Projected Spending Under the 2014 Farm Bill

The U.S. Department of Agriculture’s Economic Research Service (ERS) recently provided an update to the 2014 Farm Bill, “Projected Spending Under the 2014 Farm Bill.”

The update explained that, “The Agricultural Act of 2014 (2014 Farm Bill) is made up of 12 titles governing a wide range of food- and agriculture-related policy areas. The Congressional Budget Office (CBO) projected that the total cost of the new Farm Bill would be $489 billion over 5 years (2014-2018). Nutrition programs account for about 80 percent of this total, with projected outlays for crop insurance, conservation, and commodities representing another 19 percent.”

The ERS item also noted that, “Crop insurance program expenditures, which have been a growing share of Farm Bill program spending, are projected to make up 8 percent of the 5-year outlays under the 2014 Farm Bill. While some of those expenditures reflect support to crop insurance companies for delivery and underwriting, subsidies for farmer premiums have been increasing in recent years and are expected to increase further with new crop insurance products authorized under the new Farm Bill. In part, premium and subsidy increases have been the result of rising crop prices, since premiums are based partly on expected prices and premium subsidies are set as a percentage of the premium. Premiums and subsidies declined in 2014 from the high levels of 2011-2013, reflecting the effect of falling crop prices.

“Another factor behind rising premiums and subsidies has been increasing adoption of crop insurance by producers, both in number of acres insured and in levels of yield or revenue covered.”

Meanwhile, ERS pointed out that, “Commodity program payments are projected to make up 5 percent of outlays under the 2014 Farm Bill over the 2014-2018 period. With repeal of fixed direct payments, commodity payments are designed to respond to variable market and weather events, making payment levels more uncertain. While CBO projections at the time the 2014 Farm Bill was enacted suggested total payments would be lower than under the 2008 Farm Bill, actual future price and yield could differ from these projections and result in higher or lower payments than projected.”

Mandatory conservation program expenditures are projected to account for 6 percent of outlays under the 2014 Farm Bill. Details on conservation program spending are provided on the ERS topic page Conservation Programs: Background,” the ERS item said.

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