Trade-Related Agencies: FY2020 Appropriations, Commerce, Justice, Science, and Related Agencies (CJS)

Summary: This report provides an overview of the Fiscal Year (FY) 2020 budget request and appropriations for the International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the Office of the United States Trade Representative (USTR). These three trade-related agencies are funded through the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations. This report also provides a review of these trade agencies' programs.

Summary: The Administration's FY2020 Budget Request The President submitted his budget request to Congress on March 11, 2019. For FY2020, the Administration requested a total of $620.2 million for the three CJS trade-related agencies. The request was $26.8 million less (a 4.1% decrease) than the FY2019 appropriated amount. The request included the following for the three agencies.

Summary: ITA : $460.1 million, 4.9% less than the FY2019 amount. USITC : $91.1 million, 4.1% less than the FY2019 amount. USTR : $69.0 million, 1.5% more than the FY2019 amount.

Summary: Congressional Actions The House Committee on Appropriations reported its FY2020 CJS appropriations proposal, H.R. 3055 , in early June 2019 and passed the measure on June 25, 2019 by a 227-194 vote. The House-passed bill included a total of $694.0 million for the three CJS trade agencies, which was $47.0 million (or 7.3%) more than the FY2019-enacted amount, and $73.8 million (11.9%) more than the Administration's request. The House proposal included the following for the three agencies.

Summary: ITA : $521.0 million, 7.6% more than the FY2019 amount, and 13.2% more than the Administration's request. USITC : $101.0 million, 6.3% more than the FY2019 amount, and 10.9% more than the Administration's request. USTR : $72.0 million, 5.9% more than the FY2019 amount, and 4.3% more than the Administration's request.

Summary: The Senate Committee on Appropriations reported a CJS bill, S. 2584 , on September 26, 2019. In late October, the Senate took up the House-adopted CJS proposal, H.R. 3055 , and passed it with amendments, by a vote of 84-9 on October 31, 2019. The Senate-passed version included a total ofÂ $678.7 million for the three CJS trade agencies, which was $31.7 million (4.9%) more than the FY2019-enacted amount, $58.5 million (9.4%) more than the Administration's request, and overall $15.3 million less than the House-adopted bill. The Senate-passed version included the following for the three trade agencies.

Summary: ITA : $510.3 million, 5.4% more than the FY2019 amount, and 10.9% more than the Administration's request. USITC : $99.4 million, 4.6% more than the FY2019 amount, and 9.1% more than the President's budget request. USTR : $69.0 million, 1.5% more than more than the FY2019 amount, and equal to the Administration's request.

Summary: On December 20, 2019, the President signed the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ), approving FY2020 annual appropriations for the three CJS trade agencies. The act included the Senate's proposed funding levels for these agencies. The act provided $678.7 million for the three trade-related agencies, which was $31.7 million (4.9%) more than FY2019, and $58.5 million (9.4%) more than the Administration's request. The act provided the following for the three trade-related agencies.

Summary: ITA : $510.3 million, 5.4% more than the FY2019 amount, and 10.9% more than the Administration's request. USITC : $99.4 million, 4.6% more than the FY2019 amount, and 9.1% more than the Administration's request. USTR : $69.0 million, 1.5% more than more than the FY2019 amount, and equal in total to the Administration's request.

The International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the Office of the United States Trade Representative (USTR) are funded through the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations. This report provides an overview of these agencies' programs and a comparison of the FY2020 CJS proposals with the previous year's enacted legislation.

For FY2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), provided a total of $647.0 million in funding for the three CJS trade-related agencies. The FY2019 act provided $484.0 million in direct appropriations for ITA, $95.0 million for USITC, and a total of $68.0 million for USTR. The FY2019 appropriations for the three CJS trade-related agencies was a 0.2% decrease (-$1.3 million) from FY2018 appropriations ($648.3 million).

For FY2020, the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ), provided $678.7 million for the three trade-related agencies, which was $31.7 million (4.9%) more than the FY2019 amount, and $58.5 million (9.4%) more than the Administration's request.

See the Appendix for enacted budget authority for the trade-related agencies for FY2009-FY2020.

In the FY2020 budget cycle, the House and Senate each passed different versions of their CJS proposals under the same bill number, H.R. 3055 . In this report, the House and Senate versions of H.R. 3055 refer to the CJS provisions passed on June 25, 2019 (House) and October 31, 2019 (Senate). The CJS provisions were later struck from H.R. 3055 , and a continuing resolution was inserted in their place. The CJS provisions were then inserted into a new measure, H.R. 1158 , which passed both chambers and was signed into law as the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ).

The President submitted his FY2020 budget request to Congress on March 11, 2019. The agencies released their congressional budget justification documents in the weeks afterward. In the President's FY2020 budget, the Administration requested a total of $620.2 million for the three CJS trade-related agencies. This request was $26.8 million less (-4.1%) than the FY2019 enacted level.

The House Committee on Appropriations reported its FY2020 CJS appropriations proposal, H.R. 3055 , in early June 2019 and passed the measure on June 25, 2019 by a 227-194 vote. The House-passed bill included a total of $694.0 million for the three CJS trade-related agencies. This proposal was $47.0 million more (7.3%) than the FY2019 enacted funding, and $73.8 million more (11.9%) than the Administration's request. The House-passed bill included $521.0 million for ITA, $101.0 million for USITC, and a total of $72.0 million for USTR.

The Senate Committee on Appropriations reported its CJS bill, S. 2584 , on September 26, 2019. In late October, the Senate took up the House-adopted proposal, H.R. 3055 , and passed it with amendments by a vote of 84-9. The Senate-passed version of H.R. 3055 included a total ofÂ $678.7 million for the three CJS trade-related agencies, which was $31.7 million more (4.9%) than the FY2019-enacted amount and $58.5 million more (9.4%) than the Administration's request. The Senate-passed version included $510.3 million for ITA, $99.4 million for USITC, and a total of $69.0 million for USTR. The Senate's proposed funding levels were enacted in the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ).

The President signed the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ), on December 20, 2019, approving FY2020 annual appropriations for the three CJS trade agencies. The act provided $678.7 million for these agencies, which was $31.7 million more (4.9%) than the FY2019 amount, and $58.5 million more (9.4%) than the Administration's request. (For a full summary, see Table 1 )

International Trade Administration (ITA)10

The International Trade Administration is a bureau within the Department of Commerce. ITA's mission is to improve U.S. prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring compliance with trade laws and agreements. ITA provides export promotion services; works to enforce and ensure compliance with trade laws and agreements; administers trade remedies such as antidumping and countervailing duties; and provides analytical support for ongoing trade negotiations.

ITA went through a major organizational change in October 2013 in which it consolidated four organizational units into three more functionally aligned units: (1) Global Markets, (2) Enforcement and Compliance, and (3) Industry and Analysis. ITA also has a fourth organizational unit, the Executive and Administrative Directorate, which is responsible for providing policy leadership, information technology support, and administration services for all of ITA. ( Table 2 outlines ITA FY2020 budget proposals by unit, and Table A-1 shows budget amounts for ITA by unit between FY2009 and FY2019.)

For FY2020, the Administration requested $460.1 million for ITA in direct appropriations, with an additional $11.0 million to be collected in user fees, for a total of $471.1 million in authorized spending. With respect to direct appropriations, this request was $23.9 million less (-4.9%) than the FY2019 enacted funding level.

The House-passed H.R. 3055 included $521.0 million in direct appropriations for ITA, with an additional $11.0 million to be collected from user fees, for a total of $532.0 million in authorized spending. With respect to direct appropriations, this proposal was $37.0 million more (7.6%) than the FY2019 enacted funding level and $60.9 million more (13.2%) than the Administration's request.

The Senate-passed version proposed $510.3 million in direct appropriations for ITA with an additional $11.0 million to be collected from user fees, for a total of $521.3 in authorized spending. With respect to direct appropriations, this proposal was $26.3 million more (5.4%) than the FY2019 funding, and $50.2 million more (10.9%) than the Administration's request.

The Consolidated Appropriations Act, 2020 ( P.L. 116-93 ), adopted the Senate-proposed funding level of $510.3 for ITA's top-level funding ( Table 1 ).

ITA's Global Markets (GM) unit is a combination of the United States and Foreign Commercial Service (US&FCS) program that provides export promotion services to U.S. businesses and the SelectUSA program that works to attract foreign investment into the United States. Through US&FCS, GM aims to promote U.S. exports by helping U.S. exporters research foreign markets and identify opportunities abroad. GM's country and regional expertsâin domestic and overseas officesâadvise U.S. companies on market access, local standards, and regulations. The unit also helps to make connections through business-to-business trade shows, fairs, and missions. GM is designed to advance U.S. commercial interests by engaging with foreign governments and U.S. businesses, identifying and resolving market barriers, and leading efforts that advocate for U.S. firms with foreign governments. Through its SelectUSA program, the GM unit promotes the United States as a destination for foreign investment. (For more on SelectUSA, see section " SelectUSA Program " below.)

For FY2020, the Administration proposed reducing funding for the Global Markets unit. The Administration requested $278.0 million for Global Markets, an amount $42.0 million less (-13.1%) than the FY2019-enacted amount ( Table 2 ). The Administration proposed rescaling the Global Markets unit by "reducing personnel worldwide and closing overseas and domestic officesâ¦ ITA estimated the need to close 32 offices overseas, 18 offices domestically, and reduce personnel [by 114 positions]" in an effort "to reduce fixed operational expenses. "

In the reports accompanying the committee-reported bills, the House and Senate Committees did not adopt the Administration's proposed cuts to Global Markets, and instead recommended boosting funding for the Global Markets unit.

For FY2020, the House Appropriations Committee recommended $338.6 million for Global Markets, an amount $18.6 million more (5.8%) than the FY2019 enacted funding level and $60.7 million more (21.8%) than the Administration's request.

The Senate Committee on Appropriations recommended $335.3 for Global Markets, which was $15.3 million more (4.8%) than the FY2019 enacted amount, and $57.3 million more (20.6%) than the Administration's request. The report to accompany the Senate committee-reported CJS appropriations bill included language directing ITA to spend "no less than $130 million on employee compensation [for Global Markets];" and noted that, "at this funding level, the Committee will not approve any request to close foreign or domestic offices."

As outlined in the explanatory statement accompanying the act, the Consolidated Appropriations Act, 2020, provided "no less than $333,000,000 for Global Markets."

The mission of ITA's Enforcement and Compliance unit is to enforce U.S. trade laws and ensure compliance with negotiated international trade agreements. The Enforcement and Compliance unit is responsible for enforcing U.S. antidumping and countervailing duty (AD/CVD) laws; overseeing a variety of programs and policies regarding the enforcement and administration of U.S. trade remedy laws; assisting U.S. industry and businesses with unfair trade matters; and administering the Foreign Trade Zone program and other U.S. import programs.

For FY2020, the Administration proposed $93.8 million for Enforcement and Compliance. This request was $5.3 million more (6.0%) than the FY2019 budget authority ( Table 2 ). According to ITA's congressional budget submission, some of the Administration's objectives for the proposed increase for Enforcement and Compliance were:

to address increasing caseloads of AD/CVD investigations; to provide technical assistance on Section 232 exclusion requests; and to establish a dedicated team to investigate allegations of circumvention and duty evasion by foreign exporters and their U.S. importers.

For FY2020, the House-passed version of H.R. 3055 included $94.8 million for Enforcement and Compliance, which was $6.3 million more (7.2%) than the FY2019 budget authority, and $1.0 million more (1.1%) than the Administration's request ( Table 2 ).

In the Senate, language in the report accompanying the Senate committee-reported bill recommended "$1,000,000 above the fiscal year 2019 enacted level [$88.5 million] for the Office of Enforcement and Compliance to establish a dedicated anti-circumvention and duty evasion enforcement unit."

The explanatory statement accompanying the Consolidated Appropriations Act, 2020, did not provide specific funding levels. The statement outlined that:

The agreement does not assume House levels for Industry and Analysis, Enforcement and Compliance, and Executive Direction and Administration. However, ITA is directed to take steps to fill important vacancies across the agency in support of trade promotion, facilitation, and enforcement, as well as additional staff to support the Committee on Foreign Investment in the United States and the new Anti-Circumvention and Evasion Unit.

ITA's Industry and Analysis unit brings together ITA's industry, trade, and economic experts to advance the competitiveness of U.S. industries through the development and execution of international trade and investment policies, export promotion strategies, and investment promotion. It develops economic and international policy analysis to improve market access for U.S. businesses, and designs and implements trade and investment promotion programs. The unit serves as the primary liaison between U.S. industries and the federal government on trade and investment promotion. It administers programs that support small and medium-sized enterprises, such as the Market Development Cooperator Program.

For FY2020, the Administration proposed increasing funding for the Industry and Analysis unit. The Administration requested $62.6 million for Industry and Analysis. This request was $10.0 million more (19.1%) than the FY2019 budget authority ( Table 2 ). According to ITA's budget justification, some of the Administration's objectives for the proposed increase were:

to meet the expected increase in cases related to foreign investment in the United States and to implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA); to develop staff with economic modeling skills and sectoral expertise; to manage the trade processes related to the tariffs imposed under certain U.S. trade law (Sections 301, 201, 232 ); and to provide analysis relevant to ongoing and future trade negotiations and the resolutions of trade barriers.

For FY2020, the House-passed bill included $62.6 million for Industry and Analysis, which was $10.0 million (19.1%) more than the FY2019 budget authority and equal to the Administration's request ( Table 2 ).

In the Senate, a specific funding level was not provided for Industry and Analysis. Language in the report accompanying the Senate committee-reported CJS bill did recommend "provid[ing] the requested program changes for Industry and Analysis to implement â¦ [FIRRMA] ( P.L. 116-115 â232) and for increased analytical capabilities."

U.S. International Trade Commission (USITC or the Commission)

USITC is an independent, quasi-judicial agency responsible for conducting trade-related investigations and providing independent technical advice on U.S. international trade policy to Congress, the President, and USTR. The Commission (1) investigates and determines whether imports injure a domestic industry or violate U.S. intellectual property rights; (2) provides independent tariff, trade, and competitiveness-related analysis to the President, Congress, and USTR; and (3) maintains the U.S. tariff schedule. USITC also serves as a federal resource for trade data and other trade policy information. It makes most of its information and analyses available to the public to promote understanding of competitiveness, international trade issues, and the role that international trade plays in the U.S. economy.

USITC's annual budget request to Congress is subject to two types of submission: (1) the President's budget request for the Commission, included in the President's annual budget; and (2) the Commission's independent budget request. USITC has the authority to submit its budget directly to Congress without revision by the President, pursuant to Section 175 of the Trade Act of 1974.

The President's FY2020 budget requested $91.1 million in funding for USITC. This request was $3.9 million less (-4.1%) than FY2019-enacted appropriation ( Table 1 ). While the President requested a decrease in funding for USITC, the Commission's independent budget submission requested $101.0 million, which was $6.0 million more (6.3%) than FY2019 funding and $9.9 million more (10.9%) than the President's budget request.

The House-passed H.R. 3055 included $101.0 million for USITC. This represented $6.0 million more (6.3%) than FY2019 funding and $9.9 million more (10.9%) than the President's budget request.

The Senate-passed version of H.R. 3055 included $99.4 million for USITC. This proposal was $4.4 million more (4.6%) than the FY2019 funding, and $8.3 million more (9.1%) than the President's budget request.

The Consolidated Appropriations Act, 2020 ( P.L. 116-93 ) enacted the Senate's funding level of $99.4 million for USITC ( Table 1 ).

Office of the U.S. Trade Representative (USTR)

USTR has primary responsibility for developing and coordinating U.S. international trade and direct investment policies, as the head of the interagency trade policy coordinating process. Located in the Executive Office of the President, USTR is the President's principal advisor on trade policy and the President's chief negotiator for international trade agreements, including commodity and direct investment negotiations. USTR negotiates directly with foreign governments to create trade agreements and resolve disputes, and participates in global trade policy organizations such as the World Trade Organization. It also meets with business groups, policymakers, and public interest groups on trade policy issues.

In addition to direct appropriations for USTR, supplementary funding for the agency is available through the congressionally established Trade Enforcement Trust Fund. For more detail on the trust fund, see section " Trade Enforcement Trust Fund (TETF) " below.

For FY2020, the Administration requested a total of $69.0 million for USTR, including $59.0 million for salaries and expenses and $10.0 million to be derived from the TETF for certain trade enforcement activities ( Table 3 ). This request was $1.0 million more (1.5%) than the FY2019 enacted funding level.

The House-passed version of H.R. 3055 recommended a total of $72.0 total for USTR, including $57.0 million for salaries and $15.0 million to be derived from the TETF for certain trade enforcement activities ( Table 3 ). The House proposal for USTR was $4.0 million more (5.9%) than the FY2019 enacted funding and $3.0 million more (4.3%) than the request.

The Senate-passed version recommended a total of $69.0 million for USTR, including $54.0 million for salaries and expenses and $15.0 million to be derived from the TETF. The proposed amount was $1.0 million more (1.5%) than the FY2019 funding amount. While the Senate-passed total funding amount for USTR was equal to the Administration's request, it included a different distribution of funds between USTR's salaries and expenses account and funds to be derived from the TETF (see Table 3 ).

The Consolidated Appropriations Act, 2020 ( P.L. 116-93 ) enacted the Senate's funding levels of $69.0 million for USTR, including $54.0 million for salaries and expenses and $15.0 million to be derived from the TETF ( Table 3 ).

Selected Trade-Related Programs and Activities

Over the past decade, Congress has provided funding for specific trade-related programs or activities within broader agency budgets. The following programs are highlighted in this report, due to ongoing congressional interest: (1) ITA's China trade enforcement and compliance activities; (2) ITA's investment promotion activities in its SelectUSA Program; (3) the Survey of International Air Travelers (SIAT) within ITA; and (4) the Trade Enforcement Trust Fund, which funds certain activities of USTR.

China Trade Enforcement and Compliance Activities, ITA

Since 2004, Congress has dedicated some of ITA's funding to AD/CVD enforcement and compliance activities with respect to China and other nonmarket economies. ITA's Office of China Compliance was established by the Consolidated Appropriations Act of 2004 ( P.L. 108-199 ). Its primary role has been to enforce U.S. AD/CVD laws and to develop and implement other policies and programs aimed at countering unfair foreign trade practices in China. ITA's China Countervailing Duty Group was established by the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) to accommodate the workload that resulted from the application of countervailing duty law to imports from nonmarket economy countries.

The Office of China Compliance is within the Enforcement and Compliance unit at ITA. ITA's FY2020 budget justification did not provide a breakdown of funding for its China AD/CVD activities.

In agreement with both the House and Senate-passed proposals, the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ) provided $16.4 million for China antidumping and countervailing duty enforcement and compliance activities in FY2020, an amount equal to the FY2019-enacted funding.

SelectUSA was established by executive order in 2011 as a Commerce Department program to (1) promote the United States as an investment market and (2) address investor climate concerns that could impede investment in the United States. SelectUSA coordinates investment-related resources across more than 20 federal agencies; serves as an information resource for international investors; and advocates for U.S. cities, states, and regions as investment destinations. SelectUSA currently is part of ITA's Global Markets unit.

ITA's FY2020 budget justification did not provide a breakdown for requested funding for SelectUSA.

The House-passed H.R. 3055 also did not include a breakdown for specific funding for SelectUSA, within ITA's Global Markets unit.

The Senate-passed H.R. 3055 included up to $10.0 million for SelectUSA for FY2020.

The Consolidated Appropriations Act, 2020 ( P.L. 116-93 ) adopted the Senate funding level.

Survey of International Air Travelers (SIAT), ITA

ITA's Survey of International Air Travelers (SIAT) gathers statistics about air passenger travelers in the United States. Federal agencies use these statistics for a variety of purposes, such as to estimate the contribution of international travel to the economy, develop public policy on the travel industry, and forecast staffing needs at consulates and ports of entry.

SIAT is within the Industry and Analysis unit at ITA. The Administration proposed an increase of $3.0 million to support SIAT in FY2020, within the Industry and Analysis' funding.

The House and Senate both recommended $3.0 million to support SIAT in FY2020, within the ITA budget.

The Consolidated Appropriations Act, 2020, did not provide a specific funding amount for SIAT.

Trade Enforcement Trust Fund (TETF), USTR

In order to provide additional funding for USTR's trade enforcement activities, Congress established the Trade Enforcement Trust Fund (TETF) in 2016. In Section 611 of the Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ), Congress set up the trust fund and outlined authorized uses of the funds. According to Section 611(d), USTR can use funds from the TETF to (1) monitor and enforce trade agreements and World Trade Organization (WTO) commitments; (2) support trade capacity-building assistance to help partner countries meet their free-trade agreement obligations and commitments; and (3) investigate petitions concerning unfair trade practices under Section 301 of the Trade Act of 1974. USTR can also transfer funds to select federal agencies for trade enforcement activities authorized in Section 611(d) of the Trade Facilitation and Trade Enforcement Act of 2015.

For FY2020, the Administration requested $10.0 million to be derived from the TETF. This request was $5.0 million less than the FY2019-enacted amount. (See Table 3 ).

Both the House- and Senate-passed versions of H.R. 3055 included $15.0 million to be derived from the TETF, for trade enforcement activities authorized by the Trade Facilitation and Trade Enforcement Act of 2015. The recommendations were equal to the FY2019 enacted funding level, and were $5.0 million more than the Administration's request. (See Table 3 .) The House and Senate Appropriation committees also directed USTR to provide more detailed reporting on how funds from the Trust Fund are used.

The Consolidated Appropriations Act, 2020 ( P.L. 116-93 ) provided $15.0 million to be derived from the TETF, for trade enforcement activities authorized by the Trade Facilitation and Trade Enforcement Act of 2015. The funding level was equal to the FY2019 enacted funding level, and was $5.0 million more than the Administration's request.


Federal Crop Insurance: Record Prevent Plant (PPL) Acres and Payments in 2019

Summary: U.S. agricultural production got off to a late start in 2019 due to prolonged cool, wet springtime conditions throughout the major growing regions, particularly in states across the northern plains and eastern Corn Belt. Saturated soils prevented many farmers from planting their intended cropsâsuch acres are referred to as "prevent plant (PPL)" acres. As of November 1, 2019, the U.S. Department of Agriculture (USDA) reported that farmers were unable to plant a record 19.6 million acres in 2019âincluding 11.4 million acres of corn and 4.5 million acres of soybeans. The previous record for total PPL acres was set in 2011, when USDA reported 10.2 million acres of PPL.

Summary: USDA's Risk Management Agency (RMA) reported on November 15, 2019, that 2019 PPL indemnity payments were over $4.2 billion, with $2.6 billion (60.6%) for corn PPL acres and $1.1 billion (25%) for soybean PPL acres. The 2019 average national PPL payment rate for all crops was $224.04 per acre. Payment rates varied by crop and ranged from a low of $50 per acre for millet to a high of $1,432 per acre for dark air cured tobacco.

Summary: The unusually wet spring conditions that produced the record PPL acres in 2019 were heavily concentrated in Corn Belt states but were also reported in significant numbers in Arkansas, Texas, Mississippi, Louisiana, North Carolina, Tennessee, New York, and Oklahoma. However, South Dakota's 3.9 million acres of PPL were more than double second-place Ohio's 1.4 million of PPL acres. South Dakota's PPL acres accounted for over 20% of the national total in 2019, while its PPL indemnity payments of over $925 million accounted for 21.9% of national PPL indemnity payments. During the previous 19-year period from 2000 to 2018, national PPL averaged 4.1 million acres annually with average indemnities of $680 million per year. Of these national totals, South Dakota accounted for an average of 10% of PPL acres (406 million acres) and 11.2% of PPL indemnities ($76.4 million).

Summary: Farmers that were unable to plant a crop during the spring of 2019 due to natural causes were potentially eligible for multiple payments under federal farm programs. First, federal crop insurance provides PPL coverage under a standard policy that covers pre-planting cost and potential revenue loss. Second, the FY2019 supplemental authorized disaster assistance payments for PPL (referred to as "top up") in addition to crop insurance indemnities. Third, the Administration's 2019 MFP payments, although based on planted acres, also included payments for eligible cover crops planted on PPL acres.

Summary: In addition to the unplanted acres, a sizeable portion of the U.S. corn and soybean crops was planted later than usual. Such late planting meant that initial crop development would be behind normal across much of the major growing regions and that eventual yields would depend on beneficial weather extending late into the fall to achieve full crop maturity. Widespread wet conditions continued into the fall, especially in the northern plains and western Corn Belt. Ultimately, much of the corn crop was harvested under wet conditions with high moisture content that required drying. Due to the high costs of propane for drying, many farmers chose to leave their corn in the field until more beneficial market conditions emerged. As of December 16, 2019, USDA estimated that 8% (or 7.2 million acres) of the U.S. corn crop had yet to be harvested, adding further to the uncertainty of yields and harvested acreage for the 2019 corn crop.

Summary: Saturated soil conditions heading into the winter months suggests a continuation of wet conditions into the 2020 planting season and the potential for a repeat of planting difficulties in the year ahead. Should wet conditions persist in 2020 and create a situation where farmers are again confronted with delayed or prevented planting, many producers may also bump up against a limit on the continued use of crop insurance PPL. Another looming concern for market watchers and policymakers is that, should wet conditions persist in 2020, they could signal the potential for continued dependence on federal programs to sustain farm incomes in 2020.

This report analyzes the effects of historic wet conditions during the 2019 growing season on major U.S. field crops, primarily corn and soybeans. These effects include record acres prevented from being planted, widespread delays in planting and harvesting of the corn and soybean crops, large crop insurance indemnity payments due to prevented plantings and weather-related yield losses, and additional ad hoc payments announced for producers experiencing both trade damage and losses from prevented planting.

This report focuses on corn and soybeansâthe two largest commercial crops grown in the United States in terms of number of producers, cultivated area, volume produced, and value of production. Together, they account for 54% of land planted to major field crops since 2010. They are critical inputs for several sectors, including the livestock, biofuels, food processing, and export sectors. As a result, any delay or reduction from expected output for either of these crops can have important implications for market prices and the broader U.S. farm economy.

The U.S. Department of Agriculture (USDA) forecasted an increased role of federal support for farm incomes in 2019âincluding $22.4 billion in direct support payments and $10.3 billion in federal crop insurance indemnity payments. Together, the forecast of USDA farm support plus crop insurance indemnities of $32.7 billion represents a 35.3% share of U.S. net farm income $92.5 billion. Since 2010, the federal crop insurance program has emerged as the largest component of the farm safety net in terms of taxpayer outlays, averaging $7.8 billion annually in premium subsidies. While USDA implements the federal crop insurance program, Congress is responsible for authorizing and funding it. The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act of 1980 ( P.L. 96-365 ), as amended (7 U.S.C. Â§1501 et seq. ) and receives mandatory funding. Each of the past three farm billsâP.L. 10-246 (2008), P.L. 113-79 (2014), and P.L. 115-334 (2018)âhas included a separate title to modify crop insurance program provisions.

Wet Spring Affects Corn and Soybean Planting

U.S. agricultural production got off to a late start in 2019 due to prolonged cool, wet springtime conditions throughout the major growing regions, particularly in states across the northern plains and eastern Corn Belt. Saturated soils prevented many farmers from planting their intended crops (see text box below). Such acres are referred to as "prevent plant" (PPL) acres.

In addition to the unplanted acres, sizeable portions of the U.S. corn and soybean crops were planted later than usual, especially in Illinois, Michigan, Missouri, Ohio, Wisconsin, and North and South Dakota. Traditionally, 96% of the U.S. corn crop is planted by June 2, but in 2019 by that date 67% of the crop had been planted ( Figure 1 ). Similarly, the U.S. soybean crop was planted with substantial delays. By June 16, 77% of the U.S. soybean crop was planted, whereas an average of 93% of the crop has been planted by that date during the previous five years ( Figure 2 ).

Widespread planting delays for corn and soybeans pushed both crops' growing cycle into hotter, drier periods of the summer than usual. In addition, maximizing yield potential will likely depend on beneficial weather extending into the fall to achieve full crop maturity. This would potentially make crop growth vulnerable to an early freeze in the fall that would terminate further yield growth.

Also, planting delays increase the complexity of producer decisionmaking. When the planting occurs after a crop insurance policy's "final planting date" (FPD), the "late planting period" clause in the policy comes into play, and insurance coverage starts to decline with each successive day of delay ( Figure 3 ).

Insured acres planted on or before the FPD receive the full yield or revenue coverage that was purchased. However, if the crop is planted after the FPD, insurance coverage is reduced by 1% per day throughout the late-planting period (which begins the day after the FPD and extends for 25 days for both corn and soybeans). During the late-planting period, producers must decide whether to opt for a PPL indemnity payment or try to plant the crop under reduced insurance coverage with a heightened risk of reduced yields.

Despite the risks associated with this choice, large portions of both the corn and soybean crops were planted after the FPD ( Figure 1 and Figure 2 ). The choice of planting versus not planting was complicated in 2019 by Secretary of Agriculture Perdue's announcement on May 23 that only producers with planted acres would be eligible for "trade damage" assistance payments in 2019 under the Market Facilitation Program (MFP). The Secretary's announcement, which came in the middle of the planting period, could have encouraged greater planting than would have otherwise occurred as farmers sought to ensure eligibility for the 2019 MFP payment.

During 2018, U.S. soybean and corn producers had received MFP payments based on their farms' harvested output, including $1.65 per bushel for soybean and $0.01 per bushel for corn. For 2019, the Secretary of Agriculture was offering higher payment rates of $2.05 per bushel for soybeans and $0.14 for corn. However, the MFP payment formula would use planted acresânot harvested productionâand combine the commodity-specific payment rates of major program crops (referred to as "non-specialty crops") at the county level (weighted by historical county planted acres and yields) to derive a single county-level MFP payment rate. The potential for 2019 MFP payments could have provided sufficient incentive for some producers to plant their corn and soybean crops under conditions they would not have otherwise (e.g., to plant their crops in wet fields where potential yield-reducing problems associated with seed germination and soil compaction are increased). If such planting did occur, it likely prevented even larger PPL acres from being reported.

Additionally, overarching uncertainty remained in 2019 associated with the then-ongoing trade dispute between the United States and China. The dispute had reduced U.S. agricultural exports in 2018 and dampened prospects for both commodity prices and export volumes in 2019. These factors further complicated producers' evaluations of market payoffs under different planting and crop insurance choices.

The two principal sources for data on PPL acres within USDAâthe Farm Service Agency (FSA) and the Risk Management Agency (RMA)âprovide similar but not identical estimates of PPL ( Figure 4 ). FSA oversees the implementation of USDA's farm revenue-support and disaster assistance programs. All producers that participate in these farm programs are required to report their acreage and yields to FSA in an annual acreage report that details crop production activity by specific field.

RMA oversees the implementation of USDA's crop insurance programs. All participating producers provide detailed information on insured crops and land to RMA. Farmers report the same number of acres to RMA and FSA. However, not all farms participate in USDA farm programs or buy federal crop insurance. As a result, differences in reported acres planted, harvested, and prevented from being planted occur between the two sources.

As of November 1, 2019, U.S. farmers reported to FSA that, of the cropland that they intended to plant this past spring, they were unable to plant 19.6 million acres due primarily to prolonged wet conditions that prevented field work. In contrast, RMA reported a record 18.8 million of PPL acres. The previous record for total PPL acres was set in 2011, when RMA reported 10.2 million acres and FSA reported 9.6 million of PPL.

PPL Comparison by Crop: Corn and Soybeans Dominate

In 2019, FSA reported 19.6 million PPL acres, including 11.4 million acres of corn and 4.5 million acres of soybeansâboth crops established new records for PPL acres by substantial margins. The previous record PPL for corn was 2.8 million acres in 2013, and for soybeans it was 2.1 million acres in 2015. By way of comparison, in 2019 RMA's PPL acres included slightly more soybean (5.3 versus 4.5 million) and wheat (2.4 versus 2.2 million) acres and less corn (9.5 versus 11.4 million) acres. For both datasets (FSA and RMA), corn, soybeans, and wheat accounted for over 90% of PPL acres (92.3% for FSA, 91.5% for RMA).

RMA reported 2019 PPL indemnity payments of over $4.2 billion, with $2.6 billion (60.6%) for corn PPL acres and $1.1 billion (25%) for soybean PPL acres ( Table 1 ). The 2019 average national PPL payment rate for all crops was $224.04 per acre. Payment rates vary by crop and ranged from a low of $50 per acre for millet to a high of $1,432 per acre for dark air cured tobacco.

Some economists have suggested that the large discrepancy in corn PPL acres between the two data sources (1.9 million acres) could be the result of acres originally intended to be planted to soybeans being claimed as corn PPL acres to obtain the higher PPL indemnity for corn available under federal crop insurance. In their analysis of historical PPL indemnity rates, the PPL payment rate was almost always higher for corn than soybeans. In 2019, corn's average PPL payment rate of $270.13 per acre was about $70 per acre (34.7%) higher than soybean's average PPL payment rate ( Table 1 ). Thus, producers had an incentive to claim PPL for corn to the maximum extent possible, whether corn or soybeans was the intended crop.

A breakout of PPL acres by state and by major commodity is available in the Appendix to this report ( Table A-1 ).

PPL Comparison by State: South Dakota Stands Out

The unusually wet spring conditions that produced the record PPL acres in 2019 were heavily concentrated in Corn Belt states but were also reported in significant amounts in Arkansas, Texas, Mississippi, Louisiana, North Carolina, Tennessee, New York, and Oklahoma ( Table 2 ). However, the 3.9 million acres of PPL reported in South Dakota (primarily the eastern portion of the state) were more than double second-place Ohio, where 1.4 million PPL acres were reported. South Dakota's PPL acres accounted for over 20% of the national total in 2019, while its PPL indemnity payments of over $925 million accounted for 21.9% of national PPL indemnity payments.

PPL Acres Eligible for Multiple Payments

Farmers who were unable to plant a crop during the spring of 2019 due to natural causes were eventually eligible for multiple payments under federal farm programs. First, federal crop insurance provides PPL coverage under a standard policy that covers pre-planting cost and potential revenue loss. Second, the FY2019 supplemental authorized disaster assistance payments for PPL (referred to as "top up") in addition to crop insurance indemnities. Third, the Administration's 2019 MFP payments were based on planted acres. However, payments were also included for eligible cover crops planted on PPL acres.

If producers are prevented from planting an insured crop because of an insured peril (described below), then the PPL provisions of a standard crop insurance policy compensate the affected producers for pre-planting costs incurred in preparation for planting their insured crops.

Crop insurance PPL coverage is available for any farm-based COMBO policy. COMBO policies include individual yield or revenue insurance policies:

Revenue protection (RP) insures a producer-selected coverage level of the farm's historical yield times the higher of the projected price or the harvest price. RP with the harvest price exclusion insures a producer-selected coverage level of the farm's historical yield times the projected price. Yield protection insures for a producer-selected coverage level of the farm's historical yield.

Area-based revenue and yield policiesâsuch as Area Risk Protection and Area Yield Protectionâthat rely on county yields and revenues to trigger indemnity payments are not eligible for PPL indemnities.

As described in the section " Planting Delays Complicate Producer Choices ," policyholders who are prevented from planting acres until after the FPD may choose not to plant the crop and instead receive a PPL indemnity, calculated as a percentage of the original insurance guarantee (e.g., 55% for corn and 60% for soybean). For example, suppose that a corn producer with an insurable yield of 200 bushels per acre has purchased RP at an 80% coverage level with an RMA projected price of $4.00 per bushel. For this policy:

The RP coverage guarantee is 200 x $4.00 x 80% = $640 per acre; The PPL indemnity is 55% x $640 = $352 per acre.

Alternately, consider a hypothetical soybean producer with an average production history yield of 50 bushels per acre, an RMA projected price of $9.54 per bushel, and an RP policy with an 80% coverage level. For this policy:

The RP coverage guarantee is 50 x $9.54 x 80% = $381.60 per acre; The PPL indemnity is 60% x $381.60 = $228.96 per acre.

FY2019 Supplemental Top Up Payments for PPL Losses

On June 3, 2019, Congress passed a FY2019 supplemental appropriations bill ( P.L. 116-20 ) that, among other assistance, authorized $3 billion in additional funds for disasters that impacted farmers and ranchers. The disaster funding is administered through multiple USDA programs and provides financial assistance to producers with production losses on both insured and non-insured crops. All of the agriculture funds are designated as emergency spending.

The supplemental funding covers several types of agricultural losses from 2018 and 2019, including losses for crops prevented from being planted in 2019. In particular, producers who claimed PPL losses in 2019 are eligible for a top up of 10%-15% of their PPL indemnity. The PPL top up is 15% for producers with standard RP policies that include the harvest price option as a default and 10% for producers who opted out of the harvest price option and selected the RP with harvest price exclusion policy. For 2019, 91% of corn and soybean insured acres were covered by RP with harvest price option. Under the corn and soybean examples introduced earlier, the supplemental top up would be calculated as:

For a corn RP policy: 15% x $352 = $52.80 per acre; For a soybean RP policy: 15% x $$228.96 = $34.34 per acre.

Requirements Associated with the Top Up Payments

The FY2019 supplemental program limits payments to up to 90% of losses, including payments from crop insurance and the non-insured disaster assistance program (NAP) but excluding MFP payments. For producers who did not purchase crop insurance or NAP in advance of the natural disasters, payments are limited to 70% of losses. In addition, all recipients of any FY2019 supplemental disaster payments (including the PPL top up) are required to purchase crop insurance or NAP for the next two crop years.

Under USDA's 2019 MFP program, eligibility for paymentsâwhich range from $15 to $150 per acreâis restricted to planted acres, thus excluding any PPL acres. However, on June 10, 2019, Secretary Perdue announced that USDA was exploring "legal flexibilities" to provide a minimal per acre MFP payment to farmers who opted for a PPL indemnity but also planted an MFP-eligible cover crop (such as barley, oats, or rye) with the potential to be harvested and for subsequent use of those cover crops for forage. On July 29, 2019, USDA announced a 2019 MFP payment rate of $15 per acre for PPL losses claimed on non-specialty crop acres followed by a USDA-approved cover crop.

Combined PPL Payments from Multiple Programs

In summary, a producer can combine payments from multiple programs without having planted the intended cash crop. While it is not likely to cover all losses incurred, the combination can result in a higher payment in 2019 than was possible in previous years. Based on the above example, a corn farmer with a standard RP policy and an 80% coverage level could receive combined PPL payments of $419.80 per acre, including the PPL indemnity ($352), the supplemental top up payment ($52.80), and the MFP payment for an eligible cover crop planted on PPL acres ($15). By comparison, the original RP policy with 80% coverage would have guaranteed a maximum revenue of $640 per acre had the insured crop been planted. On such an RP policy, a yield loss of nearly 66% would be necessary to generate an indemnity payment that would match the federal payout under the suite of multiple programs available to PPL acres in 2019.

Similarly, the hypothetical soybean producer with a standard RP policy and an 80% coverage level could receive combined PPL payments of $278.30 per acre, including the PPL indemnity ($228.96), the supplemental top up payment ($34.34), and the MFP payment for an eligible cover crop planted on PPL acres ($15).

However, the second and third payment programsâthe top up and the extended MFP payment on eligible cover cropsâwere not known until later in the growing season (June 3 for the top up and July 29 for the extended MFP payment) after most late planting versus PPL decisions had been made. Some preliminary research suggests that some farmers that might have been better off choosing PPL with top up and extended MFP on cover crops but instead elected to plant corn or soybeans. This choice may have been driven in part by then-relatively high futures market prices and the prospect of qualifying for the 2019 MFP payment, which required planting an eligible crop as announced by Secretary Perdue on May 23.

Late Harvest Suggests Additional Crop Losses

In addition to the PPL acres, large portions of the corn and soybean crops were planted two to four weeks later than usual ( Figure 1 and Figure 2 ). Such late planting meant that initial crop development would be behind normal across much of the major growing regions and that eventual yields would depend on beneficial weather extending late into the fall to achieve full crop maturity. The late planting also rendered crop growth vulnerable to an early freeze in the fall. Widespread wet conditions continued into the fall, especially in the northern plains and western Corn Belt. North Dakota recorded the wettest September on record in 2019, while Iowa recorded the wettest October.

Ultimately, much of the corn crop was harvested under wet conditions with high moisture content that required drying. An early cold spell in the Upper Midwest had already heightened the demand for propane that, in addition to serving as the primary energy source for drying corn, is used to heat hog barns and for other farm operations. This resulted in limited supplies and higher prices for propane. Many farmers chose to leave their corn in the field until more beneficial market conditions emerged. As of December 16, 2019âthe date of USDA's final weekly Crop Progress report for 2019âan estimated 8% (or 7.2 million acres) of the U.S. corn crop had yet to be harvested, adding further to the uncertainty of yields and harvested acreage for the 2019 corn crop ( Table 3 ).

Saturated soil conditions heading into the winter months suggest a continuation of wet conditions into the 2020 planting season and the potential for a repeat of planting difficulties in the months ahead. These unusual conditions have come in the midst of a continued trade dispute between the United States and China that has dampened demand for U.S. agricultural products from one of the United States' principal foreign markets and has compelled the Administration to undertake large ad hoc "trade aid" payments to producers of selected commodities.

The record PPL acreage has resulted in record crop insurance PPL indemnity payments under the PPL provisions of standard federal crop insurance policies in 2019. Should wet conditions persist into 2020 and create a situation where farmers are again confronted with delayed or prevented planting, some producers may also bump up against a limit on the continued use of PPL. Under RMA rules, PPL can be taken only for crops planted on an insured unit in one of the four preceding crop years. Thus, four consecutive years of PPL would result in ineligibility for the affected cropland. Furthermore, while crop insurance indemnities can help to offset some of the financial loss associated with prevented planting or poor harvests, they are not designed to cover all of the associated losses.

Another concern for producers is the timing and clarity (or lack thereof) with respect to USDA announcements about new payment programs that are linked to producer production choices. In general, to avoid adversely influencing producer behaviorâa precept of most farm policiesâsuch announcements should be made either well in advance of the spring planting period or well after production decisions have been made.

A final looming concern for market watchers and policymakers is the increased role of USDA payments to support farm incomes in 2019. USDA forecasts $22.4 billion in direct support payments to the U.S. agricultural sector in 2019, including $14.3 billion in direct payments made under trade aid programs as well as over $8 billion in payments from other farm programs. In addition, USDA forecasts $10.3 billion in federal crop insurance indemnity payments. Together, forecasts of USDA farm support plus crop insurance indemnities combine for $32.7 billion in payments that represent a 35.3% share of USDA's November forecast of 2019 net farm income of $92.5 billion.

Without this federal support, net farm income would be lower, primarily due to continued weak prices for most major crops. Should these conditions persist into 2020, they would signal the potential for continued dependence on federal programs to sustain farm incomes in 2020.