Feds Spend More, Not Less, On Farmers

August 25, 1999

When the freedom to farm legislation was developed, a major goal was to reduce the federal government's presence in farmers' lives and lower federal costs for agriculture. The 1996 farm law includes declining payments to help accomplish that. However, if Congress passes a farmer rescue bill similar to the Senate's version, fiscal 2000 outlays would be the third-highest federal agricultural spending level ever.

USDA economist Mitchell Morehart says total federal outlays on agricultural programs in fiscal 2000 could increase to more than $20 billion, the third-highest federal agricultural spending level ever and more than four times the lowest level for the 1990s. Also, producers' planting decisions could be affected if the payments increase farmer expectations of future emergency spending legislation. In the near term, Morehart says, plantings also could be influenced by marketing assistance loan benefits if market prices are below loan rates.

The current USDA net farm income forecast is $43.8 billion for 1999, excluding any subsidies from potential 1999 legislation. That's just $300 million less than 1998 and $1.7 billion less than the average of the 1990s. Under existing legislation, total direct payments are expected to total $16.6 billion for calendar 1999 compared to $12.2 billion in 1998 and second only to the 1987 record of $16.7 billion. More than $6 billion of direct 1999 payments will be loan deficiency payments, available to producers when farm prices decline below government loan rates for marketing assistance loan crops. In 1998, LDPs totaled almost $2 billion.

Under the Senate's $7.4 billion farmer aid bill, farm income would increase by about $6.7 billion, says Morehart, spread over calendar years 1999 and 2000. Not all of the proposed aid is in direct payments to farmers and land owners. The package also includes such items as additional crop insurance and cotton marketing payments that benefit the farm sector but do not increase income directly. The effect of aid on farm income will vary by region and enterprise, says Morehart.

Morehart writes in the latest Agricultural Outlook, available on USDA's web site under news and information.