2018 Farm Bill Primer: Title I Commodity Programs

2018 Farm Bill Primer: Title I Commodity Programs

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April 3, 2019
2018 Farm Bill Primer: Title I Commodity Programs
Background
PLC provides price protection based on reference prices set
Commodity programs have historically been an essential
in statute at levels above the MAL loan rates. The 2018
part of U.S. farm policy by virtue of their long history
farm bill added an escalator provision that could potentially
(dating back to the 1930s) of providing various forms of
raise a covered commodity’s effective reference price to as
revenue support. However, the specific program design and
much as 115% of the statutory PLC reference price. ARC
the list of eligible commodities have varied over time with
provides revenue protection based on the product of five-
changing market and policy conditions.
year moving averages of both historical county yields and
Provisions of Title I, the “Commodity Title,” of the 2018
the higher of national average annual farm prices or the
farm bill (Agricultural Improvement Act of 2018, P.L. 115-
PLC effective reference price. (See Table 1 for a list of
334) authorize current commodity revenue support
MAL loan rates and PLC reference prices compared with
programs for crop years 2019-2023. (For details, see CRS
average farm prices for eligible program commodities.) In
Report R45525, The 2018 Farm Bill (P.L. 115-334):
contrast to MAL benefits, which are linked to current
Summary and Side-by-Side Comparison.) U.S. Department
production, ARC and PLC make payments based on a
of Agriculture (USDA) commodity programs are funded
portion (85%) of historical farm program acres—known as
through the Commodity Credit Corporation. (For details,
base acres—and are therefore decoupled from producer
see CRS Report R44606, The Commodity Credit
production choices.
Corporation: In Brief.) Producers must meet eligibility
Alternatively, instead of choosing commodity-specific PLC
requirements to participate in the Title I commodity
and ARC, a farmer could choose to combine all covered
programs and are subject to annual payment limits. (For
commodities into a single, whole-farm revenue guarantee
details, see CRS Report R44739, U.S. Farm Program
under the farm-level “individual” ARC (ARC-IC) program.
Eligibility and Payment Limits.)
(For details, see CRS In Focus IF10711, Farm Bill Primer:
ARC and PLC Support Programs.)
Two Tiers of Market-Based Support
The 2018 farm bill allows producers flexibility in their
There are two tiers of revenue protection for program
program choices. In 2019 producers may select ARC or
commodities: the lower marketing assistance loan (MAL)
PLC coverage, on a commodity-by-commodity basis,
program and the higher Price Loss Coverage (PLC) and
effective for both 2019 and 2020. If no initial choice is
Agricultural Risk Coverage (ARC) programs. Not all
made, then the default is whichever program was in effect
commodities are eligible for all programs (Table 1).
under the 2014 farm bill. Then, beginning in 2021,
Tier I: Market Assistance Loan (MAL) Program
producers again choose between ARC and PLC annually
First-tier revenue protection is available under the MAL
for each of 2021, 2022, and 2023. In addition, producers
program, which offers producers a commodity-specific,
may now remotely and electronically sign annual or multi-
statutorily fixed loan rate that is available for all production
year contracts for ARC and PLC.
of eligible commodities (referred to as loan crops). A
Eligible Program Commodities
participating producer may put a harvested loan crop under
Commodities eligible for the MAL loan program include
a nine-month, nonrecourse loan valued at the statutory
most major field crops as well as wool, mohair, and honey.
commodity loan rate. For a nonrecourse loan, USDA must
A smaller subset of commodities—which excludes cotton,
accept the crop as full payment for the loan if a producer
wool, mohair, and honey—is defined by the 2018 farm bill
forfeits. The loan uses the crop as collateral (thus coupling
as “covered” commodities eligible for the ARC and PLC
MAL benefits to current production), and the loan rate, in
programs (Table 1). The mix of supported crops reflects
effect, establishes a price guarantee. If local market prices
historical policy goals and compromises that have evolved
increase above the loan rate (plus interest), a producer may
over the decades. Producers of specialty crops (e.g., fruits,
repay the MAL and reclaim the crop. If market prices are
vegetables, and tree nuts) and livestock have generally
below the loan rate, then other program options are
received little or no direct government price or revenue
available to producers, including repayment of the loan at a
support through commodity programs.
USDA-announced lower rate, forfeiture of the crop, or
taking a loan deficiency payment in lieu of an MAL. (See
Dairy, Sugar, and Disaster Programs
CRS In Focus IF10714, Farm Bill Primer: The Marketing
Title I authorizes separate programs for dairy and sugar
Assistance Loan Program.)
(CRS Report R45525, The 2018 Farm Bill (P.L. 115-334):
Summary and Side-by-Side Comparison). Title I also
Tier II: ARC and PLC Programs
includes disaster assistance programs focused on livestock
A second, higher tier of support is available under the PLC
and tree crops that were permanently authorized by the
and ARC programs. Producers choose between PLC and
2014 farm bill and the noninsured disaster assistance
ARC depending on their preference for protection against a
program (NAP) for commodities not eligible for crop
decline in (a) crop prices or (b) crop revenue, respectively.
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insurance (CRS In Focus IF10565, Federal Disaster
Assistance for Agriculture).
Table 1. Farm Prices, Market Loan Rates, and PLC Reference Prices: 2014 and 2018 Farm Bills
Tier I: Market Loan Rate

Tier II: PLC Reference Price
Farm Pricea
Program
2014 Farm Bill
2018 Farm Bill

2014 and 2018 Farm Bills
Commoditiesb
Unit
$/unit
$/unit
% MYAP
$/unit

$/unit
% of MYAP
Corn
bu.
$3.52
$1.95
55%
$2.20

$3.70
105%
Soybeans
bu.
$9.25
$5.00
54%
$6.20

$8.40
91%
Wheat, all
bu.
$4.92
$2.94
60%
$3.38

$5.50
112%
Peanuts
cwt.
$21.06
$17.75
84%
$17.75

$26.75
127%
Sorghum
bu.
$3.29
$1.95
59%
$2.20

$3.95
120%
Barley
bu.
$4.95
$1.95
39%
$2.50

$4.95
100%
Oats
bu.
$2.45
$1.39
59%
$2.00

$2.40
98%
Rice, long grain
cwt.
$11.35
$6.50
57%
$7.00

$14.00
123%
Rice, medium grain
cwt.
$16.15
$6.50
40%
$7.00

$16.10
100%
Dry peas
cwt.
$11.90
$5.40
45%
$6.15

$11.00
92%
Lentils
cwt.
$27.20
$11.28
36%
$13.00

$19.97
73%
Chickpeas, large
cwt.
$31.35
$14.00
45%
$14.00

$21.54
69%
Chickpeas, small
cwt.
$25.00
$10.00
40%
$10.00

$19.04
76%
Cotton, uplandc
cwt.
$65.97
$52.00d
79%
$52.00d

na
na
Seed Cottone
cwt.
$33.37
na
na
na

$36.70
110%
Sugar, refined beet
cwt.
$32.69f
$24.09
74%
$25.37

na
na
Sugar, raw cane
cwt.
$25.97g
$18.75
72%
$19.75

na
na
Wool, graded
cwt.
$146.33h
$115.00
79%
$115.00

na
na
Wool, nongraded
cwt.
$146.33f
$40.00
27%
$40.00

na
na
Mohair
cwt.
$501.67
$420.00
84%
$420.00

na
na
Honey
cwt.
$213.75
$69.00
32%
$69.00

na
na
Minor oilseedsi
cwt.
na
$10.09
58%j
$10.09

$20.15
115%
Sunflower
cwt.
$18.07
$10.09
56%
$10.09

$20.15
112%
Flaxseed
cwt.
$16.67
$10.09
61%
$10.09

$20.15
121%
Canola
cwt.
$16.62
$10.09
61%
$10.09

$20.15
121%
Rapeseed
cwt.
$30.05
$10.09
34%
$10.09

$20.15
67%
Mustard
cwt.
$32.70
$10.09
31%
$10.09

$20.15
62%
Safflower
cwt.
$24.50
$10.09
41%
$10.09

$20.15
83%
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 Olympic average (excluding high and low data years) for crop years 2014-2018 of market-year average farm prices (MYAPs).
Average adjusted world prices are used for comparison of upland cotton and rice MAL loan rates instead of farm prices.
b. Tier I commodities are referred to as “loan” commodities; Tier II commodities are known as “covered” commodities.
c. Upland cotton was removed from eligibility by the 2014 farm bil due to a ruling from a World Trade Organization dispute settlement
case successful y brought by Brazil against U.S. cotton support programs (CRS In Focus IF10193, The WTO Brazil-U.S. Cotton Case).
d. The loan rate for upland cotton is the average MYAP for the preceding two years but within a range of $45/cwt. and $52/cwt.
e. Seed cotton was added as a covered commodity, but not a loan commodity, by the Bipartisan Budget Act of 2018 (P.L. 115-123).
f.
U.S. wholesale refined beet sugar price, Midwest markets, Mil ing and Baking News, as reported by ERS.
g. U.S. raw sugar price, Contract No. 14/16, duty fee paid New York, as reported by ERS.
h. Average farm price received with no distinction for graded or ungraded, as reported by NASS.
i.
Minor oilseeds include the six listed oilseeds as well as crambe and sesame—but these two are excluded due to insufficient data.
j.
Weighted average based on 2018 production.
https://crsreports.congress.gov

2018 Farm Bill Primer: Title I Commodity Programs

IF11164
Randy Schnepf, Specialist in Agricultural Policy

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