The Agricultural Act of 2014 (2014 Farm Bill) repealed the Direct Payments (DP) program, ending nearly 20 years of fixed annual payments.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 The 2014 Farm Bill also repealed two other programs: Countercyclical Payments (CCP), which provided payments to producers on historical base acres and yields but were triggered by movements in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, USDA’s Farm Service Agency (FSA) will operate two new crop commodity programs—Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC)—along with the Marketing Assistance Loan Program, which 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) will administer 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 more detailed information on these Title I programs, see Crop Commodity Program Provisions – Title I
- Price Loss Coverage (PLC): Producers who hold base acres of wheat, feed grains, rice, oilseeds, peanuts, and pulses (covered commodities) are eligible to enroll in the PLC program on a commodity-by-commodity basis. Payments are made when market prices fall below the reference price set in the 2014 Farm Bill. The reference price for wheat was set at $5.50 per bushel.
- Agriculture Risk Coverage (ARC): Producers who hold base acres of wheat, feed grains, rice, oilseeds, peanuts, and pulses (covered commodities) are eligible to enroll in ARC on a county or individual farm basis. County ARC payments are made when county crop revenue for the enrolled commodity drops below 86 percent of the county benchmark revenue. Individual ARC payments are made when the actual individual crop revenues, summed across all covered commodities on the ARC farm, are less than 86 percent of the ARC individual benchmark revenue.
- 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 wheat is set at $2.94 per bushel.
- 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 incomes. Once individuals are eligible, payment limitations cap the total amounts they can receive.
Title XI—Crop Insurance Programs
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 Supplemental Coverage Option (SCO) is made available to producers for covered commodities for which they have elected to participate in the Title I Price Loss Coverage program. Producers who elect to participate in the Title I Agriculture Risk Coverage program for a given crop on a given farm cannot purchase SCO for the same crop on the same farm.
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 (SCO): The SCO is available starting with the 2015 crop and will offer producers the opportunity to purchase area-based insurance coverage in combination with traditional crop insurance policies.
- 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 Area Risk Protection Insurance (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.
Environment and Conservation Programs
The 2014 Farm Bill continues support for conservation practices on agricultural land. 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 to 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.
In addition to conservation compliance requirements, producers may participate in voluntary incentive programs to address natural resource issues. Programs such as the Environmental Quality Incentives Program and the Conservation Stewardship Program, provide assistance to adopt conservation practices on land in production. Other programs, including the Conservation Reserve Program and the Agricultural Conservation Easement Program, remove environmentally sensitive land from production, establishing long-term, resource-conserving cover, or provide long-term or permanent easements for preservation of wetlands and the protection of agricultural land from nonagricultural development. The acreage cap for the Conservation Reserve Program, the primary land retirement program, is scheduled to decline from 32 million acres to 27.5 million acres beginning in fiscal year 2014 and to 24 million acres in 2017 under the 2014 Farm Bill.
For more information on these programs, see Conservation Programs.
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. USDA’s Commodity Credit Corporation (CCC) 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.
The U.S. Government provides food aid overseas through the P.L. 480 program, the Section 416 program, the McGovern-Dole Food for Education and Child Nutrition Program (FFE), and the Food for Progress (FFP) program. Under P.L. 480 Title I, USDA makes concessional sales that provide low-interest loans to qualified developing countries purchasing U.S. commodities. Generally, commodities shipped under Title I are purchased on the open market by the recipient country. The Title II program, administered by USAID, donates commodities to least developed countries. The Section 416(b) program provides for donations of CCC-owned surplus commodities to developing countries. It also allows surplus CCC commodities to be used for the purpose of P.L. 480 Title II programs and the FFP program.
The McGovern-Dole Program helps support education, child development, and food security for some of the world's poorest children. The program provides for donations of U.S. agricultural products, as well as financial and technical assistance, for school feeding and maternal and child nutrition projects in low-income, food-deficit countries that are committed to universal education. Under the Food for Progress Act of 1985, U.S. agricultural commodities are provided to developing countries and emerging democracies committed to introducing and expanding free enterprise in the agricultural sector. Commodities are currently provided by donation to foreign governments, private voluntary organizations, nonprofit organizations, cooperatives, or intergovernmental organizations.
The Bill Emerson Humanitarian Trust authorizes a reserve of up to 4 million metric tons of wheat, corn, grain sorghum, and rice to provide food aid to developing countries in times of urgent humanitarian needs. Currently, the reserve contains only cash as remaining commodity stocks were sold for cash in 2008 when wheat prices were high.
For data on use of these programs for wheat, see Wheat Yearbook Table 27-U.S. wheat exports by selected government programs.
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 Web site, see Farm and Commodity Policy and Agriculture Act of 2014: Highlights and Implications.