Home Indiana Agriculture News Farm Safety Net Payments Forecast to be Higher in 2016

Farm Safety Net Payments Forecast to be Higher in 2016

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The agriculture slump is getting so bad in the U.S. that farmers are about to get more government aid than at any time in the past decade.

About $13.9 billion of net farm income this year will be federal payments, or about 25 percent of total profit estimated at $54.8 billion, according to estimates by the U.S. Department of Agriculture. That’s the biggest payout and highest ratio since 2006, as programs authorized by Congress two years ago cost more than originally forecast.  Farmers will earn less than half what they did just three years ago, before global surpluses sent commodity prices plunging. Corn and soybeans, the biggest U.S. crops, are so cheap that farmers are expecting to lose money on every acre they plant this season. That’s putting a bigger strain on government safety nets for agriculture.  “This is a sign of a weak farm economy that is much weaker than even a couple years ago,” said Patrick Westhoff, director of the Food & Agricultural Policy Research Institute at the University of Missouri in Columbia.  Since corn and soybeans touched record highs in 2012, global output has increased faster than demand and prices tumbled. Income for U.S. farmers is headed to a 14-year low, the USDA estimated in February. A new subsidies law approved in 2014 scrapped an aid program that wasn’t tied to prices. The replacements were payments tied to market swings, which raises expenses in less-profitable years.

About $13.9 billion of net farm income this year will be federal payments, or about 25 percent of total profit estimated at $54.8 billion, according to estimates by the U.S. Department of Agriculture. That’s the biggest payout and highest ratio since 2006, as programs authorized by Congress two years ago cost more than originally forecast.  Farmers will earn less than half what they did just three years ago, before global surpluses sent commodity prices plunging. Corn and soybeans, the biggest U.S. crops, are so cheap that farmers are expecting to lose money on every acre they plant this season. That’s putting a bigger strain on government safety nets for agriculture.  “This is a sign of a weak farm economy that is much weaker than even a couple years ago,” said Patrick Westhoff, director of the Food & Agricultural Policy Research Institute at the University of Missouri in Columbia.  Since corn and soybeans touched record highs in 2012, global output has increased faster than demand and prices tumbled. Income for U.S. farmers is headed to a 14-year low, the USDA estimated in February. A new subsidies law approved in 2014 scrapped an aid program that wasn’t tied to prices. The replacements were payments tied to market swings, which raises expenses in less-profitable years.Lawmakers should have seen the higher expenses coming because it was clear when the new programs were approved that farmers were headed for reduced income, said Vincent Smith, an agricultural economist at Montana State University in Bozeman According to a 10-year price forecast the USDA made in February, corn will average between $3.60 and $3.75 a bushel until 2025. This year, farmers may receive $3.55 a bushel, more than a dollar below the average over the past decade, the department said in a separate report released last week. Prices reached a record $8.49 in 2012.  Should corn stay above the USDA’s forecast, payments may remain similar to what they would have been under previous farm programs, and the portion of farm profits attributable to the government may decline, Smith said. Should they plunge near $3, “you would see the cost rise dramatically,” he said. “That’s the snake in the woodpile.”

Lawmakers should have seen the higher expenses coming because it was clear when the new programs were approved that farmers were headed for reduced income, said Vincent Smith, an agricultural economist at Montana State University in Bozeman According to a 10-year price forecast the USDA made in February, corn will average between $3.60 and $3.75 a bushel until 2025. This year, farmers may receive $3.55 a bushel, more than a dollar below the average over the past decade, the department said in a separate report released last week. Prices reached a record $8.49 in 2012.  Should corn stay above the USDA’s forecast, payments may remain similar to what they would have been under previous farm programs, and the portion of farm profits attributable to the government may decline, Smith said. Should they plunge near $3, “you would see the cost rise dramatically,” he said. “That’s the snake in the woodpile.”