Report Outlines Farm Payment Inequalities

What the report finds is that cotton and rice get the most government support, soybeans get among the least, and corn falls somewhere in the middle.

Farm programs have been around since the 1930s and paid out an estimated $415 billion. Many may feel that the "Freedom to Farm Act" brought about a reduction in farm payments, but in reality, $223 billion (or about 52%) of total USDA Commodity Credit Corporation payments have occurred in the 15 years since the Freedom to Farm bill passed in 1996.

The report is jam-packed with great graphs outlining comparisons between the different major commodities. Here are a few highlights from the report.

Yearly support spending for the major program crops averaged $9.118 billion. If this had been distributed equally over all acreage, the payments would have been about $40 per acre. Payments actually ranged from a high of about $217 per acre for rice to a low of about $6 per acre for the other oilseeds. Overlooked by the comparison is the fact that an acre of rice had a market value of about $648 compared to corn at $434 or wheat at $208.

Therefore, few farmers, economists, or policy makers contend that equal payments per acre would be an equitable distribution of support benefits.

Some might expect that support payments for each crop measured as a share of each crop’s market value would be similar over time if the support rates were set equitably. For example, support payments for cotton amounted to 53% of the value of production for the FY2003-FY2009 period. In contrast, payments for pulses amounted to less than 3% of the crop value. On average, commodity payments represented slightly more than 12% of crop market value.

Using production costs to determine target prices is also problematic, the report notes. Commodity groups often use the argument that farmers must be able to meet their production costs and the safety net is designed to do that.

At the high end, the effective target price for peanuts amounts to 100% of the total cost of production, followed by soybeans with a target price set at 88% of total cost of production. At the low end, the effective target price for oats amounts to 37% of the total cost of production.

From a different angle that considers market conditions relative to commodity support levels, the report compared per-unit commodity payments as a share of the per-unit total cost of production. Cotton and rice per-unit payment shares (34.3% and 31.5%, respectively) are significantly higher than subsidy-to-cost shares for the other major program crops—corn, wheat, and soybeans had shares of 12.3%, 10.9%, and 3.4%, respectively.

During the past 13 years (1997-2009), monthly average market prices for the major "covered commodities" have been below loan rates 30% of the time, and below effective target prices 58% of the time. However, this frequency has varied substantially across crops.

To achieve a 30% price-safety-net policy goal, loan rates for rice, cotton, and sorghum would have to be lowered substantially: rice by 33% from $6.50 to $4.36 per cwt., cotton by 20% from 52¢ to 41.5¢ per lb., and sorghum by 5% $1.95 to $1.86 per bushel. In contrast, loan rates for the other major program crops would have to be raised to achieve a 30% safety net parity rate: barley by 16%, soybeans by 7%, oats and peanuts by 5%, corn by about 3%, and wheat by a small uptick of less than 1%.