THE U.S. Department of Agriculture sent out the first round of farm safety net payments totaling nearly $4 billion at the end of October. However, legislators' high hopes that this farm bill would "save" money may not materialize.

Nearly half of the 1.7 million farms that signed up for either the Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) programs will receive safety net payments for the 2014 crop year.

Overall, 76% of participating farm acres are protected by ARC-County, 23% by PLC and 1% by ARC-Individual.

The days of direct payments are gone, but the new safety net does protect producers when market forces or adverse weather cause unexpected drops in crop prices or revenues. However, the price tag turned out to be more than estimated when the 2014 farm bill was signed.

In August 2014, USDA estimated that subsidies for the 2014 crop under the farm bill's ARC and PLC programs would be $762 million, using $4.20/bu. for corn as an average market price for the year. It put average annual payments over the lifetime of the bill at $5.7 billion.

A Congressional Budget Office forecast in January, before the farm bill became law, put the 2014 payment for both ARC and PLC at $3.8 billion and the average annual figure at about $2.3 billion.

Over the six-year life of the 2008 farm bill, actual direct countercyclical payments and Average Crop Revenue Election payments averaged just beyond $5 billion per year.

The University of Missouri's Food & Agricultural Policy Research Institute also projects ARC and PLC payments to average slightly more than $5 billion per year for the 2014-18 period.

After running simulations, 10% of the 500 outcomes showed that payments in 2015 could actually exceed $8.5 billion, and 10% put payments at less than $1.7 billion. By 2018, the average level of projected ARC payments is expected to decline to $1.7 billion, with 10% exceeding $4.6 billion and 10% falling below $132 million.

For the 2015 crop year, average PLC payments are projected to be $1.6 billion, with 10% of outcomes exceeding $3.2 billion and 10% at less than $392 million. Because the reference prices for PLC are fixed across time, PLC payments do not show the same sharply declining trend as ARC payments.

Legislators aren't looking to change the farm bill in the midterm, but now, just one year into the new programs, they can see that the promise of cheaper farm programs is not a reality.

Volume:87 Issue:42