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Federal ag payouts to rise

Federal ag payouts to rise

DURING the farm bill debate, much of the focus was on the "savings" that would come from changes to farm programs. The biggest-ticket line-item savings came from eliminating direct payments worth $6 billion a year, but those savings could never be realized.

New forecasts by the Congressional Budget Office (CBO) and the University of Missouri's Food & Agricultural Policy Research Institute (FAPRI) predict that the new farm programs will surpass payout levels under the old system of direct payments, potentially reaching $7 billion annually over the next few years.

A revised farm baseline prepared by FAPRI has program costs jumping nearly $1.7 billion, or 81%, from the previous prediction for the 2015-16 marketing year.

CBO had estimated costs reaching $36 billion for 2014 through 2023. The new CBO baseline updates that figure nearly 50% higher to $52.7 billion over the same time period.

Direct payments were replaced with the Agricultural Risk Coverage (ARC) or Price Loss Coverage (PLC) safety nets, and as crop prices have retreated, the potential payouts from these programs could see short-term spikes before moderating as increases from year to year flatten out.

CBO projects total payments to corn and soybean producers from ARC alone to be $3.37 billion in fiscal 2017, when the government will have to pay out on the safety net. That is 38% higher than the amount producers collected last year under the direct cash payment system.

Farmers still have until March 31 to make final ARC or PLC election determinations, so it isn't certain how many will sign up for each. FAPRI projects ARC and PLC payments to peak in the 2015-16 marketing year, but after this year, program rules force downward adjustments to ARC revenue benchmarks for many crops and counties.

On the other hand, CBO estimates for the federal crop insurance program are very close to what was projected a year ago: a 10-year cost of $90 billion then versus the new baseline of $89.1 billion.

Using the new CBO projections as a backdrop, the House and Senate budget committees plan to mark up their respective versions of the fiscal 2016 congressional budget resolution this week. From there, those will go to the House and Senate floor and, if passed, will be negotiated into a final budget resolution to guide spending decisions for 2016.

The National Sustainable Agriculture Coalition (NSAC) said there is a "strong possibility" that reconciliation instructions will direct the agriculture committees to cut farm bill spending by a designated amount.

Even though the farm bill was just signed into law, it's not unprecedented for a budget reconciliation bill to reopen farm bills.

Congress enacted downward adjustments to government support prices for commodities in 1987 and made slightly more cuts in 1989. The 1990 version made cuts in tandem with the farm bill passed that year. The 1996 budget reconciliation act made major cuts to the food stamp program that had been reauthorized in the farm bill that year.

Most recently, the 2005 Deficit Reduction Act modified the terms of the 2002 farm bill, not just lowering commodity subsidies but also cutting conservation, rural development, ag research and renewable energy programs, NSAC said.

Despite a unified front from the agriculture committees and commodity groups to prevent any cuts, these higher projected payouts will make it a harder sell.

Volume:87 Issue:11

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