Whether expressed in nominal or constant dollars, government payments in the 2007-09 period represent the lowest total volumes paid to producers since 1997. During this period, however, the importance of government payments as a percent of net cash farm income varied by ERS production region.

Low levels of crop payments as a function of prices in 2007-09 and low milk program support payments meant that the government payments' shares of net cash farm income were on average less than 20 percent for producers in the Northeast, Corn Belt, Lake States, and the Pacific regions.

The government payments' shares of net cash farm income were on average highest in the southeast quadrant of the U.S., where government payments represented on average 50 percent or more of net cash farm income for producers in the Southeast and Southern Plains regions.

Farm Income and Costs: Farms Receiving Government Payments

The amount of government payments and their importance to farm income vary by the type of program, characteristics of the farm operation, and location of the farm. We group 1997, 2002, and 2008 Farm Act program payments into four broad categories:

Direct or 'fixed' paymentsbased on historical cropping patterns on a fixed number of enrolled acres and not linked to the operator's current decisions on what to produce and when to market farm output. Prior to the 2002 Farm Act, production flexibility contract payments functioned as fixed payments.

Payments that depend on current market prices for enrolled commodities. These payments are comprised of countercyclical payments, loan deficiency payments, marketing loan gains, and certificate gains. Prior to the 2002 Farm Act, emergency market loss assistance payments were made to producers when commodity prices fell to historical lows.

Conservation program payments, principally from the Conservation Reserve Program, Environmental Quality Incentives Program, and the Conservation Security Program (which together disbursed over 89 percent of all conservation payments made to farmers in 2009).

Other payments include those made by emergency and disaster relief programs, milk support programs, the peanut and tobacco buyout programs, and small miscellaneous programs.

Direct payments and payments based on market prices represent 'commodity program payments' since they are tied to current or historical acreage of program-eligible crops. For the years 2000-09, commodity program payments represented on average 60 percent of government payments to farmers, conservation payments accounted for 14 percent of all government payments, and other payments represented 26 percent of the total. Direct payments, on average, accounted for half of commodity program payments.

High program payments based on market prices in 2000-01 were due to historically low commodity prices. In addition, producers received emergency market loss assistance payments authorized by Congress. In 2005, Hurricane Katrina closed down the Port of New Orleans, generating large stockpiles of harvested commodities in the Midwest and a drop in commodity prices, leading to a short-term spike in marketing loan benefits.

Whether expressed in nominal or constant dollars, government payments in the 2007-09 period represent the lowest total volumes paid to producers since 1997. However during this period, the importance of government payments as a percent of net cash farm income varied by ERS production region. Low levels of crop payments as a function of prices in 2007-09 and low milk program support payments meant that the government payments’ shares of net cash farm income were on average less than 20 percent for producers in the Northeast, Corn Belt, Lake States, and the Pacific regions. The government payments’ shares of net cash farm income were on average highest in the southeast quadrant of the U.S., where government payments represented on average 50 percent or more of net cash farm income for producers in the Southeast and Southern Plains regions.