No Taxpayer Savings in First Year of Farm Bill Commodity Payouts

Nov 19, 2015

Many corn and soybean farmers in the Midwest are receiving their first government payments under the new Farm Bill enacted last year, and taxpayers are spending more than projected.

 

Under the old system of direct payments, farmers knew what they'd get each year and the government knew the price tag would hover around $5 billion annually. But with the new Farm Bill, farmers choose a safety-net program, either one that is triggered when average annual yield falls below a certain point or when the average annual price does. Most Corn Belt farmers chose the county-level Agricultural Risk Coverage (ARC), which calculates payments based on the average yield in the county.

 

The government's idea was to save money by replacing fixed costs with variable expenses that would, at least in some years, be lower than the old amounts. It didn't work out that way for the 2014 crop year, the season for which payments are now being distributed. (For corn and soybeans, the crop year runs September 1 through August 31.)

 

"It's going to be over $6 billion," said University of Illinois economist Gary Schnitkey. That's more than a billion over the annual direct payment amount.

 

But Schnitkey remains optimistic.

 

"As we move through time, those payments likely will come down in future years," he said.

 

Despite the high price tag for taxpayers, payments to farmers vary widely. Heavy spring rains can hinder planting. Lack of rain can kill crops. Either can reduce yield.

 

"In Iowa, many of the counties were receiving the maximum ARC county payment," Schnitkey said, "and in central Illinois we see zero."

 

Over the five year lifespan of the farm bill, Schnitkey said it's still possible the billions of dollars in projected savings could be achieved. But that will depend on unpredictable factors, like the weather.  

 

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