Farm Safety Net Provisions in a 2013 Farm Bill: S. 954 and H.R. 2642
Released: 2013-10-21T00:00:00

Summary:
The farm commodity provisions of the Food, Conservation, and Energy Act of 2008, as amended (P.L. 110-246, the 2008 farm bill) expire with the 2013 crop year. Consequently, the 113th Congress has been considering an omnibus farm bill that would establish the direction of agricultural policy for the next five years. On June 10, 2013, the Senate approved its version of the farm bill, S. 954, the Agriculture Reform, Food and Jobs Act of 2013. The House approved a farm bill (H.R. 2642) without a nutrition title on July 11, 2013, and a nutrition title (H.R. 3102) on September 19, 2013. The House adopted a resolution (H.Res. 361) on September 28 that combined the texts of H.R. 2642 and H.R. 3102 into one bill (H.R. 2642) for purposes of resolving differences with the Senate. Conference on the two measures is pending.
Among the many provisions, both bills would reshape the structure of farm commodity support, retroactively reauthorize several disaster programs, and expand coverage under the federal crop insurance program. These three areas of federal support for farmers are often collectively called the "farm safety net." Commodity programs under the original 2008 farm bill cover only crops harvested in 2008 through 2012, and were extended for an additional crop year in the American Taxpayer Relief Act of 2012 (P.L. 112-240, the fiscal cliff bill). Unlike farm commodity programs, the federal crop insurance program, which provides subsidized insurance policies for producers, is permanently authorized under the Federal Crop Insurance Act of 1980. Five disaster assistance programs under the 2008 farm bill expired on September 30, 2011, and under the farm bill extension, Congress provided authority to appropriate funds (but no actual funding) for three livestock programs and a tree assistance program.
Under both S. 954 and H.R. 2642, farm support for traditional program crops is restructured by eliminating direct payments. Direct payments—made to producers and landowners based on historical production and fixed payment rates for corn, wheat, soybeans, cotton, rice, peanuts, and other "covered" crops—have accounted for most farm program spending in recent years. As under current law, both bills authorize farm programs (with new program names) that would make payments when crop prices (or revenue) fall below a reference price (or historical average revenue). Authority is continued for marketing assistance loans, which provide additional low-price protection at "loan rates" specified in current law (with an adjustment made to cotton). The Senate bill covers only crop years 2014-2018, and it suspends permanent price support authority under the Agricultural Adjustment Act of 1938 and Agricultural Adjustment Act of 1949 until program authority in S. 954 expires in 2018. In contrast, the House bill covers crop year 2014 and each succeeding crop year (i.e., no program expiration date) and repeals permanent law.
In both bills, approximately three-fourths of the 10-year, $46 billion-$47 billion in savings (as estimated by the Congressional Budget Office) associated with the proposed elimination of current farm programs would be used to offset the cost of revising farm programs (Title I), enhancing crop insurance (Title XI), and retroactively reauthorizing four disaster programs (beginning FY2012). The two bills provide programs for covered crops, except cotton, which would have its own program (a crop insurance product called Stacked Income Protection Plan or STAX). Proponents of farm programs and federal crop insurance are attempting to address the issue of "shallow losses"—crop losses not covered currently by crop insurance—as well as provide disaster assistance for livestock producers. Critics contend that the proposals contain overly generous farm and crop insurance subsidies and shift additional commodity market risk to the federal government.

subsections: section_title: Introduction
paragraphs: The farm commodity provisions of the Food, Conservation, and Energy Act of 2008, as amended ( P.L. 110-246 , the 2008 farm bill) expire with the 2013 crop year. Consequently, the 113 th Congress has been considering an omnibus farm bill that would establish the direction of agricultural policy. On May 14, 2013, the Senate Agriculture Committee reported its version of the bill ( S. 954 , the Agriculture Reform, Food and Jobs Act of 2013), which was approved by the full Senate on June 10, 2013 (vote of 66-27). On May 15, 2013, the House Agriculture Committee completed markup of its version of the bill ( H.R. 1947 , the Federal Agriculture Reform and Risk Management Act of 2013), and floor action began in mid-June. However, on June 20, the full House voted to reject the bill (vote of 195-234). On July 11, the full House approved a revised bill, H.R. 2642 , which excluded a nutrition title, and on September 19 approved a nutrition title ( H.R. 3102 ). The House adopted a resolution ( H.Res. 361 ) on September 28 that combined the texts of H.R. 2642 and H.R. 3102 into one bill ( H.R. 2642 ) for purposes of resolving differences with the Senate. Conference on the two measures is pending.
This report compares the so-called "farm safety net" provisions in the two bills. The broader farming community uses the term farm safety net to refer to the combination of (1) farm commodity price and income support programs in the 2008 farm bill, (2) federal crop insurance (permanently authorized) under the Federal Crop Insurance Act of 1980 as amended, and (3) five disaster assistance programs in the 2008 farm bill, which are currently unfunded. Title I of both versions of the 2013 farm bill contains commodity and disaster program provisions, and modifications to the current crop insurance program are in Title XI of the Senate bill and Title X of the House bill. Both bills would reshape the structure of farm commodity support, reauthorize several disaster programs, and expand crop insurance coverage. 
section_title: Overview
paragraphs: Current farm support for traditional program crops includes direct payments, the counter-cyclical price (CCP) program, and the Average Crop Revenue Election (ACRE) program. 
Direct payments—made to producers and landowners based on historical production and fixed payment rates for corn, wheat, soybeans, cotton, rice, peanuts, and other "covered" crops—have accounted for most farm program spending in recent years. CCP payments are made when crop prices fall below a "target price" (minus the direct rate). Alternatively, producers may select ACRE, which makes payments when crop revenue drops below a guarantee based on historical revenue. Marketing assistance loans provide additional low-price protection at "loan rates" specified in current law. 
Under both the Senate-passed ( S. 954 ) and House-passed ( H.R. 2642 ) 2013 farm bills, direct payments are eliminated and programs are authorized to replace CCP and ACRE with conceptually similar programs with new names, payment triggers, and payment formulas. In both bills, approximately three-fourths of the 10-year, $46 billion-$47 billion in savings (as estimated by the Congressional Budget Office) associated with the proposed elimination of current farm programs would be used to offset the cost of updating farm programs (Title I), enhancing crop insurance (Title XI), and retroactively reauthorizing four disaster programs (beginning FY2012). The two titles account for a combined $12.4 billion savings over 10 years in the Senate bill (of $17.9 billion in total savings across all titles) and $9.8 billion in the House bill (of $39.0 billion). These titles address the issue of "shallow losses" (losses incurred by crop producers that are not covered currently by crop insurance) and provide disaster assistance for livestock producers.
 Figure 1 summarizes major provisions in the commodity and crop insurance titles of the two bills. Table 1 lists selected provisions and identifies issues for conference committee consideration. A comprehensive, section-by-section comparison of all titles in the two bills is in CRS Report R43076, The 2013 Farm Bill: A Comparison of the Senate-Passed (S. 954) and House-Passed (H.R. 2642, H.R. 3102) Bills with Current Law . 
section_title: Proposed Farm Commodity Program Revisions
paragraphs: Both S. 954 and H.R. 2642 would eliminate direct payments. Direct payments account for most of current commodity spending and are made to producers and landowners based on historical production of farm program crops. Both bills also borrow conceptually from current farm commodity programs by updating price and/or revenue programs designed to enhance risk protection for producers of "covered" crops. Importantly, the Senate bill covers only crop years 2014-2018. It also suspends permanent price support authority under the Agricultural Adjustment Act of 1938 and Agricultural Adjustment Act of 1949, which would increase price supports well above current market levels and create substantial government outlays. This provision is designed to motivate Congress to reexamine agricultural and related policy (not just farm programs) when program authority in S. 954 expires in 2018. In contrast, the House bill covers crop year 2014 and each succeeding crop year (i.e., no program expiration date) and repeals permanent law. Proponents expect this approach to better protect beneficiaries of farm programs in the long run. 
Covered commodities are wheat, oats, barley, corn, grain sorghum, long grain rice, medium grain rice, pulse crops (dry peas, lentils, small chickpeas, and large chickpeas), soybeans, other oilseeds, and peanuts. In response to a World Trade Organization case brought against the United State by Brazil, cotton is not included as a program commodity; instead it is covered by a new insurance product (see " Stacked Income Protection Plan (STAX) "). For farm programs, producers do not pay any fees or premiums for participating, unlike the federal crop insurance program, which offers subsidized policies to producers of a wide variety of crops. 
Under both the Senate-passed ( S. 954 ) and House-passed ( H.R. 2642 ) 2013 farm bills, farm support for traditional program crops is restructured by eliminating direct payments, the counter-cyclical price (CCP) program, and the Average Crop Revenue Election (ACRE) program. Authority is continued for marketing assistance loans, which provide additional low-price protection at "loan rates" specified in current law (with an adjustment made to the cotton loan rate). A brief summary of the major commodity provisions is provided below. For details on all sections in Title I (except dairy and sugar provisions), see Appendix A . 
subsections: section_title: Both Bills Retain a Counter-Cyclical Price Program
paragraphs: A counter-cyclical price program makes a farm payment when prices for covered crops decline below certain levels . The counter-cyclical price (CCP) program from the 2008 farm bill is replaced by Adverse Market Payments or AMP in S. 954 and Price Loss Coverage or PLC in H.R. 2642 . To better protect producers in a market downturn, the price guarantees (called "reference prices" in both bills) that determine payment levels are set in statute and increased relative to current "target prices." A broad exception applies in S. 954 to the reference price for crops other than rice and peanuts, where it is calculated as 55% of a rolling five-year average (excluding the high and low years). For an example of higher price parameters, see Figure 2 .
The payment rate is the difference between the reference price and the national farm price or loan rate, if higher. S. 954 continues current policy by making payments on 85% of historical plantings (or "base acres"), a provision designed to minimize the program's effect on planting decisions. In contrast, the House bill pays on 85% of planted acreage to better align payments with producer risk. Also, to better protect producers in a price downturn, under the House bill, producers may update payment yields (average yield per planted acre during 2008-2012, excluding high and low, times 90%). Under the Senate bill, yield updating is available only for rice and peanuts, based on yields from 2009 to 2012.
During the farm bill debate in recent years, including development of farm bill proposals in the 112 th Congress, commodity groups representing rice and peanut producers have led efforts to retain a reference price option as part of the overall farm program because they prefer price protection by establishing statutory minimum price support rather than revenue protection (based on historical prices) that can decline over time and erode the safety net. During committee mark-up of S. 954 , an amendment to eliminate AMP for crops other than rice and peanuts failed. 
section_title: Both Bills Retain a Revenue-Based Program
paragraphs: A revenue-based program is designed to cover a portion of a farmer's out-of-pocket revenue loss (referred to as "shallow loss") relative to an annual crop revenue guarantee based on historical farm prices and yields. The revenue-based program in the 2008 farm bill, Average Crop Revenue Election (ACRE), is eliminated and replaced by Agriculture Risk Coverage (ARC) in S. 954 and Revenue Loss Coverage or (RLC) H.R. 2642 . Payments are made on planted acres when actual crop revenue drops below a specified percentage of historical or "benchmark" revenue (88% in S. 954 and 85% in H.R. 2642 ). The producer absorbs the first portion of the shortfall (12% in S. 954 and 15% in H.R. 2642 ). The government absorbs the next 10% of revenue shortfall because the per-acre payment rate is capped at 10% of benchmark revenue. Remaining losses are backstopped by crop insurance if purchased at sufficient coverage levels by the producer.
In the Senate bill under ARC, farmers can select coverage at either the county or individual farm level (to cover more localized losses), and any payments are made in addition to AMP. In the House bill, coverage under RLC is available at only the county level, and the program is not available in combination with PLC. For both bills, payments would be in addition to any crop insurance indemnities.
A major distinction between these revenue-based farm programs and producer-purchased crop insurance is that the price component farm program guarantee is based on deviations from five-year historical crop prices (subject to reference prices used in the PLC program, which serve as minimums), while crop insurance is based on expected market prices for the upcoming season. Consequently, revenue-based farm programs can provide a revenue guarantee that is higher than what might be available through crop insurance if historical prices are high relative to expected market prices.
See Figure 3 and Figure 4 for a conceptual illustration and hypothetical example of the ARC program.
section_title: Crop Insurance Enhancements
paragraphs: The federal crop insurance program makes available subsidized crop insurance to producers who purchase a policy to protect against individual farm losses in yield, crop revenue, or whole farm revenue. More than 100 crops are insurable. The program is permanently authorized by the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) but is often modified in farm bills. 
In contrast to farm programs in Title I, where spending is reduced substantially, both versions of the farm bill increase funding for crop insurance (Title XI) relative to baseline levels. Crop insurance baseline funding (budget authority) for FY2014-FY2023 is estimated by CBO at $84.1 billion. H.R. 2642 would increase spending by $8.9 billion over the period and S. 954 would increase spending by $5.0 billion, according to CBO projections. Two new insurance products—Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX) for cotton—account for most of the additional cost. (The CBO score for each major provision appears in Table 3 , below.)
Many provisions of the crop insurance title are very similar in both bills. A major exception is a provision in S. 954 , which was adopted as a floor amendment by a vote of 59-33, that reduces crop insurance premium subsidies by 15 percentage points for producers with average adjusted gross income greater than $750,000.
Also in Senate floor action, an amendment to provide mandatory funding of $5 million to maintain crop insurance program integrity was adopted without dissent, 94-0, and an amendment to eliminate premium subsidies for tobacco crop insurance was defeated (44-72). 
For details on all sections of the crop insurance title, see Appendix B .
subsections: section_title: Supplemental Coverage Option (SCO)
paragraphs: Under both bills, a new crop insurance policy is authorized to address the issue of "shallow losses," or losses incurred by producers but not covered currently by crop insurance. The Supplemental Coverage Option (SCO) would be available for purchase by crop producers as an additional policy to cover part of the deductible under the producer's underlying policy. SCO is an area-wide (e.g., county) yield or revenue loss policy, whereby an indemnity is paid on area losses between 10% and the deductible level (e.g., 25%) selected by the producer within the underlying individual policy. SCO policies would be made available for all crops (not just program crops) if sufficient data are available. Premium is subsidized at 65%. Coverage would begin no later than the 2014 crop year. If the farmer participates in ARC under Title I of the Senate bill, a 10% deductible under SCO is increased to 22%. In the House bill, acres covered by RLC are not eligible for SCO (i.e., producers of crops other than cotton, which would be covered by STAX, cannot select RLC and purchase an SCO policy).
 Figure 5 illustrates how crop insurance and farm programs would interact under each bill. The bar on the left depicts the expected revenue (prior to planting) under a typical crop insurance revenue policy with a 30% deductible (the farmer absorbs the first 30% of the loss). Under the House committee bill and assuming the farmer selects the PLC option, an SCO policy can be purchased to cover part of the deductible (see PLC column). If a loss occurs on the farm, an initial indemnity is triggered under the farmer's individual crop insurance policy as depicted by the green box. A second indemnity from the SCO would be paid (depicted by the blue box) if there is also a loss at the county level. Overall, the farmer incurs a loss of approximately 10% (white box at top). A separate PLC payment would be made if the farm price is below the reference price. If a producer selects the Revenue Loss Coverage (RLC) rather than PLC (see RLC column), the acreage is not eligible for SCO and only an RLC payment (red box) would be made if triggered. 
Under the Senate bill (see S. 954 column), which allows a producer to participate in both the ARC revenue program and SCO, the SCO indemnity (blue) would be smaller but would fill (potentially) the gap between the ARC payment (red) and the individual policy indemnity (green).
section_title: Stacked Income Protection Plan (STAX)
paragraphs: Both bills would handle cotton separately from the other major program crops in an attempt to resolve Brazil's long-standing World Trade Organization (WTO) case against the U.S. cotton program. In lieu of the farm revenue programs proposed in Title I, both versions of the farm bill include a new cotton program comprised of a stand-alone, county-based revenue insurance policy called the Stacked Income Protection Plan (STAX). Similar to SCO, STAX sets a revenue guarantee based on expected county revenue (but not revenue or yield as under SCO). Producers could purchase this policy in addition to their individual crop insurance policy (as done for SCO) or as a stand-alone policy. 
As under SCO, the indemnity from STAX, if triggered by a revenue loss at the county level, covers part of the deductible under the individual policy. (See far right column of Figure 5 .) Specifically, STAX would indemnify losses in county revenue of greater than 10% of expected revenue but not more than the deductible level (e.g., 25%) in the underlying individual policy (or not more than 30% if used as stand-alone policy). A payment rate multiplier of 120% is available if producers want to increase the amount of protection per acre. The farmer subsidy as a share of the policy premium is set at 80% for STAX. As with all crop insurance policies, the price guarantee is based on current market prices. In a previous farm bill proposal in 2012, specifically the 2012 House committee bill ( H.R. 6083 ), a minimum price of $0.6861 per pound would have been used in the calculation of the insurance guarantee if it was higher than the expected market price.
Under a STAX policy setting, which has been advanced by the U.S. cotton sector, producers would forgo benefits from a revised farm program in order to comply with the WTO cotton case. In particular, STAX participants would not be eligible for benefits available to other program crops, such as ARC, yield updating, RLC, and counter-cyclical price payments with reference prices in PLC or AMP. Brazil has yet to formally sign off on STAX as a solution to the WTO cotton case. U.S.-Brazil negotiations in this case are ongoing and will likely hinge on the eventual farm bill treatment of cotton.
section_title: Crop Insurance Studies and Other Provisions
paragraphs: Additional crop insurance changes in both bills are designed to expand or improve crop insurance for other commodities, including specialty crops. Provisions in both bills revise the value of crop insurance for organic crops to reflect prices of organic (not conventional) crops. Separately, the bills require USDA to conduct more research on whole farm revenue insurance with higher coverage levels than currently available. Also in both bills are studies on the feasibility of insuring (1) specialty crop producers for food safety and contamination-related losses, (2) swine producers for a catastrophic disease event, (3) producers of catfish against reduction in the margin between the market prices and production costs, (4) commercial poultry production against business disruptions caused by integrator bankruptcy, (5) poultry producers for a catastrophic event, and (6) producers of biomass sorghum or sweet sorghum grown as feedstock for renewable energy. (In the Senate bill, an adopted floor amendment requires a study for alfalfa insurance.) A peanut revenue insurance product also is mandated. 
Separately, a provision in S. 954 makes payments available to producers who purchase private-sector index weather insurance, which insures against specific weather events and not actual loss. A provision in H.R. 2642 requires USDA to notify the public of any planned modification to insurance policies (and provide for a comment period) during the preceding crop year.
section_title: Conservation Provisions for Crop Insurance
paragraphs: For conservation purposes, a provision in Title XI of S. 954 reduces crop insurance subsidies and noninsured crop disaster assistance for the first four years of planting on native sod acreage. The same provision in the House bill would apply only to the Prairie Pothole National Priority Area (i.e., portions of Iowa, Minnesota, Montana, North Dakota, and South Dakota). In Title II of the Senate-passed bill only (§2609), crop insurance premium subsidies are available only if producers are in compliance with wetland conservation requirements and conservation requirements for highly erodible land. For more information on conservation compliance, see CRS Report R42459, Conservation Compliance and U.S. Farm Policy . 
section_title: Noninsured Crop Disaster Assistance Program (NAP)
paragraphs: Producers who grow a crop that is currently ineligible for crop insurance may be eligible for a payment under USDA's Noninsured Crop Disaster Assistance Program (NAP). NAP has permanent authority under Section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333). To be eligible for a NAP payment, a producer first must apply for coverage under the program. Like catastrophic crop insurance, NAP applicants must also pay an administrative fee ($250 per year). In order to receive a NAP payment, a producer must experience at least a 50% crop loss caused by a natural disaster, or be prevented from planting more than 35% of intended crop acreage. For any losses in excess of the minimum loss threshold, a producer can receive 55% of the average market price for the covered commodity. 
In order to improve coverage for crops covered under NAP, both bills (in Title XII of both bills) provide additional coverage at 50% to 65% of established yield and 100% of average market price. Premium for additional coverage is 5.25% times the product of the selected coverage level and value of production (acreage times yield times average market price). In both bills, the premium for additional coverage is reduced by 50% for limited resource, beginning, and socially disadvantaged farmers. In the Senate bill only, for producers with fruit crop losses in 2012, payments associated with additional coverage are made retroactively (minus premium fees) in counties declared a disaster due to freeze or frost. The Senate bill also increases the base NAP fee and eliminates NAP for crops and grasses used for grazing to reduce overlap with livestock disaster programs in Title I.
section_title: Disaster Programs Reauthorized
paragraphs: Five disaster programs were established in the 2008 farm bill for weather-induced losses in FY2008-FY2011. Both 2013 farm bills retroactively reauthorize four programs covering livestock and tree assistance, specifically FY2012-FY2018 for the Senate bill and beginning FY2012 and continuing without an expiration date for the House bill. The crop disaster program from the 2008 farm bill (i.e., Supplemental Revenue Assistance, or SURE) is not reauthorized in either bill, but an element of it has been folded into the new ARC program in the Senate bill by allowing producers to protect against farm-level revenue losses (the House bill has only a county-based revenue program). S. 954 also provides disaster benefits to tree fruit producers who suffered crop losses in 2012 (see above). The following four programs would be reauthorized: 
1. Livestock Indemnity Program (LIP), which would compensate ranchers for a portion of market value for livestock mortality caused by a disaster (65% in Senate bill, 75% in the House bill); 2. Livestock Forage Disaster Program (LFP), which would compensate for grazing losses due to qualifying drought conditions or fire on rangeland managed by a federal agency (both bills increase the payment amount from the 2008 farm bill in some cases); 3. Emergency Assistance for Livestock, Honeybees, and Farm-Raised Catfish (ELAP), which would provide annual funding of $15 million (Senate bill) and $20 million (House bill) to compensate producers for disaster losses not covered under other disaster programs; and 4. Tree Assistance Program (TAP), which would provide payments to eligible orchardists and nursery growers to cover 65% of the cost of replanting trees or nursery stock (70% previously) and 50% of the cost of pruning/removal following a natural disaster (in excess of 15% mortality in both cases).
section_title: Farm Program Payment Limit Changes
paragraphs: Farm commodity programs have certain limits that cap payments (currently $105,000 per person) and set eligibility based on adjusted gross income (AGI, currently a maximum of $500,000 per person for nonfarm income and $750,000 for farm income). The two bills are somewhat similar and diverge from current law, with S. 954 reducing the farm program payment limit to $50,000 per person for combined AMP and ARC payments and adding a $75,000 limit on loan deficiency payments (LDPs). Under H.R. 2642 , the limit for all Title I payments would be $125,000, of which LDPs would be limited to $75,000 and other payments including PLC, RLC, and transitional direct payments to $50,000. The House bill combines peanuts into the limit with other commodities, while the Senate bill continues separate but equal limits for peanuts. 
Both the Senate and House bills change the threshold to be considered "actively engaged" and to qualify for payments, by effectively requiring personal labor in the farming operation. 
Both bills also tighten limits on AGI, with a combined AGI limit of $750,000 in S. 954 and $950,000 in H.R. 2642 . Proponents of the changes to AGI assert that the new provisions represent a tightening of the limit. However, some high-income individuals who have been disqualified under the 2008 farm bill might be restored to eligibility, primarily because the proposed combined limit in both bills is higher than the current nonfarm AGI limit.
The House bill caps overall farm program spending at $16.96 billion for FY2014-FY2020 for combined payments under Price Loss Coverage and Revenue Loss Coverage (collectively called Farm Risk Management Election).
For disaster programs, S. 954 retains the combined $100,000 per person payment limit for LIP, LFP, and ELAP and retains the separate limit of $100,000 for TAP. H.R. 2642 contains a combined payment limit of $125,000 per person for LIP, LFP, and ELAP and a separate limit of $125,000 for TAP.
section_title: Dairy and Sugar
paragraphs: For dairy policy, both bills contain similar, significant changes, including elimination of the dairy product price support program, the Milk Income Loss Contract (MILC) program, and export subsidies. These are replaced by a new dairy margin insurance program which makes payments to participating dairy producers when the national margin (average farm price of milk minus average feed costs) falls below $4.00 per hundredweight (cwt.), with coverage at higher margins available for purchase. A provision in S. 954 makes participating producers subject to a separate program called the Dairy Market Stabilization Program, which reduces incentives to produce milk when margins are low—this provision is not present in H.R. 2642 . 
In addition, H.R. 2642 requires USDA to adhere to standard rulemaking procedures and to determine the market impacts of the new program during the rulemaking process. Separately, federal milk marketing orders have permanent statutory authority and continue intact. However, S. 954 (but not H.R. 2642 ) includes two additional provisions: one that requires USDA to use a specified pre-hearing procedure to consider alternative formulas for Class III milk product pricing, and a second that requires USDA to analyze and report on the potential effects of replacing end-product pricing with alternative pricing procedures. For more information on dairy policy, see CRS Report R42736, Dairy Policy Proposals in the Next Farm Bill .
The objective and structure of the sugar program are left unchanged in both bills, but the Senate bill reauthorizes the program through the 2018 crop year, while the House bill reauthorizes the program without an expiration date. For more information, see CRS Report R42551, Sugar Program Proposals for the Next Farm Bill .
section_title: Cost Estimates
paragraphs: Funding to write the next farm bill is based on the Congressional Budget Office's (CBO's) baseline projection of the cost of mandatory farm bill programs, and on varying budgetary assumptions about whether programs will continue. The CBO baseline projection is an estimate at a particular point in time of what federal spending on mandatory programs likely would be under current law. The May 2013 CBO baseline projection is the "scoring baseline" against which S. 954 and H.R. 2642 have been measured. 
According to the May 2013 baseline, expected outlays for all mandatory farm bill programs under current law are $973 billion during FY2014-FY2023 ( Table 2 ). Of this amount, budget authority for farm safety net programs is $143 billion over the 10-year period, including $59 billion for commodity programs and $84 billion for crop insurance. Disaster programs do not have baseline funding, since they expired ahead of other farm support programs. From a budget perspective, programs with a continuing baseline are assumed to go on under current law. These amounts can be used to reauthorize the same programs; reallocated among these and other programs; used as savings for deficit reduction; or used as offsets to help pay for other provisions. For more information on the overall farm bill score and budget situation, see CRS Report R42484, Budget Issues Shaping a Farm Bill in 2013 .
 Table 3 shows the CBO scores of both versions of the farm bill, with a detailed breakout for their respective farm safety net provisions. For just the farm safety net programs, the 10-year savings amount is $12.8 billion in S. 954 and $9.6 billion in H.R. 2642 . Approximately three-fourths of the 10-year, $46 billion-$47 billion in savings associated with the proposed elimination of current farm programs would be used to offset the cost of revising farm programs (Title I), enhancing crop insurance (Title XI), and retroactively reauthorizing four disaster programs (Title I). The 10-year savings from commodity programs in the House committee bill is $18.7 billion and savings in the Senate bill is $17.4 billion. In contrast to scoring savings under Title I, expenditures for crop insurance in both bills increase relative to baseline levels. The increase is about $4 billion lower in the Senate bill, in part because the new revenue program contains an option for a farm-level guarantee that is expected to reduce demand for crop insurance and offset some costs associated with the crop insurance changes.
section_title: Potential Impacts of S. 954 and H.R. 2642
paragraphs: A number of researchers have analyzed the proposed changes made to the farm safety net by the Senate and House farm bills. The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri concludes in an October 2013 sector-wide study that the economic consequences of the two bills would be similar in many respects, with reduced federal spending and relatively small effects on commodity markets. Comparing the two bills, FAPRI's analysis indicates that the House bill, given its parameters and structure, would provide substantially more support than the Senate bill to producers of rice, barley, and peanuts, while corn and soybean producers would benefit relatively more under the Senate bill. Actual program benefits will be sensitive to market conditions and producer participation, with government costs depending in part on eventual enrollment in the Supplemental Coverage Option (65% subsidy rate) and other factors. Under each bill, average net farm income would decline slightly as the sector would receive somewhat less federal support than under a continuation of 2008 farm bill programs. According to the study, impacts on food prices for consumers would be very small.
A separate analysis by the Agricultural and Food Policy Center (AFPC) at Texas A&M University concludes that 53 of 64 of the representative farms (80%) that it models nationwide would receive greater financial benefits (i.e., higher average net cash farm income) under the House bill relative to the Senate bill over the life of the farm bill. The study reports that under a baseline price scenario, the average difference in net cash farm income as a result of differences in policy parameters would be $19,900 per farm, in favor of the House bill in cases when the House bill results in higher cash income than the Senate bill. A major driver is the attractive combination of reference prices (increased from 2008 farm bill levels) in the House bill—which provide support through the Price Loss Coverage program when farm prices decline—combined with the Supplemental Coverage Option (SCO) to address shallow losses beyond a 10% deductible. (In the Senate bill, the SCO deductible is expanded from 10% to 22% if the farmer also participates in Agriculture Risk Coverage (ARC)). Under a declining price scenario, the proportion of farms receiving greater financial benefits under the House bill declines to 74% compared with 80% under the baseline price scenario, primarily reflecting higher potential income for California rice producers under revenue guarantees in ARC compared with potential benefits under SCO, which is not designed to protect farmers against multi-year price declines.
Other researchers have concluded that the SCO approach combined with the new revenue programs (ARC in the Senate bill and RLC in the House bill) could create situations of overcompensation for shallow losses (out-of-pocket costs absorbed by producers), while SCO alone is likely to result in fewer such concerns because it is integrated more closely with existing crop insurance coverage. The potential impact of a multi-year price decline is another major policy concern. The researchers point out that in the Senate bill, the ARC program guarantees will decline over time if market prices drop, which lengthens the adjustment period for producers. This is in contrast to the House bill (and Senate bill for rice and peanuts) which sets fixed minimum prices in the price and revenue programs. The House bill increases these parameters differently for each crop relative to their respective (and recent) market values, which the authors say could create planting incentives that differ from market signals, thereby shifting acreage toward crops that have more attractive program benefits. 
Some have expressed concern that costs of farm programs could be sharply higher than CBO estimates. An analysis by university researchers and sponsored by the American Enterprise Institute estimates that the cost of the House farm bill would be relatively modest (about $1.1 billion) if farm prices remain historically high. However, it also concludes that the annual cost could exceed $18 billion if farm prices drop to a 15-year average level. Others have criticized the analysis, calling it "an improbable price scenario," contrasting it with a stochastic scoring method used by CBO, which accounts for the probability of various price scenarios that result in either very high or low costs.
Appendix A. Title I: Commodity Programs
Appendix B. Title XI: Crop Insurance
Appendix C. Title XII: Miscellaneous (Noninsured Crop Assistance Program)