S. Rept. 112-203 - AGRICULTURE REFORM, FOOD AND JOBS ACT OF 2012112th Congress (2011-2012)
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112th Congress Report SENATE 2d Session 112-203 ====================================================================== AGRICULTURE REFORM, FOOD AND JOBS ACT OF 2012 _______ August 28, 2012.--Ordered to be printed Filed, under authority of the order of the Senate of August 2, 2012 _______ Ms. Stabenow, from the Committee on Agriculture, Nutrition and Forestry, submitted the following R E P O R T together with ADDITIONAL VIEWS [To accompany S. 3240] The Committee on Agriculture, Nutrition and Forestry (the Committee), reported an original bill (S. 3240) to reauthorize agricultural programs through fiscal year 2017, and for other purposes, having considered the same, reports favorably thereon and recommends that the bill do pass. PURPOSE OF THE BILL The purpose of this legislation is to reform, extend, modify, streamline and strengthen the nation's policies and programs pertaining to food, fiber, agriculture, conservation, rural development, agricultural trade and food aid, rural energy initiatives, forestry on private lands and research, education, and extension encompassing these subjects. Congress most recently addressed these programs comprehensively in the Food, Conservation, and Energy Act of 2008 (P.L. 110-627). The reported bill reduces the deficit by reductions in mandatory spending through policy-based revisions that improve the function and effectiveness of the programs created or extended by this legislation. These revisions include reforming assistance to farmers and ranchers through coverage for the actual risks that farmers and ranchers face; strengthening the efforts by farmers and landowners to conserve and enhance the quality of natural resources related to agriculture production, including privately owned forest land; and promoting agricultural trade and market opportunities and providing food aid and development assistance to developing countries. The bill also works to improve the integrity of food assistance to low-income families and the diets and health of all Americans. It streamlines the authorities for the provision of credit to farmers and ranchers and improves efforts to help young and beginning farmers and ranchers. The bill also fosters economic growth and a high quality of life in rural communities while streamlining the authorizations and improving program effectiveness. A significant purpose of the reported bill is improving support for the research, education and extension efforts involving food, agriculture and related fields. The reported bill also invests in the research, development and use of agriculturally-based renewable energy, chemicals and other biobased products, and it continues and enhances investments that assist and promote specialty crops and organics. Finally, the reported bill aims to enhance and improve federal crop insurance for all crops. The reported bill authorizes programs for the 2013 through 2017 crop and fiscal years. BACKGROUND AND NEEDS TITLE I--COMMODITY PROGRAMS For nearly 80 years, the United States has provided support to agricultural producers through a variety of programs and initiatives. Historically, the vast majority of that support has come in the form of protection from low prices, supply or production controls and general subsidy or income transfer payments. In recent years, Congress has emphasized policies that address farm risks. In 2000, Congress passed the Agriculture Risk Protection Act that enhanced risk management for farmers through the public-private partnership with crop insurance providers. In 2008, the Food, Conservation, and Energy Act (the 2008 Farm Bill) included two revenue-based assistance programs: one as an alternative to counter-cyclical payments and another targeted at assistance for natural disasters. The bill reported by the Committee builds upon those earlier efforts and takes a significant step forward in reforming commodity policy by moving away from income and price supports and towards risk management with assistance only in the case of loss. Recently, the agricultural sector has experienced unprecedented strength and economic growth, while at the same time the national economy has struggled to recover from an economic downturn. The Economic Research Service at the U.S. Department of Agriculture (USDA) has forecast record net farm income in 2011 and 2012, exceeding $90 billion each year. Additionally, USDA estimates that the five years of highest earnings for farmers over the last three decades have occurred since 2004. Record high commodity and livestock prices, caused by strong demand both domestically and overseas, have driven farm incomes. However, historic prices are also pushing up input costs and land values to record levels and increasing the level of risk a farmer must manage. The reported bill accomplishes significant and fundamental reform of the commodity programs, delivering substantial reductions in mandatory spending while still helping farmers and ranchers in times of need. Direct payments, counter- cyclical payments and the Average Crop Revenue Election payments are eliminated beginning with the 2013 crop year. In their place, a new risk-based, market-oriented program is authorized for the 2013 through 2017 crop years. The Agriculture Risk Coverage (ARC) program updates and modernizes commodity assistance, reforming federal agricultural policy in significant ways. Current programs make payments utilizing what are known as base acres, in combination with payment rates and target prices established by Congress. The base acres used for current programs are determined using historic planting records of covered commodities on farms. Often these records date to the 1980s and come with historical yields from the same era. Congress provided for a voluntary ``base update'' in the Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill) but it was not widely utilized. In 1996, Congress provided farmers the flexibility to plant any covered commodity on their farms but payments were disconnected from actual plantings; a policy known as ``de-coupling'' of payments. In response to market conditions, producers have updated their farming practices and changed what they plant on their farms significantly since the 1980s. For example, market forces have recently led many farmers in all regions of the country to plant soybeans on their farms. However, most base acres do not take into account these new, market-based planting decisions. As such, farmers today in different regions of the country can grow the exact same covered commodity, such as soybeans, but receive substantially different payments from Title I programs. Average direct payments for rice base are nearly ten times higher than direct payments for soybean base, so a farmer growing soybeans on rice base will receive almost ten times the Federal support as a farmer growing the same soybeans on soybean base. Counter-cyclical payments also utilize base acres. Using the same example, if prices for rice fall below the target price, a counter-cyclical payment is made to farmers with rice base. The farmer growing soybeans on rice base would thus receive a counter-cyclical payment for rice and the larger rice direct payment, while the farmer growing soybeans on soybean base does not receive a rice counter-cyclical payment. The reported bill eliminates base acres and instead makes payments on a producer's planted acres. Payments are determined by actual county or individual farm yields and actual market prices. The guarantee upon which a payment is triggered utilizes a benchmark calculation of actual yields and market prices on a rolling five-year basis, dropping out the highest and lowest years of each (known as the ``Olympic average''). As such, ARC treats every covered commodity and every farmer growing a covered commodity in the same fashion. ARC is designed to provide assistance with the actual risks a farmer faces. It is not intended to enhance or protect any one covered commodity's share of the Congressional Budget Office's forecast of future spending (the CBO baseline). The Committee acknowledges that the risks a farmer must manage to produce crops are immense and come from both weather impacting crop yields, and from the market delivering a price too low to cover the costs of producing a crop. The Committee acknowledges that crop insurance provides very effective coverage for yield risk for many crops and farmers. The improvements contained in Title XI are designed to make it more effective for more farmers and more crops. However, crop insurance, covers only a portion of the loss and includes a ``deductible'' above which the farmer is self-insured. The deductible can be larger than a farmer's operating margin. ARC provides limited assistance within the deductible range for revenue losses not otherwise covered by crop insurance. Because crop insurance does not cover multi-year price risk, the Committee acknowledges that significant risk exposure for farmers comes from a collapse in prices that is sustained or multiple years in which prices decline. Low or declining prices are especially problematic because farm input costs-- such as the cost of seed, fuel and fertilizer--tend to increase with commodity prices but not decrease as quickly as commodity prices. Farmers typically contract in advance for these inputs further exposing them to downside price risk. Previously, Congress turned to counter-cyclical policies that used statutorily-established target prices to provide payments when prices fall below the target price. Because the statutory target prices do not keep pace with the market, this policy is ineffective. Simply raising target prices can also cause distortions when farmers plant for program payments in times of low market prices and can pay a farmer in high-revenue years when yields make up for price declines. This is especially true when target prices are tied to planted acres. The Committee created ARC to provide effective, market- oriented assistance for price declines without insulating farmers from long-term trends in the market. By using a rolling five-year Olympic average of historical prices, the program provides assistance when the market decreases significantly year-over-year; allowing farmers and input prices the ability to respond. If the market decline is short-term, program assistance can help with the volatility. If the decline is longer-term, such as more than four or five years, ARC adjusts with the market and the guarantee decreases to avoid distortions. The Committee understands that price declines over a longer timeframe do not constitute shocks to the system that threaten farm operations; rather they are trends requiring appropriate responses by farmers. Accordingly, ARC provides assistance in the initial years of collapsed or declining prices allowing input prices to follow commodity prices lower and provide farmers time to adjust their operations. The five- year Olympic average price used in ARC is a market-oriented solution to the multi-year price risks a farmer must manage. The reported bill also continues marketing assistance loans and loan deficiency payments through the 2017 crop year with only two changes. Due to the loss before the World Trade Organization in a dispute initiated by Brazil against U.S. cotton supports, the loan rate for cotton is revised so that it can float between $0.52 per pound and $0.47 per pound based on a rolling two year average of prices. In addition, the conservation compliance provisions currently applicable to Title I programs and continued in this legislation are also applied in their entirety to the marketing loan program. The current sugar program is also continued without change through the 2017 crop year. Subtitle D of Title I provides assistance to dairy producers by establishing new programs that utilize risk management concepts while contributing to deficit reduction. The programs will provide market signals to help prevent over- supply and to help insure against profit margin reduction. The dairy industry experienced serious hardship in 2009 when prices received for milk marketings decreased significantly, resulting in an estimated 20 percent loss in dairy farm equity. The total loss of equity from 2007 through 2009 is estimated at $20 billion. Existing dairy support programs, including the Milk Income Loss Contract (MILC) program and the Dairy Product Price Support Program (DPPSP), proved insufficient for ensuring the viability of the domestic dairy industry. In response, dairy producers representing operations of all sizes undertook a nationwide effort to create a proposal that would help insure against reduced operating margins and stabilize dairy markets in times of overproduction. The reported legislation formalizes concepts of the producers' proposal. The reported legislation repeals MILC, DPPSP, and the Dairy Export Incentive Program (DEIP) and replaces them with a new, voluntary safety net, comprised of the Dairy Production Margin Protection Program (DPMPP) and the Dairy Market Stabilization Program (DMSP). The Committee's revisions to the original proposals contained in the reported bill are intended to ensure that the programs are growth and export oriented, as well as more equitable to farms across the country. The new safety net can be customized for each dairy farm, putting affordable risk management in the hands of dairy producers. To participate, producers will opt-in to the DMPP, elect a level of protection that fits each operation's risk management needs, and share in program costs, allowing producers of all sizes to manage risk on more of their milk production at higher protection levels. Previous safety net programs did not require producer investment and had limited effectiveness for many dairy farms due to various limitations on the assistance provided. The first component of the new safety net, the DPMPP, provides support based on the fluctuating margin between prices received for milk marketings and feed input costs. The DPMPP guarantees basic, catastrophic margin protection on an established production base for all participating dairy operations when margin dips below $4.00 for defined consecutive two-month periods. Producers pay an administrative fee for the program. The fee structure is marginally progressive, requiring higher fees from larger operations that may benefit more in times of low margins. The fee is intended only to supplement the costs of administering the programs and support other measures that will improve dairy markets. In addition to the basic guarantee, the DPMPP also provides producers with an annual opportunity to manage market volatility by buying up additional, supplemental margin protection over the $4.00 basic guarantee, in $0.50 increments, up to $8.00 margin protection on no less than 25 percent and no more than 90 percent of milk marketed. The production base for supplemental margin protection may be updated annually to allow dairy operations and the domestic dairy industry the opportunity to grow over time. Small and medium size operations tend to have higher relative overhead costs than larger operations due to efficiencies of scale. The Committee recognizes the differences, and provided additional premium subsidies for smaller farms. The reported bill provides a discounted premium on the first four million pounds of milk marketed by each participating producer. To make the program more equitable, all participating dairy operations will qualify for the discounted premium regardless of operation size. The second component of the new safety net, the DMSP, is designed to correct imbalances in dairy supply and demand when margins are low. The stabilization program provides a market signal based on margin that indicates when producers are oversupplying the market. Generally, when prices for milk marketings fall operations often work to produce more milk in order to increase revenue. This behavior can rapidly lead to an oversupply of milk, further depressing prices. The DMSP requires producers participating in the margin protection program to temporarily slow production when supply is outpacing demand. When the DMSP is in effect, participating operations will be paid on a percentage of a rolling base, requiring an operation to reduce milk marketings or face a reduced payment. By reducing a participating operation's milk payment by a percentage during times of oversupply, DMSP removes the incentive for farms to overproduce during times of low margins. Money withheld by the DMSP will be used for USDA dairy product purchases and other activities that rebuild demand. DMSP also includes a program suspension trigger based on world prices to help ensure the stabilization program does not result in an increase of cheaper imports into the U.S. market , and to help maintain U.S. dairy product competitiveness in export markets. Federal Milk Marketing Order (FMMO) reform was not included in the reported legislation. The Committee believes the Department's well-established process for considering FMMO reform is adequate for addressing potential reform. The Committee reauthorized the authority for the FMMO Review Commission. The reported legislation includes provisions that require dairy processors to report on more product characteristics to aid in price discovery, including price, quantity, and moisture content of dairy products sold. Additionally, the legislation requires cold storage reporting on quantity and characteristics of dairy products stored by processors or other cold storage facilities. The reported legislation also requires a study of the new programs' impacts on the dairy industry prior to consideration of the next Farm Bill. The Committee wants to ensure that the DMSP is working as intended, strengthens the dairy industry as a whole, and is not harming the U.S. dairy industry's ability to thrive in an expanding global marketplace. Subtitle E of Title I represents another significant change in farm commodity policy. In 2008, the Farm Bill established a suite of programs to assist farmers and ranchers with losses due to natural disasters. Those programs included Supplemental Revenue Assistance Payments (SURE), Livestock Indemnity Payments (LIP), the Livestock Forage Disaster Program (LFP), Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish (ELAP), and the Tree Assistance Program (TAP). All funding and program authorities expired at the end of fiscal year 2011 and do not cover losses suffered by farmers and ranchers in fiscal year 2012. This legislation reauthorizes LIP, LFP, ELAP and TAP with some modifications for fiscal years 2012 through 2017. The legislation moves the programs into Title I and funds them out of the funds of the Commodity Credit Corporation. The assistance provided by LIP, LFP, ELAP and TAP is now incorporated into Title I, thereby providing permanent funding baseline for these important disaster assistance programs and placing them on the same reauthorization schedule as the rest of this title. The SURE program is not re-authorized. Finally, the reported bill contains substantial reforms for commodity programs in terms of limiting payments to farmers, tightening the eligibility requirements based on the producer's Adjusted Gross Income (AGI) and prohibiting individuals who are not actually farming from being able to qualify themselves or an entity for payments under Title I. ARC payments are limited to $50,000 per individual, which can be doubled with a spouse as in current law. In addition, the current practice of providing a separate payment limit for peanuts is applied to payments under ARC. The legislation also revises the AGI limitation, removing the farm/nonfarm distinction in calculating income and setting the eligibility requirement at $750,000. Current law requires that to receive a payment a person or entity must be ``actively engaged in farming.'' This requirement allows multiple people to qualify as actively engaged in the farming operation on the basis of providing ``active personal management.'' The reported bill removes the ``active personal management'' component, requiring the provision of labor to qualify as actively engaged. A farm entity may include one person who can qualify as actively engaged as a manager of the farm, but limits it to a single individual and precludes that individual from qualifying multiple entities or qualifying the farm operation for more than the statutory payment limit. The current farm bill authorizations expire with the current crop and fiscal years. If they are allowed to expire, farm policy reverts to the 1949 Agricultural Adjustment Act and the outdated policies contained therein. The impact on farmers cannot be estimated but it is expected to be extremely expensive for the federal taxpayer. Moreover, the U.S. Department of Agriculture would struggle to abruptly adjust administration of current programs and implement policies created over 60 years ago. Accordingly, the reforms and policy changes in this legislation are necessary in their own right, but are also needed to avoid complications resulting from a return to long-outdated permanent law. TITLE II--CONSERVATION Agriculture is measured in generations. The most successful farms and ranches are those that can be passed along to children and grandchildren. Agriculture prospers with good, quality soil and clean water in sufficient quantities. As such, the reported bill continues current investments to help farmers and ranchers conserve vital natural resources. The Committee acknowledges estimates that by 2050 our world population will reach 9 billion people; requiring a 70 percent to 80 percent increase in agricultural production. As incomes rise around the world, diets improve and the demand for higher quality food increases. Much of this demand will be met by America's farmers and ranchers, who will also need to sustain vital natural resources such as soil and water. While advancing technology for seeds, inputs, and farming practices will enable farmers and ranchers worldwide to meet increasing demand, sound agricultural conservation practices are necessary to preserve agricultural productivity for future generations. The Committee recognized that savings could be achieved in this title responsibly through a review of current programs. Emphasis was placed on improvements that enhance program effectiveness and achieve reductions in future outlays. The reported bill continues important conservation investments, while streamlining and improving programs to make them more effective and reducing overall spending in this title. The most significant changes in the reported bill involve the Conservation Reserve Program, conservation easements and regional partnerships for conservation. The legislation achieves savings in the Environmental Quality Incentives Program in part through consolidation of the Wildlife Habit Incentive Program. Savings also are achieved through improvements to the Conservation Stewardship Program, along with a slight reduction in the annual acreage enrollment limitation. For 25 years, the Conservation Reserve Program (CRP) has helped preserve soil, water and wildlife resources by placing highly erodible and environmentally sensitive farmland in conserving uses through voluntary contracts with farmers, ranchers and landowners. The 2008 Farm Bill limited CRP enrollment to 32 million acres. Recently, however, high prices and strong demand for land on which to grow commodities have dampened enrollments, reducing the program to just under 30 million acres. Over the next two years alone, contracts on more than 10 million acres currently in the program will expire, many of which are likely to transition to productive agricultural uses. As such, the Committee concluded that lowering the enrollment cap better reflected current program demand, and that significant savings also could be achieved. Understanding the challenges involved in lowering the enrollment cap, the Committee established a multi-year ``step down'' of the acreage cap over the five-year life of this legislation. This achieves savings while providing for annual signups that allow the most sensitive and erodible lands to remain in the program, while those lands suitable for production return to agricultural uses. The reported bill provides greater certainty for lands enrolled in CRP to be used for grazing and harvesting, consistent with the conservation purposes of the program. It includes new opportunities for owners and operators to prepare lands for agricultural uses in the last year of the contract. Conservation easements help to protect specific types of environmentally sensitive lands, such as wetlands and important grazing lands. Easements are also valuable tools for preserving farm and ranch land that is under development pressure. Such easements retain those lands in agricultural uses to produce the crops vital to our national security and economy, as well as the growing food needs of an expanding world population. Current law has three easement programs: the Grasslands Reserve Program (GRP); the Wetlands Reserve Program (WRP) and the Farmland Protection Program (FPP). The authorities for two of these programs expire in fiscal year 2012, as does their baseline for reauthorization, which would put at risk the opportunity to protect and preserve these lands. The Committee consolidated the three conservation easement authorities into a single, simplified program, the Agricultural Conservation Easement Program. The overall program contains two parts: Agricultural Land Easements and Wetland Easements. Agricultural Land Easements are used to protect lands from development and keep them devoted to agricultural uses, including protecting grazing lands or traditional grasslands and keeping them in grazing and related uses. Wetland Easements are used to restore, protect, and enhance wetlands, which are important for water quality, quantity and wildlife habitat objectives in many areas. The single program is better focused on long-term land protection with a sufficient investment to be effective in achieving the program's goals. Other significant changes in the reported bill involve consolidating four existing programs into a single, innovative approach to support locally led conservation projects that address soil, water, or wildlife habitat issues in a specific area or region. The Regional Conservation Partnership Program combines core functions of the Agricultural Water Enhancement Program, the Chesapeake Bay Watershed Program, the Cooperative Conservation Partnership Initiative and the Great Lakes Basin Program for Soil Erosion and Sediment Control. In both the 2002 and 2008 farm bills efforts were made to allow eligible organizations to partner with the Secretary and agricultural producers to build solutions-oriented approaches to local natural resource conservation issues. These past efforts have formed a foundation for the Committee's work in the reported bill. The Regional Conservation Partnership Program takes the next step by consolidating the best features of those efforts under one set of core authorities. This will streamline and simplify the partnership approach for producers, eligible partners and USDA. The Committee believes that partnerships are a cornerstone for conservation and will only continue to grow in importance in the future. The Regional Conservation Partnership Program is a competitive, merit-based program that encourages producers to come together in a collaborative way. Producers and the organizations that they know and trust will sit around the same table with USDA and come up with a joint strategy for how to tackle their most pressing conservation issues. Importantly, limited federal resources will be magnified and multiplied by private resources; all of which are focused on natural resource conserving efforts at the farm and ranch level with a regional focus. TITLE III--TRADE The Committee has jurisdiction over two types of program authorities in this title: (1) programs that promote exports of U.S. agricultural products; and (2) programs that provide food aid to other nations. Both types of programs are important to the agricultural economy and to our nation's geopolitical interests, including providing humanitarian relief to nations facing significant food emergencies such as famine. Agricultural exports remain a bright spot for U.S. trade as it is one of the only sectors where the U.S. runs a trade surplus, exporting more than we import. U.S. farm exports reached record levels in 2010 and 2011 at over $115 billion and over $136 billion respectively. In comparison, the U.S. exported $53.7 billion worth of agricultural products in 2001-- an increase of over 150 percent. Title III of this legislation reauthorizes important programs to continue expanding agricultural exports and trade through promotion activities that open new markets and develop new customers, as well as working to combat trade barriers for U.S. products. In general, the reported bill extends current authorizations and funding levels for the export promotion programs in this title. These programs include the Market Access Program, the Foreign Market Development Program, the Emergency Markets and Facility Guarantee Loan Program, Technical Assistance for Specialty Crops and the Global Crop Diversity Trust. Minor changes are made to the Export Credit Guarantee Program (GSM-102) to help meet our obligations pursuant to the dispute settlement brought by Brazil before the World Trade Organization. The Committee also recognizes the importance of America's leadership in times of food emergencies. Between 850 million and 1 billion people in 77 countries are currently estimated to be food insecure. In 2011, the Food for Peace program authorized in this title benefitted over 46 million people. Annually, Food for Peace donates over 2.5 million metric tons of commodities around the world. Additionally, the McGovern- Dole program authorized by this title helps feed about 3 million children each year, while the Food for Progress program benefits about 7 million people annually. The food aid programs in this title benefit over 60 countries. The Committee recognizes the importance of this assistance and has reauthorized the relevant programs while at the same time reforming key policies to reduce waste in the system and provide flexibility to respond to changing food aid needs. In general, the reported bill extends current authorizations for international food aid through fiscal year 2017. The reported bill also increases funding available to support strategic prepositioning, which brings food aid commodities to at-risk regions before food emergencies strike. The bill also expands on the success of a pilot program from the 2008 Farm Bill for local and regional food aid procurement, which allows organizations to purchase food through local and regional markets. By linking local and regional purchasing with the McGovern-Dole International Food for Education and Child Nutrition Program in the application process, this bill also encourages project graduation for schools participating in McGovern-Dole. The bill puts into action the recommendations of a study authorized by the 2008 Farm Bill to research the quality of U.S. food aid. The Administrator is given increased flexibility to improve the nutritional profile of food aid for target populations, such as children under five and mothers. Since passage of the last farm bill, the famine in the Horn of Africa has brought new organizations and governments to the region, all intent on helping reduce hunger and improve food security. This pilot helps coordinate the efforts on the ground by looking at interactions and providing for groups doing resiliency work--efforts that will help ensure that famine does not occur again. TITLE IV--NUTRITION The legislation reauthorizes the Supplemental Nutrition Assistance Program (SNAP), formerly known as ``Food Stamps.'' SNAP provided food and nutrition assistance for an average of 44.7 million low-income Americans per month with average benefits of $4.46 per individual per day. The Committee acknowledges that SNAP has proven vital for families who have lost their jobs or significant income during the Nation's recent economic downturn. According to the Census Bureau's Supplemental Poverty Measure, SNAP lifted about 4 million people out of poverty in 2010, including over 2 million children. SNAP assistance goes to truly poor families and the most vulnerable members of our society. Roughly 93 percent of SNAP benefits go to households with incomes below the poverty line and nearly 75 percent of SNAP participants are in families with children. About 16 percent of all households receiving SNAP include an elderly member of the family and nearly 20 percent include someone who is disabled. In 2012, SNAP is expected to serve 4 million seniors, 4 million adults with a serious disability, and 23 million children--including 10 million children who live in severe poverty because their families' cash income is below half of the poverty line. SNAP is a counter-cyclical program which expands when the economy is weak and contracts as the economy improves. The Congressional Budget Office projects that SNAP will shrink to nearly pre-recession levels as the economy recovers. For most families, SNAP is a temporary lifeline when a troubled economy hits home limiting their ability to put food on the table. Approximately half of new SNAP recipients receive assistance for 10 months or less. As the economy recovers and the economic situation in a household improves, the need for assistance recedes and many families exit the program. Moreover, Moody's Analytics estimates that every $1 increase in SNAP benefits generates $1.72 in economic activity. The Committee acknowledges any program of SNAP's size and scope will need periodic review for improvements to ensure program integrity. The Committee recognizes SNAP error rates were at an all-time low of 3.81 percent in fiscal year 2010, and that less than 1 cent of every dollar is lost through fraud and abuse. The Committee also recognizes commercial retailer trafficking was about 1 percent. The reported bill includes provisions to enhance program integrity, including the prevention of SNAP participation for individuals with significant lottery or gambling winnings, limits on eligibility for traditional college students, and the provision of additional resources to help the Department of Agriculture prevent the trafficking of SNAP benefits. The Committee strengthened program integrity and achieved budgetary savings by addressing concerns regarding the connections between the Low-Income Home Energy Assistance Program (LIHEAP) and the Standard Utility Allowance (SUA) used in the SNAP food benefit calculation. To streamline State administration of the SNAP program, each State develops and uses a simplified SUA, a fixed dollar amount representing the average household energy costs in the State. States use the SUA to calculate the utilities expense deduction for households in their State. SNAP households that qualify for the SUA will typically receive a higher average amount of monthly SNAP food benefits based on average utilities being paid. Typically, to qualify for the SUA, SNAP households must provide actual utility bills. An exception is LIHEAP. Because LIHEAP rarely covers the full amount of utilities a household pays, receipt of LIHEAP is considered to be a reasonable proxy for actual utility expenses. SNAP allows households that receive LIHEAP to claim the SUA. Some States have chosen to provide an annual nominal amount (e.g. $1) in LIHEAP benefits to households all SNAP households to boost monthly SNAP food benefits. According to the Congressional Budget Office, 17 State agencies are issuing nominal LIHEAP benefits to qualify households for additional monthly SNAP benefits. In general, the Committee supports continuing the practice of utilizing income and deductions as a means to determine appropriate benefit levels based on the amount of income that is available for a household to make necessary food purchases. ``Shelter costs'' are one of the key components in this determination. The intent of the excess shelter deduction is to appropriately increase benefits for those households with significant housing and utility expenses. LIHEAP is targeted to low-income households who cannot afford to pay their energy bills. Moreover, the Congressional Budget Office has indicated that this connection also reduces SNAP administrative costs. The Committee is concerned with the use of nominal LIHEAP payments to increase SNAP benefits. The Committee contends that State issuance of nominal LIHEAP payments to qualify all SNAP households to claim the SUA is not consistent with the intent of the SNAP utility expense deduction. As such, the reported bill requires SNAP households to receive at least $10 in annual LIHEAP benefits to qualify for the Standard Utility Allowance. The Committee intends for this change to sufficiently deter the practice of using nominal LIHEAP benefits while not disrupting the relationship between SNAP and LIHEAP and minimizing the impact on SNAP recipients. In addition to provisions related to program integrity in SNAP, the reported bill builds upon programs to reduce hunger and improve access to healthy fruits and vegetables for seniors, schoolchildren, and both urban and rural residents in low-income communities. The Committee recognizes the need for additional resources to help the most vulnerable, and the reported bill provides additional resources for USDA through the Emergency Food Assistance Program to provide assistance to our Nation's food banks. The bill also modifies the Commodity Supplemental Food Program to better focus limited resources on seniors who represent nearly 97 percent of program participants. In addition, the bill continues the distribution of fresh fruits and vegetables by the Department of Defense to schools and service institutions, and authorizes USDA to utilize modern technology for SNAP food benefit redemption at farmers markets and grocery stores. TITLE V--CREDIT The Committee is dedicated to preserving the ability of rural America to access financial credit at reasonable rates in order to ensure continued economic health and growth. Agricultural lending is used to purchase and operate farms, start and expand agricultural businesses, and to purchase agricultural equipment. Important sources of agricultural credit include commercial lending, USDA, the Farm Credit System, and Farmer Mac. The Committee will continue to work with these stakeholders to increase access to affordable credit in rural America. The USDA operates a suite of lending programs for farmers and ranchers through the Farm Service Agency's (FSA) Farm Loan Programs. The programs provide assistance for beginning farmers and ranchers, and for farmers and ranchers with limited resources. Farming today requires substantial capital to begin and continue operating, a significant challenge to young and beginning farmers who have a difficult time obtaining capital and face other barriers to entry. The Committee recognizes the success of FSA's lending portfolio. In fiscal year 2010, FSA made more than $5 billion in loans to over 36,000 farmers. In fiscal year 2011, FSA made more than $4.8 million in loans to over 32,000 farmers. Both years represent some of the highest lending levels for the Agency and demonstrate the continued strong demand for FSA loans. 14,800 of the loans were made to young, new and beginning farmers. In fiscal year 2011, the direct loan delinquency rate was 5.7 percent and the direct loan loss rate is 0.9 percent. For the guaranteed programs, the delinquency rate is 1.43 percent and the loss rate is 0.50 percent. The reported bill reauthorizes current programs through fiscal year 2017. Of note, the reported bill includes substantial legislative language for both Titles V and VI (Rural Development). The underlying statute for both titles is Public Law 87-128, the Consolidated Farm and Rural Development Act of 1961 (ConAct). Subsequent farm bills and other legislation added programs, requirements, and other provisions to the ConAct, and several ConAct provisions have become inoperable and contradictory. Over the course of 51 years of amendments, the ConAct has become confusing, convoluted and disorganized. The Committee undertook an effort to streamline and reorganize the ConAct to improve the clarity and administration of authorized programs, which is reflected in the legislative text of both Titles V and VI of the reported bill. Specifically for credit programs, general authorities for Title V continue in one consolidated subtitle. In carrying out the programs and activities authorized in Title V, the Committee expects USDA to continue operating the programs and activities in accordance with the regulations and procedures in effect on the date of enactment of this Act to the extent that they are consistent with the requirements applicable to such programs and activities provided in this Act. The Committee stresses that it is important that the streamlining of the ConAct not disrupt lending to rural America. The Committee provides continued support to new and beginning farmers and ranchers by adjusting down payment loan limits, expanding eligibility for new legal entities created for succession planning, adjusting term limits for direct operating loans, and eliminating term limits for guaranteed operating loans. The Committee also provided additional support for military veterans interested in pursuing careers as farmers and ranchers. The reported bill also adjusts programs to provide lending assistance to farmers and ranchers that struggle with obtaining access to credit, including the historically disadvantaged. First, the reported bill allows the Secretary of Agriculture to establish intermediate relending for the highly fractionated land program for Indian tribes and tribal corporations. Second, the reported bill updates the term limits for the receipt of both direct and guaranteed loans. In 1996, the Federal Agricultural Improvement and Reform Act added provisions to the ConAct to impose term limits on direct and guaranteed operating loans administered by FSA. The term limits were suspended by Congress in 2002, 2006, and most recently by the 2008 Farm Bill which extended the suspension through December 31, 2010. The reported bill eliminates the 15-year lifetime term limits for guaranteed operating loans, and modifies the 7-year lifetime term limits for direct operating loans. For guaranteed operating loans, the term limits were eliminated, as the program is self-sufficient without cost to the American taxpayer and assists commercial lenders in offering needed credit. For direct operating loans, for every three consecutive years a borrower does not take out a loan from FSA, a borrower gains one additional year of eligibility. The change to direct operating loans addresses the potential of future down cycles for farmers and ranchers, and encourages graduation to commercial credit. TITLE VI--RURAL DEVELOPMENT As in Title V, this title of the reported bill contains significant legislative language to streamline and reorganize the Consolidated Farm and Rural Development Act of 1961, Public Law 87-128, (ConAct) so as to improve the administration of authorized programs and to simplify the process for those seeking assistance. The legislative text in Title VI is also the result of that effort. The general authorities for rural development are continued but have been organized into specific subtitles. In carrying out the programs and activities authorized in the rural development title, the Committee again expects that the Secretary will continue to operate such programs and activities in accordance with the regulations and procedures in effect on the date of enactment of this Act to the extent that they are consistent with the requirements applicable to such programs and activities provided in this Act. The Committee has reauthorized the core rural development programs that rural constituents rely on to improve infrastructure and support community and economic development. The Committee believes these programs provide resources that are essential to the future of our rural communities. Rural areas struggle with higher costs for infrastructure needs because of low population density and the unfortunate out- migration that has become all-too common in many rural communities. Traditional infrastructure investments in electricity, telephones, water and sewers are continued, and the more recent infrastructure investments in broadband service are augmented by the addition of authority for USDA to provide grant funding for the expansion of broadband service. The Committee has heard about the challenges rural communities have in accessing resources because they have difficulty completing application forms or determining their eligibility for such programs. It is the Committee's intent that these programs provide federal resources that improves the quality of life for those living in rural America in an efficient manner with simplified applications and a reduction in unnecessary or redundant paperwork and processes. Additionally, the Committee encourages rural entities to utilize rural development programs in a manner that supports projects and initiatives that develop long-term community and economic growth strategies. Traditionally, rural development programs have been used to meet an immediate need. The Committee understands that it is essential that versatile programs such as the Community Facilities Loan, Loan Guarantee and Grant Program are available to rural residents to address pressing needs and concerns, and the Committee wants to ensure that the programs authorized in this title continue to provide that type of assistance. However, to the extent possible, the Committee encourages rural communities to consider how they might use rural development resources to address multi- jurisdictional needs, by leveraging Federal, State, local or private funding, or otherwise capitalize upon the unique strengths of the rural area to support successful community and economic development. The Committee believes that projects that reflect even one of these characteristics can help to maximize the resources available at all levels of government and ultimately help rural communities reach their full potential. For these reasons, the Committee has provided the Secretary with the discretion to prioritize applications for funding that reflect an applicant's efforts to maximize resources and support strategic community and economic development. Another concern brought to this Committee by both USDA and rural constituents, is the confusion resulting from the multiple definitions of ``rural'' used by USDA to determine program eligibility. The many versions are the result of changes brought about by successive Farm Bills. The Committee acknowledges that the previous definitions were developed for sound reasons and with good intent. However, the Committee is concerned that 96 different cities and towns had received waivers through legislation passed by the Congress subsequent to passage of previous Farm Bills that granted them eligibility for Rural Development programs despite the fact that their populations had grown beyond the population limits established in Farm Bill legislation. USDA will begin using data from the 2010 Census data in the Fall of 2012, and the Committee expects that a number of currently eligible communities will lose that eligibility. Therefore, to address these concerns, the Committee has provided a single definition of ``rural'' that is intended to clarify eligibility. The new definition grants eligibility to cities and towns of less than 50,000 in population and not contiguous or adjacent to urbanized areas. The Committee recognizes that some cities and towns of less than 50,000 in population that are located within an urbanized area may in fact be ``rural in character.'' To ensure that these cities and towns that were previously eligible for the Community Facilities, Water and Waste Disposal, and Broadband programs maintain that eligibility, the Committee has provided for a process by which USDA must determine these areas to not be ``rural in character'' and thus ineligible for these programs. The Committee has directed USDA to consider the following factors when making such determinations: population density, economic conditions, and commuting patterns. The Committee's intent in authorizing a ``rural in character'' determination process is to provide USDA with the ability to make practical eligibility determinations, therefore in making such determinations, the Under Secretary may also give consideration to the unique structure of local government and the history of the area in question. Finally, the Committee has prohibited the Under Secretary from making a determination that a city or town is not ``rural in character'' for three years to ensure that ongoing projects are completed and not impacted by the changes contained in this Act in order to protect previous federal investments. TITLE VII--RESEARCH Agricultural research, extension, and education programs serve the food and agriculture sector, consumers of American agricultural products, and rural communities throughout the United States. Research programs and funding utilize two basic agencies at USDA: the Agriculture Research Service (ARS), which focuses on ``intramural'' research and basic research; and the National Institute of Food and Agriculture (NIFA) created by the 2008 Farm Bill to restructure, combine and improve ``extramural'' research functions at USDA to make better use of limited funds. The reported bill builds upon the efforts from 2008, allowing unfunded and unused program authorities to expire with fiscal year 2012 and combining, consolidating and streamlining authorities to make a more concentrated and effective use of limited funding. The remaining authorities are extended through fiscal year 2017 with few changes. The Committee provided additional funding for both the Specialty Crop Research Initiative and the Organic Research and Education Initiative beyond the levels in the 2008 Farm Bill. One of the primary activities necessary to encourage continued market growth, improved food safety and risk management for both of these industries is adequate dedicated research support. The Committee recognizes that research is one of the primary means by which the Farm Bill provides these farmers assistance, so the reported bill increases funding beyond the levels in the 2008 Farm Bill, consistent with increased market needs. The Committee also expects USDA to provide more detailed information regarding expected research expenditures when submitting its annual budget request to Congress in an effort to improve transparency and safeguard against unnecessary duplication. The reported bill provides for the creation of the Foundation for Food and Agriculture Research (FFAR). Modeled after the National Institute for Health Foundation and other successful government-sponsored research foundations, FFAR is intended to leverage Federal dollars and private research money to reverse the recent downward trend in agriculture and food research funding. The increased productivity and boost in crop yields experienced by American farmers can be attributed to research investments made 30 to 50 years ago. Federal investment in public agricultural research has been trending downward at a time when the demands of a growing and hungry world require that American agriculture research again take a leading role in pushing forward food production. USDA, the National Academy of Sciences, the National Science Foundation and agricultural research stakeholders play an integral role in establishing the Foundation. The Committee does not intend for the Foundation to be duplicative of current funding or research efforts, but rather foster public-private partnerships among the agricultural research community, including federal agencies, academia, non-profit organizations, corporations and individual donors to identify and prioritize the most pressing needs facing agriculture. It is the Committee's view that the Foundation will complement the work of USDA basic and applied research activities and further advance USDA's research mission. Furthermore, the Committee does not intend for the Foundation's funding to in any way offset or allow for a reduction in the appropriated dollars that go to agricultural research. TITLE VIII--FORESTRY There are an estimated 354,000,000 acres of non-industrial forestland in the United States under private ownership. The Committee acknowledges the important role these forests play in providing clean air and water, wildlife habitat, and recreational opportunities. This title provides private forest landowners with important tools to conserve their forest acres. The reported bill asserts the Committee's oversight role by placing authorization levels on programs and putting their reauthorization cycle in line with the Farm Bill. These changes are not intended to be a statement on the quality or purpose of these programs. The Committee recognizes the impact of insect infestation and disease on our nation's forests. In some places, infestations are reaching epidemic proportions and becoming a central threat to forest health. With this in mind, the reported bill seeks to give forest managers greater opportunity to identify and manage risk in the forest. Stewardship End Result Contracting is a tool that has been authorized in the past by the Appropriations Committees. By addressing this activity through the Farm Bill, the Committee intends to situate the authorization of this tool within an authorizing committee. Over the last decade, Stewardship Contracting has been a proven method for carrying out needed forest restoration activities, particularly in areas without a strong timber industry presence. TITLE IX--ENERGY Since the 2002 Farm Bill, this Committee has invested in helping rural communities and American farmers to advance renewable energy alternatives. The Committee recognizes the numerous benefits from the expansion of renewable energy, biofuel and biobased products manufacturing and the innovative and pioneering investments made by the programs in this title. The Committee reauthorizes almost all of the programs from the 2008 Farm Bill and provides mandatory funding for the investments made by this title. Continuing a ten-year investment in this area, the energy title supports the creation of new market opportunities for farmers. It also helps producers and rural businesses save money on their energy bills and helps boost the production of farm-grown renewable alternatives to fossil fuels. In the current economic climate, the new bio-economy is one opportunity for rural communities to strategically develop new markets and create jobs. Biobased manufacturing is an example of how a developing industry can benefit and reinvigorate a rural economy. Most biobased manufacturers will locate near the feedstock, in small towns surrounded by farmland. The economic benefit is twofold: first, the farmers growing the feedstock will have new markets for their crops. And, second, this not only drives the farm economy but it also boosts the local and regional economy by creating new jobs and wealth that stays in those communities. According to a recent USDA study, the bio- based plastic and chemical products industry could create over 100,000 American jobs. By nature, most of these jobs will be located in rural America. The investments made through this title support innovation by assisting entrepreneurs and businesses with investments in projects ranging from commercial-scale digester projects that turn food and agriculture waste into energy to on-farm energy audits, educational efforts and similar undertakings to reduce energy consumption and boost alternative energy production. The Rural Energy for America Program, known as REAP, helps producers reduce their energy costs through renewable or efficiency measures. REAP has helped farmers, livestock producers and small businesses reduce their energy costs through various activities. These small investments not only improve the farmer's profit margins but also help create and retain jobs in local communities. According to recent testimony from USDA, the REAP program has created or saved over 14,000 jobs in rural America. Innovations that produce advanced biofuels, bioenergy and other biobased materials are important to our economy and national security but they are often dependent on feedstocks not currently produced on our farms. While farmers can realize substantial economic opportunities in new feedstock markets, the risks of producing them create significant barriers and stifle the growth of these new markets. The Committee has focused on policies to help farmers overcome these barriers, while connecting them to bio-economy innovators so as to create new market opportunities, products and jobs. The investments that help propel biorefineries are also important job creation investments that help build wealth in rural communities. Biobased manufacturing and refining are rooted in our small towns, employing rural residents and developing new markets for biomass feedstocks from local farms and ranches. Often times, financing these facilities can be beyond the capacity of the local communities and banks. The policies in this title are designed to help bridge the capital gap and support innovation in communities and entrepreneurs. For example, loan guarantees and grants can seed opportunities that will grow new businesses for the community, new markets for farmers, and new jobs for rural residents. Finally, this title makes investments that seek to save energy and boost the bottom line for America's farmers and ranchers. Like most small businesses, farmers and ranchers worry about the energy costs associated with running their operations. The relatively small federal investments in on-farm energy production and energy efficiency made by this title can provide real help to farmers that will save money and improve their bottom lines. Energy policy investments spur local job creation and retention, help farmers and rural businesses, and boost local and regional economies. TITLE X--HORTICULTURE The 2008 Farm Bill contained the first title for specialty and organic crops, recognizing the importance of fruits and vegetables, nuts, floriculture and nursery products for the first time in any Farm Bill. The Committee recognizes that according to the most recent Agricultural Census these crops account for 12.7 percent of harvested acreage and 46.9 percent of total crop value in the United States; demonstrating the significant and growing role of specialty crops in the U.S. farm economy. Specialty crop producers are both expanding American export markets and helping to develop strong, local food systems. Fruits and vegetables also represent a key component of a complete diet which many Americans continue to lack. The 2010 Dietary Guidelines for Americans suggests Americans should consume between 9 and 13 servings of fruits, vegetables and nuts. For a balanced diet, the Guidelines suggest that half the plate be filled with fruits and vegetables at each meal. The reported bill builds upon the provisions from the 2008 Farm Bill for specialty crop producers, organic agriculture and local food systems. First, the bill expands the Specialty Crop block grants, which go to States to support research and promotion of fruits and vegetables, and adjusts the grant allocation formula to better account for both high value crops as well as the number of acres devoted to specialty crop production in a state. While the Committee continues to support the administration of block grants through a Federal and State partnership, the Committee acknowledges that this structure poses a challenge in coordinating projects between multiple states. To facilitate projects of common interest, the Committee has authorized multistate projects related to pests and disease, food safety, and commodity-specific areas. Second, the Committee recognizes the pest and disease risks and common challenges for specialty crop producers, as well as the need to streamline authorities to improve the effectiveness for producers and ensure that the functions of both of these programs are maintained. As such, the reported bill consolidates the National Clean Plant Network and the Pest and Disease Management and Disaster Prevention Program, while continuing the focus on early detection and surveillance of invasive pests, interventions to prevent crop damage, and the supply of clean, pathogen-free plant material for producers. Third, the reported bill builds on support for local and regional food systems. The Economic Research Service found that over 40 percent of vegetable, fruit and nut farms in the United States sell their products in local and regional markets, employing on average 13 fulltime workers per $1 million in revenue earned. The Committee bill supports continued growth in local and regional food systems, increasing funding for Farmer's Markets and expanding authorities so resources can help develop local infrastructure. The program provides competitive grants to improve and expand farmer's markets, roadside stands, community-supported agriculture programs, and other direct producer-to-consumer market opportunities as well as assisting producers in ``scaling up'' through aggregation and other marketing techniques that facilitate farm-to- institution and other market opportunities. Finally, the Committee recognizes that organic production and the demand for organic products continues to grow. A 2010 survey of organic growers shows that organic sales reached $28.6 billion in 2010, surging 7.7 percent above sales in 2009. The reported bill expands support for the National Organic Programs and key organic programs such as the Organic Research and Education Certification Cost-Share Program that helps farmers achieve certification for organic farming. The bill also continues to support organic data collection, a component to improving risk management for organic producers. It also provides additional authority for enforcement of organic standards, addressing shortcomings in the National Organic Program identified in a 2010 report by USDA's Office of the Inspector General. TITLE XI--CROP INSURANCE The Committee recognizes the Federal Crop Insurance program as the cornerstone of the farm safety net. This is a message that was heard consistently by the Committee throughout the farm bill hearing process, and this title embodies the expressed priority of producers to protect, preserve and improve the Federal Crop Insurance program. Producers face a multitude of risks over which they have no control, including weather and market fluctuations within the crop year. One storm can wipe out an entire crop in a matter of minutes and put the future of a farming operation in jeopardy. Crop insurance helps producers manage exactly this type of risk, which allows producers to obtain credit and provides a way for them to recover quickly from disaster to put seed in the ground another year. The provisions in this title also follow the general principle that the purpose of farm programs should be to help producers manage the risk they face every day, and the provisions focus on expanding the program's reach to assist farmers and crops that currently are not covered by the program or are inadequately covered. The Federal Crop Insurance program is the most crucial component of the farm safety net for U.S. farmers. In 2007, farmers insured more than 271 million acres through either catastrophic coverage or buy-up coverage. That year the estimated liability was $67 billion and represented a 97 percent increase in liability covered since 2000. For the 2011 crop year, the crop insurance program covered over 265 million acres and over $114 billion in liability. The significant disasters in 2011 also resulted in $10.8 billion in indemnity payments. These staggering numbers demonstrate the fundamental importance of and need for crop insurance. These substantial increases in the liability covered are attributable both to enhanced participation in the program and to a significant increase in the prices of most commodities insured under the program. As discussed previously, the reported bill includes a new crop insurance program for producers of upland cotton. In 2002, Brazil initiated a dispute settlement case before the World Trade Organization against U.S. support for cotton production. In 2004, a WTO panel found that payments to cotton producers pursuant to the marketing loan and counter-cyclical program were in violation of the U.S. WTO commitments. The panel reached the same conclusion with regard to the export credit guarantees under the GSM-102 program. The United States responded by making some changes to domestic cotton support and GSM-102, but Brazil argued the response was inadequate and a WTO compliance panel ruled for Brazil in 2007. That ruling was upheld on appeal in 2008. The dispute went before a WTO arbitration panel to determine the level of retaliation in August of 2009, and Brazil announced that it would impose retaliation of $829.3 million in U.S. goods, including $268.3 million in cross-retaliation, in April 2010 based on the arbitration panel's findings. In April 2010, the U.S and Brazil reached a temporary settlement agreement to avoid retaliation, and in June they signed the ``Framework for a Mutually Agreed Solution to the Cotton Dispute in the WTO (WT/DS267)'' (the Framework Agreement). Under the Framework Agreement, Brazil suspended retaliation against the U.S. pending U.S. compliance and in return for $147.3 million in annual payments from the U.S. (out of funds of the Commodity Credit Corporation) to a newly created Brazilian Cotton Institute for the provision of technical assistance and capacity-building for the Brazil cotton industry. The U.S. and Brazil also agreed to quarterly discussions on changes to U.S. cotton supports leading up to ``successor legislation to the 2008 Farm Bill'' with a view to reaching a mutually agreed solution to the dispute. The Committee recognizes that it is necessary for the U.S. and Brazil to resolve the dispute and the important role that changes in the reported bill for upland cotton play in moving to a resolution. The Committee also recognizes the significant risks that cotton farmers face and the continuing need for a safety net for those producers. As such, the reported bill removes upland cotton from the list of ``covered commodities'' in Title I, thus making upland cotton ineligible for the Agriculture Risk Coverage program. The reported bill creates the Stacked Income Protection Plan (STAX) for producers of upland cotton to permit upland cotton farmers to purchase an area-wide revenue plan of coverage above or in lieu of their individual coverage. STAX is modeled off of existing Group Risk Income Protection plans of insurance, using county data and triggering at a loss of 10 percent or greater, down to 30 percent where it is presumed the producer will buy up individual coverage. The Committee contends that STAX should help resolve the WTO dispute with Brazil because it represents a significant shift in domestic assistance to cotton farmers. STAX is an insurance plan, not a direct subsidy program. As such, it has four important mitigating factors as compared to subsidy programs that justify resolution. First, farmers have to pay some of the cost for the coverage out of their own pockets and the cost of the program will be rated on an actuarially sound basis, meaning farmers will pay for the actual value of the coverage. Second, assistance to cotton farmers under STAX will only occur when there has been a loss at the county level and is not tied directly to losses on the individual farm. Third, STAX contains a 10 percent deductible, leaving the farmer responsible for the first 10 percent of any loss. Finally, STAX as written by the Committee does not contain a reference or floor price so that the revenue coverage provided by STAX to the farmer will reset every spring when RMA calculates the spring price and that price will be determined by the markets, rather than a set price established by Congress. This makes STAX market-oriented and avoids any potential insulation from signals of the market and will avoid distorting domestic or international markets. The Committee asserts that the significant reform in domestic cotton support as a result of STAX, in combination with the adjustments in the cotton loan rate and the adjustments to the GSM-102 program subsidy, should serve as a sufficient basis for the U.S. and Brazil to reach a mutually- agreeable solution to the WTO dispute without need for further payments to Brazil and without any need for retaliatory measures by Brazil. The Committee encourages USDA and the U.S. Trade Representative to work with Brazil on this resolution. As discussed previously, the reported bill is a significant change in federal agriculture policy with a focus on risk management and assistance only when farmers have suffered a loss. Recognizing the need for more tools for farmers as they seek to best manage their risk, the Committee has also created a new insurance option for producers called the Supplemental Coverage Option (SCO). The reported bill amends section 508(c) of the Federal Crop Insurance Act to permit farmers to supplement their individual coverage with coverage based on an area yield and loss basis. The SCO coverage extends above the individual coverage in the deductible range but requires a 10 percent deductible. Indemnity payments are triggered only if losses in the area exceed 10 percent of expected levels. In the case of those producers participating in ARC, the deductible is 21 percent of the expected value of the crop under the underlying insurance policy. SCO provides for a premium subsidy of 70 percent of the premium associated with the coverage. In SCO, the reported bill provides farmers a valuable new tool to help them manage their risks in conjunction with underlying individual coverage and the ARC program. Producers who cannot afford high levels of individual buy-up coverage now have an affordable area-wide option to supplement completely or in conjunction with ARC. The remainder of Title XI in the reported bill contains important improvements to existing crop insurance coverage to make insurance more effective for farmers, as well as some technical changes to the administration of crop insurance to improve the program's operation. Specifically, the reported bill makes the enterprise unit pilot a permanent part of the program due to its popularity with farmers. The bill allows the Federal Crop Insurance Corporation to split enterprise units between irrigated and non-irrigated acres so that the insurance coverage better matches the significant differences between those two practices. The reported bill also improves the transitional yield and provides new authority for the FCIC Board to conduct and prioritize research and development of new plans of insurance. The Committee recognizes the vital importance of helping young and beginning farmers get started and succeed in farming. As such, the Committee has made revisions to the Federal Crop Insurance Act to help young and beginning farmers better manage their risk through additional premium assistance, better transitional yields and improved accounting for prior experience through the use of previous production history. The final set of changes in this title involve the Committee's efforts to help expand crop insurance to crops that are not currently covered or that are underserved, especially for livestock, peanuts, catfish and specialty crops. These changes are intended to improve the process for developing new crop insurance products for underserved crops and regions by allowing the FCIC to increase the advance payment for research and development of new policies by 50 percent. The bill also allows the Risk Management Agency to conduct research and development activities to maintain or improve existing policies or to develop new policies. The bill also supports the development of whole-farm insurance and index-based weather insurance. TITLE XII--MISCELLANEOUS The Miscellaneous Title addresses challenges faced by, and improves communication and outreach with, small and disadvantaged producers, and veterans. It provides for improved safety and training of the agricultural workforce, removes overlap between certain programs, and allows for more efficient sharing of information. In addition, the Committee recognizes the importance of animal health, marketing, and sustainability and the Miscellaneous Title contains critical provisions to preserve domestic livestock production. Finally, the Miscellaneous Title makes improvements to the Noninsured Crop Disaster Assistance Program (NAP) that are in line with the overall goals of the reported legislation to improve tools for farmers to manage their risks and to eliminate duplication and overlap among programs. For producers of crops that are not covered by crop insurance, the Committee recognized the need for effective risk management tools and concerns that current support under NAP was inadequate and limited producer participation. As such, the reported legislation includes a revision to NAP that provides an option to producers to purchase a higher level of NAP coverage for their crops, known as a ``buy-up'' option. The reported legislation also eliminates overlap between NAP and the disaster provisions in Title I. SUMMARY OF PROVISIONS TITLE I--COMMODITY PROGRAMS Repeals The reported bill eliminates direct payments, counter- cyclical payments and the Average Crop Revenue Election payments. Agriculture Risk Coverage The bill establishes the Agriculture Risk Coverage (ARC) program as a new risk management tool for producers of covered commodities that provides market-oriented, multi-year price assistance, as well as yield assistance. ARC payments are made on eligible acres, not base acres. Eligible acres are defined as the farmer's actual planted acres not to exceed the acreage planted to covered commodities and upland cotton during the 2009 to 2012 crop years (with adjustments for acres coming out of the Conservation Reserve Program and for resource-conserving crop rotations such as summer fallow). ARC provides a producer with a one-time, irrevocable election whether to receive individual farm or county level coverage. The ARC guarantee is set at 89 percent of the benchmark revenue, which is calculated as the product of the 5-year Olympic average prices and the 5-year Olympic average yields (county or individual farm) for each commodity. Payments are made on the shortfall between the guarantee and the actual revenue, but cannot exceed 10 percent of the benchmark revenue. For farmers electing coverage at the county level, payments are made on 80 percent of their eligible acres (45 percent of those acres prevented from being planted) and for those farmers electing coverage at the individual level, payments are made on 65 percent of the eligible acres (45 percent of those acres prevented from being planted). Upland Cotton Upland cotton is no longer a covered commodity and producers of upland cotton are not eligible for the ARC program. Due to the loss before a WTO panel in a dispute brought by Brazil, the Committee, at the request of cotton producers, has removed upland cotton from the definition of covered commodities and has created a separate insurance policy for cotton producers in Title XI. Removal of upland cotton from the list of covered commodities, changes in the marketing loan rate for upland cotton and changes to the Export Credit Guarantee Program (GSM-102) contained in the reported bill are intended to help reach a resolution to the WTO dispute. Marketing Assistance Loans and Loan Deficiency Payments Marketing Assistance Loans and Loan Deficiency Payments are continued in the reported bill through the 2017 crop year with only two changes from the program as designed by the 2008 Farm Bill. First, due to the above-mentioned WTO dispute with Brazil, the upland cotton loan rate has been revised to adjust based upon the preceding two year average price for upland cotton, but not to exceed $0.52 per pound nor drop below $0.47 per pound. The current marketing loan rate for upland cotton in the 2008 Farm Bill is $0.52 per pound. Second, the reported legislation revises the conservation compliance provisions from the 2008 Farm Bill to align with the conservation compliance provisions for ARC. As such, farmers utilizing marketing assistance loans must certify that they are in compliance with the same provisions as they are required to for ARC payments. Sugar The sugar program as designed in the 2008 Farm Bill is continued through crop year 2017 without change. Dairy The legislation seeks to reform and improve dairy policy by replacing existing programs (Milk Income Loss Contract, the Dairy Product Price Support Program, and the Dairy Export Incentive Program) with the Dairy Production Margin Protection and Dairy Market Stabilization Programs. The first is a voluntary program that helps provide assistance when dairy operation margins are below $4.00 as calculated using the all- milk price and a national average feed cost. Operations can also purchase additional margin protection above $4.00 but not to exceed $8.00 in $0.50 increments. The second program is required for an operation participating in the margin protection program and it is designed to promote growth while also encouraging producers to temporarily scale back marketings in times when the market is oversupplied and margins are low. Supplemental Agricultural Disaster Assistance The 2008 Farm Bill established a suite of programs to assist farmers and ranchers with losses due to natural disasters which included Supplemental Revenue Assistance Payments (SURE), Livestock Indemnity Payments (LIP), the Livestock Forage Disaster Program (LFP), Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish (ELAP), and the Tree Assistance Program (TAP). All programs expired at the end of fiscal year 2011 and thus do not currently cover losses suffered in fiscal year 2012. This legislation reauthorizes LIP, LFP, ELAP and TAP with some modifications for fiscal years 2012 through 2017, moves the programs into Title I and funds them out of the funds of the Commodity Credit Corporation. As such, the assistance provided by LIP, LFP, ELAP and TAP are now incorporated into the Title I baseline and will require reauthorization on the same schedule as the rest of Title I. SURE is not re-authorized. Payment Limitation Reforms The legislation undertakes three significant reforms. First, payments made pursuant to the ARC program are limited to $50,000 per individual (but can be doubled with a spouse, similar to current law). This compares to a current combined limit of $105,000 for direct payments and the counter-cyclical program. In addition, a second payment limitation for peanuts is maintained. Second, the adjusted gross income eligibility requirement is revised by eliminating the differentiation between farm and nonfarm AGI and using a single three-year rolling average of a producer's AGI for eligibility. The AGI requirement is set at $750,000. Finally, the requirement that an individual be ``actively engaged in farming'' to be eligible to receive payments has been reformed by eliminating the ``active personal management'' provisions that allowed multiple individuals to claim eligibility by only providing management to the operation. The legislation strikes the phrase ``active personal management'' and creates a specific class of actively engaged that permits a single individual to be actively engaged as the manager for a farm. Only one person in a farm operation can be eligible for providing management and not labor to the farm and that person cannot qualify other farm operations as actively engaged or permit the farm operation to exceed the $50,000 payment limitation. TITLE II--CONSERVATION Conservation Reserve Program The Conservation Reserve Program (CRP) helps preserve soil, water and wildlife resources by placing highly erodible and environmentally sensitive land in conserving uses through voluntary contracts with farmers, ranchers and landowners. The 2008 Farm Bill limited enrollment in CRP to 32 million acres. Current enrollment in the program is just under 30 million acres with contracts on more than 10 million acres set to expire in the next two fiscal years. The reported bill provides for a ``step down'' of the acreage cap over the five-year life of this legislation as follows: Fiscal year 2013, no more than 30 million acres Fiscal year 2014, no more than 27.5 million acres Fiscal year 2015, no more than 26.5 million acres Fiscal year 2016, no more than 25.5 million acres Fiscal year 2017, no more than 25 million acres. The reported bill also allows for the enrollment of up to 1.5 million acres of grasslands by merging provisions of the previous Grasslands Reserve Program into CRP. Additionally, this legislation provides greater flexibility for certain lands enrolled in CRP to be used for grazing and harvesting. Agricultural Conservation Easement Program The reported legislation combines three conservation easement authorities into a single program, the Agricultural Conservation Easement Program. The overall program contains two parts: Agricultural Land Easements and Wetland Easements. Agricultural Land Easements are used to protect agricultural land from development and keep them devoted to agricultural uses, including keeping grazing lands and important grasslands in grazing and related uses. Wetland Easements are used to restore, protect, and enhance wetlands, which are important for water quality, quantity and wildlife habitat in many areas. Sufficient funding and authority is provided to create a 10- year baseline for all types of easements. Environmental Quality Incentives Program The legislation continues the Environmental Quality Incentives Program (EQIP), providing farmers and ranchers with important cost-share assistance on working lands for conservation activities that help farmers meet or avoid the need for natural resource regulation. Additionally, many parts of the Wildlife Habitat Incentive Program (WHIP) have been consolidated into EQIP, focusing the program on farmers and ranchers looking to create or improve areas for wildlife habitat on their working lands. Conservation Stewardship Program The legislation continues the Conservation Stewardship Program (CSP) as revised in the 2008 Farm Bill. This program encourages higher levels of conservation and the adoption of new and emerging conservation technologies on farms, ranches, and forests. The Committee made changes to the program to ease use and implementation, including a slight reduction in the annual enrollment cap. The cap on nonindustrial private forestland that can be enrolled in the program is removed and greater focus is given to identifying resource concerns at the local level. The program also adds flexibility to accept land coming out of the Conservation Reserve Program when priority resource concerns will be addressed. Regional Conservation Partnership Program Current law authorizes four programs that are designed to work with farmers, ranchers and partner organizations to achieve conservation objectives: Agricultural Water Enhancement Program; Chesapeake Bay Watershed Program; Cooperative Conservation Partnership Initiative; and Great Lakes Basin Program for Soil Erosion and Sediment Control. The reported bill consolidates these four programs into one that will support projects that improve soil quality, water quality and quantity, or wildlife habitat in a specific area or region. Projects are selected through a competitive, merit-based process, and leverage partner resources to achieve project goals. Within the program is a Critical Conservation Area component through which the Secretary shall designate areas with particularly significant water quality and quantity issues and natural resource regulatory pressures. Conservation Innovation Grants Conservation Innovation Grants (CIG) are continued in the reported bill, providing grants on a competitive basis to encourage the development of new or improved conservation practices. CIG is geared towards projects that offer new approaches to providing producers environmental and production benefits. The set-aside for air quality is removed. The legislation includes a new reporting requirement to increase program transparency. Voluntary Public Access and Habitat Incentive Program Private landowners are able to realize a value-added benefit by creating wildlife habitat and opening their land up to hunting, fishing, and other kinds of public outdoor recreation. The legislation continues this program and requires the Secretary to report to Congress on the program's effectiveness by 2015. Conservation of Private Grazing Land The program is reauthorized to improve private grazing land by offering technical assistance and educational activities to landowners looking to better manage their land. Grassroots Source Water Protection Program State rural water associations are encouraged to use technical assistance in order to promote conservation activities that protect the quality of our nation's drinking water through this program. Small Watershed Rehabilitation Program Many of the flood control structures (mainly dams) in our country are reaching their maximum life expectancy. This program provides funds for projects to rehabilitate and improve the longevity of existing structures. Terminal Lakes Assistance The reported bill provides assistance for addressing unique concerns regarding terminal lakes, defined as the lake and its riparian and watershed resources that are considered flooded with no natural outlet or at risk because of insufficient water. For the flooded terminal lakes, the reported bill creates a land purchase grant program in conjunction with the State for the purchase of land flooded by the terminal lake. For terminal lakes with insufficient water, the reported bill transfers funds to the Department of the Interior to assist in providing water through leases, land and related water rights purchases and research, support and conservation activities. TITLE III--TRADE Export Credit Guarantee Program The Export Credit Guarantee Program, also known as GSM-102, provides export credit guarantees that help ensure the availability of credit to finance the exports of U.S. agricultural products to countries where financing might not be available. The reported legislation continues the authorization for the program through 2017 with one change. The Committee seeks a resolution to the WTO dispute with Brazil by reducing the current levels of export credit guarantees from $5.5 billion to $4.5 billion, while maintaining United States export competitiveness for agriculture. Market Access Program The reported bill extends the authority and provides $200 million per year through fiscal year 2017. Foreign Market Development Program The reported bill extends that authority with $34.5 million each fiscal year for fiscal years 2013 through 2017. Emerging Markets and Facility Guarantee Loan Program The legislation extends the program through fiscal year 2017 at existing funding and loan guarantee levels. Technical Assistance for Specialty Crops This program provides financial assistance to producers and exporters of specialty crops in addressing barriers to trade in their products in overseas markets. The reported bill makes slight revisions to the purpose of the program to ensure that technical barriers to trade (e.g., burdensome regulatory requirements) can be addressed. The reported bill reauthorizes the program through fiscal year 2017 with $9 million each fiscal year. Global Crop Diversity Trust The reported bill authorizes annual appropriations of $60 million for each fiscal year through 2017 to fund the Global Crop Diversity Trust. The bill also requires that U.S. contributions may not exceed one fourth of the total of funds contributed to the Trust from all sources. Food for Peace The reported legislation continues the authorities under the Food for Peace Act through fiscal year 2017. In particular, Title II of the Act contains the title's primary food aid budget authority and is reauthorized to continue the nation's ability to provide for emergency aid and non-emergency development projects. This program enables the U.S. to donate food overseas to promote food security. Additionally, the reported bill increases the amount of funds available to support strategic prepositioning, which brings food aid commodities to at-risk regions before food emergencies strike. The reported legislation also continues the Farmer-to- Farmer program and slightly raises the percentage of funds that may be used for this program from 0.5 percent to 0.6 percent. McGovern-Dole International Food for Education and Child Nutrition Program The reported bill reauthorizes the McGovern-Dole International Food for Education and Child Nutrition Program through fiscal year 2017. The legislation also expands on the success of the Local and Regional Food Aid Procurement pilot program created by the 2008 Farm Bill. The authority allows organizations to purchase food through local and regional markets and promotes stability by supporting local producers and economies. Food Aid Quality The 2008 Farm Bill authorized a study to research the quality of U.S. food aid. The reported bill puts into action the recommendations of the study giving the Administrator increased flexibility to improve the nutritional profile of food aid for target populations, such as children under five and mothers. Resiliency Pilot in the Horn of Africa Famine in the Horn of Africa has brought new organizations and governments to the region, all intent on helping reduce hunger and improve food security. The reported bill creates a pilot program to help coordinate the efforts on the ground by looking at interactions and providing for groups doing resiliency. The bill authorizes the appropriation of $10 million in funding to this pilot through 2017. Bill Emerson Humanitarian Trust The Bill Emerson Humanitarian Trust holds extra resources so that the U.S. can respond quickly to food crises when domestic supplies are short. The Committee reauthorizes the Act creating the trust through fiscal year 2017. TITLE IV--NUTRITION Supplemental Nutrition Assistance Program The reported bill reauthorizes the SNAP program through fiscal year 2017 with a series of changes to improve the program's effectiveness in providing food assistance to poor families and individuals, while helping to eliminate fraud, abuse and misuse of the program and its benefits. Specifically, the Committee provides additional funding to USDA to prevent trafficking of food assistance benefits and to strengthen retailer program integrity. The legislation address concerns about SNAP households with lottery or gambling winnings by requiring households with substantial lottery or gambling winnings to lose benefits immediately after receiving winnings. Winners will be prevented from receiving new benefits if they do not meet the financial requirements of SNAP. Eligibility for college students is tied to Perkins program criteria to focus eligibility on students participating in technical and vocational education programs, primarily 2 year colleges, trade studies, remedial course work, basic adult literacy, or English as a second language. The reported bill also requires participating retailers to stock more staple foods like fruits and vegetables and bans stores from participating if sales of prohibited items like liquor and tobacco is higher than 45 percent of the store's total sales. Further, the Committee reviewed benefit amounts which are determined by evaluating both income and living expenses. The Standard Utility Allowance is used by many states to estimate average utility costs to make benefit determinations. The reported bill includes a provision to stop states from issuing nominal Low-Income Heating and Energy Assistance Program (LIHEAP) benefits to qualify households to receive Standard Utility Allowances for the sole purpose of increasing households' SNAP benefits. The provision will not affect households that receive more than $10.00 in annual LIHEAP assistance, or any household that can demonstrate utility costs. Finally, the bill directs the Food and Nutrition Service to conduct demonstration projects to test modern technology including smartphones and online payments to improve access to SNAP retailers. SNAP Nutrition Education and Employment and Training Programs The bill continues the Employment and Training components of SNAP. The reported bill also adds physical activity as an eligible use of the program, and maintains current funding levels through fiscal year 2017. Commodity Supplemental Food Program The reported bill maintains funding authorizations at current levels for the Commodity Supplemental Food Program (CSFP) through fiscal year 2017. Additionally, the legislation contains provisions to transition CSFP to a program for senior citizen populations while allowing the small percentage of women and children currently participating in CSFP to continue receiving benefits until they exceed the age of eligibility. The Emergency Food Assistance Program The Emergency Food Assistance Program (TEFAP) helps supplement the diets of low-income individuals by providing emergency food and nutrition assistance, largely through food banks. The reported bill provides additional resources to fund TEFAP through fiscal year 2017. Department of Defense Fresh Program The reported bill reauthorizes and maintains current funding for the Department of Defense Fresh Program, which distributes fresh fruits and vegetables to schools and service institutions. Senior Farmers Market Nutrition Program The reported bill reauthorizes and maintains current funding levels for the Senior Farmers Market Nutrition Program, which provides low-income seniors with coupons to be exchanged for eligible foods (fruits, vegetables, honey, and fresh-cut herbs) at farmers' markets, roadside stands, and community supported agriculture programs. Whole Grain Products The reported bill continues the whole grain products program to encourage school meals programs to sample a variety of whole grains and whole-grain products. The program requires an evaluation to determine whether whole-grain consumption increased, and which products were most acceptable to schoolchildren. Healthy Food Financing Initiative The reported bill authorizes the Healthy Food Financing Initiative to administer loans and grants to improve access to healthy foods in food deserts with goals of improving the health of families and creating and preserving jobs. Fresh Fruit and Vegetables Program The reported bill reauthorizes and maintains current funding levels for the Fresh Fruit and Vegetables Program, which provides free fresh fruits and vegetables to elementary school children throughout the school day in school districts with a high proportion of low-income students. Community Food Projects The reported bill provides grants to eligible nonprofit organizations to improve community access to food through the development of innovative projects including school-to-garden programs and urban greenhouse initiatives. Hunger Free Communities The reported bill authorizes grants to incentivize the purchase of fruits and vegetables by SNAP participants in underserved communities, with the Federal share limited to 50 percent. TITLE V--CREDIT Conservation Loan and Loan Guarantee Program The Conservation Loan and Loan Guarantee Programs provide authority for loans to borrowers to build conservation structures or establish conservation practices. The reported bill reauthorizes the program through fiscal year 2017 at current funding levels. Beginning Farmer and Rancher Individual Development Accounts Pilot Program The reported legislation reauthorizes the Beginning Farmer and Rancher Individual Development Accounts Pilot Program which provide matching-funds for savings accounts specifically to be used for farming-related expenses for beginning farmers and ranchers. Ownership and Operating Direct and Guaranteed Loans The reported bill reauthorizes the direct and guaranteed ownership and operating loans administered through the Farm Service Agency at existing levels through fiscal year 2017. The bill maintains higher loan funds reserved for direct farm ownership loans and improves the down payment loan program. The bill continues the reserved portion of guaranteed farm ownership loan and direct operating loan funding for beginning farmers and ranchers. Also, the bill eliminates term limits for guaranteed operating loans, and revises term limits for direct operating loans to permit a borrower to receive eligibility of one additional year for each period of three consecutive years the borrower does not obtain a direct loan. State-Mediation Program State mediation programs assist in resolving agriculture and USDA-related lending-related disputes. The reported bill incorporates the program into the title by extending the authorization to 2017. TITLE VI--RURAL DEVELOPMENT Water, Waste Disposal and Wastewater Facility Grants and Loans This program provides grants, loans and loan guarantees to public agencies for projects that support the development, storage, treatment, purification, or distribution of water or the collection, treatment, or disposal of waste in rural areas. The reported bill reauthorizes the program through fiscal year 2017 and provides that rural communities with populations of less than 5,500 are prioritized for funding. Community Facilities Loans, Loan Guarantees and Grants The bill reauthorizes the Community Facilities Program which supports projects related to economic development, public safety, and health care delivery, and prioritizes communities with less than 20,000 residents. It also provides that the Secretary make up to 3 percent of funds provided through the Community Facilities Loan and Grant Program available to applicants for technical assistance to help smaller communities in the development of their applications to the Community Facilities program. Rural Water and Wastewater Circuit Rider Program The legislation continues the Rural Water and Wastewater Circuit Rider Program which provides competitive grants to non- profit organizations that give technical assistance to rural public water systems. This technical assistance helps the water systems to comply with state and federal environmental regulations. The program is reauthorized to receive $25 million annually. Rural Business Development Programs In general, the reported bill reauthorizes the suite of rural business development programs through fiscal year 2017. Notably, it combines two existing programs, the Rural Business Opportunity Grants program and the Rural Business Enterprise Grants program, into a single program, the Rural Business Development Grants program, which awards competitive grants to public agencies and non-profit community development organizations for business development, planning, technical assistance, or job training in rural areas. Also extended are the Rural Cooperative Development Grants program, the Rural Microenterprise Assistance Program created by the 2008 Farm Bill, the Appropriate Technology Transfer for Rural Areas Program, the Value-Added Producers Grant Program with a priority for projects in which at least 25 percent of recipients are beginning farmers or socially-disadvantaged. The Business and Industry Direct and Guaranteed Loan Program is extended. The bill also reserves funds made available through the program for projects that include the processing, distribution, storage, and marketing of locally produced agricultural food products. General Rural Development Programs The reported bill reauthorizes general loan and grant authorities for rural development. Additionally, it authorizes the Secretary to give priority to applications submitted for funds through Rural Development programs that support regional approaches to community and economic development. These applications should reflect the participation of multiple stakeholders in the service area of the proposal. The applications should also have clear objectives and an explanation of performance measures that will be used to determine progress in meeting those objectives. Access to Broadband Services in Rural Areas Through the Broadband Program, USDA provides funds for the construction, improvement, and acquisition of facilities and equipment needed to provide broadband service in rural communities. The reported bill authorizes USDA to begin providing combinations of grants and loans for the expansion of broadband service. The program will target funds to rural communities isolated from significant population centers. Distance Learning and Telemedicine This program provides competitive grant and loan funding that supports equipment and infrastructure improvements that enhance telecommunications capabilities at educational and medical facilities and is reauthorized through 2017. Rural Energy Savings Program The reported bill authorizes a new loan program, administered by USDA, which will issue zero-interest loans to any electric cooperative or coordinated group of electric cooperatives for the purpose of lending the funds to their customers to make energy saving retrofit and structural improvements. TITLE VII--RESEARCH The reported bill reauthorizes critical agricultural research programs that were reauthorized in the 2008 Farm Bill. The Committee recognized the need to streamline the authorities in this title and permitted some authorities that had not received funding in recent years to expire. Foundation for Food and Agriculture Research The Committee recognizes the significant need for agricultural research and the challenge to find funding in the current fiscal environment. As such the reported bill creates a new non-profit foundation, the Foundation for Food and Agriculture Research, to leverage private funding, matched with federal dollars, to support public agricultural research. This innovative approach will foster continued innovation in agricultural research. Specialty Crop Research Initiative The reported bill reauthorizes this program and provides mandatory funding over 10 years for the Specialty Crop Research Initiative, ensuring funding will be available for key research projects for fruits, vegetables and other specialty crops. Agriculture and Food Research Initiative The reported bill reauthorizes the Agriculture and Food Research Initiative (AFRI) program through fiscal year 2017 without policy changes; continuing to provide competitive grants for basic and applied research. University Research and Extension Service The bill reauthorizes agricultural research activities at 1862, 1890 and 1994 land-grant institutions and funding for extension service activities through fiscal year 2017 without policy changes. National Agricultural Research, Extension, Education and Economics (NAREEE) Advisory Board The bill reauthorizes the NAREEE advisory board through fiscal year 2017, which provides consultation to USDA, industry and Congress on agricultural research priorities. The legislation directs the NAREEE advisory board to consult with industry groups on agricultural research, extension, education, and economics, and to make recommendations to the Secretary based on that consultation. Policy Research Centers This program provides competitive grants for cooperative agreements with policy research centers to conduct research and education programs concerning the effect of policies on the farm and agricultural sectors, the environment, rural families and economies, and consumers, food and nutrition through fiscal year 2017. Capacity Building Grants for Non-Land Grant Colleges of Agriculture (NLGCA) Institutions This program provides competitive grants to assist NLGCA institutions in maintaining and expanding the capacity to conduct education, research, and outreach activities related to agriculture, renewable resources, and other similar disciplines. It is continued through fiscal year 2017 without change. Organic Research Initiative Funding for the Organic Research and Extension Initiative is provided over 5 years. Beginning Farmer and Rancher Development Program The bill continues the Beginning Farmer program, which develops and offers education, training, outreach and mentoring programs to ensure the success of the next generation of farmers. The bill expands eligibility to include military veterans who wish to begin a career in agriculture. Addresses Critical Shortages of Veterinarians The reported bill seeks to help address the shortage of veterinarians in rural agricultural areas by supporting veterinary education and rural recruitment. Increased Transparency for Budget Submissions In order to increase transparency and reduce duplication across agencies, the reported bill requires USDA to provide more detailed information regarding expected research expenditures when submitting its annual budget request to Congress. TITLE VIII--FORESTRY Healthy Forest Reserve Program The bill reauthorizes the Healthy Forest Reserve Program (HFRP), a voluntary program that enhances forest ecosystems to promote the recovery of threatened and endangered species, improve biodiversity, and enhance carbon sequestration. Forest Legacy Program This program protects water quality, provides habitat, recreational opportunities and other public benefits on our working forests; making sure that we maintain our forests, the program is extended through fiscal year 2017. Community Forest and Open Space Conservation Program The Community Forest and Open Space Conservation Program is reauthorized. This program leverages federal dollars to help communities, including tribes, to protect forests in threat of conversion to non-forest use. Forest Stewardship Program Private forest landowners benefit from the landscape level information that Forest Stewardship Plans developed through this program provide. The reported bill seeks to make sure that landowners have the resources necessary to manage their forests in an economically and environmentally effective manner by continuing this program through 2017. International Forestry The International Forestry Program encourages the trade of legally harvested timber. It also supports domestic production by working to prevent invasive species from entering the country. The program is reauthorized through 2017. Urban and Community Forestry This program helps communities develop and maintain urban forestry programs, which protect urban trees and forests, and is reauthorized through 2017. Stewardship Contracting The reported bill provides permanent authority for Stewardship End Result Contracting. TITLE IX--ENERGY Rural Energy for America Program The reported bill reauthorizes the program through fiscal year 2017 with $48.2 million in mandatory funding for each fiscal year and provides for a streamlined application process for farmers and rural businesses applying for small and medium sized projects. Biomass Crop Assistance Program The Biomass Crop Assistance Program (BCAP) program created by the 2008 Farm Bill provides support for farmers and ranchers who wish to plant energy crops to produce and use biomass crops for conversion to advanced biofuels or bioenergy. Agricultural producers in BCAP project areas may contract with the Department of Agriculture to receive biomass crop establishment payments up to 50 percent of costs, plus annual payments in amounts determined by the Secretary in subsequent years to help to compensate for lost opportunity costs until crops are established. The program is reauthorized through fiscal year 2017 with $38.6 million in mandatory funding each fiscal year. The reported bill revises the Collection, Harvest, Storage and Transportation assistance provisions to limit payments for wood-based biomass, while limiting the amount of funding that can be used for this assistance. BioPreferred Program and Federal Government Procurement Preference Program The bill reauthorizes USDA's BioPreferred Program and the Federal Government Procurement Preference Program with modifications to include reporting of biobased purchases by the federal agencies, as well as providing for auditing and enforcement of biobased purchasing activities. The reported bill provides $3 million in mandatory funding each fiscal year. Biorefinery Assistance Program This program provides loan guarantees for renewable energy projects and is extended through fiscal year 2017 with $100 million in mandatory funds for fiscal year 2013 and $58 million for each of fiscal years 2014 and 2015. Eligibility for the program has been expanded to include biobased manufacturing, which is defined as a facility that uses agricultural products to make end user products on a commercial scale, including renewable chemicals. Bioenergy Program for Advanced Biofuels This program provides production payments for advanced bioenergy sources such as methane digesters, advanced biofuels and biopower and is reauthorized through fiscal year 2017. Biodiesel Fuel Education Program The Biodiesel Fuel Education Program provides competitive grants to non-profit entities to provide information about the benefits of biodiesel fuel use to government and private organizations. The bill reauthorizes the program through fiscal year 2017 with $1 million per fiscal year in mandatory funding. Biomass Research and Development Initiative (BRDI) The bill reauthorizes research on biomass feedstock development for bioenergy and biobased products through fiscal year 2017 with $26 million in mandatory funding for each fiscal year. Feedstock Flexibility Program for Bioenergy Producers The Feedstock Flexibility Program assures that sugar imports do not result in increased forfeitures of U.S. sugar and it is reauthorized through 2017. Community Wood Energy Program This program provides competitive, cost-share grants for communities to supply public buildings with energy from sustainably-harvested wood from the local area and is reauthorized through fiscal year 2017. TITLE X--SPECIALTY CROPS & HORTICULTURE Farmers Market and Local Food Promotion Program The Farmers Market and Local Food Promotion Program authorized in the reported bill continues the efforts from the Farmers Market Promotion Program by providing competitive grants to improve and expand farmers markets, roadside stands, community-supported agriculture programs, and other direct producer-to-consumer market opportunities. The program authority is expanded to also provide assistance in developing local food system infrastructure and central regional food development centers like food hubs and terminal markets that help producers with training, aggregating, distributing and other market activities. Local Food Data and Evaluation The bill expands collection of data related to local and regional food systems and directs USDA to evaluate the success of and recommend improvements to current programs designed to strengthen access to local foods. Specialty Crop Block Grants The reported bill adjusts the grant allocation formula from solely the value of specialty crop production in a state to the average of both the value of specialty crop production and acres of specialty crops planted in a state. The bill also allows funding for multistate projects related to pest and disease, food safety, and commodity-specific projects. Continues Data Collection on Organics The bill improves coordination between the Agriculture Marketing Service and the Risk Management Agency to ensure risk management tools are sufficient. National Organic Program The National Organic Program is reauthorized and one-time mandatory funding is provided for technology upgrades to improve program performance. National Organic Program The bill continues to provide assistance to organic producers seeking certification under the National Organic Program. This program will provide up to 75 percent of the cost of certification, but no more than $750. Organic Promotion The bill directs the Secretary to assess the feasibility of creating an organic promotion program. Pest and Disease Management The bill consolidates the National Clean Plant Network and the Pest and Disease Management and Disaster Prevention Program. TITLE XI--CROP INSURANCE Supplemental Coverage Option The reported bill creates a Supplemental Coverage Option insurance policy that allows producers to purchase additional coverage on an area yield and loss basis. The coverage option establishes a coverage deductible of 21 percent for producers enrolled in ARC and 10 percent for all other producers. Crop Insurance for Fruit and Vegetable Producers Crop insurance coverage is expanded for underserved crops and regions, including fruit and vegetable producers. The bill provides additional assistance for underserved producers to partner with private developers of crop insurance to create improved insurance products. The bill also allows the Risk Management Agency (RMA) to conduct research and development on new or improved crop insurance products. Stacked Income Protection Plan for Producers of Upland Cotton The reported bill creates a new stand-alone revenue protection coverage program for cotton growers. The program covers between 10 percent and 30 percent of expected county revenue, using the expected price established under existing Group Risk Income Protection and higher of the expected county yield or average county yield for the most recent five crop years, dropping the highest and lowest years. The program utilizes a multiplier factor to establish the maximum protection at not more than 120 percent, provides distinct coverage for irrigated and non-irrigated practices, and provides 80 percent premium subsidy. Peanut Revenue Crop Insurance The reported bill creates a separate peanut revenue insurance product with an effective price for peanut growers using the Rotterdam price index with an adjustment to reflect the farmer stock price. Improves Crop Insurance for Beginning Farmers and Ranchers The reported bill contains provisions to help these young and beginning farmers fully utilize the Federal crop insurance program. Beginning farmers and ranchers are given a 10 percentage point discount for all crop insurance premiums. The bill also provides beginning farmers and ranchers with an improved production history when they have previous farming experience or when they face natural disasters. Enterprise Units The reported bill makes the pilot enterprise unit premium assistance permanent and allows producers the choice to separate their irrigated and non-irrigated enterprise unit coverage on the farm. Standard Reinsurance Agreement The reported bill requires the FCIC Board to ensure budget neutrality to the maximum extent practicable during renegotiation of the Standard Reinsurance Agreement (SRA), and return any savings realized in these renegotiations to RMA programs TITLE XII--MISCELLANEOUS Outreach for Socially Disadvantaged Farmers The reported bill continues grants to organizations that work with minority farmers to help them acquire, own, operate, and retain farms and ranches and equally participate in all USDA programs. Continues Advocacy and Outreach Efforts The reported bill reauthorizes the Office of Advocacy and Outreach, which was created in the 2008 Farm Bill to increase the viability and profitability of small farms and ranches, beginning farmers or ranchers, and socially disadvantaged farmers or ranchers. Wildlife Reservoir Zoonotic Disease Initiative To ensure continued research to combat devastating livestock diseases, the reported bill includes a Wildlife Reservoir Zoonotic Disease Initiative to improve diagnostic testing and vaccines for bovine tuberculosis, brucellosis, and other zoonotic diseases. Ensures Health of American Livestock The reported bill reauthorizes the Trichinae Certification Program and the National Aquatic Health Plan. Sheep Production and Marketing Grant Program The reported bill includes a competitive grant program to enhance production and marketing of the sheep industry. Pilot Program To Eradicate Feral Swine The reported bill includes a pilot project that directs the Natural Resources Conservation Service and the Animal and Plant Health Inspection Service to work together on eradication methods that can be used throughout the country. Grants To Improve Agricultural Labor Supply, Stability, Safety, and Training The reported bill reauthorizes the Agricultural Career and Employment Grants Program. Funds may be used to assist agricultural employers and farmworkers to develop skills, the provision of agricultural labor market information, transportation and short-term housing. LEGISLATIVE HISTORY Hearings Agriculture: Growing America's Economy On February 17, 2011, the Committee held a hearing to discuss growing America's economy through agricultural policy. Witnesses giving testimony included: Honorable Thomas Vilsack, Secretary, United States Department of Agriculture, Washington, DC; Keith Creagh, Director, Michigan Department of Agriculture and Rural Development, Lansing, MI; Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City, Kansas City, MO; Fred Yoder, Former President, National Corn Growers Association, Plain City, OH; Dr. Joe Outlaw, Economist, Texas A&M; University, College Station, TX. Fundamentals and Farming: Evaluating High Gas Prices and How New Rules and Innovative Farming Can Help On March 30, 2011, the Committee held a hearing to evaluate high gas prices and examine how new rules and innovative farming can help with this issue. Witnesses giving testimony included: Dr. Richard G. Newell, Administrator, Energy Information Administration, United States Department of Energy, Washington, DC; Dan M. Berkovitz, General Counsel, Commodity Futures Trading Commission, Washington, DC; Stanley R. Townsend, on behalf of the Kansas Farm Bureau, Weskan, KS; Jeff Broin, President and CEO of POET, LLC, Co-Chairman of Growth Energy, Sioux Falls, SD; Dr. Bruce E. Dale, Professor of Chemical Engineering and Materials Science, Michigan State University, Lansing, MI. Food for Thought: The Role, Risks and Challenges for American Agriculture and the Next Farm Bill in Meeting the Demands of a Growing World On May 26, 2011, the Committee held a hearing to discuss the role, risks and challenges for American agriculture and the next farm bill in meeting the demands of a growing world. Witnesses giving testimony included: Honorable Tom Vilsack, Secretary, United States Department of Agriculture, Washington, DC; Honorable Dan Glickman, Co-Chair of the Chicago Council's Global Agricultural Development Initiative, Chicago, IL; former Secretary, United States Department of Agriculture, Washington, DC; Barry Mumby, Senior Member, Wakeshma Farms LLC, Colon, MI; Dr. Andrew Rosenberg, Senior Vice President for Science and Knowledge, Conservation International, Arlington, VA; Douglas DeVries, Senior Vice President, Global Marketing Services, Agriculture and Turf Division, Deere and Company, Moline, IL; Dr. Per Pinstrup-Andersen, H.E. Babcock Professor of Food, Nutrition, and Public Policy, J. Thomas Clark Professor of Entrepreneurship, and Professor of Applied Economics, Cornell University, Professor of Agricultural Economics, Copenhagen University, Ithaca, NY. Opportunities for Growth: Michigan and the 2012 Farm Bill: East Lansing, MI On May 31, 2011, the Committee held a field hearing to consider opportunities for growth for Michigan in the 2012 Farm Bill in East Lansing, MI. Witnesses giving testimony included: Dr. Lou Anna K. Simon, President, Michigan State University, East Lansing, MI; Dr. J. Ian Gray, Vice President for Research and Graduate Studies, Michigan State University, East Lansing, MI; Dr. Thomas G. Coon, Director, Michigan State University Extension, East Lansing, MI; Clark Gerstacker, Corn and Soybean Production, Member, Michigan Corn Growers Association, Midland, MI; Ben LaCross, Cherry Production, Chair, American Farm Bureau, Young Farmers and Ranchers Committee, Cedar, MI; Ray Van Driessche, Sugar Beet Production and Conservation, Director of Community and Government Relations, Michigan Sugar Company, Bay City, MI; Julia Baehre Rothwell, Apple Production, Chair, Michigan Apple Association, Belding, MI; Ken Nobis, Dairy Production, President, Michigan Milk Producers Association, Novi, MI; Peter B. Blauwiekel, Pork Production, Member, Michigan Pork Producers Council, Fowler, MI; Karen Serfass, Forestry Production, Past President, Michigan Forest Association, Dafter, MI; Kristen Holt, President, Quality Assurance International, Senior Vice President, Food Safety and Quality, NSF International, Ann Arbor, MI; Eric Davis, Director, Food Initiative, United Way for Southeastern Michigan, Detroit, MI; Dennis West, President, Northern Initiatives, Marquette, MI; James Reid, Reid Dairy Farm, Grant Township, MI; David Armstrong, President and Chief Executive Officer, Greenstone Farm Credit Services, East Lansing, MI. Farm Bill Accountability: The Importance of Measuring Performance, While Eliminating Duplication and Waste On June 23, 2011, the Committee held a hearing on Farm Bill accountability and the importance of measuring performance while eliminating the duplication of waste. Witnesses giving testimony included: Honorable Dallas Tonsager, Under Secretary, Rural Development, United States Department of Agriculture, Washington, DC; Honorable Michael Scuse, Acting Under Secretary, Farm and Foreign Agricultural Services, United States Department of Agriculture, Washington, DC; Honorable Harris Sherman, Under Secretary, Natural Resources and Environment, United States Department of Agriculture, Washington, DC; Honorable Kevin Concannon, Under Secretary, Food, Nutrition, and Consumer Services, United States Department of Agriculture, Washington, DC; Honorable Joe Leonard, Assistant Secretary for Civil Rights, United States Department of Agriculture, Washington, DC; Phillis Fong, Inspector General, United States Department of Agriculture, Washington, DC; Brett Blankenship, Blankenship Brothers, Washtucna, WA; Masouda Omar, Manager of Business Finance Loan Production, Colorado Housing and Finance Authority, Denver, CO. The State of Livestock in America On June 28, 2011, the Committee held a hearing on the state of livestock in America. Witnesses giving testimony included: Dr. Joe Glauber, Chief Economist, United States Department of Agriculture, Washington, DC; Dr. Greg Parham, Administrator, Animal and Plant Health Inspection Service, United States Department of Agriculture, Washington, DC; Alfred V. Almanza, Administrator, Food Safety and Inspection Service, United States Department of Agriculture, Washington, DC; Dave White, Chief, National Resources Conservation Service, United States Department of Agriculture, Washington, DC; Rick Sietsema, Farmer, Sietsema Farms, Allendale, MI; Dennis O. Jones, Pork Producer, South Dakota Farmers Union, Bath, SD; Steven D. Hunt, Chief Executive Officer, U.S. Premium Beef, LLC, Kansas City, MO; Frank Harper, President-elect, Kansas Livestock Association, Sedgwick, KS; Michael Welch, President and CEO, Harrison Poultry, Inc., Bethlehem, GA; Hans McPherson, Rancher and Member, Montana Farm Bureau, Stevensville, MT. Growing Jobs in Rural America On July 14, 2011, the Committee held a hearing to discuss ways to grow jobs in rural America. The witnesses on the first panel were: Bruce Graham, CEO, Indiana Statewide Association of Rural Electric Cooperatives, Inc., Indianapolis, IN; Zac Stewart, Ambient, LLC, Ignacio, CO; Paul Bony, Director, Residential Market Development, Climate Master, Oklahoma City, OK; Dr. Helen Sanders, Vice President, Technical Business Development, SAGE Electrochromics, Inc, Faribault, MN. The witnesses on the second panel were: Dr. Marc Verbruggen, President and CEO, NatureWorks LLC, Wayzata, MN; Dr. Oliver Peoples, Founder and Chief Scientific Officer, Metabolix, Inc., Cambridge, MA; John McIntosh, Vice President of Sales and Marketing, Signature Crypton Carpet, Dalton, GA; Dennis Hall, Assistant Director, Ohio BioProducts Innovation Center, Columbus, OH. Opportunities for Specialty Crops and Organics in the Farm Bill On July 28, 2011, the Committee held a hearing to discuss opportunities for specialty crops and organics in the Farm Bill. The witnesses on the first panel were: Dr. Catherine Woteki, Under Secretary, USDA, Research, Education and Economics, Washington, DC; Ann Wright, Deputy Under Secretary, USDA, Marketing and Regulatory Programs, Washington, DC. The witnesses on the second panel were: Glenn Abbett, Manager, Abbett Farms, LLC, LaCrosse, IN; Paul Bencal, Owner, Paul Bencal Farm, Ransomville, NY; Dennis Engelhard, Owner, Engelhard Family Farms, Unionville, MI; Kim Tait, Owner, Tait Farm Foods, Inc., Centre Hall, PA; Charles Wingard, Director of Field Operations, W.P. Rawls and Sons, Pelion, SC; Robert Woolley, Dave Wilson Nursery, Hickman, CA. Looking Ahead: Kansas and the 2012 Farm Bill On August 25, 2011, the Committee held a field hearing in Kansas to discuss ways to grow agriculture and strengthen rural communities. The witnesses on the first panel were: Honorable Sam Brownback, Governor, state of Kansas, Topeka, KS; Dr. Kirk Schulz, President, Kansas State University, Manhattan, KS. The witnesses on the second panel were: Steve Baccus, President, Kansas Farm Bureau, Minneapolis, KS; Karl Esping, Kansas Sunflower Commission, Lindsborg, KS; Kent Goyen, Kansas Cotton Association, Cunningham, KS; Ken Grecian, Kansas Livestock Association, Palco, KS; Bob Henry, Kansas Soybean Association, Robinson, KS; Kenneth McCauley, Kansas Corn Growers, White Cloud, KS; David Schemm, Kansas Association of Wheat Growers, Sharon Springs, KS; Gregory Shelor, Kansas Grain Sorghum Producers, Minneola, KS. The witnesses on the third panel were: Ron Bach, High Plains Farm Credit, Jetmore, KS; Kathleen Brinker, Nemaha-Marshall Electric Cooperative Association, Inc., Axtell, KS; Ron Brown, Kansas Association of Conservation Districts, Fort Scott, KS; Barth Crouch, Playa Lakes Joint Venture, Salina, KS; Robert Tempel, Windriver Grain LLC, Garden City, KS; Jeff Whitham, Western State Bank, Garden City, KS; Karen Wilder, The Schwan Food Company, Salina, KS. Energy and Economic Growth for Rural America On February 15, 2012, the Committee held a hearing to examine USDA rural development and energy programs, and to review policies to promote rural economic development and job growth in connection with development of the 2012 farm legislation. The witness on the first panel was: The Honorable Thomas Vilsack, Secretary, USDA, Washington, DC. The witnesses on the second panel were: Mathias McCauley, Regional Planning and Community Development, Northwest Michigan Council of Governments, National Association of Counties and National Association of Development Organizations, Traverse City, MI; Florine Raitano, Rural Community Assistance Corp, Dillom, CO; Mark Rembert, Energize Clinton County, Wilmington, OH; Charles Fluharty, Rural Policy Research Institute, Columbia, MO. The witnesses on the third panel were: Steve Flick, Show Me Energy Cooperative, National Farmers Union, Centerview, MO; Lee Edwards, Virent, Inc., Madison, WI; Bennie Hutchins, Energy Program, Ag Energy Resources, LLC, Brookhaven, MS; William Greving, Greving Farms Inc., Prairie View, KS. Strengthening Conservation through the 2012 Farm Bill On February 28, 2012, the Committee held a hearing to review performance of USDA agriculture conservation programs. The witnesses on the first panel were: Bruce Nelson, Farm Service Agency, USDA, Washington, DC; David White, Chief, Natural Resources Conservation Service, USDA, Washington, DC., The witnesses on the second panel were: Jeff Trandahl, National Fish and Wildlife Foundation, Washington, DC; Becky Humphries, Great Lakes/Atlantic Regional Office, Ducks Unlimited, Inc., Ann Arbor, MI; Dean Stoskopf, Stoskopf Farms, Hoisington, KS; Carl Mattson, George Mattson Farms, Chester, MT; Darrel Mosel, Land Stewardship Project, Gaylord, MN; Earl Garber, National Association of Conservation Districts, Washington, DC. Healthy Food Initiatives, Local Production, and Nutrition On March 7, 2012, the Committee held a hearing to examine policies to promote regional and local agricultural markets and improve access to healthy foods, and to review federal food assistance programs. The witness on the first panel was: Honorable Thomas Vilsack, Secretary, USDA, Washington, DC. The witnesses on the second panel were: Dan Carmody, Eastern Market Corporation, Detroit, MI; Ronald McCormick, Sustainable Agriculture, Produce, Floral and Local Sourcing, Wal-Mart Stores, Bentonville, AR; Jody Hardin, Grady, AR; Anne Goodman, Cleveland Food Bank, Cleveland, OH; John Weidman, One Penn Center, Philadelphia, PA. Risk Management and Commodities in the 2012 Farm Bill On March 15, 2012, the Committee held a hearing to examine risk management and commodity programs. The witness on the first panel was: Michael Scuse, Acting Under Secretary, Farm and Foreign Agricultural Services, USDA, Washington, DC. The witnesses on the second panel were: Hope Hills, Spicebush Creek Farms, Bangor, MI; Jarvis Garetson, Copeland, KS; Bob Carden, Carden & Associates, Inc, Winter Haven, FL; Steve Rutledge, Farmers Mutual Hail Insurance Company, West Des Moines, IA. The witnesses on the third panel were: Steve Wellman, American Soybean Association, Syracuse, NE; Pam Johnson, National Corn Growers Association, Floyd, IA; Erik Younggren, National Association of Wheat Growers, Hallock, MN; Jimbo Grissom, Western Peanut Growers Association, Seminole, TX; Travis Satterfield, Satterfield Farms, Benoit, MS; Chuck Coley, National Cotton Council, Vienna, GA. The witnesses on the third panel were: Roger Johnson, National Farmers Union, Washington, DC; Bob Stallman, American Farm Bureau Federation, Washington, DC; Ryan Best, Future Farmers of America, Portales, NM. Committee Consideration On April 26, 2012, the Committee met in open session to mark up the legislation. Those members in attendance included: Senators Stabenow, Roberts, Leahy, Harkin, Conrad, Baucus, Nelson, Brown, Casey, Klobuchar, Bennet, Gillibrand, Lugar, Cochran, Chambliss, Johanns, Boozman, Grassley, Thune and Hoeven. Committee Members made opening statements starting at 10:44 a.m. A substitute amendment containing a Manager's Amendment to the Committee Print was accepted by voice vote, with Senators Chambliss, Boozman, and Cochran recorded as voting no. The substitute was considered the original text for the purpose of further amendment. The Committee proceeded by considering amendments to each title of the legislation. TITLE XII--MISCELLANEOUS An amendment was offered by Senator Chambliss to amend the Immigration and Nationality Act to provide for the temporary employment of foreign agricultural workers. The amendment was withdrawn. An amendment was offered by Senator Nelson with Senator Johanns to clarify areas classified as rural for the Rural Housing Act. The amendment was withdrawn. An amendment was offered by Senator Boozman to enable the Secretary of Agriculture to determine whether major rules promulgated by any Federal agency could have a negative effect on access to affordable food. The amendment was withdrawn. An amendment was offered by Senator Boozman to transfer regulatory authority over child labor regulations for agriculture from the Secretary of Labor to the Secretary of Agriculture. The amendment was withdrawn. An amendment was offered by Senator Baucus with Senators Nelson, Klobuchar, and Boozman to clarify payment terms for sales of agricultural commodities or products to Cuba under the Trade Sanctions Reform and Export Enhancement Act of 2000. The amendment was withdrawn. TITLE II--CONSERVATION An amendment was offered by Senator Bennet to allow the Secretary of Agriculture to waive eligible entity contribution requirements for agricultural land easements of special significance. The amendment was withdrawn. TITLE III--TRADE An amendment was offered by Senator Johanns to require a USDA study on the creation of an Under Secretary for Trade and Foreign Agricultural Affairs. The amendment was adopted by voice vote. TITLE X--HORTICULTURE No amendments pertaining to the horticulture title were offered. TITLE VII--RESEARCH No amendments pertaining to the research title were offered. TITLE V--CREDIT No amendments pertaining to the credit title were offered initially. After it was closed, Senator Brown asked for unanimous consent to revisit the title. An amendment was offered by Senator Brown to provide USDA with the authority to conduct pilot projects on a limited scale to test different approaches that could improve program delivery and consumer service. The amendment was adopted by voice vote. TITLE VI--RURAL DEVELOPMENT An amendment was offered by Senator Casey to assist in production of locally and regionally produced food through the RMAP program. The amendment was withdrawn. Prior to a vote on final passage of the bill, Senator Brown asked unanimous consent to revisit title VI to offer an amendment. He offered an amendment to create a temporary task force directed to help make USDA rural development programs more accessible and user-friendly. The amendment was withdrawn. TITLE VIII--FORESTRY No amendments pertaining to the forestry title were offered. TITLE IX--ENERGY An amendment was offered by Senator Conrad with Senator Lugar to provide mandatory funding for agricultural energy programs. A second degree amendment was offered by Senator Chambliss to strike the language that calls for an offset and instead uses the savings of the legislation to fund Senator Conrad's amendment. Senator Chambliss' second degree amendment was adopted by unanimous consent and Senator Conrad's amendment was adopted by voice vote, with Senator Roberts recorded as voting no. An amendment was offered by Senator Hoeven to confirm that USDA can provide REAP funds for blender pumps. The amendment was withdrawn. TITLE IV--NUTRITION An amendment was offered by Senator Brown on behalf of Senator Casey with Senators Gillibrand and Leahy to clarify the authority of the Secretary of Agriculture to purchase emergency food. After a discussion, an agreement was made to delay the consideration of the amendment before final passage of the bill to give USDA and the Secretary an opportunity to make an assessment of the amendment. An amendment was offered by Senator Boozman to close the LIHEAP loophole entirely and use part of the savings to increase reimbursements for school breakfast and lunches to offset increased costs from new nutrition standards. The amendment was withdrawn. An amendment was offered by Senator Gillibrand to protect children from harm due to SNAP cuts. The amendment was withdrawn. An amendment was offered by Chairwoman Stabenow on behalf of Senator Leahy to allow greater flexibility in the use of benefits for the purchase of community-supported agriculture (CSA) share. A second degree amendment was offered by Chairwoman Stabenow on behalf of Ranking Member Roberts. The second degree amendment was adopted by unanimous consent and the first degree amendment was adopted by voice vote. The Committee revisited the amendment offered by Senator Brown on behalf of Senator Casey with Senators Gillibrand and Leahy to clarify the authority of the Secretary of Agriculture to purchase emergency food. The amendment, as modified, was adopted by voice vote. Committee members were in agreement that the amendment should not adversely impact the $4 billion in deficit reductions from nutrition spending agreed to by members of the Committee. TITLE XI--CROP INSURANCE No amendments pertaining to the crop insurance title were offered. TITLE I--COMMODITIES An amendment was offered by Senator Baucus with Senators Conrad, Harkin, and Hoeven to make changes to the individual program under ARC. The amendment was adopted by voice vote. FINAL PASSAGE The legislation, as amended and subject to technical changes, was reported out by roll call vote of 16 yeas and 5 nays with the requisite quorum present, at which point the Committee adjourned. On May 24, 2012, the Committee held a business meeting to vote on changes to the legislation. Those members in attendance included: Senators Stabenow, Roberts, Leahy, Conrad, Nelson, Casey, Klobuchar, Bennet, Gillibrand, Lugar, Johanns, and Grassley. The bill as modified was ordered reported by voice vote. ESTIMATED COSTS In accordance with paragraph 11(a) of rule XXVI of the Standing Rules of the Senate and section 403 of the Congressional Budget Act of 1974, the Committee provides the following cost estimate, prepared by the Congressional Budget Office: Congressional Budget Office letter is attached as pages 49A through 49J. S. 3240--Agriculture Reform, Food, and Jobs Act of 2012 Summary: S. 3240 would amend and extend a number of major programs administered by the U.S. Department of Agriculture (USDA), including those addressing farm income support, food and nutrition, land conservation, trade promotion, rural development, research, forestry, energy, horticulture, and crop insurance. When combined with estimated spending under CBO's baseline projections for those programs, CBO estimates that enacting S. 3240 would bring total direct spending for those USDA programs to $970 billion over the 2013-2022 period--$23.1 billion less than we project would be spent if those programs were continued as under current law. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending. Enacting S. 3240 would not affect revenues. The act also would authorize appropriations over the 2013- 2017 period for existing and new USDA programs involving research and education, nutrition, trade promotion, rural development, credit assistance, forestry, and conservation initiatives. CBO estimates that implementing those provisions would cost about $29 billion over the next five years, assuming appropriation of the necessary amounts. S. 3240 contains no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA). The nontax provisions of S. 3240 would impose private- sector mandates, as defined in UMRA, on entities in the dairy industry and spectators of animal fighting ventures. Because the cost of some of the mandates would depend on future regulations, CBO cannot determine whether the aggregate cost of the mandates would exceed the annual threshold established in UMRA for private-sector mandates ($146 million in 2012, adjusted annually for inflation). Estimated cost to the Federal Government: The estimated budgetary impact of S. 3240--relative to CBO baseline projections--is shown in Table 1. The costs of this legislation fall within budget functions 150 (international affairs), 270 (energy), 300 (natural resources and environment), 350 (agriculture), 450 (community and regional development), and 600 (income security). TABLE 1.--SUMMARY OF ESTIMATED BUDGETARY EFFECTS OF S. 3240 AS PASSED BY THE SENATE ON JUNE 21, 2012 -------------------------------------------------------------------------------------------------------------------------------------------------------- By fiscal year, in millions of dollars-- ------------------------------------------------------------------------------------------------------------------------- 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2017 2013-2022 -------------------------------------------------------------------------------------------------------------------------------------------------------- CHANGES IN DIRECT SPENDING Estimated Budget Authority.... -93 -729 -2,852 -2,253 -2,222 -2,984 -2,838 -2,918 -2,871 -2,745 -8,149 -22,504 Estimated Outlays............. -24 -1,714 -2,956 -2,153 -2,209 -2,806 -2,774 -2,871 -2,870 -2,767 -9,055 -23,143 CHANGES IN SPENDING SUBJECT TO APPROPRIATION Estimated Authorization Level. 6,859 7,354 7,393 7,421 7,465 1,238 627 638 650 662 36,493 40,308 Estimated Outlays............. 2,845 5,165 6,606 7,096 7,325 4,693 2,450 1,172 816 677 29,036 38,844 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note: Components may not sum to totals because of rounding. Basis of estimate: For this estimate, CBO assumes that S. 3240 will be enacted around the end of fiscal year 2012. The legislation would provide direct spending authority for most of the USDA programs authorized, amended, or created by the legislation through the 2013-2017 period. Following the baseline projection rules of section 257 of the Balanced Budget and Emergency Deficit Control Act, CBO estimates the 10-year costs of S. 3240 by assuming that most of those programs continue to operate beyond that five-year authorization period. A description of the major budgetary effects of each title of the act, including changes in direct spending for mandatory programs and changes in spending that are subject to future appropriation for discretionary programs, was provided in CBO's cost estimate for S. 3240 as introduced on May 24, 2012. Direct Spending CBO's estimates of the changes in direct spending that would result from enacting the legislation are presented in Table 2. All estimates are relative to CBO's March 2012 baseline projections for spending by mandatory agriculture programs. That baseline assumes that the agriculture programs authorized by the most recent farm bill (Public Law 110-246) continue to operate beyond their statutory expiration dates through 2022. (The 2008 farm bill established authorizations through 2012 for most such programs.) TABLE 2.--ESTIMATED EFFECTS ON DIRECT SPENDING FOR S. 3240 AS PASSED BY THE SENATE ON JUNE 21, 2012 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ By fiscal year, in millions of dollars-- ----------------------------------------------------------------------------------------------------------------------------------------- 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2017 2013-2022 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN OUTLAYS FROM DIRECT SPENDING Title I--Commodity Programs End Direct Payments............................... 0 -4,958 -4,958 -4,958 -4,958 -4,958 -4,958 -4,958 -4,958 -4,958 -19,832 -44,622 End Countercyclical Payments...................... 0 0 -101 -127 -121 -123 -130 -137 -134 -135 -349 -1,008 End Average Crop Revenue Elections Payments....... 0 0 -863 -637 -470 -479 -452 -547 -632 -533 -1,970 -4,613 Agriculture Risk Coverage......................... 0 2,906 2,954 3,447 3,444 2,951 3,101 3,118 3,282 3,333 12,751 28,536 Dairy Program..................................... -31 -45 -42 -32 9 15 -6 19 45 9 -141 -59 Supplemental Agriculture Disaster Assistance...... -2 447 217 214 221 219 219 221 225 231 1,097 2,212 Other Commodity Provisions........................ 0 85 17 2 3 3 4 4 3 4 107 125 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title I............................... -33 -1,565 -2,776 -2,091 -1,872 -2,372 -2,222 -2,280 -2,169 -2,049 -8,336 -19,428 Title II--Conservation Conservation Reserve Program...................... 27 25 -399 -438 -531 -523 -512 -478 -497 -469 -1,316 -3,795 Conservation Stewardship.......................... -7 -50 -93 -129 -173 -221 -264 -307 -350 -393 -452 -1,987 Environmental Quality Incentives Program.......... -70 -89 -80 -92 -100 -111 -121 -101 -100 -100 -431 -964 Agricultural Conservation Easement................ -222 -72 226 304 211 123 72 56 47 64 447 809 Regional Conservation Partnership................. -3 -7 -8 -8 -10 -10 -10 -10 -10 -10 -36 -86 Other Conservation................................ 168 18 18 18 18 10 10 10 10 10 240 290 Repeal of Wildlife Habitat Incentives............. -18 -37 -47 -57 -66 -76 -85 -85 -85 -85 -225 -641 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title II.............................. -125 -212 -383 -402 -651 -808 -910 -915 -985 -983 -1,775 -6,374 Title IV--Nutrition Utility Allowances................................ 0 -130 -530 -540 -540 -540 -550 -550 -550 -560 -1,740 -4,490 Grant Programs.................................... 39 49 49 44 49 24 24 24 24 24 228 345 Retailer Equipment................................ -7 -8 -8 -8 -8 -8 -8 -8 -8 -8 -39 -79 Expiring Provisions............................... 33 49 29 23 15 15 15 15 15 15 149 224 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title IV.............................. 65 -41 -461 -482 -485 -510 -520 -520 -520 -530 -1,403 -4,000 Title VI--Rural Development Value-Added Marketing Grants...................... 0 0 5 8 12 12 8 4 1 0 25 50 Rural Microenterprise Program..................... 0 1 2 4 4 3 1 0 0 0 11 15 Rural Water and Waste Disposal.................... 0 3 14 13 7 6 5 2 0 0 37 50 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title VI.............................. 0 4 21 25 23 21 14 6 1 0 73 115 Title VII--Research, Extension, and Related Matters Organic Agriculture Research and Extension........ 8 13 16 16 16 8 3 0 0 0 69 80 Specialty Crop Research........................... 13 23 29 48 50 53 50 50 50 50 163 416 Beginning Farmer and Rancher Development.......... 4 9 14 17 17 13 8 4 0 0 60 85 Foundation for Food and Agriculture Research...... 10 20 20 30 20 0 0 0 0 0 100 100 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title VII............................. 34 64 79 111 103 74 61 54 50 50 391 681 Title VIII--Forestry.................................. 0 1 1 1 1 1 1 1 1 1 4 9 Title IX--Energy Biorefinery Assistance............................ 5 32 50 55 44 20 10 0 0 0 186 216 Rural Energy for America Program.................. 10 30 42 48 48 38 20 4 0 0 178 240 Biomass Research and Development.................. 1 5 16 25 26 25 21 10 1 0 73 130 Biomass Crop Assistance........................... 4 12 20 27 31 29 23 16 8 4 94 174 Other Energy Programs............................. -2 -1 12 6 4 1 0 0 0 0 19 20 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title IX.............................. 18 78 140 161 153 113 74 30 9 4 550 780 Title X--Horticulture Farmers Market and Local Food Promotion........... 20 20 20 20 20 0 0 0 0 0 100 100 National Clean Plant Network...................... 3 6 8 9 11 13 14 15 15 15 37 109 Specialty Crop Block Grants....................... 8 14 15 15 15 15 15 15 15 15 67 142 Other Horticulture................................ 1 2 2 2 2 0 0 0 0 0 9 9 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title X............................... 32 42 45 46 48 28 29 30 30 30 213 360 Title XI--Crop Insurance Supplemental Coverage Option...................... 0 32 306 354 345 385 382 395 404 398 1,037 3,001 CAT Premiums...................................... 0 -5 -45 -53 -54 -54 -55 -56 -57 -58 -157 -437 Enterprise Units.................................. 0 5 50 59 60 62 65 67 68 70 174 506 Adjustment in APH Yields.......................... 0 2 26 53 82 111 139 146 147 149 163 855 Stacked Income Protection for Cotton.............. 0 0 263 334 315 417 463 481 473 478 912 3,224 Peanut Revenue Crop Insurance..................... 0 3 26 30 30 30 30 30 30 30 89 239 Beginning Farmer Provisions....................... 0 2 16 20 21 25 27 27 27 28 59 193 Crop Production on Native Sod..................... 0 -1 -6 -13 -19 -25 -26 -26 -26 -26 -39 -168 Participation Effects of Commodity Programs....... -23 -220 -260 -294 -296 -263 -268 -272 -284 -289 -1,093 -2,469 Other Crop Insurance Provisions................... 9 30 37 35 33 9 -7 -17 -18 -18 144 93 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title XI.............................. -14 -152 413 525 517 697 750 775 764 762 1,289 5,036 ----------------------------------------------------------------------------------------------------------------------------------------- Title XII--Miscellaneous Outreach Tor Socially Disadvantaged Farmers....... 3 4 5 5 5 2 1 0 0 0 22 25 Sheep Production and Marketing Grant.............. 1 1 0 0 0 0 0 0 0 0 2 2 Noninsured Crop Disaster Assistance............... -5 63 -40 -52 -52 -52 -52 -52 -52 -52 -86 -346 ----------------------------------------------------------------------------------------------------------------------------------------- Subtotal, Title XII............................. -1 68 -35 -47 -47 -50 -51 -52 -52 -52 -62 -319 Total Changes in Direct Spending.............. -24 -1,714 -2,956 -2,153 -2,209 -2,806 -2,774 -2,871 -2,870 -2,767 -9,035 -23,143 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Note: CAT = Catastrophic Crop Insurance; APH = Average Producer History. Components may not sum to totals because of rounding. Spending Subject to Appropriation CBO estimates that implementing the provisions of S. 3240 that authorize appropriations would cost $29 billion over the 2013-2017 period, assuming appropriation of the necessary funds. Those discretionary costs are displayed in Table 3. Most of those provisions were described in CBO's cost estimate of S. 3240 as introduced on May 24, 2012. TABLE 3.--ESTIMATED EFFECTS ON DISCRETIONARY SPENDING FOR IMPLEMENTING S. 3240 AS PASSED BY THE SENATE ON JUNE 21, 2012 ---------------------------------------------------------------------------------------------------------------- By fiscal year, in millions of dollars-- -------------------------------------------------------------- 2013 2014 2015 2016 2017 2013-2017 ---------------------------------------------------------------------------------------------------------------- CHANGES IN SPENDING SUBJECT TO APPROPRIATION Title I--Commodity Programs: Estimated Authorization Level................ 5 5 5 5 5 25 Estimated Outlays............................ 4 5 5 5 5 24 Title II--Conservation: Estimated Authorization Level................ 155 130 130 130 130 675 Estimated Outlays............................ 72 92 114 127 130 535 Title III--Trade: Estimated Authorization Level................ 2,124 2,751 2,754 2,757 2,761 13,146 Estimated Outlays............................ 805 1,967 2,492 2,653 2,719 10,636 Title IV--Nutrition: Estimated Authorization...................... 318 181 183 187 189 1,058 Level Estimated Outlays...................... 297 186 183 186 189 1,041 Title V--Credit: Estimated Authorization Level................ 91 91 91 99 99 471 Estimated Outlays............................ 84 91 91 98 99 463 Title VI--Rural Development: Estimated Authorization Level................ 1,120 1,128 1,137 1,144 1,156 5,685 Estimated Outlays............................ 158 527 812 980 1,065 3,542 Title VII--Research, Extension, and Related Matters: Estimated Authorization Level................ 2,078 2,102 2,128 2,154 2,180 10,641 Estimated Outlays............................ 1,061 1,675 2,110 2,136 2,162 9,144 Title VIII--Forestry: Estimated Authorization Level................ 590 590 590 590 590 2,949 Estimated Outlays............................ 265 413 501 560 590 2,330 Title IX--Energy: Estimated Authorization Level................ 228 228 228 228 228 1,140 Estimated Outlays............................ 29 96 160 205 228 718 Title X--Horticulture: Estimated Authorization Level................ 50 50 50 50 50 250 Estimated Outlays............................ 35 47 50 50 50 231 Title XII--Miscellaneous: Estimated Authorization Level................ 101 98 98 78 78 453 Estimated Outlays............................ 36 66 88 95 88 373 Total Changes: Estimated Authorization Level............ 6,859 7,354 7,393 7,421 7,465 36,493 Estimated Outlays........................ 2,845 5,165 6,606 7,096 7,325 29,036 ---------------------------------------------------------------------------------------------------------------- Note: Components may not sum to totals because of rounding. Pay-as-you-go-considerations: The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting on-budget direct spending or revenues. The net changes in outlays that are subject to those pay-as-you-go procedures are shown in Table 4. TABLE 4.--CBO ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS FOR S. 3240, THE AGRICULTURE REFORM, FOOD, AND JOBS ACT OF 2012, AS PASSED BY THE SENATE ON JUNE 21, 2012 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ By fiscal year, in millions of dollars-- ----------------------------------------------------------------------------------------------------------------------------------- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012-2017 2012-2022 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE OR DECREASE (-) IN THE DEFICIT Statutory Pay-As-You-Go Impact.............................. 0 -24 -1,714 -2,956 -2,153 -2,209 -2,806 -2,774 -2,871 -2,870 -2,767 -9,055 -23,143 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Estimated impact on state, local, and tribal governments: S. 3240 contains no intergovernmental mandates as defined in UMRA. In general, state, local, and tribal governments would benefit from the continuation of existing agricultural assistance and the creation of new grant programs. Estimated impact on the private sector: The nontax provisions of the act would impose private-sector mandates as defined in UMRA. Specifically, the act would: Expand reporting requirements on manufacturers of dairy products. Because manufacturers already report information about dairy products to USDA, CBO expects that the cost of reporting additional information would not be significant. Impose mandates on dairy handlers that purchase milk from dairy producers participating in the Dairy Market Stabilization Program (DMSP). Under the DMSP, when producer margins fall below a designated amount, handlers would be required to report information to USDA and reduce payments for milk to participating dairy producers. In addition, the program would require handlers to pay to USDA the amount by which the payment was reduced. According to information from industry sources, the cost for handlers to collect and report information under the DMSP could amount to hundreds of millions of dollars annually, depending on regulations to be issued by USDA. Prohibit individuals from attending animal fighting ventures (defined as any event that involves a fight between at least two animals and is conducted for purposes of sport, wagering, or entertainment). Currently, sponsoring an animal fighting venture involving live birds is permitted, under certain conditions, in states and territories where such events would not violate the laws of the state or territory. Because animal fighting ventures are banned in all states and the District of Columbia, CBO expects that the cost of the prohibition would be small. Because the compliance cost for dairy handlers would depend on future regulations, CBO has no basis to determine whether the aggregate cost of the mandates in the act would exceed the annual threshold established in UMRA for private-sector mandates ($146 million in 2012, adjusted annually for inflation). Previous CBO estimate: On May 24, 2012, CBO transmitted a cost estimate for S. 3240, the Agriculture Reform, Food, and Jobs Act of 2012, as introduced in the United States Senate on May 24, 2012. CBO estimated that version of the legislation, when combined with estimated spending under CBO's baseline projections for the mandatory agriculture and nutrition programs included in the act, would bring total direct spending for those USDA programs to $969 billion over the 2013-2022 period--S23.6 billion less than we projected would be spent if those programs were continued as under current law. The Senate passed S. 3240 on June 21, 2012, with several amendments. CBO estimates that those amendments would increase direct spending by $450 million over 10 years, compared with the version of the legislation as introduced (see Table 5). Taking into account the estimated outlay effects of the adopted amendments, mandatory spending under S. 3240 for USDA programs would be $970 billion over the 2013-2022 period--$23.1 billion less than estimated under current law. Table 5 itemizes the costs of the amendments adopted by the Senate. S. 3240, as passed by the Senate, also includes several amendments that would authorize more discretionary spending compared with the version of the legislation introduced on May 24. 2012. CBO estimates that discretionary spending under the act would total $29 billion over the 2013-2017 period, or $590 million more than for S. 3240 as introduced, assuming appropriation of the necessary amounts. Those additional authorizations of appropriations include: $100 million a year to combat bark beetles on forest land; $20 million a year to promote maple syrup production; $25 million a year to research poultry feed; and $10 million to purchase pulse (certain grain legume) crops for the School Lunch Program. Other provisions of S. 3240 would require USDA to study a variety of issues, establish a USDA Office of Tribal Relations, and amend the operation of various discretionary USDA programs. TABLE 5.--CBO ESTIMATE OF THE IMPACT ON DIRECT SPENDING OF AMENDMENTS TO S. 3240 ADOPTED BY THE SENATE ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ By fiscal year, in millions of dollars-- ----------------------------------------------------------------------------------------------------------------------------------------------------------- 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2017 2013-2022 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN DIRECT SPENDING FOR S. 3240 AS INTRODUCED ON MAY 24, 2012 Estimated Budget Authority.......... 295 -1,352 -2,909 -2,305 -2,272 -3,000 -2,855 -2,934 -2,888 -2,764 -8,542 -22,983 Estimated Outlays................... 338 -2,092 -3,087 -2,226 -2,270 -2,869 -2,812 -2,897 -2,884 -2,795 -9,337 -23,593 AMENDMENTS ADOPTED AFFECTING DIRECT SPENDING Manager's Amendment: Estimated Budget Authority...... -355 410 22 18 18 18 19 19 19 21 113 209 Estimated Outlays............... -353 260 95 39 20 30 17 18 15 31 61 172 Improve Livestock Forage Disaster Program: Estimated Budget Authority...... 0 11 5 5 6 6 6 6 6 6 27 57 Estimated Outlays............... 0 11 5 5 6 6 6 6 6 6 27 57 Strengthen Rural Communities: Estimated Budget Authority...... -33 83 33 33 33 0 0 0 0 0 149 149 Estimated Outlays............... -9 0 20 32 40 34 22 10 1 0 83 150 Organic Crop Price Elections For Crop Insurance: Estimated Budget Authority...... 0 1 1 1 1 1 1 1 1 1 4 9 Estimated Outlays............... 0 0 1 1 1 1 1 1 1 1 3 8 Disaster Assistance for 2012 Fruit Losses: Estimated Budget Authority...... 0 120 0 0 0 0 0 0 0 0 120 120 Estimated Outlays............... 0 108 12 0 0 0 0 0 0 0 120 120 Conservation Compliance for Crop Insurance: Estimated Budget Authority...... 0 -2 -4 -6 -9 -9 -9 -9 -9 -9 -21 -66 Estimated Outlays............... 0 0 -2 -4 --6 -9 -9 -9 -9 -9 -12 -56 Total Changes: Estimated Budget Authority...... -388 623 57 51 49 16 17 17 17 19 392 478 Estimated Outlays............... -362 379 131 73 61 63 37 26 14 29 282 450 CHANGES IN DIRECT SPENDING FOR S. 3240 AS PASSED BY THE SENATE ON JUNE 21,2012Estimated Budget Authority.......... -93 -729 -2,852 -2,253 -2,222 -2,984 -2,838 -2,918 -2,871 -2,745 -8,149 -22,504 Estimated Outlays............... -24 -1,714 -2,956 -2,153 -2,209 -2,806 -2,774 -2,871 -2,870 -2,767 -9,055 -23,143 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Estimate prepared by: Federal Costs: Jim Langley, Greg Hitz, Dave Hull, Kathleen FitzGerald, Emily Holcombe, Ann Futrell, Dan Hoople, and Jeff LaFave; Impact on State, Local, and Tribal Governments: J'nell L. Blanco and Lisa Ramirez- Branum; Impact on the Private Sector: Amy Petz. Estimate approved by: Peter H. Fontaine, Assistant Director for Budget Analysis. REGULATORY IMPACT STATEMENT In compliance with subsection (b)(2) of paragraph 11 of rule XXVI of the Standing Rules of the Senate, the Committee states that, in its opinion, it is necessary to dispense with the requirements of paragraph (1) of that subsection in order to expedite the business of the Senate. The Committee further notes that the programs in the reported bill are, by and large, voluntary and are assistance-based not regulatory in nature and, thus, the Committee does not foresee significant regulatory impacts on groups or classes of individuals and businesses as a result of this legislation. The regulations issued pursuant to the implementation of the bill will prescribe and define the programs authorized. Significant new regulatory burdens are not expected to result from the regulations issued pursuant to the reported bill. NUMBER OF PERSONS COVERED The Committee notes that nearly every American will be affected in some way by the reported legislation as it pertains to the production of food, feed, fiber and fuel for the nation, as well as providing assistance for conserving natural resources, promoting international trade, providing assistance to low-income Americans to feed themselves and their families, provides economic development assistance for rural communities and renewable energy, as well as for food and agricultural- based research. ECONOMIC IMPACT The Committee concludes that the reported legislation will not have an adverse economic impact on the nation. The reported bill provides assistance to farmers, ranchers, rural communities, rural businesses, low-income families and universities. The reported legislation helps to support 16 million jobs in the U.S. and will have a positive impact on the national economy. PRIVACY The Committee concludes that the reported legislation will not have a negative impact on the personal privacy of individuals. PAPERWORK The Committee does not anticipate a major increase in paperwork burdens resulting from the reported legislation. In fact, the reported legislation contains numerous efforts to eliminate, consolidate and otherwise streamline programs and improve the efficiency of administration, which the Committee intends to help reduce overall paperwork for participants in the programs contained within the reported legislation. CONGRESSIONALLY DIRECTED SPENDING In compliance with paragraph 4(b) of rule XLIV of the Standing Rules of the Senate, the Committee states that, in its opinion, the reported bill does not contain any congressionally directed spending items requiring report. SECTION-BY-SECTION ANALYSIS Section 1. Short Title; Table of Contents This section supplies the short title for the legislation, ``Agriculture Reform, Food and Jobs Act of 2012'' and the table of contents for the entire legislation. SUBTITLE A--REPEALS AND REFORMS Sections 1101, 1102 and 1103 repeal direct payments, counter-cyclical payments and Average Crop Revenue Election program, respectively, effective with the 2013 crop year. Section 1104. Definitions Section 1104 provides definitions for various terms used in this subtitle. ``Actual Crop Revenue'' with respect to a covered commodity for a crop year means the amount determined by the Secretary under section 1105(c)(4) that establishes whether agriculture risk coverage payments are required to be made for that crop year. ``Agriculture Risk Coverage Guarantee'' with respect to a covered commodity for a crop year means the amount determined by the Secretary under section 1105(c)(4) to determine whether payments are required to be made for that crop year. ``Agriculture Risk Coverage Payment'' means a payment for a covered commodity made under section 1105(c). ``County Coverage'' is for the purposes of agriculture risk coverage under section 1105 and means the level of coverage determined using the total quantity of all acreage in a county of the covered commodity that is planted or prevented from being planted by a producer with the yield determined by the average county yield. ``Covered Commodity'' means wheat, corn, grain, sorghum, barley, oats, long grain rice, medium grain rice, pulse crops, soybeans, other oilseeds, and peanuts. Additionally, the Secretary is instructed to study the feasibility of including popcorn as a covered commodity by 2014 and if the Secretary determines it to be feasible, shall designate popcorn as a covered commodity. ``Eligible acres'' means all acres planted or prevented from being planted to covered commodities on a farm in any crop year. Eligible acres shall not exceed the average total acres planted or prevented from being planted to covered commodities and upland cotton on the farm for the 2009 through 2012 crop years. The Secretary shall provide for an adjustment to eligible acres to account for cropland coming out of Conservation Reserve Program contracts and to account for resource conserving rotations such as summer fallow. Agricultural land that has been used for the purpose of enriching land or conserving moisture in conjunction with a crop rotation practice between crop years 2009-2012 is an essential part of the definition of eligible land in the Agricultural Risk Coverage program proposed in this bill. It is the intent of the Committee that a land enriching crop such as alfalfa be included in a rotation practice included in the definition of eligible land. The Secretary is directed to specifically include alfalfa as an eligible crop as part of a rotation practice in this context when promulgating regulations to implement the Agricultural Risk Coverage program. ``Extra Long Staple Cotton'' means cotton that is produced from pure strain varieties of the Barbadense species or any hybrid of the species, or other similar types of extra-long staple cotton, designated by the Secretary, having characteristics needed for various end uses for which United States upland cotton is not suitable and grown in irrigated cotton-growing regions of the Unites States designated by the Secretary or other areas designated by the Secretary as suitable for the production of the varieties to types. ``Individual Coverage'' for purposes of the Agriculture Risk Coverage program means the level of coverage determined based on the sum of all of a producer's acreage in a county planted or prevented from being planted to a covered commodity and the yields associated with those acres. ``Medium Grain Rice'' includes short gain rice. ``Midseason price'' means the applicable national average price received by producers for the first 5 months of the applicable marketing year. ``Other Oilseed'' means a crop of sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, or any oilseed designated by the Secretary. ``Producer'' means an owner, operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is entitled to share, in the crop available for marketing from the farm, or would have shared the crop been produced. ``Pulse Crop'' means dry peas, lentils, small chickpeas, and large chickpeas. ``State'' means a State of the United States and includes the District of Columbia, the Commonwealth of Puerto Rico, and any other territory or possession of the United States. ``Transitional Yield'' has the meaning given the term in section 502(b) of the Federal Crop Insurance Act. Section 1105. Agriculture risk coverage Section 1105 authorizes Agriculture Risk Coverage (ARC) payments for the 2013 through 2017 crop years. Producers are provided an opportunity to make a one-time election to receive coverage at either the individual level or county level for all covered commodities and all acres under the control of the producer. The coverage election is binding on the producer through the 2017 crop year, so that new acreage coming under the producer's control would be subject to the coverage level elected by that producer and not a previous producer. Acreage leaving the producer's control would no longer be subject to that producer's election but would be subject to the subsequent producer's election. Furthermore, the Secretary is required to ensure that producers are not able to reconstitute or transfer control of acreage in an attempt to alter or reverse the coverage election. ARC payments are required to be made when a producer's actual crop revenue for a covered commodity is less than the ARC coverage guarantee. The guarantee is set as 89 percent of the benchmark revenue, which is defined as the product obtained by multiplying the 5-year Olympic yield (individual or county) by the 5 year Olympic national average price. The payment rate is the difference between the agriculture risk coverage guarantee for the covered commodity and the actual crop revenue for the covered commodity, but not to exceed 10 percent of the benchmark revenue for the crop year for the covered commodity. This subsection establishes the ARC coverage band as between 89 percent and 79 percent of the benchmark or rolling historic revenue. Payments for individual coverage are made on 65 percent of the eligible acres that were planted to the covered commodity or 45 percent for those acres that were prevented from being planted. Payments for county coverage are made on 80 percent of the eligible acres that were planted to the covered commodity or 45 percent for those acres that were prevented from being planted. Finally, the Secretary is required to use all information to check for anomalies in making payments, calculate a separate guarantee for irrigated and non-irrigated commodities, differentiate by type or class the national average price of sunflower, barley (using malting barley values) and wheat, and assign a yield for producers who do not have a yield history or whose yield is an unrepresentative average yield. The Committee intends for the Farm Service Agency (FSA) to administer ARC through its existing system, but expects very close cooperation and coordination between FSA and the Risk Management Agency (RMA), especially with regard to sharing information and reporting by farmers. For the yields in the ARC calculation, the Committee intends that USDA utilize information from RMA and the Federal Crop Insurance Corporation (FCIC) as much as possible and where available. Individual yields should be based on the yields the producer reports to RMA for crop insurance and that are used to calculate the producers' Actual Production History. The Committee does not intend for USDA to duplicate yield information collection efforts between RMA and FSA. As discussed above, the eligible acres concept is a significant departure from current policy regarding base acres. The Committee does not intend for FSA to utilize any aspect of historical base acres in the administration and operation of ARC. Eligible acres are those planted or prevented from being planted to covered commodities on the FSA farm. Eligible acres are not to exceed the average annual total acres planted to covered commodities and upland cotton during the 2009 through 2012 crop years. Specifically, this is a cap on the total number of planted acres that can be eligible for payments under ARC, rather than a revised or new base acre calculation. Payments will not be made on eligible acres unless they are planted to a covered commodity and the ARC program is triggered for that covered commodity. ARC payments are calculated using all of a producer's planted or prevented acres in a county, (i.e., on an enterprise unit basis), however the total acres eligible for ARC payments planted cannot exceed the eligible acre cap on a FSA farm. While the decision to opt for individual or county coverage applies to all farms under control of a producer and while benefits of ARC are calculated on an enterprise unit basis, the acreage cap is to be applied on a farm by farm basis. The following is an example of how this acreage cap would be applied to two separate farms under the control of a single producer: Farm #1 has a 2009-2012 planting history of 200 acres of covered commodities and upland cotton. These are the eligible acres for Farm #1. In 2014, Farm #1 plants 100 acres of soybeans and 100 acres of wheat for a total of 200 planted acres. If this farm is eligible for an ARC payment for wheat or soybeans, there would be no prorate factor because this producer is planting the same number of acres as the eligible acreage cap for that farm. Farm #2, which is operated by the same producer as Farm #1, has a 2009-2012 planting history of 700 acres of covered commodities and upland cotton. These are the eligible acres for Farm #2. In 2014, Farm #2 plants 400 acres of soybean and 400 acres of wheat for a total of 800 planted acres. This exceeds the eligible acreage cap by 100 acres, so if the farm is eligible for an ARC payment for wheat or soybeans, there would be a prorate factor of 87.5% (700 acre cap/800 acres planted). If the soybean actual revenue is less than the soybean guarantee, but the wheat actual revenue is more than the wheat guarantee, the producer will receive payment on 450 soybean acres, 100 of the 450 soybean acres receiving payment will be on Farm #1 and the remaining 350 acres receiving payment will be on Farm #2 (350 acres is the prorate factor of 87.5% times 400 acres of planted soybeans on Farm #2). If the soybean payment is $25 per acre and the producer elected county coverage then the producer will be paid $9,000 ($25 multiplied by 80% multiplied by 450 acres). If the producer receives less than 100 percent of the crop production for either of the farms due to, but not limited to partnership or share-crop agreements, then the producer's share of the eligible acres for each farm will be proportional to the producer's share of the crop production. Section 1106. Producer agreement required as condition of provision of payments Section 1106 continues current law regarding conservation compliance, acreage reporting and transfers of interest for eligibility for ARC payments. Producers are required to comply with applicable conservation and wetland protections and effectively control noxious weeds and otherwise maintain the land in accordance with sound agricultural practices as determined by the Secretary. As in current law, there is no penalty with respect to benefits assessed against producers on the farm for an inaccurate acreage or production report. Data that is reported by the producer must meet the requirements under the Federal Crop Insurance Act without additional submission to the Department. Additionally, adequate safeguards to protect the interests of tenants and sharecroppers are required. Section 1107. Period of effectiveness Section 1107 establishes that the programs and provisions of this subtitle are applicable through the 2017 crop year. SUBTITLE B--MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS Section 1201. Availability of nonrecourse marketing assistance loans for loan commodities In general, section 1201 continues current law through 2017 authorizing the Secretary to make nonrecourse marketing assistance loans for loan commodities. The section defines ``Loan Commodity'' same as current law, except replaces ``wool'' with ``graded wool'' and ``non-graded wool.'' The only revision to current law in this section involves applying the same conservation compliance provisions applicable to ARC to this program such that to be eligible to receive marketing assistance loans producers must comply with applicable conservation and wetland protections and effectively control noxious weeds and otherwise maintain the land in accordance with sound agricultural practices as determined by the Secretary. Similarly, it sets requirements governing transfers of interest, requires acreage and production reports, provides for adequate safeguards to protect the interests of tenants and sharecroppers and incorporates special loan, storage, handling, and marketing rules for peanuts. Section 1202. Loan rates for nonrecourse marketing assistance loans Section 1202 continues current law establishing loan rates for the loan commodities. The loan rates are the same as provided for in the 2008 Farm Bill except the upland cotton loan rate which has been adjusted due to the WTO dispute with Brazil. The section also continues current law establishing single loan rates in each county for each of the ``other oilseeds.'' The following are the loan rates for the 2013-2017 crop years: Wheat, $2.94 per bushel (Same as current law) Corn, $1.95 per bushel (Same as current law) Grain Sorghum, $1.95 per bushel (Same as current law) Barley, $1.95 per bushel (Same as current law) Oats, $1.39 per bushel (Same as current law) Upland Cotton (changed from 2008 Farm Bill from $0.52 per pound): for the 2013 and each subsequent crop year, the simple average of the adjusted prevailing world price for the 2 immediately preceding the next domestic plantings, but in no case less than $0.47 per pound or more than $0.52 per pound. Extra-long staple cotton, $.7977 per pound (Same as current law) Long grain rice, $6.50 (Same as current law) Medium grain rice, $6.50 (Same as current law) Soybeans, $5.00 per bushel (Same as current law) Other oilseeds, $10.09 per hundredweight (Same as current law) Dry Peas, $5.40 per hundredweight (Same as current law) Lentils, $11.28 per hundredweight (Same as current law) Small chickpeas, $7.43 per hundredweight (Same as current law) Large chickpeas, $11.28 per hundredweight (Same as current law) Graded wool, $1.15 per pound (Same as current law) Non-graded wool, $0.40 per pound (Same as current law) Mohair, $4.20 per pound (Same as current law) Honey, $0.69 per pound ( $0.03 cents lower than current law) Peanuts, $355 per ton (Same as current law) Section 1203. Terms of Loans Section 1203 continues current law setting marketing assistance loan terms at nine months and prohibiting extensions. Section 1204. Repayment of Loans Section 1204 continues current law regarding repayment of loans. Producers are required to repay a marketing assistance loan for a loan commodity (other than upland cotton, long grain rice, medium grain rice, extra long staple cotton, peanuts, and confectionary and each other kind of sunflower seed (other than oil sunflower seed)) at a rate established for the commodity plus interest, calculated based on the average market prices for the loan commodity during the preceding 30 day period. The loan repayment rate for extra-long staple cotton is the loan rate established under section 1202, plus interest. In addition, it requires the Secretary to issue by regulation a formula to determine the prevailing world market price for upland cotton, long grain rice, and medium grain rice, and a mechanism by which the Secretary shall announce periodically those prevailing world market prices. Current statutory requirements regarding adjustment to the prevailing world market prices for long grain rice, medium grain rice and upland cotton are continued. The Secretary is required to establish a mechanism for determining and announcing these adjustments in order to avoid undue disruption in the United States market. Current law regarding the repayment rates for confectionery and other kinds of sunflower seeds (other than oil sunflower seed) at a rate that is lesser of the loan rate established under section 1202, plus interest, or the repayment rate established for oil sunflower seed is continued. The Secretary will temporarily adjust repayment rates in the event of a severe disruption to marketing, transportation, or related infrastructure. Section 1205. Loan deficiency payments Section 1205 continues current law through 2017 authorizing the Secretary to make loan deficiency payments available to producers who agree to forego marketing loans for the same commodities. It authorizes loan deficiency payments for producers of unshorn pelts and hay and silage, although such producers are not eligible for marketing loans. The section also establishes the computation for loan deficiency payments as the product of the payment rate for commodity multiplied by the quantity of the commodity produced by using the rate in effect as of the date the producer requests payment. Section 1206. Payments in lieu of loan deficiency payments for grazed acreage Section 1206 continues current law through 2017 authorizing the Secretary to make payments to producers of wheat, barley, oats, or triticale if the producer agrees to use the acreage for grazing livestock and to forgo any other harvesting. Payments must be made at the same time as loan deficiency payments, in an amount that is the product of the loan deficiency payment rate and the payment quantity, as determined by multiplying the quantity of grazed acreage by the payment yield. Separate rules apply for determining the triticale payment amount. Such acreage is not eligible for a crop insurance indemnity or noninsured crop assistance. Section 1207. Special marketing loan provisions for upland cotton. Section 1207 continues current law through 2017 requiring an import quota program for upland cotton whenever the Secretary determines that, for any consecutive four-week period, the Friday through Thursday average price for the lowest priced U.S. growth delivered C.I.F. Northern Europe exceeds the Northern Europe price by more than 1.25 cents per pound. This section prohibits the Secretary from adjusting the average price quotation for the value of any certificates during any month for which the Secretary estimates the season- ending U.S. upland cotton stocks-to-use ratio to be below 16 percent. In making such estimates, the Secretary is required to estimate and report the season-ending U.S. stocks-to-use ratio on a monthly basis. The Secretary must continue to provide economic adjustment assistance to domestic users of upland cotton in the form of payments for all documented use of that upland cotton during the previous monthly period, regardless of the origin of the upland cotton. Assistance provided should be 3 cents per pound and made available only to domestic users of upland cotton that certify that the assistance is used to acquire, construct, install, modernize, develop, convert, or expand land, plant, buildings, equipment, facilities, or machinery. Section 1208. Special competitive provisions for extra long staple cotton Section 1208 continues current law through 2017 requiring a program to expand the domestic use of extra-long staple cotton produced in the U.S., increase exports, and ensure that the U.S. remains competitive in world markets. The Secretary makes payments when, for a four week period, the world market price for the lowest priced extra-long staple cotton is below the prevailing price for a competing growth of extra-long staple cotton is less than 134 percent of the loan rate for extra-long staple cotton. Section 1209. Availability of recourse loans for high moisture feed grains and seed cotton Section 1209 continues current law through 2017 authorizing the Secretary to make recourse loans available to producers of corn and grain sorghum who normally harvest all or a portion of their crop in a high moisture state. Producers must present certified scale tickets or field or other physical measurements of the standing or stored crop. In regions without certified commercial scales, producers must certify that they were the owners of the feed grain and comply with established deadlines. The section defines ``high moisture state'' as corn or grain sorghum having moisture content in excess of Commodity Credit Corporation standards for marketing assistance loans. The Secretary is also authorized to make available recourse seed cotton loans on any production. Section 1210. Adjustments of loans. Section 1210 provides that the programs and provisions of this subtitle are applicable through 2017, and authorizes the Secretary to make adjustments in the loan rates for any commodity based on differences in grade, type, quality, location, and other factors. SUBTITLE C--SUGAR Section 1301. Sugar Section 1301 continues current law through 2017 requiring the Secretary to make loans available to sugarcane processors at 18.75 cents per pound for raw cane sugar, and to sugar beet processors at a rate that is 128.5 percent of the loan rate for raw cane sugar. The Secretary is authorized to reduce the loan rates if negotiated reductions in domestic and export subsidies of other major sugar producing countries in the aggregate exceed the commitments made as part of the Agreement on Agriculture. It also authorizes the Secretary to provide that refined sugars, whether from beets or cane, are substitutable for purposes of the refined sugar and sugar containing products re-export programs. In addition, the Secretary will annually estimate: the quantity of sugar subject to human consumption in the United States; the quantity of sugar that would provide reasonable carryover stocks; the quantity available from carry- in stocks for human consumption; the quantity of sugar available from domestic processing of sugarcane, sugar beets, and in-process beet sugar; and the quantity of sugars, syrups, and molasses that will be imported for human consumption. SUBTITLE D--DAIRY PART I--DAIRY PRODUCTION MARGIN PROTECTION PROGRAM AND DAIRY MARKET STABILIZATION PROGRAMS The United States dairy industry should be allowed to grow and compete globally to help ensure a strong American agricultural economy. The Committee recognizes the importance of both the producer and processor sectors of the dairy industry. The Secretary should use his authority granted in this subtitle and his discretion to ensure the entire dairy industry is strengthened by the new programs and policies. Section 1401. Definitions Section 1401 defines the terms used in the Dairy Production Margin Protection Program (DPMPP) and Dairy Market Stabilization Program (DMSP): ``Milk price'' is the ``all-milk price,'' or average price received by dairy operations across the United States. ``Average feed cost'' is calculated based on specific national corn, soybean meal, and alfalfa prices. ``Actual Dairy Production Margin'' is the difference between the ``all-milk price'' and the ``average feed cost.'' ``Dairy operation'' means 1 or more producers that produce and market milk as a single operation, and each dairy producer shares in the pooling of resources and a common ownership structure, is at risk in the production of milk, and contributes land, labor, management, equipment, or capital to the dairy operation. The Secretary is allowed to determine additional ownership structures. ``Handler'' means an initial handler that is the initial individual or entity making payments directly to a dairy operation. ``Consecutive 2-month period'' refers to the 2-month period consisting of January and February, March and April, May and June, July and August, September and October, November and December. ``Basic Production History'' is the production history determined for a participation operation for basic margin protection ``Annual Production History'' is the production history determined for a participating dairy operation when the operation purchases supplemental margin protection. Section 1402. Calculation of average feed cost and actual dairy producer margins Section 1402 establishes that the national average feed cost shall be calculated by the Secretary, based on U.S. prices for corn, soybean meal, and alfalfa each month. In the margin protection program, actual dairy operation margin is calculated by the Secretary by subtracting a defined, national average feed cost from the all-milk price for defined consecutive 2- month periods. In the stabilization program, actual dairy operation margin is calculated by the Secretary by subtracting the average feed cost from the all-milk price for the preceding month. The Committee expects the Secretary to collect the data necessary for the administration, functionality, and success of the new programs as soon as practicable. SUBPART A--DAIRY PRODUCTION MARGIN PROTECTION PROGRAM Section 1411. Establishment of dairy production margin protection program Section 1411 establishes the DPMP program, to provide assistance to dairy operations based on a calculated margin of milk price over feed costs. Basic margin protection is available to all operations with coverage for a $4.00 margin on 80 percent of production based on an established basic production history. Supplemental margin protection is available for purchase on an annual production history with subsidized premiums. An operation will have the opportunity to purchase supplemental coverage from a $4.50 margin up to an $8.00 margin in $0.50 increments on up to 90 percent (no less than 25 percent) of the annual production history. Section 1412. Participation of dairy operations in production margin protection program Section 1412 establishes that all operations are eligible for payments pursuant to the margin protection program, provided they sign up for basic or supplemental protection. Operations may opt for coverage through the Milk Income Loss Contract (MILC) established by FCEA of 2008, until June 2013 at modified support levels. Operations may participate in either MILC or DPMP program, but not both, through June 2013. Additionally, dairy operations may participate in either Livestock Gross Margin-Dairy (LGM-Dairy) or DPMP, but not both. There are no guarantees that LGM-Dairy funding will be available or that all producers will be able to get LGM-Dairy coverage when funding is available. The Committee extended the MILC program at modified levels until June 2013 to provide a transition period for producers while the Secretary finalizes rules for the new programs. The Department should notify MILC participants of the MILC program end date. The Committee intends for the Secretary to educate the dairy industry, including potential program participants, about the new options and obligations included in both the margin protection and market stabilization programs. The Committee encourages the Secretary to partner with market participants and State and local organizations to carry out the educational activities. The section also establishes an administration fee for the margin protection program. Fees will be used to cover costs to administer DPMP and DMSP and for USDA-administered dairy market transparency measures. The administration fee is waived in the case of limited resource farmers. The Committee intends for the provided program administrative fees to be used to supplement the Secretary's current budget for dairy programs, and not serve as the primary source of funding for program implementation. The Committee expects the fees to be used for providing additional staff and services only if necessary to expedite program implementation and to ensure sufficient staff for program administration. The Committee also intends for the Secretary to use the fees for providing consistent funding for transparency measures. Section 1413. Production history of participating dairy operations Section 1413 establishes the methods for calculating production histories for the basic and supplemental margin protection programs. It allows herd growth by annually updating production history for supplemental margin protection. The section also authorizes the Secretary to specify conditions for transferring production history of a dairy operation by sale or lease. It prohibits a purchaser or lessee from obtaining a different level of basic or supplemental protection coverage during the calendar year in which the transfer is made. These provisions are intended to ensure program integrity and not allow dairy operations to game the program. Section 1414. Basic margin protection Section 1414 provides that basic protection is available to all participating operations to receive a basic margin protection payment whenever actual dairy margin for a consecutive 2-month period is less than $4.00 per hundredweight (cwt) of milk. Operations will receive payments equal to the difference between $4.00 and the actual margin (when actual margin is less than $4.00) on 80 percent of base production. Section 1415. Supplemental margin protection Section 1415 allows a dairy operation participating in the basic margin protection program to annually purchase supplemental protection to cover higher margins in increments of $0.50 for margins between $4.50 and $8.00 on 25 percent to 90 percent of milk production. Operations must pay an annual premium for supplemental protection based on actual production. A discounted premium is offered on the first 4 million pounds of milk, which covers production from approximately 200 to 250 cows annually. The premiums are as follows: ------------------------------------------------------------------------ Premium/cwt (< 4 Premium/cwt (>4 Coverage Level million lbs) million lbs) ------------------------------------------------------------------------ $4.50 $0.01 $0.02 5.00 0.02 0.04 5.50 0.035 0.10 6.00 0.045 0.15 6.50 0.09 0.29 7.00 0.40 0.62 7.50 0.60 0.83 8.00 0.95 1.06 ------------------------------------------------------------------------ Participating operations will receive payment whenever the average actual margin for a defined consecutive two-month period is less than the selected coverage threshold. Payment is based on the difference between actual margin and guaranteed margin, multiplied by the selected coverage percentage and the lesser of the annual production history divided by 6, or the actual amount of milk marketed during the previous 2-month period. The Committee expects the Secretary to provide flexibility for producers when establishing payment plans for the new programs. Limited discretion is provided to design the new programs with flexibilities for producers, including the monthly payment of administrative fees and premium payments, or payment using other appropriate time periods to maximize program integrity and producer convenience. Where applicable and practicable, premium payments should be withheld from a producer's milk check. Section 1416. Effect of failure to pay premiums Section 1416 establishes that a participating operation that fails to pay the required administrative fees or premiums remains legally obligated to pay them and may not receive basic or supplemental margin protections payments until fees are fully paid. SUBPART B--DAIRY MARKET STABILIZATION PROGRAM Section 1431. Establishment of dairy market stabilization program Section 1431 creates the Dairy Market Stabilization Program to assist in balancing the supply of milk with demand when producers are experiencing low or negative operating margins. Subject to exceptions in Section 1436, when dairy margins fall below a certain level, the Secretary is required to have initial dairy handlers reduce the payments to dairy operations in order to encourage them to either scale back milk production temporarily or to avoid increasing production while margins are considered low or negative. The payment reductions are based on actual margin, according to the following schedule: ------------------------------------------------------------------------ Milk payment, greater of the Actual margin following ------------------------------------------------------------------------ >$5.00-