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By Casey Wooten
Oct. 5 — The Agriculture Department's announcement that it would send out more than $7 billion in subsidy payments to farmers drew both praise and criticism in agriculture policy circles.
The USDA said Oct. 4 that it would make the disbursements to about 1.7 million farmers hit by the years-long slump in crop commodity prices. The figure is about $3 billion more compared to the previous year's announced payments (See previous story, 10/05/16).
The announcement drew praise from farm groups, who said the subsides were sorely needed to offset low farm income, which is expected to drop to $71.5 billion for 2016, down 11.5 percent compared to the previous year and the lowest since 2009. Taxpayer and budget-slashing groups criticized the payout, hinting that the new subsidy programs are likely to be a battleground when Congress begins drafting the 2018 farm bill next year.
The payments—likely to go out within the month—will be made to farmers enrolled in the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, which were enacted as part of the 2014 farm bill.
Most of the payments will be sent to corn, wheat, rice, peanut and soybean growers and will account for about 10 percent of net farm income in 2016, the USDA said.
National Farmers Union President Roger Johnson said the payments would provide much-needed assistance to farmers.
“A strong farm safety net is a critical risk management tool for agriculture, and we’re pleased to see the ARC and PLC safety net programs will assist producers faced with low commodity prices,” Johnson said in an Oct. 4 statement.
But Johnson also said that the programs weren't without flaws, and that the NFU would continue to work with Congress as lawmakers craft the 2018 farm bill so that the safety net “more accurately reflects the true costs of production.”
Part of that discussion could center on how ARC payments are calculated at the county level. Last year, some groups criticized the program for what they saw as uneven payments across regions.
“It’s based on what your county revenue does, and for right or wrong, last year we had some counties that got $40 or $50 an acre and the county right next door got nothing,” Bob Young, chief economist at the American Farm Bureau Federation, told Bloomberg BNA.
Young, who also praised the payments, said that the Farm Bureau will be looking at how subsidies go out this year to see whether the USDA should change what data the department uses to calculate payments.
“The checks won’t go out until the end of the month, and I suspect that’s when we’ll have a much better idea,” he said.
This year's sharp increase in subsidy payments “is not a surprise,” Daren Bakst, an agriculture policy research fellow at the Heritage Foundation, told Bloomberg BNA.
Bakst said that when Congress drafted the new farm subsidy programs for the 2014 farm bill, they did so as commodity prices were near record highs.
“And it was inevitable that the prices were going to come down and as a result of the way these program operate, it triggers more money, and that’s exactly what’s going on,” he said.
In preparation for the next farm bill, Bakst and The Heritage Foundation recently unveiled a 148-page study recommending major changes to the Agriculture Department's subsidy programs, including eliminating the ARC and PLC programs.
Instead, Bakst pushes for the USDA to eliminate revenue-based subsidies and instead subsidize crop yield-based policies only.
“We’ve set up a program where it’s going to be far more generous to farmers and more costly to taxpayers than was projected, and that’s the big problem here,” Bakst said.
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Text of the Heritage report is available at http://thf-reports.s3.amazonaws.com/2016/Farms_and_Free_Enterprise.pdf.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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