WASHINGTON, April 14, 2014 – Updated budget projections released by the Congressional Budget Office (CBO) suggest that some of the new farm bill programs may save even more than first expected when the legislation, formally known as the Agricultural Act of 2014, was signed into law.
Granted, it’s not easy to make comparisons, especially when you consider that the latest CBO projections extend to an additional year -- from 2014 to 2024 -- and payments under some of the new programs are not expected to be made until fiscal year 2016.
But the additional farm program savings, especially in the midst of total federal spending – which will continue to shrink this year before rising substantially after 2015, according to CBO – comes as relatively good news for farm program advocates.
When CBO analyzed the farm bill in a Jan. 28 letter to House Agriculture Committee Chairman Frank Lucas, R-Okla., projections were focused on fiscal years 2014-2023 and the bill was expected to cost $956 billion. Looking at that 10-year period, the new Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs were estimated to cost $27.232 billion.
The CBO’s latest baseline estimates that PLC and ARC will cost $24.3 billion during that same time frame, or about $2.9 billion less than projected in January. Of that additional savings, $2.275 billion is from future sequestration cuts between 2014 and 2023. But CBO also estimates that there will be an additional $640 million in savings from PLC and ARC that the agency had not predicted at passage.
In addition, CBO is projecting another $700 million in savings from the crop insurance title, bringing total expected reductions in the farm bill safety net to over $3 billion compared to what had previously been expected in January.
Of course, participation rates will likely change over time and the actual costs will vary each year as market prices fluctuate. Farm program signup is not expected to begin until the fall of 2014 at USDA’s Farm Service Agency offices and a market conditions can change a great deal by that time.
But that price outlook will be key as growers determine whether to sign up for ARC and PLC. Many observers have predicted that the majority of corn and soybean growers – especially those in the Midwest – are likely to sign up to participate in the ARC program.
However, the April 14 baseline assumes that only 41 percent of corn base and 49 percent of soybean base will be enrolled in ARC. It is unclear how this compares to the earlier projections, because CBO did not publish participation rates for ARC and PLC in the Jan. 28 letter to Lucas.
CBO assumes that the season average market price for corn will range from $3.90/bu. in 2014 to $4.58/bu. in 2024. For soybeans, the range varies from a low of $10.02/bu. in 2015 to $11.47/bu. In 2024.
For wheat, the average market price ranges from $5.40/bu. in 2014 to $5.95/bu. in 2023. Only 27.5 percent of wheat growers are expected to enroll in county-level ARC, according to CBO.
Upland cotton prices range from a low of $0.6509/lb. in 2015 to $0.7009/lb. in 2023. According to the CBO baseline, rice prices range from a high of $15.25/cwt in 2014 to a low of $14.93 in 2023.
Other highlights from the CBO projections regarding the farm bill:
· Spending on the Supplemental Nutrition Assistance Program (SNAP) is expected to continue to decline during 2014-2024 by about $21.6 million, compared to the May 2013 baseline, based on an improved U.S. employment outlook and the average monthly participation numbers dropping from almost 47 million in 2014 to 33.6 million in 2024.
· Livestock disaster assistance outlays are expected to reach almost $1.5 billion in 2014, as producers can seek claims for losses in 2012, 2013, and 2014 and then drop down below $300 million annually for most of the remaining years of baseline.
· Spending on the sugar program is projected to reach $238 million in 2014 and then drop to only $11 million in 2015. For the rest of the fiscal year projections, spending ranges from $24 million to $51 million.
· Outlays for the new dairy margin program is projected to increase from $222 million in 2013 to $238 million in 2014 before dropping to negative $11 million in 2015 and gradually climbing back up to $141 million in 2024.
For a copy of CBO’s projected farm bill savings on Jan. 28, 2014, click here:
http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr2642LucasLtr.pdf
For a copy of CBO’s April 14, 2014, farm bill baseline, click here:
http://www.cbo.gov/publication/44202
For a copy of CBO's April 14, 2014, SNAP baseline, click here:
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44211-2014-04-SNAP.pdf
For a copy of the full April 14, 2014, CBO overview, click here:
http://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdf
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