Costs of Farm Subsidy Programs Skyrocket

Tuesday, June 7, 2016

 

The costs of two farm subsidy programs are spiraling out of control, belying Congressional assurances in 2014 that they would save taxpayers’ money, according to two recent estimates.

Congress created the Agriculture Risk Coverage-County and Price Loss Coverage programs in the 2014 farm bill as a supposedly “cheaper alternative” to replace the previous system of “direct payment” subsidies to growers. But the new analyses show that in 2014 the two programs cost the government more than direct payments did in any year between 2005 and 2013. In 2014, these programs cost more than $5.2 billion, while the largest year of direct payments between 2005 and 2013 was $5.196 billion in 2005.

An analysis released last week by the “farmdoc daily” website of the University of Illinois said the higher payments under the Agriculture Risk Coverage program will continue in 2015 and this year. Because of the way the programs work, payments are not made until the end of the year after the crop was grown. Consequently, Risk Coverage payments for 2015 will not be made until the end of 2016.

Although corn growers are expected to receive subsidy payments in fewer counties in 2015 than in 2014, many of these counties are projected to garner significantly more in total payments. Corn growers in much of Indiana and Illinois did not collect any Risk Coverage payments in 2014, but the analysts predicted they will receive $60-to-$80 per acre for 2015. The authors of the article do not say if 2015 national costs will be larger than 2014’s overall.

Their forecasts for this year are even worse. The authors predict that for corn, “most counties in the U.S. would receive ARC payments.” Corn growers in almost every county in Ohio, Indiana, Illinois and Iowa are expected to collect payments of $40-to-$80 per acre. Corn growers in many western states are projected to receive $80-to-$105 per acre (Figure 1).

Figure 1. Most corn-growing counties are estimated to get Risk Coverage payments in 2016.

Source: Gary Schnitkey et al. "Estimated 2016 ARC-CO Payments." farmdoc daily (6):103, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 1, 2016.

The new estimates reinforce the Congressional Budget Office’s January 2016 prediction that the Agriculture Risk Coverage and Price Loss Coverage programs will cost 70 percent more than originally projected.

Replacing the problematic direct payment program with new, expensive farm subsidy programs was not reform. Taxpayers need real reform in the next farm bill to get them out from under the costly burden of these programs.  

 

 

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