farm_bill/
babcock_free_crop_insurance.pdf.
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Farm Safety Net Proposals in the 112th Congress

Deep Loss Program, formerly known as Systemic Risk Reduction
Program, or SRRP (Sponsor: American Farm Bureau Federation)28

Program type:
Deep-loss revenue insurance.
Programs eliminated:
DP, CCP, ACRE, SURE, and catastrophic crop insurance.
Commodity coverage:
Current program crops (with potential extension to other crops
also covered by crop insurance at later date).
Loss coverage:
Deep losses (e.g., in excess of 20% or 30%).
Program description:
Program makes a payment when crop revenue for a county (or
some geographic area) is below a guarantee based on county
yields and historical prices. Protects against multi-year price
declines but not shallow losses (i.e., losses stemming from
producer’s crop insurance deductible). To protect against shallow
losses or to cover individual farm yield risk, producers could
purchase individual policies that would “wrap around” the core
coverage.
Price protection:
Guarantee based on three-year average or five-year Olympic
average of crop insurance harvest prices.
Geographic loss trigger:
County (if data not available, use crop reporting district or other
region).
Eligible acres:
Planted acreage.
Payment calculation:
Payment made on eligible acres. Per-acre payment rate equals
difference between area revenue guarantee (e.g., 70% or 80%
times county yield x crop insurance historical average price) and
actual revenue (e.g., county yield x crop insurance harvest price).
Payment limit:
None.
Conservation compliance:
Unspecified.
Cost to producer:
Minimal fee. As currently available, producer could purchase
individual (subsidized) policies for additional coverage.
Budget cost estimate:
Not available. The American Farm Bureau Federation (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 core coverage, and hence have
less liability and potential for indemnities. The level of the

28 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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insurance deductible on the core policy as well as the premium
subsidy rates for buy-up coverage would be determined by
budget cost implications.
Rationale: AFBF argues that the federal government should provide more protection from larger
downside risks while allowing producers to manage shallow losses on their own by purchasing
additional (subsidized) insurance. According to the organization, the farm bill should provide
strong safety net programs “that do not guarantee a profit and minimize the potential for farm
programs affecting production decision.”29 AFBF also says the proposal, unlike others, can be
applied to a broader range of commodities, like fruits and vegetables.


29 FBNews, January 23, 2012, http://www.fb.org/assets/files/fbn/current_issue.pdf.
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Farm Safety Net Proposals in the 112th Congress

Farmer-Owned Reserves (FOR)
(Sponsor: National Farmers Union)30

Program type:
Establishes a new FOR for each of the major program crops with
increased loan rates, and acreage set-asides.
Programs eliminated:
DP, CCP, and marketing loan benefits (i.e., loan deficiency
payments and marketing loan gains).
Commodity coverage:
Current program crops: wheat, feed grains (corn, grain sorghum,
barley, oats), rice, soybeans, upland cotton, minor oilseeds,
peanuts, and pulse crops (dry peas, lentils, chickpeas).
Loss coverage:
Not applicable.
Program description:
Producers may place their crop in a crop-specific FOR whenever
the market price falls below that crop’s loan rate. Each FOR is
capped, e.g., corn at 3 million bus., wheat at 800 million bus.,
soybeans at 400 million bus., etc. A crop placed in the FOR must
remain there until its market price exceeds 160% of its loan rate
(i.e., FOR release trigger), when it is released to the market. All
crops placed in the FOR receive an annual storage payment of
$0.40 per unit (e.g., bushel, cwt, lb.). 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, not crop-by-crop as in the
past. Set-asides would be allocated at the county level.
Participation in the set-aside is voluntary, but all farmers could
bid on acreage they would be willing to put in the set-aside.
Price/revenue protection:
Producer prices are protected by higher loan rates.31
Geographic loss trigger:
Not applicable.

30 National Farmers Union, “NFU Unveils Study to Present Policy Options to Reduce Farm Bill Costs,” news release,
September 13, 2011, at http://nfu.org/news/news-archives/current-news/52-family-farm-policy/686-nfu-unveils-study-
to-present-policy-options-to-reduce-farm-bill-costs. Key study findings and URL links to the University of Tennessee
study are available at http://www.nfu.org/study.
31 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, which would encourage farmers to follow market signals with minimal influence
from the loan rate.
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Eligibility:
Commodity payments would only be made for quantities
actually placed in the FOR, in contrast to the current marketing
loan program which makes payments on every bushel produced.
As a result, the level of government payments could be
significantly lower.
Payment calculation:
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.
Payment limit:
None.
Conservation compliance:
Unspecified.
Cost to producer:
None.
Budget cost estimate:
No official score available.
Rationale: According to a study funded by the National Farmers Union,32 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. The study estimates that the FOR proposal would have saved an estimated $56.4 billion
over a historical 13-year period from 1998 to 2010 if it had been in place in lieu of existing
programs, while the value of production for affected crops would have been $33 billion higher.

32 Harwood D. Schaffer et al., A Study of the Impact of a Reserve Program Had One Been in Effect in the Period, 1998
to 2010
, University of Tennessee Institute of Agriculture, Knoxville, TN, September 10, 2011, http://www.nfu.org/
images/stories/policy/091211_Report.pdf.
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Additional Proposals
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.33 The bill parallels a concept developed by the
National Milk Producers Federation as an alternative to current dairy programs that critics say
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
.
Proposals for Whole Farm 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.
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
five-year average and the current year farm plan). Coverage is available for up to 80% of
guaranteed income.34
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.35 The council states that whole-farm revenue plans

33 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).
34 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.
35 The Chicago Council on Global Affairs, U.S. Agriculture and Nutrition Policy Statement: Transforming American
(continued...)
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are less expensive to taxpayers than traditional support programs. Researchers, however, have
pointed out the difficulty in developing whole-farm insurance products, including complexity in
measuring and classifying risks that underlie the insurance contracts.36 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.
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.
Growing Opportunities (Representative Blumenauer)
On October 26, 2011, Representative 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.”37 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, marketing
assistance loan 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.

(...continued)
Food and Agriculture Policy, September 23, 2011, http://farmpolicy.com/wp-content/uploads/2011/11/FarmBill-
ChicagoCouncil.pdf.
36 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/.
37 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.
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California Recommendations (Coalition of California Agricultural Interests)
In terms of value of production, California is the largest, most diversified agricultural state. 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.38 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.


38 California Department of Food and Agriculture, California and the Farm Bill: A Vision for Farming in the 21st
Century
, October 14, 2011, at http://www.cdfa.ca.gov/farm_bill/pdfs/FarmBillCof12.pdf.
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Appendix A. Current Farm Safety Net Programs
Evaluated by Key Criteria

Current Program: Direct Payments (DP) Program39
Program type:
Fixed, decoupled income support based on historic program
acreage and yields.
Commodity coverage:
Historic program crops: wheat, feed grains (corn, grain sorghum,
barley, oats), rice, soybeans, upland cotton, other oilseeds
(sunflowers, canola, flaxseed, rapeseed, mustard seed, safflower,
crambe), and peanuts.
Loss coverage:
No loss needed to trigger payment.
Program description:
Per-acre payments made to participating owners of historical
base acres irrespective of current planting behavior.
Revenue protection:
Decoupled income support.
Geographic loss trigger:
No loss needed to trigger payment.
Eligible acres:
Historic base acres, no planting required to receive payment.
Payment calculation:
DP payment rate times 85% of historic base acres times the
direct payment yield.40
Payment limit:
$40,000 per person; $80,000 with spouse.
Conservation compliance:
Yes, conservation compliance linked explicitly to DP.
Cost to producer:
None.
Budget cost estimate:
Projected cost of DP during FY2013-FY2022 is $49.6 billion or
$4.96 billion per year.41
WTO status:42
Notified as green box (i.e., exempt from inclusion under the
United States’ AMS limit of $19.1 billion).43

39 For details, see CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill.
40 An adjustment factor of 83.3% (in place of 85%) was used for FY2009 through FY2011.
41 CBO Budget Projections, March 2012.
42 WTO = World Trade Organization.
43 The AMS (or aggregate measure of support) is the sum of all market or trade distorting domestic support programs.
Each WTO member country’s AMS is subject to certain disciplines including a hard cap. For more information, see
CRS Report RS20840, Agriculture in the WTO: Limits on Domestic Support.
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Current Program: Counter-Cyclical Payments (CCP) Program44
Program type:
Variable, partially decoupled, commodity-specific income
support.
Commodity coverage:
Current “covered commodities”: wheat, feed grains (corn, grain
sorghum, barley, oats), rice, soybeans, upland cotton, other
oilseeds (sunflowers, canola, flaxseed, rapeseed, mustard seed,
safflower, crambe), peanuts, and pulse crops (dry peas, lentils,
chickpeas).
Loss coverage:
No individual farm loss required. Partially offsets crop-specific
revenue losses due to price declines that occur when the national
season-average farm price falls below a national price trigger
(i.e., the crop’s target price less its DP rate).
Program description:
Payments are coupled with current-year farm prices—a payment
is triggered when the national season-average farm price for a
specific crop falls below its national price trigger (i.e., the crop’s
target price adjusted downward by its DP rate). Payments are
partially decoupled since they are made on historic base acreage
and program yields.
Price/revenue protection:
Provides revenue protection when national farm price falls below
a national price trigger.
Geographic loss trigger:
National price trigger.
Eligible acres:
Historic base acres, no planting required to receive payment.
Payment calculation:
Total CCP payment = CCP payment rate times 85% of historic
base acres times CCP program yield. CCP payment rate equals
difference between the target price and the sum of the direct
payment rate and the higher of the (1) national season-average
farm price or (2) national loan rate.
Payment limit:
$65,000 per person; $130,000 with spouse.
Conservation compliance:
Yes.
Cost to producer:
None.
Budget cost estimate:
Projected cost of CCP during FY2013-FY2022 is $1 billion or
$0.1 billion per year.45
WTO status:
Notified as non-product-specific AMS (i.e., amber box) but
eligible for non-product-specific de minimis exemption.

44 For details, see CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill.
45 CBO Budget Projections, March 2012.
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Current Program: Marketing Loan Benefits (MLB) Program46
Program type:
Voluntary coupled, commodity-specific price support.
Commodity coverage:
Current “covered commodities”: wheat, feed grains (corn, grain
sorghum, barley, oats), rice, soybeans, upland cotton, other
oilseeds (sunflowers, canola, flaxseed, rapeseed, mustard seed,
safflower, crambe), and pulse crops (dry peas, lentils, chickpeas);
peanuts; plus other “loan-eligible commodities”: extra long
staple cotton, wool, mohair, and honey.
Loss coverage:
Farmer receives benefit on production when market prices fall
below loan rates; no yield protection.
Program description:
Voluntary price support program based on commodity-specific
loan rates. Producer may claim a benefit (as either a marketing
loan gain for crops already placed under a nonrecourse
marketing loan, or as a loan deficiency payment for eligible
crops not yet placed under loan) when the local county price for
a specific commodity (or adjusted world price for cotton or rice)
falls below its national loan rate. Also includes certificate
exchanges.

Price protection:
Each crop’s statutorily fixed marketing loan rate acts as a per-
unit revenue floor for producers with the government making up
any difference between the loan rate and the market price.
(Market price is unaffected by the program.)
Geographic loss trigger:
Payment triggered at the county level when posted county prices
fall below the national loan rate.
Eligible acres:
All production from harvested acres is eligible for the MLB.
Payment calculation:
The producer receives the difference between the national loan
rate and the posted country price or adjusted world price (for
cotton and rice). For crops under loan, the farmer may repay the
loan at the posted county price if it is lower than the loan rate.
Payment limit:
None.
Conservation compliance:
Yes.
Cost to producer:
None.
Budget cost estimate:
Projected cost of MLB during FY2013-FY2022 is $776 million
or $78 million per year.47
WTO status:
Notified as product-specific AMS (i.e., amber box) where
payments may be eligible on a commodity-by-commodity basis
for product-specific de minimis exemption.

46 For details, see CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill.
47 CBO Budget Projections, March 2012.
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Current Program: Acreage Crop Revenue Election (ACRE)48
Program type:
Voluntary coupled, commodity-specific income support.
Commodity coverage:
Current “covered commodities”: wheat, feed grains (corn, grain
sorghum, barley, oats), rice, soybeans, upland cotton, other
oilseeds (sunflowers, canola, flaxseed, rapeseed, mustard seed,
safflower, crambe), peanuts, and pulse crops (dry peas, lentils,
chickpeas).
Loss coverage:
Covers a portion of commodity-specific revenue losses relative
to historic average revenue.
Program description:
Voluntary program; however, selection is permanent for life of
2008 farm bill. ACRE protects producers against crop-specific
revenue losses regardless of the cause—price decline, yield loss,
or both. ACRE payments require that two revenue triggers (farm
and state) be met. ACRE applies to all eligible crops on a farm,
but payments for each crop are calculated separately.
Price/revenue protection:
Multi-year: both revenue guarantees (farm and state) are based
on five-year Olympic averages of yields and the two-year simple
average of the national farm price.
Geographic loss trigger:
Two triggers must be met—farm-level and state-level; however,
the payment is based on a state-level loss formula.
Eligible acres:
85% of planted acres.49
Payment calculation:
Total payment = state payment rate per acre times 85% of
planted acres times ratio of five-year Olympic average farm yield
over the five-year Olympic average state yield (state benchmark
yield). State payment rate per acre equals the lower of (1) 25% of
the state guarantee or (2) difference between the state guarantee
(90% of the simple average of the national average farm price
times the state benchmark yield) and the product of actual state
yield times the higher of (i) the national average farm price or
(ii) 70% times loan rate.
Payment limit:
ACRE does not have a separate payment limit. Instead, ACRE
payments count toward the counter-cyclical program payment
limit of $65,000 per person. The limits for both direct payments

48 For details, see CRS Report R40422, A 2008 Farm Bill Program Option: Average Crop Revenue Election (ACRE).
49 Total number of planted acres eligible for ACRE payments may not exceed the total historical base acres for the
farm. If planted acreage exceeds the farm’s base acres, then the producer may select which planted acres to enroll in
ACRE.
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and counter-cyclical/ACRE payments are adjusted to account for
the 20% reduction in direct payments under ACRE.50
Conservation compliance:
Yes.
Cost to producer:
Participants must forgo 100% of CCP and 20% of DP for all
eligible crops on a farm; marketing loan rates reduced by 30%.
Budget cost estimate:
Projected cost of ACRE during FY2013-FY2022 is $5 billion or
$0.5 billion per year.51
WTO status:
Notified as product-specific AMS (i.e., amber box) where
payments may be eligible for product-specific de minimis
exemption on a crop-by-crop basis.

50 The DP limit of $40,000 is adjusted downward by 20% or $8,000 (i.e., the reduction in DP rates for a producer
selecting ACRE), while the CCP limit of $65,000 becomes the ACRE limit and is adjusted upward by the 20%
reduction in DP.
51 CBO Budget Projections, March 2012.
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Expired Program: Supplemental Revenue Assistance Payments
(SURE)52

Program type:
Coupled, whole-farm income support.
Commodity coverage:
All crops.
Loss coverage:
Covers a portion of whole-farm revenue losses relative to
historic average revenue.
Program description:
Designed to replace ad hoc disaster assistance payments with a
permanent program. SURE partially compensates producers for
losses (due to natural disaster or adverse weather) in whole-farm
crop revenue (a producer’s revenue from all crops in all counties,
i.e., the entire enterprise and not just the crops affected by loss).
The whole-farm revenue, including farm program payments and
net insurance indemnities, is compared with a guaranteed
revenue level. If the actual whole-farm revenue is less than the
farm’s guaranteed level, then the producer receives a payment.
Revenue protection:
The SURE revenue guarantee is essentially the sum of a farm’s
crop insurance guarantees increased by 15%, and NAP
guarantees increased by 20%. For insurable crops, the guarantee
is 1.15 times higher of (APH or CCP yield) times insurance
coverage level times planted acreage times price election. For
non-insurable crops, the guarantee is 1.20 times 50% of higher of
(adjusted NAP or CCP yield) times planted acreage times NAP
price.
Geographic loss trigger:
Eligible farms must be located in a secretarial-disaster-declared
county (or contiguous county) or have an overall yield loss
greater than 50% with at least one crop having at least a 10%
yield loss due to disaster-related conditions.
Eligible acres:
All planted or prevented planted acreage.
Payment calculation:
60% of (program guarantee minus total farm revenue) where
total farm revenue is sum for all crops of (harvested production
times national average farm price) plus government payments53
plus crop salvage value.
Payment limit:
Payments are limited such that the guaranteed level cannot
exceed 90% of expected farm income. Total payments per

52 For details, see CRS Report R40452, A Whole-Farm Crop Disaster Program: Supplemental Revenue Assistance
Payments (SURE)
.
53 Government payments equals 15% of direct payments plus 100% of all other payments—CCP, ACRE, marketing
loan benefits, net crop insurance payments (indemnities minus premiums), NAP payments, and other disaster
payments. Including government payments prevents a farmer from receiving two payments for the same loss.
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person may not exceed $100,000 for SURE plus the three
livestock-related disaster programs of the 2008 farm bill.54 Since
2009, SURE payments are not available to producers if their
three-year average adjusted gross income (AGI) is $500,000.
Conservation compliance:
Yes.
Cost to producer:
Participants must purchase crop insurance (or NAP if crop
insurance is not available) on all crops in their farming operation
such that SURE is supplemental, not primary, insurance.55
Budget cost estimate:
Due to its expiration on September 30, 2011, SURE has no
baseline funding in future years.
WTO status:
Notified as non-product-specific AMS (i.e., amber box) but
eligible for non-product-specific de minimis exemption.





54 These include (1) Livestock Indemnity Payments, which compensate ranchers at a rate of 75% of market value for
livestock mortality caused by a disaster; (2) Livestock Forage Disaster Program, to assist ranchers who graze livestock
on drought-affected pastureland or grazing land; and (3) Emergency Assistance for Livestock, Honey Bees and Farm
Raised Fish, which will provide up to $50 million to compensate these producers for disaster losses not covered under
other disaster programs. See CRS Report RL34207, Crop Insurance and Disaster Assistance in the 2008 Farm Bill.
55 Producers are excluded from this requirement if the crop is not economically significant (i.e., accounts for less than
5% of total expected farm revenue) or if the NAP administrative fee (currently $250 per crop) exceeds 10% of the
value of the coverage.
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Appendix B. Joint Select Committee on Deficit
Reduction and Agriculture Policy

The Joint Select Committee on Deficit Reduction (or joint committee) established in the 112th
Congress was instructed to develop a bill to reduce the federal deficit by at least $1.2 trillion over
the 10-year period ending in FY2021.56 The committee was established under the Budget Control
Act of 2011 (BCA; P.L. 112-25). Because of its authority, the joint committee’s budget
recommendations had potential to significantly affect the development of the next farm bill.
Legislative Process and Timeline of Joint Committee
Any legislation resulting from the joint committee recommendations was to proceed under special
“fast track” procedures that would prevent amendments and limit debate. The BCA allowed 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 had to be approved by the joint committee by November 23,
2011. Leaders of the joint committee declared an impasse on November 21, 2011, and ended their
efforts without passing a bill.
A simple majority of the 12 members would have sufficed to move the bill to both chambers for
an up or down vote. Ultimately, to become law, the joint committee’s bill was required to be
passed by both chambers of Congress by December 23, 2011. If a joint committee proposal
cutting the deficit by at least $1.2 trillion was not enacted by January 15, 2012, then an automatic
spending reduction process that includes sequestration (the cancellation of budgetary resources)
would ensue. Congressional committees whose jurisdiction was likely to be impacted by a joint
committee proposal—for example, the House and Senate Agriculture Committees—were free to
submit their own recommendations to the joint committee. However, no specific policy
restrictions or requirements were placed on the joint committee. Hence, it was under no formal
obligation to incorporate any recommended actions.
House and Senate Agriculture Committees’ Letter to the Joint
Committee

On October 17, 2011, the leadership of the House and Senate Agriculture Committees57 offered a
letter to the joint committee recommending $23 billion in net deficit reduction from mandatory
programs in the agriculture committees’ jurisdiction.58 The unofficial consensus of those claiming
to have knowledge of committee intentions was that the $23 billion would be allocated by cutting
$13 billion from commodity support, $6 billion from conservation, and $4 billion from nutrition

56 See CRS Report R41965, The Budget Control Act of 2011.
57 House Agriculture Committee Chairman Frank Lucas and Ranking Member Collin Peterson; Senate Agriculture
Committee Chairwoman Debbie Stabenow and Ranking Member Pat Roberts.
58 “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.
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programs.59 The letter by the leadership of the agriculture committees 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, no
legislative package was forwarded by the agriculture committee leadership to the joint committee.
According to news sources, regional differences over the potential “farm safety net” design
appeared to be the most prominent obstacle to an agreement among agricultural policymakers.60
On November 21, 2011, the chairs of the House and Senate Agricultural Committees announced
that they had developed a package to save $23 billion, but because the joint committee failed to
reach an overall agreement, their effort on the package had ended. The agriculture committee
leadership is expected to continue the process of reauthorizing the farm bill through the
agriculture committees.61
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 were concerned that the joint committee’s budget
recommendations (whether influenced by the agriculture committee leadership’s proposal or not)
would have provided 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—feared that they would be shut out of the process.
After the House and Senate Agriculture Committee leadership issued its October 17 letter to the
joint committee, Members of Congress, the news media, and several issue-specific advocacy
groups spoke out against the “secret nature” of the leadership’s policy recommendations and the
joint committee’s fast-track process, which they said circumvented the traditional open debate of
farm policy legislation. On November 3, 2011, Congressman Kind delivered a letter to the joint
committee—co-signed by 26 other members of Congress and endorsed by several advocacy
groups—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.”62
Draft Proposal
On November 18, 2011, the press reported on a draft proposal of farm bill recommendations.63
The document was subsequently described in the press as a preliminary draft under discussion by

59 “Conrad: Farm Bill Content Now Moving Target,” Hagstrom Report, Vol. 1, No. 206, November 8, 2011, at
http://www.hagstromreport.com.
60 “Still No Farm Bill Language for Lawmakers,” Chris Clayton, DTN Ag Policy Editor, November 8, 2011.
61 House & Senate Agriculture Committee Leaders , “Statement from House & Senate Agriculture Committee Leaders
on Super Committee’s Announcement,” press release, November 21, 2011, http://agriculture.house.gov/press/
PRArticle.aspx?NewsID=1481.
62 Available at http://kind.house.gov/uploads/11.3.11_%20Letter%20to%20SC_farm%20programs.pdf.
63 Senator Debbie Stabenow, Chairwoman, Senate Committee on Agriculture, Nutrition, and Forestry, draft paper on
“Recommendations to the Joint Select Committee on Deficit Reduction.” The paper was widely circulated by the press
on November 18, 2011.


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some but not all members of the agriculture committees’ leadership. In the absence of action by
the joint committee, proposals in the draft reportedly have been considered as a starting point for
farm bill deliberations in 2012.
The draft borrowed heavily from proposals by Members of Congress and others. The draft
contained multiple titles, including a proposal for the farm safety net. Legislative language was
not released, which precludes a detailed description of the plan.
In broad terms, the proposal would have eliminated most of the current farm programs (except
marketing loans) and replaced them with the Ag Risk Coverage (ARC) program as a free
supplement to subsidized crop insurance coverage. Producers of most program crops (except
cotton) would select one of the following two options.
• The revenue option is designed to protect against both yield and price declines at
the farm level (compared with the state level under the current ACRE program).
A payment would be made on 60% of planted acreage when a producer’s farm
revenue (yield times price) drops below 87% of the farm’s five-year average
(excluding the high and low years). Losses below 75% of farm revenue would
not be covered (crop insurance, if purchased by producers, would cover these
losses). Reportedly, the revenue option would be attractive to producers in the
Midwest and Plains because it would build on what many consider favorable
benefits from the crop insurance program for corn, soybeans, and wheat.
• The price option would make payments on planted acreage to producers when the
national average price during the first five months of the marketing year drops
below a reference (target) price. This option is similar to counter-cyclical
payments under the 2008 farm bill, except that price protection would be higher
than current levels. Reportedly, the price option is designed to be attractive to
rice, peanut, and sorghum producers because crop insurance has been viewed as
less attractive for these crops.
Cotton would be handled separately in an attempt to resolved a long-standing trade conflict with
Brazil under the World Trade Organization. The draft described the new cotton program as a
stand-alone revenue protection program. Cotton producers have been advocating a separate
county-based insurance program (see “Stacked Income Protection Plan (STAX)
(Sponsor: National Cotton Council).”
For specialty crops, crop insurance coverage would be expanded. For dairy, current programs
would be replaced with a new margin-based payment program, combined with provisions to
reduce farm output when margins (milk price minus feed costs) decline.

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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