Farm Bill Primer: Farm Safety Net Programs

Farm Bill Primer: Farm Safety Net Programs

September 22, 2022
Farm Bill Primer: Farm Safety Net Programs
The so-called federal “farm safety net” is a collection of
Assistance Program (TAP) for qualifying tree, bush, and
programs administered by the U.S. Department of
vine crops; the Livestock Indemnity Program (LIP); the
Agriculture (USDA) that provide risk protection and
Livestock Forage Disaster Program (LFP); and the
income support to farmers in the United States who
Emergency Assistance for Livestock, Honey Bees, and
experience natural disasters, adverse growing conditions,
Farm-Raised Fish Program (ELAP). ELAP support is
and/or low market prices. Program payments are triggered
available for producers of certain livestock, honey bees, and
automatically based on production, weather, and/or market
farm-raised fish. For additional information on disaster
conditions. Farm safety net programs fall into three
assistance programs, see CRS Report RS21212,
categories: the federal crop insurance program (FCIP),
Agricultural Disaster Assistance.
standing agricultural disaster programs, and agricultural
commodity support programs. The FCIP and standing
Commodity support programs, the third category, provide
agricultural disaster programs are permanently authorized
price and income support to farmers. Eligible producers of
under various laws. The commodity support programs are
eligible field crops—including corn, soybeans, wheat,
authorized through the 2023 crop year by the Agricultural
cotton, rice, peanuts, and certain other crops—may receive
Improvement Act of 2018 (2018 farm bill; P.L. 115-334).
support from the Agriculture Risk Coverage (ARC) and/or
The 2018 farm bill continued the farm safety net programs
Price Loss Coverage (PLC) programs. PLC coverage
from the prior farm bill with relatively minor changes. If
cannot be combined with ARC coverage for the same
continued in the next farm bill, the Congressional Budget
commodity. Eligible producers of an expanded list of
Office estimates the combined federal cost of farm safety
eligible commodities may receive support from either the
net programs to average about $13.4 billion annually for
Marketing Assistance Loan (MAL) program or the Loan
FY2023-FY2032, not adjusted for inflation
Deficiency Payment (LDP) program. Dairy producers are
eligible for income support from the Dairy Margin
In addition to the farm safety net programs, Congress
Coverage (DMC) program. Producers of sugar beets, sugar
appropriated and the Administration initiated ad hoc farm
cane, and refined sugar benefit from the MAL program and
support between 2018 and 2021, providing additional
marketing allotments. For additional information, see CRS
disaster and income assistance to farmers. Payments from
Report R45730, Farm Commodity Provisions in the 2018
ad hoc programs have at times exceeded payments from
Farm Bill (P.L. 115-334).
farm safety net programs, raising questions about the
effectiveness of the farm safety net that Congress may
Figure 1. Farm Safety Net Program Outlays, FY2014-
choose to consider in the next farm bill.
FY2021
Farm Safety Net Programs
The first category of farm safety net programs includes the
FCIP, a program that offers farmers the opportunity to
purchase insurance coverage from private sector insurers to
help mitigate the financial consequences of certain market
and adverse growing conditions. The federal government
regulates the policies offered and subsidizes the premiums
that farmers pay in order to encourage farmer participation
in the program. These subsidies cover on average 62% of
the premium for policies sold in 2021. FCIP coverage is
available for most field crops, a wide variety of specialty
crops, certain types of livestock and animal products, and

grazing lands. For more information on the FCIP, see CRS
Source: CRS calculations using audit reports of the Federal Crop
Report R46686, Federal Crop Insurance: A Primer.
Insurance Corporation and USDA Budget Explanatory Notes for the
Commodity Credit Corporation, various years.
The second category includes permanent programs that
Notes: FCIP = federal crop insurance program. Adjusted for inflation
provide financial assistance to help producers recover from
using the U.S. Bureau of Economic Analysis Implicit Price Deflators
certain natural disasters. In this category, the Noninsured
for Gross Domestic Product where 2021=100, updated July 28, 2022.
Crop Disaster Assistance Program (NAP) offers farmers the
Commodity support outlays were relatively lower in FY2015 and
opportunity to purchase coverage for losses due to natural
relatively higher in FY2016 due to Agriculture Risk Coverage (ARC)
disasters in areas where FCIP coverage is unavailable. NAP
and Price Loss Coverage (PLC) program implementation
support is available for a wide variety of crops. Other
requirements. FY2016 commodity support outlays include ARC and
standing disaster assistance programs include the Tree
PLC payments for the first two years of program operations.
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Farm Bill Primer: Farm Safety Net Programs
Magnitude of the Farm Safety Net
of relief: supplemental disaster assistance for the 2018-2021
Farm safety net program outlays vary by year (Figure 1).
crop years, supplemental FCIP prevented planting
Adjusted for inflation, annual federal outlays for FY2018-
payments for the 2019 crop year, supplemental support in
FY2021 averaged $8.9 billion for the FCIP, $660 million
2018-2019 in response to retaliatory tariffs imposed by
for the standing disaster assistance programs, and $5.7
foreign trading partners, and supplemental support in 2020-
billion for the commodity support programs. Outlays for the
2022 in response to the outbreak of the COVID-19
FCIP and disaster assistance programs tend to increase with
pandemic, among other ad hoc support (Figure 2).
increasing commodity prices, while outlays for commodity
support programs tend to increase with decreasing
Figure 2. Ad Hoc Appropriations and Administration-
commodity prices.
Initiated Funding for Farm Support, FY2018-FY2022
Farm safety net program payments are proportional to
production. In the 2018-2020 calendar years, the top 10%
of farms in terms of gross farm income on average received
more than 70% of FCIP indemnities and commodity-related
payments. For additional information, see CRS Report
R47051, U.S. Farm Income Outlook: 2021 Forecast.
Constraints on Farm Safety Net
Programs
Once authorized in a farm bill, farm safety net programs
face few budgetary constraints on program execution. All
farm safety net programs are funded with mandatory
appropriations of “such sums as necessary.” None of the

farm safety net programs requires federal disaster
Source: CRS calculations using P.L. 115-123, P.L. 116-20, P.L. 116-
designations to trigger payments. Disaster assistance and
94, P.L. 116-136, P.L. 116-260, P.L. 117-43, and USDA press releases.
commodity support program payments are generally
Notes: While most was for farm support, USDA was authorized to
determined by formulas specified in statute.
use a portion of the FY2020 and FY2021 funds for purposes other
than direct farm support.
Farmers may experience constraints on participating or on
benefits received from certain farm safety net programs.
Issues for Congress
Certain commodity support and disaster assistance
The farm safety net programs have been established over
programs include statutory mechanisms to limit program
time to provide a measure of stability in the farm sector and
payments and/or restrict eligibility based on the farm
to promote an adequate supply of certain agricultural
operators’ adjusted gross incomes. Farmers do not pay to
products while allowing producers to respond to market
participate in many, but not all, farm safety net programs.
signals. The extent of support provided by these programs
The most popular types of FCIP, NAP, and DMC coverages
each year reflects certain policy priorities and budget
require farmer-paid premiums.
constraints at the time of farm bill reauthorization. Some ad
hoc support since 2018 augmented payments from farm
Legislative changes to the farm safety net programs face
safety net programs. Others compensated for losses not
certain limitations. Currently, all farm safety net programs
addressed by the farm safety net and/or expanded the set of
have budget baseline—meaning that the programs have
commodities and producers eligible to receive support.
built-in future funding if policymakers decide to continue
Most of the ad hoc support appropriated since 2018 was
them past the expiration of the 2018 farm bill. Since 2002,
exempt from the budget rules that apply to farm bill
Congress’ ability to maintain or expand support from farm
programs and discretionary spending.
safety net programs during farm bill reauthorizations has
been constrained due to congressional budget rules and
In view of the supplemental payments to the farm sector in
available baseline. For additional information about budget
recent years, Congress may consider what level of farm
issues in the context of the 2018 farm bill, see CRS Report
support is adequate to fulfill current policy objectives and
R45425, Budget Issues That Shaped the 2018 Farm Bill.
whether the farm bill safety net programs are sufficiently
Also, U.S. commitments to limit trade-distorting support
flexible to respond to changing circumstances. Congress
under the World Trade Organization’s (WTO’s) Agreement
also may consider whether the combination of spending on
on Agriculture create additional considerations for the types
farm revenue support programs and supplemental spending
of farm support and the total funding for farm safety net
exceeds annual spending limits on trade-distorting domestic
programs. For additional information, see CRS Report
support payments that the United States has agreed to under
R46577, U.S. Farm Support: Outlook for Compliance with
WTO rules. If Congress seeks to have the next farm bill be
WTO Commitments, 2018 to 2020.
budget neutral, any expansion in farm safety net programs
may require funding reductions for other farm bill
Additional Farm Support Since 2018
priorities.
Since the enactment of the 2018 farm bill, USDA has
created ad hoc farm support programs using funds
Stephanie Rosch, Analyst in Agricultural Policy
appropriated by Congress and funds from the Commodity
Credit Corporation. These programs provided various types
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Farm Bill Primer: Farm Safety Net Programs

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