freeimages.com/ZGingerFalling crop prices have raised cost projections for the farm bill.From WATTAgNet:
Falling crop prices have raised cost projections for the farm bill.
The Congressional Budget Office (CBO) said annual payments to farmers could average $4.8 billion over the next decade, which is almost 50 percent more than what was predicted less than a year ago, after the 2014 farm bill passed.
Some relief will come for taxpayers because costs for the crop insurance program will be lower. The CBO says there will be a $200 million drop from its past projections for average yearly crop insurance costs.
“History shows there is a close correlation between crop prices, as represented by corn, and the total crop insurance premium and premium subsidies,” Keith Collins, a former chief economist for the Agriculture Department and a consultant now for the crop insurance industry, told Politico. “So when prices drop, as over the past two years, premiums and subsidy costs fall.”
The CBO is projecting a combined annual cost of the Agricultural Risk Coverage program and the price-loss coverage plan to be $4.4 billion, compared with its projection of $2.94 billion in April. Other smaller subsidy programs bring the total to $4.8 billion.
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Economists have estimated that new subsidies from the U.S. government’s five-year farm bill could be as high as $10 billion.
Some economists have estimated that new subsidies from the U.S. government’s five-year farm bill could be as high as $10 billion. That would be more than 10 times the U.S. Department of Agriculture’s (USDA) working estimate and more than double the forecast by the Congressional Budget Office (CBO).
If farmers’ revenues fail to meet benchmarks tied to long-term price and production averages, they could receive payouts. The USDA and CBO made their estimates before crop prices fell on record harvest expectations.
The farm bill’s new programs were meant to cost taxpayers less by replacing a nearly two-decade-old scheme of direct cash payments to farmers, which were about $5 billion per year and were made regardless of need.
Due to ample supplies, corn prices have fallen well below the long-term average price used as a benchmark for one of the farm bill’s programs. This year’s bumper harvest may not be large enough to compensate for the price falls, and revenues for some farmers could be low enough to trigger payments.
Beginning November 17, farmers were able to start signing up for the programs. Most participants will be the farm families who own and operate about 98 percent of all U.S. farms.



