Adding Up $23.6B Worth of Farm Bill Cuts


by Chris Clayton, DTN Ag Policy Editor

OMAHA (DTN) — The Congressional Budget Office confirmed Friday that Senate Agriculture Committee Chairwoman Debbie Stabenow hit her target by generating $23.6 billion in savings in the Agriculture Reform, Food and Jobs Act that should come to the Senate floor early next month.

With a total 10-year cost projected at $969 billion, the bill would spend $23.6 billion less over 10 years than if current farm-bill programs remained in place, the CBO report released Friday shows. Over the actual five-year life of the farm bill from 2013-17, the Senate bill would save about $9.3 billion.

While the Senate Agriculture Committee approved the farm bill last month, Stabenow, D-Mich., officially introduced the legislation on Thursday after making some adjustments to ensure the CBO projections showed at least $23 billion in savings.

The lion’s share of net savings, $19.8 billion, comes from an overhaul of commodity programs. Ending direct payments, the counter-cyclical program and Average Crop Revenue Election program, or ACRE, would save $50.2 billion over 10 years. They would largely be replaced with the Agriculture Risk Coverage program that would cost $28.5 billion over 10 years, CBO projects. Other commodity programs, including disaster aid, account for about $2 billion in costs.

The House Agriculture Committee is expected to propose a different set of commodity programs that would include some form of target-price provisions for at least some crops. That will shift the way the House comes up with its farm-program costs and projected savings in the legislation.

The Agricultural Risk Coverage program, which has a $50,000 payment cap, would become the primary commodity safety net under the Senate version of the bill for crop farmers, other than cotton. ARC would have two options for producers: a county coverage that protects up to 80{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} of projected revenues, and an individual farm policy that protect up to 65{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} of projected revenue. ARC would require at least an 11{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} loss before producers could collect. Moreover, because of the payment cap and ARC’s structure, the Senate shifts a heavier burden of the farm safety net to insurance programs.

The bill also reauthorizes four disaster programs for livestock, bees, fish and forestry. Collectively, the programs add nearly $1.9 billion to the 10-year costs of the bill.

In conservation, the CBO estimates that trimming acreage in the Conservation Reserve Program to 25 million total acres would save $3.8 billion over 10 years. Reducing annual signup for the Conservation Stewardship Program would save another $2 billion over 10 years as well.

Crop insurance costs are projected to rise under the bill, largely because of two new programs. The Senate bill creates the Supplemental Coverage Option, or SCO, that would work with a farmer’s individual insurance. SCO works much like some insurance policies that trigger payments based on countywide production. Under the program, USDA would pay 70{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} of the premium for an SCO policy.

To ensure the $23 billion in savings in the farm bill, the Senate Agriculture Committee added a deductible of 10{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} of expected revenue for farmers not participating in the Agricultural Risk Coverage program. For farmers enrolled in ARC, the deductible for the SCO insurance would be 21{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} as well.

The change was made because initially the legislation made it appear that a farmer buying enough individual crop insurance and the SCO policy could guarantee 100{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} of their revenue. Without the deductible, the SCO policy also was more expensive than senators anticipated. As it stands, the SCO policies add $1 billion in cost to the farm bill over five years, jumping to $3 billion in additional costs for the 10-year budget projections.

The Stacked Income Protection for Cotton, or STAX, also is created under the bill, but the CBO anticipates that insurers could not sell those policies before the 2014 crop year. Under STAX, USDA would pay 80{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} of the premiums. CBO estimates the program would cost $912 million through 2017, which would jump to $3.2 billion over 10 years.

The Senate bill also requires USDA to lower the premium costs for Catastrophic coverage, or CAT. In doing so, that actually generates a 10-year savings of $437 million because the change also reduces how much USDA pays insurers for offering CAT coverage.

In nutrition, the farm bill makes changes to the way people can become eligible for Supplemental Nutrition Assistance Program benefits, also known as the food-stamp program. The bill saves $4.5 billion over 10 years in SNAP costs by ensuring people who qualify for low-income heating assistance are not automatically approved for SNAP.

CBO scores aren’t perfect forecasts of spending, however. For instance, CBO projected the Biomass Crop Assistance Program created in the 2008 farm bill would cost $70 million over five years. The first year of BCAP cost more than $500 million because forestry and pulp-wood processors determined they could qualify under the program.

A detailed breakdown of the projected Senate farm bill costs can be found at


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Posted with DTN Permission by Haylie Shipp


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