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USDA study focuses on distribution of federal farm program payments

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USDA study focuses on distribution of federal farm program payments
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

WILLMAR -- When Congress formulated the 2008 farm bill, two of the more contentious issues were income eligibility and payment limits.

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Income eligibility relates to the income caps that Congress placed on household income to determine eligibility for federal farm program benefits. The levels set by Congress differ, depending on the type of government program, and the amount and type of household income -- farm or off-farm.

Payment limits refer to the total amount of farm program payments that an individual can receive. The payment limit amounts can vary by the specific type of government program.

With budget constraints now overshadowing nearly every piece of legislation being considered in Washington, income eligibility and payment limits are likely to again become a topic of discussion and debate in the coming months as Congress drafts a new farm bill.

A new study from the U.S. Department of Agriculture sheds some light on how recent changes in the structure of farms is impacting the distribution of farm program payments, including indemnity payments received under the federal crop insurance program.

The information provided in this study might also provide some insight as to how any changes made by Congress regarding income eligibility and payment limits could impact the issuing of farm program dollars under the next farm bill.

In their study, T. Kirk White and Robert A. Hoppe of USDA's Economic Research Service provide information on how previous farm program payments have been distributed, and what impact the present income eligibility and payment limits have had on their distribution.

Some of the key findings of their study regarding farm payments and their distribution include:

* Total federal farm program payments have ranged from as high as $24.4 billion in 2005, to as low as $7.3 billion in the late 1990s. In 2009, the total was $12.3 billion.

* Indemnity payments under federal crop insurance have grown larger in recent years. In 1991, indemnity payments totaled $955 million. By 2009 that figure had increased to $5.2 billion. However, not all of the increase represents a net benefit since farmers do pay premiums to have the insurance.

* Similarly, not all farm program payments directly benefit the recipients. Higher government payments can lead to increased production costs, such as higher land rental rates. Therefore, some of the benefits of federal farm program dollars flow from the farm operator to the landowner, in the form of higher land rents.

* A long-term trend to larger farming operations has contributed to a shift in the distribution of commodity-related program payments and crop insurance indemnity payments toward larger farms, most of which are family farms.

* Since the operators of larger farms tend to earn higher household incomes, there has been a corresponding shift in the distribution of commodity-related program payments toward farms with higher household incomes.

* Most commodity-related program payments now go to farms operated by households with annual incomes over $89,000 -- significantly higher than the income of a typical U.S. household.

* Federal crop insurance indemnity payments have also shifted toward farms operated by higher household incomes, although not as much as commodity-related program payments.

Based on what their research found regarding the distribution of farm program payments and crop insurance indemnities, White and Hoppe reached the following conclusions regarding income eligibility and payment limits:

* The current payment limits and income eligibility caps affect few recipients and only a small share of total payments.

* Several recent proposals to lower payment limits or income eligibility caps would still only affect a few recipients. However, some farms -- especially rice and cotton farms -- could be affected more than others because they tend to receive larger payments.

* Given the small number of farms potentially affected by the proposed limits, in most areas, the impact would be small.

* Under the current farm bill, payment limits do not apply to federal crop insurance indemnities or premium subsidies.

To view the entire findings of this study, visit USDA's Economic Research Service website at www.ers.usda.gov.

Minnesota sweet corn production down 10 percent

The National Agricultural Statistics Service is estimating that Minnesota sweet corn production totaled 735,760 tons in 2011, down 10 percent from the previous year's estimate of 821,730 tons and down 25 percent from 2009's record high production of 979,250 tons.

Planted acreage was estimated at 124,400 acres, up 2 percent from the previous year. Harvested acreage of 119,900 acres was also up 2 percent from 2010.

Average crop value was a record high of $131 per ton, compared to $90.70 in 2010.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.

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