Bumper Crop Could Cost Taxpayers Billions In Farm Subsidies

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Peter Fricke Contributor
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Record agricultural output is pushing crop prices down, meaning farm subsidies could exceed projections by several billion dollars, according to Bloomberg.

When Congress passed the latest farm bill in February, it made a number of reforms, including “replac[ing] direct payments with programs tied to price and revenue.” It also “increased the prices that would prompt government subsidies,” based on forecasts that agricultural prices would remain high. (RELATED: 10 Reasons the Farm Bill Makes No Sense)

At the time, lawmakers touted the five-year bill’s “projected savings in subsidies of $14 billion over a decade,” but now that the prices of many staple crops have fallen below the thresholds triggering support payments, spending on those subsidies could be more than twice the roughly $4 billion that was projected, according to some estimates.

“It’s very premature to speculate about the farm bill savings when major programs haven’t even gone into effect yet,” a spokesperson for Senate Agriculture Committee Chairwoman Debbie Stabenow told Bloomberg, referring to the March deadline for farmers to select from new subsidy options. (RELATED: Report: USDA Fails to Recoup Millions in Improper Farm Subsidies)

Among those options, according to a recent analysis by economists at The Ohio State University and the University of Illinois, detailed in Congressional Quarterly, are Agricultural Risk Coverage, “which provides payments when county revenue for a crop falls below a rolling five-year average,” and Price Loss Coverage, “which triggers subsidies when prices fall below a target level.”

“For corn growers,” who stand to receive the vast majority of crop subsidies under almost any scenario, “ARC is the no-brainer,” offering estimated payments of $79 per acre, compared to only about $26 per acre under PLC.

The analysis determined that farm subsidies could cost as much as $8.4 billion if prices wind up at the low end of the latest USDA forecasts, but would still total $6.8 billion even if prices “are at the midpoint of the projected ranges for each commodity.” (RELATED: It’s Time to End Welfare for Farmers)

On the other hand, if prices unexpectedly soar to the high-end of USDA projections, “the total cost of the programs falls to $3.3 billion.”

Josh Sewell, a policy analyst for the group Taxpayers for Common Sense, told Bloomberg that the farm bill was “based on false premises of fake savings,” because “the prices Congress used to calculate the bill’s cost were divorced from reality.”

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