What is in this article?:
- USDA says larger farms will get larger share of government payments
- DP and CCP
- Explaining farm payments to the masses is a challenge.
- Agriculture economists contend it is the general public and often the media that generally misunderstand the farm subsidy payment system.
- A significant portion of the benefits of payments is captured by non-operator landlords.
A new USDA study indicates government commodity payments will continue to shift to farm households with higher income, a trend brought about because agricultural production in recent years has shifted to farms with larger sales.
The report, authored by USDA’s Economic Research Service (T. Kirk White and Robert A. Hoppe), says the trend does not reflect a change in program policy but uses the same payment formula adopted in the original program to determine which farms would receive support based upon production numbers.
"Since operators of larger farms tend to have higher household income, the shift of commodity-related payments to larger farms has resulted in a shift of payments to higher income households," notes the USDA report released this week. "For example, in 1991, half of commodity payments went to households with incomes over $54,940 in constant 2009 dollars (50th percentile) and a quarter of commodity payments went to farm households with incomes greater than $115,000 (75th percentile).
By 2009, the distribution of payments had shifted upward considerably, with half of commodity payments going to households with incomes over $89,540 and a quarter going to farm households with incomes greater than $209,200."
The report is significant as pressure continues to mount for lawmakers who are being pressured by budget constraints and by commodity critics and taxpayers concerned with farm subsidy programs. The issue has become such a hot ticket item that many corn and soybean groups have said they are willing to forgo direct payments for other types of farm subsidy programs due to the growing controversy.
"While commodity program payments to farmers vary considerably from one year to the next, they continue to play an important role in agricultural policy, accounting for $6 billion to $16 billion annually between 1999 and 2009," says USDA in the new report. Those numbers do not include conservation program payments.
Federal farm programs include the “fixed” or direct payments program, the countercyclical payments (CCP) program, and marketing loan benefits programs. In addition, the 2008 Farm Act created the Average Crop Revenue Election (ACRE) program, which also provides commodity-related payments, although farmers did not begin receiving ACRE payments until after the period covered in the analysis, 1991 to 2009.