Is ARC-CO acting as a Safety Net Program? Evidence from Iowa

The Agricultural Act of 2014, referred to as the 2014 Farm Bill, is the legislative backbone of federal farm income support programs and agricultural disaster assistance programs. These programs, combined with federal crop insurance, are what is typically referred to as the farm safety net. As the debate has begun for the next version of the Farm Bill, policy discussions have centered on improving the effectiveness of the safety net. However, in previous Farm Bills, there had been a concerted effort to utilize decoupled agricultural support to ensure that US farm programs would meet World Trade Organization (WTO) standards. The commodity programs in the 1996 and 2002 Farm Bills were led by the direct payment programs-essentially fixed decoupled payments that flowed to agricultural producers, regardless of the agricultural economy. In the 2008 and 2014 Farm Bills, commodity programs were modified to react to conditions in the agricultural economy. Congress must determine how to balance decoupled agricultural programs, which are less responsive to the agricultural economy but more accepted in the WTO, against safety net agricultural programs, which are more responsive but also seen as more trade distorting.