How Much Greater Will 2014/15 Farm Program Payments Be Than CBO Estimate

Published on: 22:15PM Aug 06, 2015

Gary Schnitkey and Carl Zulauf from the University of Illinois just released a new estimate of total estimated ARC/PLC payments for the 2014 crop year (to be paid after September 30, 2015).  Their report estimates total farm program payments of about $5.7 billion for this year.  In their summary and commentary section, they indicate it is still unclear if payments under the 2014 farm bill would be greater than if the 2008 farm bill had been extended.

I decided to use their estimated number of $5.7 billion and compare that to the original CBO projection released in January, 2014.  CBO estimated total farm program payments for 2014 crop year paid in the US Government fiscal 2016 year (October 1, 2015 to September 30, 2016) of about $4.1 billion.  This appears to be about $1.6 billion short of where actual payments may end up.  Prices were lower this crop year than anticipated by CBO; however, expectations for 2015 crop prices are even lower than 2014 crop prices.  How might that affect next year's payments.

Assuming that some PLC payments will kick in next year for the major crops and about the same amount of ARC payments (Illinois, Indiana, Ohio, Missouri are likely looking at maximum ARC payments and Northern Iowa, Minnesota, Dakotas and Nebraska may be much lower), we can estimate that total farm program payments for the 2015 crop year will be higher than this year and it could be as high as $7-8 billion depending on final yields and prices.  This compares to the original CBO estimate of about $4.4 billion.

Misses that are this high may cause Congress to make changes before the end of the Farm Bill (if budget needs are the prime focus).  However, the Farm Doc Daily report indicated program payments averaged more than $15 annually between 1998 to 2002, so current payments are still much lower than some prior year payments.