Eliminate Title I Agriculture Programs

Background

Since 1933, lawmakers have enacted and often modified a variety of programs to support commodity prices and supplies, farm income, and producers' liquidity. The Agriculture Act of 2014 (the 2014 farm bill) was the most recent comprehensive legislation addressing farm income and price support programs. Title I of that bill authorized programs through 2018 for producers of major commodities (such as corn, soybeans, wheat, and cotton), as well as specialized programs for dairy and sugar.

Option

Beginning with the 2024 marketing year, this option would eliminate all Title I commodity support programs. (For example, commodity support for wheat would end on June 1, 2024, and commodity support for corn would end on September 1, 2024.)

Under this option, the permanent agriculture legislation enacted in 1938 and 1949 would be repealed. (That permanent legislation would offer producers price and income support at a relatively high level after the 2014 farm bill or any new farm legislation expired.)

Effects on the Budget

The budgetary effects of this option are estimated relative to the Congressional Budget Office's baseline projections for the affected programs, which—as required by law—incorporate the assumption that the programs will continue to operate beyond their scheduled expiration date. The effective date for this option is set for 2024 under the assumption that the option could not be implemented before legislation is passed that authorizes the programs to continue to operate through 2023. The option would generate savings with respect to CBO's baseline projections, starting in 2024, which incorporate the assumption that the programs continue through 2028.

Reductions in government spending with respect to CBO's baseline would begin in fiscal year 2024 and savings would rise sharply in fiscal year 2026, when most outlays for the 2024 marketing year would occur. CBO estimates that this option would reduce spending by $20 billion, with respect to that baseline, over the 2019-2028 period.

This estimate is derived by eliminating projected spending for the Title I commodity support programs, which is uncertain because it can vary greatly from year to year as a result of changes in weather, trade, and market demand. Such changes have a direct effect on commodity production and prices, which affect the cost of the programs.

Other Effects

During the Great Depression of the 1930s, the 25 percent of the population that lived on farms had less than half the average household income of urban households; federal commodity programs came about to alleviate that income disparity. One argument for eliminating Title I commodity support programs is that the structure of U.S. farms has changed dramatically since then: The significant income disparity between farm and urban populations no longer exists. In 2014, about 97 percent of all farm households (which now constitute about 2 percent of the U.S. population) were wealthier than the median U.S. household. Farm income, excluding federal program payments, was 52 percent higher than median U.S. household income. Moreover, payments made through programs that support commodity prices and incomes are concentrated among a relatively small portion of farms. Three-quarters of all farms received no farm-related government payments in 2014; most program payments, in total, went to mid- to large-scale farms (those with annual sales above $350,000).

Moreover, agricultural producers have access to a variety of other federal assistance programs, such as subsidized crop insurance and farm credit assistance programs. In addition, eliminating Title I programs would limit spending that may distort trade between U.S. producers and other countries, thereby reducing the risk that the World Trade Organization might again challenge agricultural support by the federal government (as it did with the U.S. cotton program).

An argument against eliminating commodity support programs is that despite relatively high average income among farmers, the farm sector still faces significant challenges. Farm income fluctuates markedly and depends on the vagaries of the weather and international markets. Commodity programs try to stabilize crop revenues over time. Also, a significant portion of U.S. agricultural production is exported to markets where foreign governments subsidize their producers. Without support from the government's commodity programs, U.S. producers might not be able to compete as effectively in those export markets. Finally, many years of continual government payments from commodity programs have been capitalized into the fixed assets of farm operations (primarily land); abruptly removing that income stream would cause farmers' wealth to drop significantly.