Crop Insurance Provisions in the 2014 Farm Bill (P.L. 113-79)

Summary

Congressional Research Service

7-5700

www.crs.gov

R43494

Summary

The enacted 2014 farm bill (the Agricultural Act of 2014; P.L. 113-79) enhances the federal crop insurance program by expanding its scope, covering a greater share of farm losses, and making other modifications that broaden policy coverage. The changes stem from the desire of many in Congress, particularly members of the agriculture committees, to bolster what they consider to be the most significant aspect of the farm safety net.

Under the federal crop insurance program, which is administered by the U.S. Department of Agriculture’s Risk Management Agency (RMA), producers purchase subsidized policies to help manage financial risks associated with crop yield or revenue losses, primarily from natural disasters. In contrast, farm commodity programs apply to a narrower set of “program” crops, require no participation fees, and make payments when prices fall below statutory minimums or when crop revenue is low relative to historical levels.

A prominent crop insurance feature of the 2014 farm bill is the authorization of policies designed to reimburse “shallow losses”—an insured producer’s out-of-pocket loss associated with the policy deductible. A new crop insurance policy called Stacked Income Protection Plan (STAX) is made available for upland cotton producers, while the Supplemental Coverage Option (SCO) is made available for other crops. The STAX policy indemnifies losses in county revenue of greater than 10% of expected revenue but not more than the deductible level (e.g., 25%) selected by the producer for the underlying individual policy. (It can also be purchased as a stand-alone policy.) Similarly, SCO is based on expected county revenue (or yields) and covers part of the deductible under the producer’s underlying policy. The government subsidy as a share of the policy premium is set at 80% for STAX and 65% for SCO.

A variety of additional provisions are expected to expand existing crop insurance products or require examination of the potential for new products, including those that would benefit specialty crops and animal agriculture. Provisions revise the value of crop insurance for organic crops to reflect generally higher prices of organic (not conventional) crops. USDA is also required to conduct more research on whole farm revenue insurance with higher coverage levels than currently available. Studies or policies are also required for insuring (1) specialty crop producers for food safety and contamination-related losses, (2) swine producers for a catastrophic disease event, (3) producers of catfish against reduction in the margin between the market prices and production costs, (4) commercial poultry production against business disruptions caused by integrator bankruptcy, (5) poultry producers for a catastrophic event, (6) producers of biomass sorghum or sweet sorghum grown as feedstock for renewable energy, and (7) alfalfa producers. A peanut revenue insurance product and rice margin insurance also are mandated. Another provision provides funding for index weather insurance for protecting against weather.

To address conservation concerns, the 2014 farm bill links eligibility for crop insurance premium subsidies to compliance with wetland and conservation requirements for highly erodible land. Also, crop insurance subsidies are reduced for plantings on native sod acreage in certain states.

In total, the crop insurance title increases funding for crop insurance by an additional $5.7 billion over 10 years relative to projected levels that assumed no change in policy. The largest cost items are for STAX ($3.3 billion) and SCO ($1.7 billion), according to the Congressional Budget Office. A controversial item not included in P.L. 113-79 was the reduction of premium subsidies for high-income farmers, which had been included in the Senate farm bill but not the House bill.

Contents

Introduction 1

Crop Insurance Background 1

Policy Rationale for Federal Crop Insurance 1

Authorizing Legislation 2

Insurable Commodities and Types of Policies 2

Program Structure and Federal Costs 3

Crop Insurance Provisions in the 2014 Farm Bill 3

Stacked Income Protection Plan (STAX) for Upland Cotton 4

Supplemental Coverage Option (SCO) 5

“Enterprise Units” and Yield Guarantees 6

Peanuts and Rice 7

Alfalfa and Industrial Crops 7

Provisions for Specialty Crop Producers 7

Whole Farm Insurance 7

Organic Prices for Insuring Crops 8

“NAP” Enhancement 8

Index-based Weather Insurance 9

Food Safety Insurance Study 9

Studies for Animal Agriculture Insurance 9

Conservation Provisions 9

Provisions for Beginning Farmers 10

“Budget Neutral” for the Next Standard Reinsurance Agreement 10

Premium Subsidies 11

Estimated Cost of the Crop Insurance Title 11

Figures

Figure 1. Stacked Income Protection Plan (STAX) with a Crop Loss 5

Figure 2. Supplemental Coverage Option (SCO) with a Crop Loss 6

Tables

Table 1. Cost of Provisions in the Crop Insurance Title of the 2014 Farm Bill 12

Appendixes

Appendix. Crop Insurance Provisions in the Enacted 2014 Farm Bill 13

Contacts

Author Contact Information 1

Acknowledgments 1

Introduction

The federal crop insurance program is considered by many farmers and policy makers as the centerpiece of the farm safety net. The program makes available subsidized insurance policies for about 130 commodities ranging from apples to wheat. These “multiple peril” policies help producers manage financial risks associated with crop yield or revenue losses. Insurable causes of losses include adverse weather (e.g., drought and flood), insects or disease outbreaks, and failure of irrigation water supply.

The enacted 2014 farm bill (the Agricultural Act of 2014; P.L. 113-79) enhances the federal crop insurance program by expanding its scope, covering a greater share of farm losses, and making a variety of other modifications that broaden policy coverage. This report describes in detail changes made to the program as part of the 2014 farm bill. A table at the end of this report (Table A-1) provides a side-by-side comparison of the crop insurance provisions in Title XI of the 2014 farm bill and the permanent authorizing statute for federal crop insurance (Federal Crop Insurance Act, 7 U.S.C. §1501 et seq.), prior to enactment of the 2014 farm bill.

Two other key elements of the farm safety net are (1) the farm commodity programs, which provide price and income support for a much narrower list of “covered and loan commodities” such as corn, soybeans, wheat, rice, and peanuts; and (2) agricultural disaster programs, which primarily assist producers owning livestock or fruit trees. For information on these programs as modified by the 2014 farm bill, see CRS Report R43448, Farm Commodity Provisions in the 2014 Farm Bill (P.L. 113-79), and CRS Report RS21212, Agricultural Disaster Assistance.

Crop Insurance Background

Policy Rationale for Federal Crop Insurance

In 1938, Congress established the federal crop insurance program following several unsuccessful attempts by the private sector to sell multiple-peril policies, beginning in the late 1800s. These ventures lost money and were discontinued because areas they covered were too small to adequately distribute risks when crops failed. Since then, private crop insurance has focused on single peril insurance for causes of loss not correlated across wide areas, such as hail or fire.

Agricultural weather risks typically affect a large area rather than individual farms, resulting in potential losses that historically have been considered too large for private insurers. Others, though, contend that international financial markets have expanded dramatically in recent decades and now have significant capacity to provide coverage of risks that are much greater than those associated with potential crop losses.

Separately, the crop insurance program must address problems associated with moral hazard, such as farmers intentionally under-applying crop inputs to collect indemnities. Another issue is adverse selection, whereby high-risk farmers tend to participate more than low-risk farmers, thus increasing program costs. Some argue that the government is in a better position than the private sector to address these issues and monitor farm behavior and losses given better access to data and linkages with farm program benefits.

From a demand standpoint, federal subsidies for purchasing crop insurance have been increased over the years to improve affordability and boost farmer participation. In general, the premium required to cover the cost of crop insurance is more than producers are willing to pay. As a result, in the absence of federal subsidies, U.S. agricultural acreage covered by crop insurance and coverage levels selected by farmers would likely be lower, potentially increasing the odds of a costly federal bailout in the event of a catastrophic weather event.

Proponents of federal crop insurance argue that the program is essential because it provides specific risk management solutions that benefit farmers, input suppliers, the entire agricultural sector, and ultimately all food consumers. They also say widespread participation reduces the potential for ad-hoc disaster spending, a longstanding policy goal. In contrast, critics argue that the program covers an excessive amount of producer risk, inappropriately subsidizes large farms, wastes taxpayer dollars, and encourages crop production on environmentally fragile lands.

Authorizing Legislation

The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. §1501 et seq.). The Federal Crop Insurance Corporation (FCIC) was created as a wholly-owned government corporation in 1938 to carry out the program. The program is administered by the U.S. Department of Agriculture’s Risk Management Agency (RMA).

Insurable Commodities and Types of Policies

Policies are available for approximately 130 crops and cover more than 250 million acres nationwide. Insurable commodities include major field crops such as wheat, corn, soybeans, cotton, peanuts, and rice, as well as many specialty crops (including fruit, tree nut, vegetable, and nursery crops), pasture, rangeland, and forage crops. For major crops, three-fourths or more of U.S. planted acreage is insured under the federal crop insurance program.

Farmers annually purchase about 1.2 million policies, with many producers purchasing multiple policies depending on farm size and number of crops grown. The policies protect against individual farm losses in yield, crop revenue, or whole farm revenue. Area-wide policies are available for some crops, whereby an indemnity is paid when there is an overall loss over a broad area level. In general, yield-based policies offer a guarantee at the individual farm level or area-wide (e.g., county) level. For revenue policies, the insurance guarantee also incorporates the expected market price prior to planting (i.e., no statutory minimum prices as provided in some farm programs). For some policies, the guarantee can increase if the harvest price is higher than the expected price, thereby increasing the point at which indemnities are triggered.

The producer selects a coverage level and absorbs the initial loss through the deductible. For example, a coverage level of 70% has a 30% deductible (for a total equal to 100% of the expected value prior to planting the crop). The producer pays a portion of the premium which increases as the level of coverage rises. The federal government pays the rest of the premium—62%, on average, in 2013—plus the cost of selling and servicing the policies. This differs from farm commodity programs, which require no participation fees. Also unlike farm commodity programs, crop insurance has no subsidy limits, and participants can be eligible regardless of income levels.

Program Structure and Federal Costs

The federal crop insurance program is a partnership between RMA (through the FCIC) and private industry. RMA approves and supports products, develops and approves the premium rates, administers premium subsidies, reimburses private companies for their administrative and operating costs (i.e., delivery costs for selling and servicing the policies), and reinsures company losses. RMA also sponsors educational and outreach programs and seminars on the general topic of risk management.

Approximately 19 private insurance companies provide the “boots on the ground” for selling and servicing the insurance policies through a network of agents. They also share risk (profit/loss potential) with the government. The Standard Reinsurance Agreement (SRA) defines the risk-sharing arrangement, whereby insurance companies may transfer some liability associated with riskier policies to the federal government and retain profits/losses from less risky policies.

During FY2009-FY2013, federal costs averaged $8.4 billion per year, varying between $3.7 billion in FY2010 and $14.1 billion in FY2012, depending on crop losses and commodity prices, which affect premium subsidy amounts and program liability (e.g., high market price result in high premiums and liability).

Crop Insurance Provisions in the 2014 Farm Bill

The general enhancement of the federal crop insurance program in the 2014 farm bill stems from the desire of many in Congress, particularly members of the agriculture committees, to bolster what they consider to be the most significant aspect of the farm safety net. Unlike farm commodity programs, federal crop insurance is applicable to a wide variety of crops and requires producers to pay for at least part of the program. Producers are indemnified only after an insurable crop loss. During the farm bill debate, some in Congress voiced concerns that the program is too generous. Congress considered but did not pass premium caps and/or income limits on crop insurance similar to ones governing farm commodity program payments.

For crop insurance in the 2014 farm bill, a prominent feature is the authorization of policies designed to reimburse “shallow losses”—an insured producer’s out-of-pocket loss associated with the policy deductible. These include a new crop insurance policy called Stacked Income Protection Plan (STAX) for upland cotton and the Supplemental Coverage Option (SCO) for other crops. A variety of additional provisions are expected to expand existing crop insurance products or require FCIC to examine the potential for new products, including those benefiting specialty crops and animal agriculture.

Stacked Income Protection Plan (STAX) for Upland Cotton

Beginning with the 2014 farm bill, upland cotton is no longer a “covered commodity,” making upland cotton producers ineligible for either Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) under the farm commodity support programs. Instead, upland cotton is eligible for Stacked Income Protection (STAX), which is a revenue-based, area-wide crop insurance policy that may be purchased as a stand-alone policy for primary coverage or purchased in tandem with an individual farm loss policy or area policy. This major policy revision was sought by U.S. cotton producers in an attempt to resolve a long-running trade dispute with Brazil that requires changing the U.S. cotton support program so it does not distort international markets.

Critical to participation, and as part of the agreement to make upland cotton ineligible for the PLC/ARC programs, is the government’s share of the premium cost. The federal subsidy is 80% for STAX and the government pays for delivery costs. Policies are to be offered in all producing counties at the county level, or on the basis of a larger geographic area if necessary. A payment rate multiplier of 120% is available if producers want to increase the amount of protection per acre.

The indemnity from STAX is triggered by a revenue loss at the county level. When purchased as a “stacked” policy, the indemnity is designed to cover part of the deductible of the underlying policy. Specifically, STAX would indemnify losses in county revenue of greater than 10% of expected revenue but not more than 30%. For producers purchasing STAX in conjunction with an individual policy, the maximum coverage under STAX cannot exceed the deductible level selected by the producer in the underlying individual policy. For individual producers, indemnities for STAX and other policies cannot overlap.

A graphical illustration of STAX is shown Figure 1. The bar on the left depicts the expected revenue (prior to planting) under a typical cotton crop insurance revenue policy with a 30% deductible (the farmer absorbs the first 30% of the loss). The expected revenue is the 10-year average yield for an individual producer times the expected market price (the average futures market price prior to planting). The insurance guarantee is set at 70% of the expected revenue (100% minus the 30% deductible). Upon harvest, if actual revenue falls short of the guarantee, an initial indemnity is triggered under the farmer’s individual crop insurance policy as depicted by the green box in the right-hand column. If a STAX policy is also purchased and there is a loss at the county level, a STAX indemnity would be paid (depicted by the blue box). Overall, the farmer incurs a loss of approximately 10% (white box at top), with the STAX indemnity reducing the amount of “shallow loss” absorbed by the producer.

Figure 1. Stacked Income Protection Plan (STAX) with a Crop Loss

(STAX for upland cotton covers part of the deductible under the individual policy)

Source: CRS.

Notes: A STAX indemnity (blue box above) is triggered when actual county revenue is less than 90% of expected county revenue. Scenario assumes expected (and actual) revenue is the same at the individual farm and county level (STAX). STAX may be purchased as a stand-alone policy for primary coverage. Upland cotton acres enrolled in STAX are not eligible for SCO.

Supplemental Coverage Option (SCO)

Like STAX but for other crops, the Supplemental Coverage Option (SCO) is authorized by the 2014 farm bill to cover part of the deductible under the producer’s underlying policy (the “shallow loss”). SCO is an area-wide (e.g., county) loss policy, whereby an indemnity is paid on area losses not more than the deductible level (e.g., 25%) selected by the producer for the underlying individual policy. However, unlike STAX, the SCO guarantee can be based on either expected county yields or revenue, and it must be purchased in conjunction with a traditional crop insurance policy. Indemnities are triggered by county losses greater than 14%, and policy coverage cannot exceed the difference between 86% and the coverage level selected by the producer for the underlying policy.

A graphical illustration of SCO is shown in Figure 2. The bar on the left depicts the expected revenue (prior to planting) under a typical crop insurance revenue policy with a 30% deductible (the farmer absorbs the first 30% of the loss). The expected revenue is the 10-year average yield for a producer times the expected market price (e.g., average futures market price for major crops). The guarantee is set at 70% of the expected revenue (100% minus the 30% deductible). If a loss occurs on the farm, an initial indemnity is triggered under the farmer’s individual crop insurance policy as depicted by the green box in the right-hand column. If an SCO policy is also purchased and there is also a loss at the county level, a indemnity from the SCO also would be paid (depicted by the blue box). Overall, the farmer incurs a loss of approximately 14% (white box at top), with the SCO indemnity reducing the “shallow loss” absorbed by the producer.

Figure 2. Supplemental Coverage Option (SCO) with a Crop Loss

(SCO covers part of the deductible under the individual policy)

Source: CRS.

Notes: SCO indemnity (in blue box above) is triggered by a loss in county revenue (or yield if underlying individual policy is yield-based). Scenario assumes expected (and actual) revenue is the same at the individual farm and county level (SCO).

SCO is designed to serve as a “shallow loss” program for covered commodities enrolled by producers in Price Loss Coverage (PLC) under the farm commodity support program. A separate PLC payment would be made if the farm price for the crop is below a “reference price” set in statute. For crops enrolled in the alternative Agriculture Risk Coverage (ARC) program, SCO is not available because ARC is already designed to pay for “shallow losses.”

SCO policies are to be offered for crops that have sufficient data for policy development, and coverage is to begin no later than the 2015 crop year. USDA has announced plans for developing 2015 policies for corn, grain sorghum, rice, soybeans, winter wheat, spring wheat, and cotton. The government subsidy as a share of the policy premium is 65%.

“Enterprise Units” and Yield Guarantees

Currently available policies are enhanced through a number of provisions beginning with the 2015 crop year. To provide better coverage for producers with both irrigated and nonirrigated crops, separate insurable “enterprise” units for each practice will be available (an enterprise unit is all land for a single crop in a county, regardless of the tenant/landlord structure). Separating the acreage can increase risk protection for producers because losses on dryland crops would no longer be offset by higher yields on irrigated acreage when the two are combined.

Another concern of producers in recent years has been the treatment of poor yields used to establish the insurance guarantee, which is based on 4 to 10 years of historical yields called actual production history (APH). Current law allows a “yield plug” if the producer’s actual or appraised yield for any particularly year is less than 60% of the “transitional yield,” generally based on the 10-year historical county average yield. The yield plug allows the replacement of a low actual yield in the APH with a yield equal to 60% of the applicable transitional yield. The 2014 farm bill enhances this provision by keeping the yield plug unchanged from current law (except in the case of native sod) but allowing producers to exclude without replacement any recorded or appraised yield from the APH calculation if the average crop yield in the county for any particular year is less than 50% of the 10-year county average.

Peanuts and Rice

The peanut and rice industries successfully argued for enhanced crop insurance options. The 2014 farm bill mandates a peanut revenue insurance product and rice margin insurance, with both to be made available for the 2015 crop year. For several years, rice producers have been interested in protecting against rising cost of inputs (e.g., fuel, fertilizer) as it affects their margin (income minus costs). For peanut producers, the revenue policy is to use the “Rotterdam price index” or other appropriate prices as determined by the Secretary. Setting the price guarantee is problematic for peanuts because the market is considered “thin,” with only two peanut shellers reportedly buying over 80% of all peanuts from growers. No futures market exists for peanuts, and private contracts between producers and shellers reportedly account for most transactions, making it difficult to independently verify pricing needed to help set price parameters in the insurance policies.

Alfalfa and Industrial Crops

The 2014 farm bill also requires FCIC to enter into contracts to conduct research and development on modifications to insurance currently available for alfalfa through the “forage production” policy. Geographic coverage of the existing policy is limited, and supporters of the provision have said that loss coverage has been inadequate.

FCIC is also to research policies for crops currently not insurable, including biomass sorghum and sweet sorghum grown expressly for the purpose of producing a feedstock for renewable biofuel, renewable electricity, or biobased products.

Provisions for Specialty Crop Producers

Federal crop insurance is available for over 80 specialty crops (including fruit, tree nut, vegetable, and nursery crops), making the program the primary financial safety net for specialty crop producers. While additional policies have been introduced over the last 10 years, producer groups and some Members of Congress during the farm bill debate wanted to improve the safety net for specialty crops, in part since these crops are not eligible for farm commodity support programs.

Whole Farm Insurance

USDA is required to conduct more research on whole farm revenue insurance with higher coverage levels than currently available under the Adjusted Gross Revenue (AGR) and AGR-Lite policies which insure revenue of the entire farm rather than an individual crop. In general, the AGR products are designed to protect producers with specialty crops and/or commodities not covered by individual policies. Historically, whole-farm insurance has seen limited participation, in part because the products are complex, the policies are available only in some parts of the country, and the maximum available coverage of 80% is considered too low for adequate risk protection.

FCIC has been working on a revised whole farm insurance plan that reportedly reflects provisions on whole farm insurance specified in the 2014 farm bill. The farm bill provisions include increasing available coverage from 80% to 85%, and a maximum liability of $1.5 million, up from $1 million for AGR-Lite. Also, eligible producers are to include direct-to-consumer marketers and producers who produce multiple agricultural commodities, including specialty crops, industrial crops, livestock, and aquaculture products. FCIC also may provide diversification-based additional coverage payment rates, premium discounts, or other enhanced benefits in recognition of the risk management benefits of crop and livestock diversification strategies for producers. FCIC can also expand coverage for the value of any packing, packaging, or any other similar on-farm activity that FCIC determines to be the minimum required in order to remove the commodity from the field.

Organic Prices for Insuring Crops

Current law requires FCIC to broaden coverage for organic crops. To reflect the higher product value and provide additional protection for producers, organic price elections have been made available for 16 crops as of early 2014. The 2014 farm bill extends the current practice by requiring FCIC to offer price elections by 2015 that reflect actual retail or wholesale prices of organic (not conventional) crops for all organic crops produced in compliance with standards issued by USDA under the Organic Foods Production Act of 1990.

“NAP” Enhancement

When crop insurance is not available, catastrophic coverage under the existing noninsured crop disaster assistance program (NAP) can be purchased from USDA’s Farm Service Agency. NAP applicants pay an administrative fee (currently $250 per crop), and no premium is charged (like CAT crop insurance). In order to receive a NAP payment, a producer must experience at least a 50% crop loss caused by a natural disaster, or be prevented from planting more than 35% of intended crop acreage. For production losses in excess of the minimum, a producer receives 55% of the average market price for the commodity.

In order to expand coverage for specialty crops and others covered under NAP, the 2014 farm bill provides additional coverage at 50% to 65% of established yield and 100% of average market price. The farmer-paid premium for additional coverage is 5.25% times the product of the selected coverage level and value of production (acreage times yield times average market price). Also, the per-person payment limit is increased from $100,000 to $125,000. Separately, to assist producers with fruit crop losses in 2012, payments associated with additional coverage are made retroactively (minus premium fees) in counties declared a disaster due to freeze or frost.

Index-based Weather Insurance

FCIC is authorized to conduct two or more pilot programs (and approve subsequent policies) for index-based weather insurance. Index weather insurance protects against specific weather events and not actual losses. Priority is given to specialty crops (e.g., fruits and vegetables) and livestock commodities (including pasture, rangeland, and forage) that have had no available coverage or have low participation rates under existing coverage. The subsidy shall not exceed 60% of the estimated premium amount. Administrative and operating expenses are to be reimbursed as with other policies, but federal reinsurance, research and development costs, and other reimbursements or maintenance fees are not provided for these policies. Expenditures from the FCIC fund are limited to $12.5 million per year for FY2015-2018.

Policies may be sold by the approved insurance provider that submits the application as well as others who agree to pay maintenance fees to the submitting provider. Policies cannot be substantially similar to privately available hail insurance.

Food Safety Insurance Study

The 2014 farm bill requires FCIC to contract for a study on coverage for specialty crops that would indemnify producers for production or revenue losses related to food safety concerns such as government, retail, or national consumer group announcements of a health advisory, product removal, or recall related to a contamination concern. FCIC must submit a report to Congress within one year of enactment of the farm bill.

Studies for Animal Agriculture Insurance

Compared with the crop sector, the federal crop insurance program provides only limited coverage for the livestock industry. Relatively new or pilot programs protect livestock and dairy producers from loss of gross margin or price declines. Livestock producers can also insure against hay and forage losses through the Forage Production policy (see “Alfalfa and Industrial Crops” above) and the Pasture, Rangeland, and Forage program, which uses a rainfall index or vegetative index to determine loss.

The 2014 farm bill directs FCIC to study a variety of topics that could lead to additional insurance policies for animal agriculture. FCIC is required to enter into contracts to conduct research and development on policies for the margin between the market value of catfish and input costs and poultry business interruption insurance for poultry growers, including losses due to bankruptcy of an integrator (owner-processor). FCIC is also required to contract for studies on insuring swine producers for a catastrophic event and insuring poultry producers for a catastrophic event.

Conservation Provisions

As directed in the conservation title (II) of the 2014 farm bill, crop insurance premium subsidies are available only if producers are in compliance with wetland conservation requirements and conservation requirements for highly erodible land. USDA expects most producers will be unaffected because the same requirement has been in place for years to maintain eligibility for farm program and other USDA benefits.

Also, to limit the incentive to convert native sod to cropland, a separate provision in the crop insurance title affects producers purchasing policies for crop insurance or noninsured crop disaster assistance program (NAP). For the first four years of planting on native sod acreage in Iowa, Minnesota, Montana, Nebraska, North Dakota, and South Dakota, farmers will pay more for the risk coverage through reduced crop insurance subsidies or higher NAP fees, and the yield guarantee is reduced compared to other cropland. For details, see Table A-1.

Provisions for Beginning Farmers

To help develop the next generation of producers, the 2014 farm bill makes several changes to benefit beginning farmers or ranchers with less than five years of experience. For example, to reduce the cost of purchasing crop insurance for beginning farmers or ranchers, the $300 fee for purchasing catastrophic (CAT) coverage is waived. Also, the premium subsidy schedule for additional coverage is increased by 10 percentage points.

To boost the yield guarantee for beginning farmers, the calculation can now use yields recorded by prior producers on the acreage, which might be higher than the alternative when historical data are not available (i.e., 65% of the transitional yield based on county average yields). When his