Read the full “Planting for Washington” Fact Sheet Here

Key Takeaways

Proponents of the Agricultural Act of 2014 (2014 Farm Bill) claimed a signature achievement – the bill’s estimated impact of reducing anticipated spending compared to previous farm bills. But there are several problems with this claim. The reductions in projected costs were projected to accrue mostly from eliminating existing commodity-specific programs, namely the direct payments program; and providing agricultural businesses the opportunity to instead participate in one of two “cheaper” programs, Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC). Actual spending on Title 1 supports, however, is much greater than projected. The programs also appear to be unduly influencing planting decisions. These cost overruns and likely modifications in the next farm bill adversely impact taxpayers, the environment, and the agricultural sector.

Payments under ARC and PLC are dependent upon USDA’s calculation of actual prices and yields achieved in a given year. A look at costs incurred thus far is disheartening. Congressional Budget Office reports indicate the ARC and PLC programs cost nearly $13.5 billion in Fiscal Years 2016 and 2017. As of April 5, 2018, the USDA reports making an additional $7 billion in payments for crops grown in 2016. The president’s Fiscal Year 2019 Budget Request indicates the administration expects to spend more than $7.5 billion on the programs in Fiscal Year 2018, with costs finally dipping below $5.0 billion in Fiscal Year 2019 (at $4.965 billion). Agricultural businesses were on pace to be paid merely $4.5 billion annually under the discredited direct payments program that these programs replaced.

Artificially high reference prices for certain commodities coupled with the unique treatment of cotton base acreage appear to have influenced the planting decisions of many agricultural businesses. Owners of base acreage have been able to choose their plantings based on an expected rate of governmental payment each year. This ability to pad net revenue with governmental payments has had the most obvious impact in the planting of peanuts. In spite of market prices that are consistently far below the farm bill reference price, which is supposedly set at a price at which producers suffer a loss, increased plantings of peanuts have occurred every year since passage of the 2014 farm bill. In addition, peanuts planted on generic base acres, and guaranteed to receive a payment at the time of planting, have made up an increasing share of peanut acreage.

Taxpayers can afford a safety net to help agricultural producers protect themselves from perils that can’t be managed. What the country cannot afford is lawmakers misusing the Farm Bill to plant programs that pay out in good times and bad and claim to save tax dollars while actually increasing costs. In order to right size the financial safety for agricultural businesses to something taxpayers can afford, lawmakers must use the 2018 Farm Bill debate to create programs that are cost-efficient, transparent, responsive to need, and holds all parties accountable for producing results. This includes reforming the agricultural business income entitlement programs to reward producers that plant for the market rather than those looking to harvest taxpayer dollars.