What is in this article?:
- 7 Questions About the Farm Bill
- Question 2: Will the programs focus on across-year or on within-year protection?
- Question 3: Will the across-year programs focus on price or revenue protection?
- Question 4: Will the support levels for across-year programs react to changes in market conditions?
- Question 5: Will the program use historical or planted acres to indemnify producers?
- Question 6: How much overlap will be allowed between farm bill programs and crop insurance?
- Question 7: Does a farm have to have a loss to trigger payments?
Designs of the farm bill programs will largely answer the following seven questions. In some cases, these are contentious issues across regions and across crops. For example, some may want a revenue program while others desire a target price program. Hence, resolution of these issues likely will require compromise, perhaps leading to unclear answers. It is highly unlikely that any party to the farm bill negotiations will receive all their desired answers to the above questions and will therefore have to choose which of these questions are more important to them.
Farm Bill markup likely will begin soon in both the Senate and House Agricultural committees. Much of the focus for traditional program crops will be around three programs: a revenue program, a target price program and a supplemental crop insurance program. While the exact nature of the programs will depend on negotiations, what is almost certain is that the programs' rationale will be risk management. Given a risk management focus, farm bill negotiations will need to debate and somehow resolve the following seven questions.
Question 1: Will support provided to some crops be greater than the support provided strictly by risk management considerations?
Risk management programs provide a level of payments that more closely follows gross revenue than do the historical farm bill Title 1 programs. For example, a continuation of the current direct payment program results in higher payments for rice and peanuts than for corn, soybeans and wheat. Modifications of the risk management focus may be needed to gain political support for differing regions and crops.
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Preferential treatment can be implemented by various measures. For a revenue program, minimum prices could be put in place, as was done for rice and peanuts in the 2012 Senate Farm Bill. Target prices can be set higher relative to expected market prices for some crops than other crops, as was done for rice and peanuts in last year's House Agricultural Committee Farm Bill. In a supplemental crop insurance program, higher subsidy levels and higher loss multiples can be given to some crops over other crops, as was done for cotton in their STAX program compared to the Supplemental Coverage Option (SCO) proposed for other program crops in the 2012 Senate Farm Bill and 2012 House Agricultural Committee Farm Bill.