No Doubt About it: Price Tag Gets Ever Higher for New Gold-Plated Farm Subsidies

In a recent article in Politico, reporter David Rogers took issue with estimates of per-acre subsidy payments that growers could receive under the Agriculture Risk Coverage farm subsidy program created in the 2014 farm bill – estimates that EWG highlighted in a March 13 blog. We based it on newly published projections by the University of Missouri’s Food and Agricultural Policy Research Institute and the University of Illinois’ Farmdoc Daily

We’ll let Mr. Rogers and the Institute fight it out over whose projections are the most accurate. The fact of the matter is that estimates are estimates, and farm bills have a long history of costing more than projected. Only time will tell.

Roger’s beef with EWG is his claim that we misinterpreted a map from the University of Illinois publication Farmdoc Daily. The authors estimated the per-acre payments that corn growers could receive under the newly minted Agriculture Risk Coverage subsidy program, widely known as just ARC.

We found Farmdoc Daily’s cost estimates to be shockingly high. The authors presented their findings in a map that showed that corn growers in many counties in four Midwest states could receive payments ranging from $60 to $200 per acre on their base acres. We pointed out that those payments would be far, far larger than the so-called direct payments that ARC replaced.

The Politico article chastised EWG for citing the $200-per-acre estimate, arguing that no farmer would ever get that much and that the Farmdoc writer, Gary Schnitkey, said he thought $80 per acre would be closer to the truth. But that’s what a range means. The most common payment rate would likely fall somewhere in between. The author didn’t mention what payment level he considered most probable within this range.

David Rogers is right to point out that payments to a grower participating in the county-based version of ARC are “capped” at 10 percent of the county benchmark revenue – a five year Olympic average of prices and yields used to determine the size of ARC payments. That cap is one reason, he argues, that no grower could ever get payments as high as $200 per acre.

Does he think the University of Illinois analysts didn’t consider that cap when they produced the county-by-county estimates they reported in the Farmdoc piece?

The ultimate “cap” on farm subsidy payments is the $125,000 individual limit applied to total payouts from the ARC and Price Loss Coverage subsidies, marketing loan gains and loan deficiency payments. The Farmdoc piece projected very small payouts for soybeans but large ones for corn.

So how many base acres of corn would it take to bust the $125,000 limit if the payments turned out to be at the $200 per acre level? A single corn producer would need to be getting payments on 625 base acres of corn before he or she would bust the limit. But both spouses qualify for a payment limit. Such a farm couple would need to get payments on fully 1,250 corn base acres before they hit the $250,000 cap. That’s a lot of base acres considering that the average farm size in the four states ranges from 188 acres planted to all crops, not just corn, in Ohio to 754 acres in Kansas.

We sincerely hope that David Rogers is right that ARC payments will not reach $200 per acre. But are we supposed to be happy with the $80-per-base acre payment? That’s still more than three times the old $24-per-acre average direct payment for corn. So even at $80 per base acre, growers will get the equivalent of three years’ of direct payments in the first year of the new farm bill alone – with more to come.

We can, and probably will, go back and forth before we know what the payments really turn out to be. But the question that these feuding estimates and the 2014 farm bill ignore is: Why are these payouts going out in the first place?

We agree that growers should have a safety net. Taxpayers should step in when farmers suffer potentially crippling losses. But payments within the ranges reported by Farmdoc Daily – on top of payouts from heavily subsidized crop insurance programs – look more like a trampoline than a safety net.

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