In October, 1.7 million U.S. farmers got their first payouts under flexible subsidies created by Congress in 2014 to replace a system of fixed support. A crash in commodity prices means the program—which gives farmers three choices with different risks and rewards—will pay out about $1 billion more than anticipated. “Farm bills are written for the bad years, not the good ones,” says Dale Moore, public policy director for the American Farm Bureau Federation. While some got more than they would have under the old system, Illinois farmer J. Gordon Bidner was among those who got no federal cash for their crops, thanks to a healthy corn harvest. “We are all about managing and minimizing risks,” he says.
Farmers have three options. Two guarantee revenue in bad harvest years, while the third provides a cushion when prices fall. The catch: Farmers are stuck with their choices until 2018, when the Farm Bill comes up for renewal— no matter how markets or nature behave.
Agricultural Risk Coverage (County) insures farmers’ revenue based on countywide yields for specific crops, such as corn, soy, or wheat.
76% of all U.S. farm acres are enrolled in ARC-CO.
Agricultural Risk Coverage (Individual) provides revenue protection based on a farmer’s own harvest history.
1% are enrolled in ARC-IC.
Price Loss Coverage offers farmers price support for their commodity crops.
23% of all farm acres are covered by PLC.Bidner chose ARC-CO and got $0 in October for his 2014 crop, because it outperformed previous harvests, thanks to the end of a brief drought. Under the earlier, fixed subsidy program, Bidner received $8,000 a year.
So far, Bidner has sold 56% of his corn crop and 40% of his soybeans. That’s far below his usual sales target of 75 percent at this point in the season. He’s keeping it off the market in hopes that prices—$3.68¼ per bushel for corn and $8.57¾ per bushel for soybeans as of Nov 18—will go up before the next harvest.
Payouts under the ARC-CO program can vary, even between adjacent counties. Northern Illinois received more rain in 2014 than the south, decreasing yields—so farmers there got federal support, while Bidner didn’t need it.
The Congressional Budget Office predicted in March that the new subsidy system would cost $4.02b in 2015 and peak at $7.25b in 2016. Instead, government support is expected to reach $5b this year, in part because a glut in commodities is keeping prices low — which means payouts are high. “The estimates were overly optimistic,” says Vincent Smith, a professor of agricultural economics at Montana State University in Bozeman. “Some farmers will receive hundreds of thousands of dollars.”