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The US Federal Farm Safety Net

Protecting Farmers from the Unpredictable


Farmers Continue To Struggle Against Extended Drough

Farmers Continue To Struggle Against Extended Drough

Scott Olson/Getty Images

By the end of July 2012, more than half of the counties in the United States, mainly in the farming and ranching states of the West, the Great Plains and the Midwest, had been declared federal disaster areas due to the worst drought since 1955. With no relief in sight for what had become the most wide-spread natural disaster in U.S. history, the U.S. Department of Agriculture (USDA) reported that nearly 40% of the nation's corn crop was in danger of being ruined and without hay or water for their cattle, ranchers were selling out. It is during natural disasters like the drought -- unpredictable and unpreventable - that Americans should be grateful for the federal farm safety net.

What is the Farm Safety Net?

With their numbers already declining, the ability of our nation's farmers and ranchers to survive the financial devastation of natural disasters is critical to maintaining a safe, secure and sufficient food supply. The U.S. farm safety net is a set of congressionally authorized farm programs and other assistance that provides farmers and ranchers with protection against risks, such as lost income, limited access to credit, or devastation from natural disasters.

Also See: When the Last Farmer Dies

Funding for the federal farm safety net is set and incorporated into the federal budget through what has become known as the "farm bill," enacted approximately every 5 years by the U.S. Congress. The farm bill authorizes funding of the farm safety net for five- and ten-year baseline periods. Current (2008) farm bill funding levels for the farm safety net are $74.4 billion for 2013-2017 and $152.7 billion for 2013-2022.

The federal farm safety net is comprised of three main elements: commodity programs, crop insurance and disaster assistance.

Federal Commodity Programs

Generally known as "farm subsidy" or "price support" programs, federal farm commodity programs are a combination of loan programs and direct payments (subsidies) to farmers intended to ensure that U.S. farms and ranches produce annually adequate quantities of what the USDA considers to be essential farm products. The commodity programs are geared toward both providing an adequate and safe U.S. food supply, and ensuring the nation's position as the world's leading exporter of agricultural commodities.

Also See: Top Federal Benefit and Assistance Programs

The commodity programs encourage farmers to produce the essential products by ensuring they receive competitive prices that respond to the constantly changing worldwide farm products market.

Crops supported by commodity programs funded in the 2008 Farm Bill (Public Law 6124) include: food grains, feed grains, oilseeds, upland cotton, peanuts, and pulse crops.

Food grains include wheat and rice, and feed grains include corn, sorghum, barley, and oats. Oilseeds include soybeans, sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, and sesame seed. In the U.S., pulse crops include dry peas, lentils, small chickpeas, and large chickpeas.

The term "pulse crops" refers to a family of over 60 legume crops grown in many parts of the world and considered especially important to human nutrition. Pulse crops are high (up to 25%) in protein, starch and dietary fiber.

Growers of "specialty crops" like fruits, vegetables and nuts, and livestock producers receive little or no support from the commodity programs. Instead these producers typically participate in federal disaster assistance programs and purchase Federal Crop Insurance.

Federal Crop Insurance

As the name implies, the Federal Crop Insurance Program protects farmers from devastating financial harm resulting from crop failures resulting from natural disasters like droughts, floods, unseasonal frosts and widespread plant disease.

While farmers must purchase crop insurance, the policies are heavily subsidized by the government. On average, the government pays about 60% of the farmer's crop insurance premium. The Congressional Budget Office (CBO) has estimated that subsidies for federal crop insurance will cost the government about $9.0 billion through 2022.

According to the USDA, the number of acres of farmland covered by the Federal Crop Insurance Program has increased from 13.9 million has increased from 13.9 million acres (25%) in 1988, to 265.8 million acres (85%) in 2012. In 2012, farmers running about 500,000 U.S. farms held 1.14 million crop insurance policies worth over $114 billion on liability.

In total, federal crop insurance policies can be purchased on more than 100 different crops including field crops and specialty crops, fruit trees, nursery-grown crops, and pasture and rangeland. In addition, dairy farmers and ranchers can buy federal crop insurance on dairy product and livestock sales margins.

Federal Disaster Assistance

The USDA's Farm Service Agency (FSA) administers federal disaster assistance programs to help farmers and ranchers recover from losses caused by natural disasters such as drought, flood, fire, freeze, tornadoes, pest infestation, and other calamities.

Off the five agricultural disaster assistance programs authorized under the current (2008) farm bill, the cornerstone Supplemental Revenue Assistance Payments Program (SURE) is designed to compensate farmers for portions of crop losses not already covered under the Federal Crop Insurance Program.

The SURE program works in combination with the Federal Crop Insurance Program and the Noninsured Crop Disaster Assistance Program (NAP) to reduce farmers' financial risk due to disasters.

Specifically, the SURE program compensates farmers for a portion of their losses not covered by federal crop insurance caused by all types of damaging weather, as well as other natural occurrences such as earthquakes or volcanic eruptions.

Ranchers and other agricultural producers are protected from similar disasters by the Livestock Indemnity Program (LIP), Livestock Forage Disaster Program (LFP), Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP), and the Tree Assistance Program (TAP) for orchard and nursery tree growers.

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