The Agricultural Act of 2014 (2014 Farm Bill) repealed the Direct Payments (DP) program, ending nearly 20 years of fixed annual payments. Payments were calculated based on historical production (base) acres and yields, and were paid to producers regardless of whether their farms faced losses. The 2014 Farm Bill also repealed two other programs: Countercyclical Payments (CCP), which provided payments to producers on historical base acres and yields but were triggered by movements in current prices, and the Average Crop Revenue Election (ACRE) program, which provided payments to producers when their revenues fell below benchmark levels.
Under Title I of the 2014 Farm Bill, the U.S. Department of Agriculture’s (USDA) Farm Service Agency (FSA) operates two new crop commodity programs—Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC), but upland cotton is not included as a covered commodity under these new programs. Historical cotton base acres were renamed generic acres, and producers who grow covered commodities on generic acres are eligible for ARC/PLC payments, if triggered, for those commodities. For further details see FSA’s ARC/PLC Program Fact Sheet. The Marketing Assistance Loan Program continues almost unchanged.
Under Title XI of the 2014 Farm Bill, Congress established several new programs aimed at providing support for revenue or yield losses smaller than those covered by most traditional crop insurance policies. USDA’s Risk Management Agency (RMA) administers two new programs—the Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX)—in addition to the traditional crop insurance program.
Title I—Crop Commodity Programs for Cotton Producers
For more detailed information on these Title I programs, see Crop Commodity Program Provisions – Title I
- Cotton Transition Payments: Fixed payments were provided to owners of historical cotton base in 2014 while the STAX program was being implemented.
- Marketing Assistance Loan Program: A post-harvest nonrecourse commodity loan program with marketing loan provisions for producers of wheat, corn, grain sorghum, barley, oats, upland cotton, extra-long staple (ELS) cotton, long- and medium-grain rice, soybeans, other oilseeds, peanuts, wool, mohair, honey, dry peas, lentils, and small and large chickpeas. When market prices fall below loan rates, marketing loan provisions allow for repayment of loans at the lower price and for loan deficiency payments to producers who choose not to place commodities under loan.
The loan rate for upland cotton is the simple average of the adjusted prevailing world price for the two immediately preceding marketing years, but not less than $0.45 per pound or more than $0.52 per pound. The loan rate for ELS cotton is set at $0.7977 per pound.
- Eligibility requirements and payment limitations: In order to receive some types of commodity program payments, individuals must meet eligibility requirements based on the level of their participation in farming activities and on their income. Once individuals are eligible, payment limitations cap the total amount they can receive.
Title XI—Crop Insurance Programs for Cotton Producers
For more detailed information on these Title XI programs, see Crop Insurance Program Provisions – Title XI
Under the 2014 Farm Bill, traditional crop insurance continues, and the new SCO program is made available to producers, including upland cotton producers. Producers of covered commodities (which does not include cotton) who have elected the Title I ARC program for a given crop on a given farm cannot purchase SCO for the same crop on the same farm. Another new insurance program, STAX, is available only to upland cotton producers.
Benefits under the Federal crop insurance program, including the SCO, are not subject to the eligibility and payment limitations that govern Title I crop commodity programs.
- Supplemental Coverage Option: The SCO is available starting with the 2015 crop and offers producers the opportunity to purchase area-based insurance coverage in combination with traditional crop insurance policies.
- Stacked Income Protection Plan: STAX offers upland cotton producers the opportunity to purchase area-based revenue insurance policies beginning with the 2015 crop. STAX policies may be purchased as stand-alone policies or in combination with traditional crop insurance policies. Upland cotton growers may also purchase SCO policies, but not for the same acres they have covered with STAX.
- Traditional crop insurance: Producers can purchase insurance policies at a subsidized rate under Federal crop insurance programs. These insurance policies make indemnity payments to producers based on current losses related to either below-average yields (crop yield insurance) or below-average revenue (revenue insurance). Both yield and revenue insurance options are available:
- Yield insurance plans: APH (Actual Production History) protects farmers against yield losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects, and disease. Catastrophic Risk Protection Endorsement (CAT) coverage provides a lower level of coverage on yield losses at a low cost to producers. Area Risk Protection Insurance (ARPI) policies use county yields as the basis for determining a loss. Dollar Plan coverage pays for both quantity and quality yield losses and is limited to some high-value crops (e.g., fresh market tomatoes and strawberries).
- Revenue insurance plans: Revenue Protection (RP) provides protection against a farmer’s gross revenue (i.e., price times yield) falling below some guaranteed level. A version of the ARPI uses county yields instead of farm yields when calculating revenue coverage levels and actual revenue. Adjusted Gross Revenue (AGR) coverage insures the revenue of the entire farm rather than an individual crop by guaranteeing a percentage of average gross farm revenue, including a small amount of livestock revenue.
Export and Food Aid Programs
Export programs administered by USDA's Foreign Agricultural Service (FAS) and the U.S. Agency for International Development (USAID) help promote and facilitate purchase of U.S. agricultural products in foreign markets. These programs include the Export Credit Guarantee Program, the Market Access Program, and the Foreign Market Development Program.
Export credit guarantees help foreign importers facing foreign exchange constraints and needing credit to purchase commodities. The Export Credit Guarantee Program (GSM-102) underwrites commercial financing of U.S. agricultural exports by guaranteeing repayment of private, short-term credit for up to 2 years. The Commodity Credit Corporation does not provide financing, but guarantees payments due from foreign banks, which allows U.S. financial institutions to offer competitive credit terms to foreign banks.
The Market Access Program (MAP) aids in the creation, expansion, and maintenance of foreign markets for U.S. agricultural products. MAP forms partnerships between USDA's CCC and nonprofit trade associations, cooperatives, trade groups, or small businesses to share the cost of overseas marketing and promotional activities. MAP partially reimburses program participants for these activities, which include consumer promotions, market research, trade shows, and trade servicing.
The Foreign Market Development Program, also known as the Cooperator Program, aids in the creation, expansion, and maintenance of long-term export markets for U.S. agricultural products. The program enlists private-sector involvement and resources in coordinated efforts to promote U.S. products to foreign importers and consumers around the world. CCC funds are used to partially reimburse cooperators conducting approved overseas promotion activities.
Environment and Conservation Programs
The 2014 Farm Bill continues support for conservation practices on agricultural land. For more information on these programs, see Conservation Programs.
To remain eligible for nearly all agriculture-related farm program benefits, including farm commodity programs, crop insurance premium subsidies, conservation programs, disaster assistance, farm loan programs, and other benefits, farmers cropping highly erodible land are required to implement an approved conservation plan and be in compliance with wetland conservation provisions. Producers who choose to till native sod that has not been previously tilled receive reduced crop insurance premium subsidies and limits on the yield or revenue guarantee available during the first 4 years of crop production.
ERS Topic Highlights and Policy-Related Research
The core research and data program of the Economic Research Service covers the breadth of USDA programs touched by farm legislation: farming, nutrition, conservation, rural development, research, and energy. For an overview of the 2014 Farm Bill and links to related pages on the ERS website, see Farm and Commodity Policy and Agricultural Act of 2014: Highlights and Implications.