WASHINGTON, July 1, 2015 – The new farm bill will cost a little more than previously thought because of the surprisingly strong interest in the new Agriculture Risk Coverage (ARC) program, economists say. But overall it appears that the programs are right in line with the average cost of commodity subsidies over the past decade. Those are among the findings of the analysis by the Food and Agriculture Policy Research Institute based at the University of Missouri.
ARC turned out to be far more popular with corn and soybean growers than economists at FAPRI initially thought. As a result, the government will pay out a bit more for the 2014, 2015 and 2016 crops than economists initially calculated and a little less for 2017 and 2018. The bottom line: FAPRI says ARC will cost $1.4 billion more in the first five years than previously estimated, but savings in the Price Loss Coverage (PLC) program and crop insurance will drop the net increase in cost to $308 million.
The big difference is in the way the programs work: ARC provides payments when county farm revenue falls below the previous five-year average, so as the average goes down the size of the payments goes down. PLC provides payments whenever market prices fall below the reference price set for the commodity.
Another interesting finding: FAPRI estimates that commodity subsidies and crop insurance indemnities will cost an average of $11.2 billion a year over the five-year period. From 2004 to 2013, the average cost of farm programs and crop insurance indemnities was $11.3 billion a year.
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