Overview of Farm Safety Net Programs

Overview of Farm Safety Net Programs

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Updated August 17, 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 all crops. Base acres and program yield are
based on historical plantings for each farm. Averages in benchmark
exclude high and low years.
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Overview of Farm Safety Net Programs
Table 1. Farm Safety Net Programs
Producer Cost/Federal
Program/Instrument
Commodity Coverage
Program Description
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
Premium depends on deductible
commodity program crops (see
actual yield or revenue falls
selected by producer and other
below), specialty crops (fruits, tree
short of the guarantee set at
factors. Producer pays a portion
nuts, vegetables, nursery crops),
50% - 85% of expected level (as
of premium (38% on avg.) and no
pasture, rangeland, and forage crops,
selected by producer) and
delivery cost. Projected federal
and livestock margins.
established at prices prior to
cost is $8.8 bil./yr. for premium
planting. Loss is at field or
subsidy, program losses, and
county level, depending on
admin. costs.
policy.
Noninsured Crop
Available for crops not currently
Payments for losses in excess of
Participation fee of $250 per
Disaster Assistance
eligible for crop insurance.
50%. Additional coverage is
crop plus a charge for more
Program (NAP)
available for purchase.
coverage. Federal cost of $165
mil. in FY2014.
Commodity Programs (Farm Service Agency)
Price Loss Coverage
Wheat, corn, grain sorghum, oats,
Payments made if actual price is
No participation fee. Projected
(PLC)
barley, long grain rice, medium grain
below statutory reference price
annual federal cost for the

rice, pulse crops (dry peas, lentils,
(PLC) or actual revenue is
combined PLC/ARC is about
or
small chickpeas, and large chickpeas),
below guarantee based on 86%
$4.3 bil./yr.
soybeans, sunflower seed, rapeseed,
of historical revenue (ARC).

canola, safflower, flaxseed, mustard
Producers select either PLC or
Agriculture Risk
seed, crambe, sesame seed, and
county-level ARC for each crop;
Coverage (ARC )
peanuts. Excludes upland cotton.
or, individual ARC, which
covers all crops with a single
farm-level revenue guarantee.
Marketing Assistance
Same crops as for PLC/ARC plus
Loan deficiency payments (LDP)
No participation fee. Projected
Loans (MAL)
upland cotton, extra long staple
(or marketing loan gains) when
annual federal cost is about $250
cotton, wool, mohair, and honey.
actual price is below statutory
mil./yr.
loan rate. Loans provide interim
financing.
Nonrecourse sugar
Refined beet sugar and raw cane
Minimum price guarantee; limits
No participation fee. Generally,
loans and marketing
sugar.
on sales of domestic sugar.
no net federal cost but outlays
allotments
were $259 mil. for the 2012
crop.
Margin Protection
Milk.
Payments made if actual 2-mo.
$100 fee plus statutorily-fixed
Program (MPP) and
avg. margin (milk price minus
premium for coverage selected
Dairy Product
feed cost) is below producer-
by producer. Projected annual
Donation Program
selected threshold. USDA
federal cost for both programs is
(DPDP)
purchases dairy products for
about $100 mil./yr.
donation when margin is low.
Disaster Assistance (Farm Service Agency)
Supplemental
Beef/dairy cattle, bison, poultry,
Payment for excess livestock
No participation fee. Projected
Agricultural Disaster
sheep, swine, horses, other livestock, mortality (LIP), grazing losses
annual federal cost is about $530
Assistance Programs
honeybees, farm-raised fish, and
(LFP), other losses (ELAP), and
mil./yr.
(does not require
trees/bushes/vines producing an
excess fruit tree/vine mortality
disaster designation)
annual crop.
(TAP). See note for program
names.
Emergency Loans (EM)
Crops and livestock (also physical
Low-interest loans for
Producers repay
(requires disaster
losses to real estate).
producers in a disaster county
interest/principal in 1 to 7 years
designation)
and not eligible for commercial
(longer for real estate). Federal
credit.
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
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Overview of Farm Safety Net Programs
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.
Acknowledgment: This product was originally written by Dennis Shields, who left CRS in August 2015.
Randy Schnepf, Coordinator, Specialist in Agricultural Policy
IF10191

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