Farm-state lawmakers could have a “quite large” baseline for crop subsidies, “even approaching $100 billion” over a decade, when they write the 2018 farm bill, says economist Carl Zulauf of Ohio State University. In a blog, Zulaug rebuts speculation, based on the decline in pay-out for the Agricultural Risk Coverage (ARC) subsidy, that the House and Senate Agriculture Committees could have a small amount of money available to confront an era of low commodity prices.
Writing at farmdoc Daily, Zulauf says the Congressional Budget Office, which sets the baseline, is likely to consider the chance that Congress will give farmers the chance as part of the 2018 farm bill to switch to the traditionally designed Production Loss Coverage (PLC) subsidy from ARC. “History also suggests farmers will choose the program expected to pay the most at the time of the decision.” If everyone switched to PLC, the CBO could project costs of $10.45 billion a year based on current prices, says Zulauf. That annual cost would translate to more than $100 billion over 10 years.
“Thus, at the present time, the argument that the baseline for crop commodity programs in the next farm bill will be small is premature,” said Zulauf. “The baseline could be quite large, even approaching $100 billion. Hence, as with most farm bills, a critical factor for the next farm bill will be prices and price expectations for field crops at the time that the next farm bill is written.”
When the 2014 farm law was enacted, CBO estimated crop subsidies would cost $44.5 billion over 10 years. The actual cost has risen as commodity prices have declined.