Report sheds light on farm bill cost

New economic projections released by the Agriculture Department Thursday carry a sober warning of what lower corn prices could mean for the cost of the new farm bill over the next few years.

For the 2014-2015 marketing year beginning Sept. 1, the report projects a seasonal average farm price of just $3.65 per bushel of corncompared to $4.50 for the current year. In 2015-2016, the price drops further to $3.30 per bushel before beginning a slow but steady climb back up to $4.10-$4.20 per bushel by 2023 and 2024.

Thats a much steeper decline than many had expected and well below the corn prices assumed by the Congressional Budget Office in scoring the new farm bill.

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Just a year ago, the department was forecasting about $1 more per bushel for corn in the same 2015-2017 period. If the revised projections prove accurate, it will surely impact the cost of new counter-cyclical programs signed into law last week by President Barack Obama.

The departments economists will present a much fuller forecast next week at the annual Agricultural Outlook Forum held Feb. 20 and 21. Because Thursdays report was prepared before the new farm bill was completed, its value is more as a harbinger of what could lie ahead.

Of special interest is the spike shown in government payments under the so-called ACRE revenue protection program under the old 2008 farm bill.

At one level, this is an academic exercise since ACRE has been supplanted by the new ARC or Agricultural Risk Coverage program under the new bill. But the design of both programs is quite similar, and just as Thursdays report shows a spike in payments under ACRE, it is a warning that the same dynamic could repeat itself with ARC.

As crop prices decline from recent high levels, incentives to enroll in the ACRE program rise, the report reads. Payments under the program associated with 2014-16 crops (paid in 2015-17) are projected to be large, over $9 billion annually in 2015-16 and more than $4 billion in 2017.

Indeed, from 2015 to 2017, the report shows that total government payments to farmers would jump by about $21 billion over what the department had forecast a year ago.

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Report sheds light on farm bill cost