CBO to determine farm bill spending

Just how much farm bill can you get for $68 billion?

Not as much as most farmers and their commodity associations would like. And it's not just that commodities have a smaller pie to divvy up as Congress begins cogitating on how to craft the next farm program that worries them, it's also that more folks want a slice.

“The farm bill will be all about Congressional Budget Office figures,” said James Richardson, with the Texas A&M Food and Agriculture Policy Center.

Richardson, speaking at the Texas Ag Forum recently in Austin, said funds available for the next farm bill will be about $35 billion less than legislators had in 2002. And, in addition to the historic commodities included, fruit and vegetables and renewable fuels will be part of the mix.

“That money has to come from somewhere,” he said. “It will be tight.”

Richardson also discussed potential effects a proposed adjusted gross income (AGI) means test would have on farmers.

“The administration has proposed revising the AGI means test for eligibility to farm program payments,” Richardson said. The figure set in the 2002 law was exclusion at $2.5 million, average AGI for three preceding years, and if less than 75 percent of the AGI comes from farming, ranching or forestry operations. Payments affected include direct payments, market loan guarantees/loan deficiency payments and counter cyclical payments.

The revised means test lowers the threshold to $200,000 and repeals the 75 percent exclusion.

Richardson and others with the agricultural and food policy center use a model consisting of 64 typical farms across the country to evaluate the impact of farm programs, prices and other influences on farm income. “We applied the $200,000 AGI means test for 2008 through 2014. We calculated a three-year moving average AGI each year to determine if a farm was eligible for CCP, DP, MLG/LDP.”

Richardson said the nature of farm net income risk showed that a farm could be eligible for payments one year and not the next.

He said 17 of 19 representative feed grains farm experienced at least one year between 2008 and 2014 when they lost all government payments. Larger farms lost as much as $192,710 (North Dakota Grain farm) but smaller farms considered typical of the areas they represented also were ineligible for government payments some years because of the rule change.

“Farms in Iowa, Missouri, North Dakota, Nebraska, Texas and South Carolina all were ineligible for payments for at least one year during the simulation,” Richardson said.

The program meant lower net cash incomes and lower ending real net worth. “Six of the 16 feed grain farms that lost government payments saw more than $150,000 decrease in real net worth and four lost more than 3 percent of real net worth.”

Richardson said eight of the 10 representative wheat farms would “experience losses in government payments with the lower AGI limits. Average annual losses in government payments are much smaller for feed grains due to the lower probability of wheat farmers receiving CCP from 2008 through 2014. The reductions in real ending net worth are quite small, ranging from zero to $66,000 for farmers affected by the proposed AGI limit change.”

Cotton farm losses

He said 16 of the 20 representative cotton farms experienced lower average annual government payments under the revised AGI. “Lost payments were generally low but four of the 16 farms lost more than $150,000 when ineligible. Losses in net worth under the AGI limit were also generally low; however, five farms lost more than 2 percent of their net worth and one of those lost 15.4 percent.”

Richardson said low cash income projections for rice farms kept their AGI low. “Only four of the 15 representative rice farms experienced a loss of farm program payments under the AGI limits. Losses in government payments ranged from zero to more than $250,000 when ineligible.”

He said net worth losses in 2014 ranged from $1,800 to $215,700 for those farms.

Richardson said an administration proposal to replace CCP with a revenue assurance program (RAP) would save less money than the secretary of Agriculture estimates, based on his analysis.

“The administration says RAP would save $5 billion the first five years and $9 billion over ten years,” Richardson said. “I don't agree. I think it would save just under $1 billion the first five years and about $3 billion over nine years.”

He said commodity outlook for the next few years looks positive for grains but not as good for cotton and rice.

“Outlook for grain is the best I've seen since 1995,” he said. “Cotton and rice are still in the red.”

He said the next farm program will include some familiar programs, not because “it's what we want but what we can afford.”

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