January 24, 2020

Direct Payments: Issues Arise; CFTC Chairman

Reuters writer Roberta Rampton reported yesterday that, “President Barack Obama’s pledge to cut subsidies to big farm businesses in his first budget reopens a long-simmering fight about whether — and if so, how — the United States should reform its traditional farm supports.

“Obama signaled in a speech to Congress on Tuesday he wants to cut direct payments as part of a broad effort to trim government spending and curb the soaring federal deficit.

Farmers say they count on the $5.2 billion in payments as a way to provide stability amid volatile commodity prices, high costs for fertilizer and other inputs, and the vagaries of weather.”

[Note: More on Direct Payments– The USDA’s Economic Research Service (ERS) has stated that, “On a per acre basis, the value of direct payments varies by the commodity associated with the historic base and by payment yields (graph), which vary by location (graph).” ERS added that, “The primary economic impacts of direct payments are increases in farm income and land values. However, since direct payments also increase producer wealth, they could facilitate additional investment and may influence a farmer’s risk aversion.”

With respect to farm income, ERS has forecast a 20 percent decrease in net farm income for 2009, while the Federal Reserve Bank of Chicago noted recently that, “Farmland values declined in the fourth quarter of 2008 for the Seventh Federal Reserve District—the first quarterly decrease in a decade.” However, the USDA’s National Agricultural Statistics Service indicated yesterday that the average value per acre of U.S. cropland was $2,760 in 2008, up from $2,530 in 2007 and up from $2,300 in 2006.

The Environmental Working Group has also conducted detailed analysis regarding Direct Payments.]