Farm Bill Primer: Title I Commodity Programs

Farm Bill Primer: Title I Commodity Programs

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August 28, 2017
Farm Bill Primer: Title I Commodity Programs
Background
farm prices or PLC reference prices. (See Table 1 for a list
Commodity programs have historically been an essential
of MAL loan rates and PLC reference prices compared with
part of U.S. farm policy by virtue of their long history
average farm prices for eligible program commodities.) In
(dating back to the 1930s). However, the specific program
contrast to MAL benefits, which are linked to current
design and the list of eligible commodities have varied over
production, ARC and PLC make payments based on
time with changing market and policy conditions.
historical farm program acres—known as base acres—and
Provisions of Title I, the “Commodity Title,” of the 2014
are therefore decoupled from current producer production
choices.
farm bill (Agricultural Act of 2014, P.L. 113-79), authorize
current commodity price and income support programs for
For each program crop, the 2014 farm bill gave eligible
crop years 2014 through 2018. (For details, see CRS Report
producers (those with base acres for program crops) a one-
R43448, Farm Commodity Provisions in the 2014 Farm
time choice between PLC and ARC depending on their
Bill (P.L. 113-79).) U.S. Department of Agriculture
preference for protection against a decline in (a) crop prices
(USDA) commodity programs are funded through the
or (b) crop revenue, respectively. Alternately, rather than
Commodity Credit Corporation (CCC). (For details, see
selecting between PLC and ARC for each covered
CRS Report R44606, The Commodity Credit Corporation:
commodity, a farmer could choose to combine all covered
In Brief.) Producers must meet eligibility requirements (see
commodities into a single, whole-farm revenue guarantee
below) to participate in the Title I commodity programs and
under the farm-level “individual” ARC (ARC-IC) program.
are subject to annual payment limits. (For details, see CRS
(For details, see CRS In Focus IF10711, Farm Bill Primer:
Report R44739, U.S. Farm Program Eligibility and
ARC and PLC Support Programs.)
Payment Limits.)
Eligible Program Commodities
Two Tiers of Market-Based Support
Commodities eligible for the MAL loan program include
most major field crops as well as wool, mohair, and honey.
For major program crops (Table 1), the principal
A smaller subset of commodities—which excludes cotton,
commodity programs consist of two tiers of price or
wool, mohair, and honey—is defined by the 2014 farm bill
revenue protection.
as “covered” commodities eligible for the ARC and PLC
Tier I: Market Assistance Loan (MAL) Program
programs. (See Table 1 for a list of covered commodities.)
The first tier of price protection is available under the MAL
The mix of supported crops reflects historical policy goals
program, which offers producers a guaranteed price via a
and compromises that have evolved over the decades.
commodity-specific, statutorily fixed loan rate that is
Producers of specialty crops (e.g., fruits, vegetables, and
available for all production of eligible commodities
tree nuts) and livestock have generally received little or no
(referred to as loan crops). A participating producer may
direct government price or revenue support through
put a harvested loan crop under a nine-month, nonrecourse
commodity programs.
loan valued at the statutory commodity loan rate. For a
Cotton, Dairy, and Sugar Programs
nonrecourse loan, USDA must accept the crop as full
Cotton is not eligible for the ARC and PLC programs.
payment for the loan if a producer forfeits. The loan uses
Cotton was removed from eligibility by the 2014 farm bill
the crop as collateral (thus coupling MAL benefits to
due to a ruling from a World Trade Organization dispute
current production), and the loan rate, in effect, establishes
settlement case successfully brought by Brazil against U.S.
a price guarantee. If local market prices increase above the
cotton support programs. (See CRS In Focus IF10193, The
loan rate (plus interest), a producer may repay an MAL and
WTO Brazil-U.S. Cotton Case.) Instead, cotton producers
reclaim the crop. If market prices are below the loan rate,
have been eligible for an insurance-like program—the
then other program options are available to producers,
Stacked Income Protection program—and several one-time
including repayment of the loan at a lower rate, forfeiture of
payment programs, including Cotton Transition Assistance
the crop, or taking a loan deficiency payment in lieu of an
Payments during 2014 and 2015 and a cotton ginning cost-
MAL. (See CRS In Focus IF10714, Farm Bill Primer: The
share payment program in 2016. For details, see CRS
Marketing Assistance Loan Program.)
Report R44914, Farm Safety-Net Payments Under the 2014
Tier II: ARC and PLC Programs
Farm Bill: Comparison by Program Crop.
A second, higher tier of support is available under the Price
Title I authorizes separate programs for dairy and sugar—
Loss Coverage (PLC) and the Agricultural Risk Coverage
described in CRS In Focus IF10195, U.S. Dairy Programs
(ARC) programs. PLC provides price protection based on
After the 2014 Farm Bill (P.L. 113-79) and CRS In Focus
reference prices set in statute at levels above the MAL loan
IF10223, Fundamental Elements of the U.S. Sugar
rates. ARC provides revenue protection based on the
Program.
product of five-year moving averages of both historical
county yields and the higher of national average annual
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Table 1. Farm Prices, Market Loan Rates, and PLC Reference Prices
Farm Pricea
Tier I: Market Loan Rate

Tier II: PLC Reference Price
Program
Commodities
Unit
$/unit
$/unit
% of SAFPb

$/unit
% of SAFP
Corn
bu.
$3.57
$1.95
55%

$3.70
104%
Soybeans
bu.
$9.53
$5.00
52%

$8.40
88%
Wheat, all
bu.
$4.93
$2.94
60%

$5.50
112%
Peanuts
cwt.
$20.43
$17.75
87%

$26.75
131%
Sorghum
bu.
$3.35
$1.95
58%

$3.95
118%
Barley
bu.
$5.26
$1.95
37%

$4.95
94%
Oats
bu.
$2.46
$1.39
39%

$2.40
98%
Rice, long grain
cwt.
$10.97
$6.50
66%

$14.00
128%
Rice, medium grain
cwt.
$15.37
$6.50
66%

$16.10
105%
Dry peas
cwt.
$11.87
$5.40
45%

$11.00
93%
Lentils
cwt.
$27.70
$11.28
41%

$19.97
72%
Chickpeas, large
cwt.
$30.53
$11.28
37%

$21.54
71%
Chickpeas, small
cwt.
$24.03
$7.43
31%

$19.04
79%
Cotton, upland
cwt.
$63.83
$52.00c
99%

na
na
Sugar, refined beet
cwt.
$32.05d
$24.09
75%

na
na
Sugar, raw cane
cwt.
$24.89e
$18.75
75%

na
na
Wool, graded
cwt.
$145.00g
$115.00
79%

na
na
Wool, nongraded
cwt.
$145.00g
$40.00
28%

na
na
Mohair
cwt.
$490.33
$420.00
86%

na
na
Honey
cwt.
$211.03
$69.00
33%

na
na
Minor oilseedsf
cwt.
na
$10.09
na

$20.15
na
Sunflower
cwt.
$19.57
$10.09
52%

$20.15
103%
Flaxseed
cwt.
$17.17
$10.09
59%

$20.15
117%
Canola
cwt.
$16.37
$10.09
62%

$20.15
123%
Rapeseed
cwt.
$34.43
$10.09
29%

$20.15
59%
Mustard
cwt.
$33.13
$10.09
30%

$20.15
61%
Safflower
cwt.
$23.40
$10.09
43%

$20.15
86%
Source: USDA, National Agricultural Statistics Service (NASS), and Economic Research Service (ERS), Farm Income and Wealth Statistics.
Notes: na = not applicable, bu. = bushel, cwt. = hundredweight or 100 lbs. Commodities with market loan rates are loan crops. Crops with
PLC reference prices are “covered” commodities. Tier II support also includes ARC revenue protection not listed in this table.
a. The average for crop years 2014-2016 of season average farm prices (SAFPs); also used in the percentage calculations.
b. Average adjusted world prices are used for comparison of upland cotton and rice MAL loan rates instead of farm prices.
c. The loan rate for upland cotton is the average SAFP for the preceding two years but within a range of $45/cwt. and $52/cwt.
d. U.S. wholesale refined beet sugar price, Midwest markets, Milling & Baking News, as reported by ERS.
e. U.S. raw sugar price, Contract No. 14/16, duty fee paid New York, as reported by ERS.
f.
Minor oilseeds include the six listed oilseeds as well as crambe and sesame—but these two are excluded due to insufficient data.
g. Average farm price received, with no distinction for graded or ungraded, as reported by NASS.

IF10718
Randy Schnepf, Specialist in Agricultural Policy

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Farm Bill Primer: Title I Commodity Programs

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