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.
Question 2: Will the programs focus on across-year or on within-year protection?
A supplemental crop insurance program will enhance crop insurance protection, thereby increasing within-year protection. A revenue and target price program, respectively, protect against revenue and price declines that occur across years. Because all three of the programs must fit within budget parameters, the greater the focus on a supplemental insurance program the lower will be across-year protection, and vice versa.
The discussion in the preceding paragraph presumes that the supplemental insurance coverage provided by STAX and SCO programs is the same proposed in last year's farm bill drafts. Both of these programs based their revenue guarantees on crop insurance's pre-plant projected prices. These projected prices are based on harvest futures prices for the crop year. This design choice results only in within-year protection. An alternative design option is to base prices on historical prices, which would introduce the potential for across-year protection.