U.S. farmers will stick with traditional crop subsidies based on crop prices and shy away from the crop revenue subsidy created in the new farm law, says the Congressional Budget Office. The revenue program and expansion of the federally subsidized crop insurance program were two key points of the 2014 law. Signup for the farm program is expected to open this fall.
In its baseline for agriculture, CBO foresees enrollment in Agriculture Risk Coverage (ARC), the revenue program, at 41 pct for corn, 49 pct for soybeans and 27.5 pct for wheat. That is lower than estimates by the think tank FAPRI at the University of Missouri – 50 pct for corn, 60 pct for soybeans and 30 pct for wheat. Farm outlays depend in part on which subsidy program farmers select.
CBO expects ARC and the traditionally styled Price Loss Coverage (PLC) program to make payments beginning with the 2015 crops. They would account for the bulk of an estimated $16 bln over five years in commodity subsidies. Crop insurance would cost $43 bln over the same period. CBO sees generally higher corn, wheat and soybean prices than FAPRI or USDA in the near and medium term.
Groups representing corn and soybean growers pressed for ARC, which shields growers from low prices and poor yields, as the best safety net in an era of volatile market prices. Traditional subsidies offset low prices but provide little help when yields plummet. However, they are more familiar to growers. As well, Southerners said insurance-like programs do not work well for rice and peanuts.
Analysts such as Art Barnaby of Kansas State University say PLC allows more flexibility for growers, who must make a one-time choice on which program to use for five years. With PLC, Barnaby said, growers can adjust their crop insurance coverage year to year and decide if they want to enroll in the Supplemental Coverage Option, which operates similar to ARC.