U.S. grain, cotton and soybean farmers will collect an average of $11.2 billion a year in crop subsidies and crop insurance benefits under the 2014 farm law, down by nearly 1 percent from the average of the preceding decade, says a University of Missouri think tank. The Food and Agricultural Policy Research Institute made the estimate while assessing the early impact of the 2014 law, which allowed growers to update the yields and acreage bases of the eight major crops – wheat, rice, corn, sorghum, barley, oats, soybeans and cotton – eligible for crop subsidies and federally subsidized crop insurance. Growers also chose between a revenue-based subsidy and a traditional crop subsidy based on trigger prices.
In the end, FAPRI said, payments under the new farm law will be consonant with the previous decade – $11.2 billion annually vs $11.3 billion – but the mix is somewhat different. Crop program benefits are down by $1.5 billion a year while crop insurance net indemnities are up by $1.4 billion. The outcome reflects the decision by lawmakers to make crop insurance the major element in the farm safety net and to reduce crop-subsidy outlays.
Corn and soybean growers opted almost exclusively for the new revenue program, called Agricultural Risk Coverage, while rice and peanut growers stampeded to the Price Loss Coverage program. “For most crops, the results are consistent with most producers making program choices that maximize expected payments,” said FAPRI. Because they increased their “base” acres and updated yields and opted heavily for ARC, corn growers are forecast to receive an additional $1.46 billion for their 2014 crop, exceeding FAPRI’s projection last winter. ARC payments are highest in the beginning years of the farm law but decline because of persistently low market prices.
For the five-year life of the farm law, total payments for all crops would be $300 million larger than FAPRI’s March estimate. “This figure should be kept in context; changing average crop price projections by a few cents a bushel would result in a larger change in projected outlays,” said FAPRI.