The Congressional Budget Office is sticking with a cost estimate for USDA’s Commodity Credit Corporation spending authority that is far lower than congressional Republicans need to fund their farm bill proposals.
CBO on Tuesday estimated that USDA’s use of its Section 5 authority under the CCC would total $12 billion from fiscal 2025 through 2034. In February, USDA estimated that it would spend $15 billion over that period.
Neither figure is anywhere close to the $50 billion or more the House Agriculture Committee has been counting on to fund commodity program increases in the farm bill the panel passed in May.
The new projections “prove what we have been saying all along: the House Republican farm bill is unpaid-for, relying on magic math and wishful thinking,” Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., said in a statement.
“In exchange for blocking USDA’s ability to provide real time assistance to farmers through the CCC to address emerging challenges, House Republicans received only a small fraction of the $50 billion hole they need to fill to pay for their bill," she said.
CBO has been using an even lower CCC savings estimate for the House Ag farm bill of about $8 billion. CBO is scoring the bill off of estimates issued in May 2023.
Separately, CBO on Tuesday trimmed its cost projections for the Supplemental Nutrition Assistance Program even as it raised the forecast for the federal deficit.
CBO, which issues cost estimates for legislation that Congress is considering, including the farm bill, also revised its cost estimates for farm programs and significantly increased its estimate of how much money will be provided to farmers and ranchers for disaster assistance.
CBO raised the forecast for the federal budget deficit in fiscal 2024 to $1.9 trillion from the $1.6 trillion projected in February. Meanwhile, the federal debt is expected to total about 99% of gross domestic product (GDP) this year and grow to 122% of GDP by 2034.
CBO lowered the projected cost of SNAP by $7 billion this year and $59 billion from fiscal 2025-34, or about 5%. CBO said “recent data showed that actual average monthly benefits were lower than previously projected.”
CBO lowered slightly its cost estimates for some commodity program payments, but increased its projections for disaster assistance, according to an analysis provided to Agri-Pulse by Pat Westhoff, director of the University of Missouri’s Food and Agricultural Policy Institute.
The 10-year estimate for disaster aid was raised by $8.9 billion from the February forecast, according to Westhoff’s calculations. USDA is now expected to provide just under $20 billion in disaster aid from fiscal 2025 through 2034.
CBO raised its 10-year estimate for payments to rice producers but made small reductions for other major commodities, including corn, soybeans, wheat and cotton.
Economist says base update could increase land values
Regardless of what happens with the farm bill this year, both parties have offered proposals that would allow some farmers to get additional base acreage enrolled in commodity programs. Such proposals could get carried over until the next Congress, if further work on the farm bill gets delayed until then; the last base updates were in 2002 and 2014.
Depending on how a new base update would be enacted, it could have an impact on land values and cash rents, since new base acreage would be eligible for PLC and ARC payments.
The farm bill the House Agriculture Committee advanced in May would allow producers to obtain base for land that doesn’t have it now, but the total new base nationwide would be capped at 30 million acres. If acreage enrolled exceeds the cap, USDA would have to pro-rate the new base.
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The top Republican on the Senate Ag Committee, John Boozman of Arkansas, released a farm bill framework June 12 that also would allow farmers to obtain new base acres, but the summary provides little detail of how it would be done. A summary released by Boozman says only that his plan would add “base acres for farms without base or minimal base and creates a mechanism to continue bringing new and beginning farmers into the safety net for years to come.”
A Boozman aide said some details were subject to negotiation but that he isn’t proposing an acreage cap like the House bill. The bill would allow new and beginning farmers to get base as existing base acreage is retired by USDA; the department is required to remove acreage from the commodity programs when the land is converted to non-agricultural uses.
Stabenow hasn’t detailed her proposal either, but it would clearly be the most limited of the three. Her section-by-section summary says her bill would provide “a limited opportunity for underserved producers that own or operate a farm to establish new base acres or add base acres if recent plantings exceed the existing base acres.”
A new analysis by Ohio State economist Carl Zulauf raises some questions about the impact a broad base update would have on producers. He notes, for example, that the update could increase the value of land that doesn’t have base now. The increase would vary considerably depending on expected program payments for a particular commodity.
Carl Zulauf, Ohio State University economist.
capitalization rate and no changes in program rules, land that received peanut base could increase in value by $2,785 an acre, Zulauf said. Other increases: $1,433 an acre for rice, $697 an acre for cotton, $577 for corn and $233 for soybeans. Under the House bill, the increases could be significantly higher, since the bill would increase PLC reference prices and also modify coverage levels under the Agriculture Risk Coverage program, he said in an interview with Agri-Pulse. Under the House bill, reference prices would be raised as much as 19% and 20.7% for soybeans and rice, respectively. The rate for peanuts would be raised by 17.8%. Cotton and corn would see increases of 13.5% and 10.8%, respectively.Zulauf said increases in land values for new base acreage would likely happen relatively quickly.
Randy Dickhut, a farmland analyst for Agricultural Economic Insights, said commodity program payments have in the past likely had a greater impact on rental rates than land values, because of the uncertainty about whether there will be payments in a given year.
PLC triggers payments in years when the average market price is lower than the reference price for a commodity. ARC provides payments when county revenue is below a five-year average.
When market prices are high, landowners don’t give much thought to what the commodity programs provide. “In low-price years, it becomes much more important,” he said.
Patrick Creamer, a spokesman for the Senate Ag GOP staff, noted in a statement to Agri-Pulse that a lot of issues go into land values, including “soil health and productivity, crop decisions, geographical location and access to irrigation, interest rates, inflation, and interest from competing income such as solar panels and commercial development, among others.
“Having access to a suite of effective risk management tools makes farms more economically resilient to these factors now and into the future,” he said.
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