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August 12, 2015
Overview of Farm Safety Net Programs
The federal “farm safety net” provides risk protection and
insects or disease outbreaks. The average premium subsidy
financial support to U.S. farmers. The three components are
is 62%, and projected federal cost is $8.8 billion per year.
the permanently authorized federal crop insurance program,
farm commodity programs (crop years 2014-2018), and
Farm commodity programs provide price and income
permanently authorized agricultural disaster programs. The
support for a much narrower list of “covered” and “loan”
2014 farm bill (the Agricultural Act of 2014; P.L. 113-79)
commodities such as corn, soybeans, wheat, rice, and
enhanced crop insurance, revised commodity programs, and
peanuts. Payments are made when the actual crop price
retroactively authorized four disaster programs beginning in
drops below a statutory minimum or when revenue is below
FY2012. During the next 10 years, the combined federal
a guarantee based on prices and yields during the most
cost of the farm safety net is expected to average about
recent five years (Figure 2 and Table 1). Participation is
$13.5 billion per year, based on estimates from the
free. Projected program costs are just over $4 billion per
Congressional Budget Office. The U.S. Department of
year. Dairy and sugar producers have separate programs.
Agriculture (USDA) administers the programs. See Table 1
for details and a list of CRS reports.
Agricultural disaster programs cover livestock producers
and tree fruit producers, who generally do not benefit from
The federal crop insurance program is considered by
crop insurance and/or commodity programs. These
many farmers and policymakers as the centerpiece of the
programs make payments for (1) livestock deaths in excess
farm safety net. The program makes available subsidized
of normal mortality, (2) forage losses related to drought, (3)
insurance for about 130 commodities ranging from apples
other losses for producers of livestock, honey bees, and
to wheat. When purchased, these “multiple peril” policies
farm-raised fish, and (4) losses in trees/bushes/vines from
help producers manage financial risks associated with a loss
which an annual crop is produced. Participation is free.
in yield or crop revenue (Figure 1). Insurable causes of
Projected program costs are about $500 million per year.
losses include adverse weather (e.g., drought and flood) and
No disaster designation is needed.
Figure 1. Crop Insurance Illustration
Figure 2. Commodity Program Illustration
Source: CRS.
Note: Where available and if purchased, the Supplemental Coverage
Option (SCO) policy covers up to 16 percentage points of the
deductible when triggered by a county loss. Policy applies to planted
(not historical) acreage.
Source: CRS.
Notes: Producers select either PLC or county-level ARC for each
covered crop, or individual ARC, which uses a single farm-level
revenue guarantee for al crops. Base acres and program yield are
based on historical plantings for each farm. Averages in benchmark
exclude high and low years.
www.crs.gov | 7-5700
Overview of Farm Safety Net Programs
Table 1. Farm Safety Net Programs
Program/Instrument
Commodity Coverage
Program Description
Producer Cost/Federal Outlays
Federal Crop Insurance (Risk Management Agency) & Noninsured Crop Disaster Assistance Program (NAP) (Farm Service Agency)
Crop insurance policies
More than 100 crops, including
Indemnities triggered when actual
Premium depends on deductible
commodity program crops (see below),
yield or revenue falls short of the
selected by producer and other
specialty crops (fruits, tree nuts,
guarantee set at 50% - 85% of
factors. Producer pays a portion of
vegetables, nursery crops), pasture,
expected level (as selected by
premium (38% on avg.) and no
rangeland, and forage crops, and livestock producer) and established at prices
delivery cost. Projected federal cost
margins.
prior to planting. Loss is at field or
is $8.8 bil./yr. for premium subsidy,
county level, depending on policy.
program losses, and admin. costs.
Noninsured Crop
Available for crops not currently eligible
Payments for losses in excess of
Participation fee of $250 per crop
Disaster Assistance
for crop insurance.
50%. Additional coverage is available
plus a charge for more coverage.
Program (NAP)
for purchase.
Federal cost of $165 mil. in FY2014.
Commodity Programs (Farm Service Agency)
Price Loss Coverage
Wheat, corn, grain sorghum, oats, barley,
Payments made if actual price is
No participation fee. Projected
(PLC)
long grain rice, medium grain rice, pulse
below statutory reference price
annual federal cost for the combined
crops (dry peas, lentils, small chickpeas,
(PLC) or actual revenue is below
PLC/ARC is about $4.3 bil./yr.
or
and large chickpeas), soybeans, sunflower
guarantee based on 86% of
seed, rapeseed, canola, safflower,
historical revenue (ARC). Producers
flaxseed, mustard seed, crambe, sesame
select either PLC or county-level
Agriculture Risk
seed, and peanuts. Excludes upland
ARC for each crop; or, individual
Coverage (ARC )
cotton.
ARC, which covers all crops with a
single farm-level revenue guarantee.
Marketing Assistance
Same crops as for PLC/ARC plus upland
Loan deficiency payments (LDP) (or
No participation fee. Projected
Loans (MAL)
cotton, extra long staple cotton, wool,
marketing loan gains) when actual
annual federal cost is about $250
mohair, and honey.
price is below statutory loan rate.
mil./yr.
Loans provide interim financing.
Nonrecourse sugar
Refined beet sugar and raw cane sugar.
Minimum price guarantee; limits on
No participation fee. Generally, no
loans and marketing
sales of domestic sugar.
net federal cost but outlays were
allotments
$259 mil. for the 2012 crop.
Margin Protection
Milk.
Payments made if actual 2-mo. avg.
$100 fee plus statutorily-fixed
Program (MPP) and
margin (milk price minus feed cost)
premium for coverage selected by
Dairy Product
is below producer-selected
producer. Projected annual federal
Donation Program
threshold. USDA purchases dairy
cost for both programs is about
(DPDP)
products for donation when margin
$100 mil./yr.
is low.
Disaster Assistance (Farm Service Agency)
Supplemental
Beef/dairy cattle, bison, poultry, sheep,
Payment for excess livestock
No participation fee. Projected
Agricultural Disaster
swine, horses, other livestock,
mortality (LIP), grazing losses (LFP),
annual federal cost is about $530
Assistance Programs
honeybees, farm-raised fish, and
other losses (ELAP), and excess fruit mil./yr.
(does not require
trees/bushes/vines producing an annual
tree/vine mortality (TAP). See note
disaster designation)
crop.
for program names.
Emergency Loans (EM)
Crops and livestock (also physical losses
Low-interest loans for producers in
Producers repay interest/principal in
(requires disaster
to real estate).
a disaster county and not eligible for
1 to 7 years (longer for real estate).
designation)
commercial credit.
Federal cost is about $2 mil./yr.
Source: CRS reports: R43758 (farm safety net), R43448 (commodity programs), R40532 and R43494 (crop insurance), RS21212 (disaster
assistance).
Notes: Federal crop insurance, NAP, and disaster assistance are permanently authorized, but not commodity programs (crop years 2014-2018
and through December 31, 2018, for dairy). Except where noted, the federal cost is the average annual cost for FY2015- 2024 projected by the
Congressional Budget Office. Additional support is provided through import restrictions and federal milk marketing orders for dairy (CRS Report
R43465) and import restrictions for sugar (CRS Report R43998). The four disaster programs are Livestock Indemnity Payments (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). Emergency agricultural land assistance programs also are available for producers following natural disasters; see
CRS Report R42854.
Dennis A. Shields, dshields@crs.loc.gov, 7-9051
IF10191
www.crs.gov | 7-5700