Deck 4: Analyzing Economic Consequences of Farm Safety Net Programs in the 2014 Farm Bill

Question 1

Counter-cyclical programs are a primary component of the US farm financial safety net.

Answer 1

True
Explanation:The farm financial safety net offers risk management tools to producers. Many of these tools are counter-cyclical; they help reverse or soften the trend effects of the market cycle.

Question 2

Membership within _________________ is a means of diversifying and reducing the price volatility faced by any one producer.

A) the ARC-CO Program
B) the ARC-IC Program
C) a Cooperative Pool
D) the MALP Program
E) a Shallow Loss Coverage Program

Answer 2

C
Explanation:Membership within a Cooperative Pool is a means of diversifying and reducing the price volatility faced by any one producer.

Question 3

New taxes create consumptive and protective effects where net market value is completely lost to the entire economy. The tax policy is responsible for a net loss in efficiency, and we refer to this change as a deadweight loss. On the other hand, when subsidies are introduced into markets, the opposite effect occurs - the market experiences a net efficiency gain.

Answer 3

False
Explanation:Both new taxes and new subsidies create consumptive and protective effects where net market value is completely lost to the entire economy. The tax or subsidy policy is responsible for a net loss in efficiency, we refer to this change as a deadweight loss.

Question 4

In the 2014 Farm Bill, the Dairy Product Donation Program (DPDP)

A) is nearly identical to the 2008 Dairy Product Price Support (DPPS) program that it replaced.
B) is an insurance-style deficiency payment program. Qualified dairy producer participants cany choose to pay increased premiums for increased net income coverage. The program premiums are subsidized.
C) is a binding set of government-enforced regulations that structure and monitor the market relationship between milk handlers and milk producers.
D) serves two purposes: (1) the USDA dairy product purchases stimulates upward price pressure in the dairy market and, (2) it provides real assistance to food banks and related low-income nutrition programs.
E) provides financial assistance to dairy producers when pesticides or other residues contaminate the dairy farm's production, and a government agency compels the producer to remove his/her milk from the commercial market.

Question 5

In the the 2014 Farm Bill, Cross-Compliance conservation policy applies to

A) The PLC Commodity Program.
B) The ARC Commodity Program.
C) The MALP Commodity Program.
D) Subsidized Federal Crop Insurance.
E) All of the above.

Question 6

The Marketing Assistance Loan Program (MALP) is

A) similar in design to the US Sugar Program. MALP is provided to producers at a zero cost to US taxpayers.
B) a voluntary farm program within the 2014 Farm Bill where producers can borrow funds at low interest rates; the loans are secured by the value of harvested Title I commodities.
C) the one 2014 Farm Bill commodity program that is no longer subject to the ""Sodbuster"" Conservation Cross-Compliance provision.
D) a type of "insurance rider" to protect qualified producers from most of the specific risk exposure associated with paying an insurance deductible during an event (e.g., a crop yield disaster) requiring an insurance payout.
E) a traditional counter-cyclical program where farmers receive government pay-outs when market prices fall below legislated reference prices.

Question 7

USDA's Risk Management Agency (RMA)

A) is the primary USDA Agency who administers the PLC and ARC commodity programs.
B) detemines how the US manages Tariff- Rate-Quotas (TRQ's) to prevent excessive agricultural imports from entering the US. RMA regulates the fixed annual volume of an imported product at a low tariff rate. RMA also sets import amounts, beyond the initial TRQ quota, that are subject to a prohibitively-high tariff.
C) is the primary USDA Agency who administers the Supplemental Revenue Assistance (SURE) crop disaster program.
D) tasks include: 1) management of the Federal Crop Insurance Corporation (FCIC), 2) development and approval of insurance premium rates on current and new commodities, 3) administration of crop insurance subsidies on producer premiums and private insurers' expenses, and 4) the reinsurance of private insurers' losses.
E) is the primary USDA Agency who determines the type of price protection that can be offered to dairy producers participating in the Dairy Margin Protection program.

Question 8

Supplemental Agricultural Disaster Assistance Programs

A) are new crop insurance products offered to producers by USDA's Risk Management Agency.
B) provide financial assistance to dairy producers when pesticides or other residues contaminate the dairy farm's production, and a government agency compels the producer to remove his/her milk from the commercial market.
C) extend the farm safety net to a broader cross section of agricultural producers (including livestock, tree fruit, honeybees and farm-raised fish)
D) are ad-hoc and temporary programs that do not have any identifiable revenue source to fund payouts.
E) are government-enforced regulations that structure and monitor the market relationship between handlers and producers.

Question 9

By law, the US Sugar Program cannot create a cost to the government.

Question 10

The Dairy Margin Protection Program (DMPP)

A) is a system used to limit the US imports of dairy-related products. The DMPP program is a type of tariff-rate-quota (TRQ)
B) is a binding set of government-enforced regulations that structure and monitor the market relationship between milk handlers and milk producers.
C) offers financial assistance to dairy producers when pesticides or other residues contaminate the dairy farm's production, and a government agency compels the producer to remove his/her milk from the commercial market.
D) serves two purposes: (1) the USDA dairy product purchases stimulates upward price pressure in the dairy market, and (2) it provides real assistance to food banks in the form of food donations.
E) is an insurance-style deficiency payment program. Qualified dairy producer participants cany choose to pay increased premiums for increased net income coverage. The program premiums are subsidized.

Question 11

In the context of the 2014 Farm Bill, the term ""Cross-Compliance"" refers to

A) the effort to restore farm incomes damaged by market downturns and/or natural catastrophes.
B) the connection or situation when participation in a Title I program is contingent on following the rules of other programs (such as Resource Conservation)
C) a type of crop insurance offered to producers who have crossed into a new type of crop tecchnology, and need special coverage. This program is sponsored by USDA's Risk Management Agency.
D) producers who offer all or part of their harvested commodity's production as collateral, and then borrows funds for nine months from the federally-subsidized Commodity Credit Corporation (CCC) .
E) None of the above.

Question 12

Shallow Loss Coverage

A) is a type of "insurance rider" to protect qualified producers from most of the specific risk exposure associated with paying an insurance deductible during an event (e.g., a crop yield disaster) requiring an insurance payout.
B) is the one aspect of the US Sugar Program where taxpayer dollars are expended to implement the farm safety net.
C) is new type of price protection offered to dairy producers participating in the Dairy Margin Protection program.
D) is a counter-cyclical commodity program that provides protection from severe downturns in farm revenue (price multiplied by yield)
E) is a traditional counter-cyclical program where farmers receive government pay-outs when market prices fall below legislated reference prices.

Question 13

The Agriculture Risk Program (ARC) in the 2014 Farm Bill

A) is a traditional counter-cyclical program where farmers receive government pay-outs when market prices fall below legislated reference prices.
B) offers financial assistance to dairy producers when pesticides or other residues contaminate the dairy farm's production, and a government agency compels the producer to remove his/her milk from the commercial market.
C) is an insurance-style deficiency payment program. Qualified dairy producer participants cany choose to pay increased premiums for increased net income coverage. The program premiums are subsidized.
D) is a counter-cyclical commodity program that provides protection from severe downturns in farm revenue (price multiplied by yield)
E) is the one 2014 Farm Bill commodity program that is no longer subject to the ""Sodbuster"" Conservation Cross-Compliance provision.

Question 14

The Price Loss Coverage (PLC) in the 2014 Farm Bill

A) is a type of crop insurance offered to producers by USDA's Risk Management Agency.
B) is the one 2014 Farm Bill commodity program that is no longer subject to the ""Sodbuster"" Conservation Cross-Compliance provision.
C) is a traditional counter-cyclical program where farmers receive government pay-outs when market prices fall below legislated reference prices.
D) is new type of price protection offered to dairy producers participating in the Dairy Margin Protection program.
E) is the one aspect of the US Sugar Program where taxpayer dollars are expended to implement the farm safety net.

Question 15

Classified Pricing is

A) a federal dairy pricing system that divides the range of milk-related products into four classes.
B) a unique type of crop insurance premium discount system offered to producers by USDA's Risk Management Agency.
C) a new type of price protection offered to dairy producers participating in the Dairy Margin Protection program.
D) a new crop pricing system where producers who offer all or part of their harvested commodity's production as collateral, can then borrows funds at PLC reference prices for nine months from the federally-subsidized Commodity Credit Corporation (CCC) .
E) the one pricing aspect of the US Sugar Program where taxpayer dollars are expended to implement the farm safety net.