You are here

As Crop Prices Sink, Farm Subsidies Soar

WASHINGTON (FERN's Ag Insider) - The government faces three high-cost years for farm subsidies, beginning with $5.8 billion for this year, says the Congressional Budget Office (CBO), as low commodity prices drive up the cost of programs that stabilize crop revenue. In its latest budget baseline, CBO forecasts that crop subsidies will cost a total of $22 billion for fiscal 2016, 2017, and 2018. That’s a 9% increase from the estimate it made a year ago of $20.1 billion for the period.

The major recipients would be corn, soybean, wheat, and peanut growers. Corn, soybeans, and wheat are the three most widely planted crops in the country, grown on 225 million acres while peanuts are planted on around 1.6 to 1.7 million acres annually. Corn farmers were projected to get $10.5 billion from 2016 to 2018, soybean growers $3.5 billion, wheat growers $2.9 billion, and peanuts $1.7 billion.

“We’re going to have a fair amount of ARC spending,” said Pat Westhoff of the think tank FAPRI at the University of Missouri, referring to the Agricultural Risk Coverage subsidy. Corn and soybean growers enrolled predominantly in ARC, which shields farmers from the effects of low prices and poor yields. The price guarantees in ARC are based on a rolling five-year average of commodity prices, which were record high in 2012 and strong in 2013 but swooned in 2014 and 2015. “The price guarantee is going to start coming fairly quickly,” said Westhoff. CBO says crop subsidy costs will drop sharply after 2018.

Wheat growers mostly signed up for the traditionally styled Price Loss Coverage subsidy, but a sizable minority selected ARC, so both programs will pay sizable amounts on wheat. Peanut growers would collect their payments from PLC.

Counterbalancing the rising cost of crop subsidies would be lower spending on federally subsidized crop insurance, projected at $24.1 billion for fiscal 2016 to 2018, or $1.8 billion less than projected a year ago. The 2014 farm law expanded the role of crop insurance to make it the chief safeguard of farm revenue with indemnities – payments to producers – of around $9 billion a year.

CBO says mandatory spending on agricultural programs, which include conservation, will average $16 billion a year through fiscal 2026.

 

This article was produced by FERN's Ag Insider, providing top news and analysis on food, agriculture, and the environment.

Follow Us  / Like Us  / Subscribe  

 
Read more about

Talk in Marketing

Most Recent Poll

What best describes your approach to farmland right now?