New Report on Overlap in Farm Safety Net Programs
December 9th, 2011
A new report from USDA’s Economic Research Service analyzes potential overlap and duplication in federal farm safety net programs. The report, Identifying Overlap in the Farm Safety Net, clarifies competing definitions of what is meant by the terms “farm safety net,” provides an overview of where overlap can occur in these programs, and presents an analytical method for measuring this overlap.
Due to the sheer number and complex combinations of farm safety net programs, many policymakers have become wary of overlap in producer support programs. There are numerous federal programs that provide payments to farmers, which include commodity price and income support programs, as well as risk management programs such as crop insurance and disaster assistance.
These programs combined are typically what fall under the term “farm safety net” or “Title I Programs” (even though authorization for some of these programs do not actually fall under Title I of the farm bill). Farm safety net programs have been an essential component of agricultural policies since the New Deal era, when the federal government first established price support systems to help farmers survive volatile markets and depressed prices during the Great Depression.
Because these farm safety net programs were established over time throughout successive farm bills and other legislation, there has been criticism about potential duplication in coverage and payments within these programs, and concern that actual payments to farmers may exceed actual crop production losses.
With recent farm bill discussions focused on eliminating direct payments altogether, this report chose to focus primarily on the potential for overlap within the following risk management and income support programs:
- Average Crop Revenue Election (ACRE) which is an alternative revenue-based safety net to the price-based safety net provided by counter-cyclical payments
- Supplemental Revenue Assistance Payments (SURE) which supplements crop insurance by providing financial assistance at the whole farm level for crop production losses due to natural disasters
- Crop revenue insurance (i.e. AGR, AGR-lite) which protects against low revenue due to unavoidable natural disasters and market fluctuations
The report lays the conceptual groundwork for assessing potential program duplication by identifying patterns of farm program participation.
Some of the key findings from the report include:
- Because federal farm program designs and purposes vary, producers can be expected to participate in multiple programs on the same farm, depending on factors like the number and types of commodities the farmer produces (or has historically produced) and current market/production conditions.
- Many risk management programs are designed to preclude overt duplication. However, overlap among them may occur because different programs may protect producers from similar risks at different points in time or under several different risk scenarios.
- Because both ACRE and SURE insure revenues, the potential exists for them to interact with each other and with crop (revenue) insurance products to generate overlapping support within the farm safety net.
- Occasionally there appears to be evidence of (1) overlap in support that actually duplicates coverage for the same losses and (2) support from multiple programs that provides compensation beyond that intended in individual programs.
The ERS report takes a careful look at the overlap issues, but not at targeting. NSAC and its allies have long advocated for fairness and reform in the farm safety net programs, including placing reasonable income limits on producers eligible to receive farm payments, and requiring that payment recipients are actively engaged in the day to day farming operations. These important NSAC priorities are included in the Rural America Preservation Act of 2011, which was introduced in the Senate by Sens. Chuck Grassley (R-IA) and Tim Johnson (D-SD). We will be continue to press for inclusion of these reforms in any farm bill debates over the coming year.
NSAC has also been working with allies and champions in Congress to develop a whole farm revenue-based crop insurance program that works for diversified grain and grain-livestock operations and for specialty crop and local food producers. To read more about this proposal, check out our page on the Local Farms, Food, and Jobs Act, which was introduced in the House by Rep. Chellie Pingree (D-ME-1) and in the Senate by Sen. Sherrod Brown (D-OH).
To read more about NSAC’s work on commodity payments reform, check out our Grassroots Guide.