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Januarie 2019
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ON FARM LEVEL
Farm subsidies
USA farm subsidies
Farming operations have been receiving
assistance from as early as 1862, with most
systems evolving over time to date.
All these subsidies ensure that farm in-
comes are much higher than the incomes
of most Americans, inducing overproduc-
tion, inflating land prices and harming the
environment. The Trump administration has
decided to cut down farm subsidies for
2019, by imposing limits on the maximum
payments to each producer and ending
subsidies for producers earning above
$500 000 a year.
Eight types of farm
subsidies in the USA
Insurance
The government crop insurance pro-
gramme is one of the largest support pro-
grammes for producers. It helps to protect
agricultural producers from losses due to
low crop yields or lower than expected crop
prices. This programme cost the govern-
ment about $5 billion in 2016 and nearly
$9 billion annually over a five-year period
(
Graph 2
on page 29).
Agricultural risk coverage
This programme works according to a
benchmark or guaranteed level. Produc-
ers get subsidies if their revenue per acre
or alternatively their county’s revenue per
acre falls below the set amount. In general,
the lower the prices and the revenue, the
higher the subsidies. The pay-out for this
programme was about $3,2 billion in 2017,
covering more than 20 crops (
Graph 3)
.
Price loss coverage
With this programme subsidies are paid to
producers based on national average price
of crop – compared to the crop’s reference
price as set by congress. The larger the fall
in a crop’s national price below its reference
price, the larger the pay-out to producers.
Pay-outs are almost guaranteed since refer-
ence prices are set high. Payments for this
programme were $3,2 billion in 2017, cover-
ing more than 20 crops (Graph 3).
Producers have the choice to participate
in either agricultural risk coverage or price
loss coverage. At the same time, they can
enrol in crop insurance, the general function
being to keep farm income high.
Marketing loans
This price-guarantee programme began
during the New Deal. The original idea was
to give producers a loan at harvest time so
that they could hold their crops to sell at a
higher price later.
The cost of this programme dropped to near
zero in 2017, but it was about $160 million
in each of the previous two years (Graph 3).
Conservation programmes
The United States Department of Agricul-
ture (USDA) runs numerous farm conserva-
tion programmes, which costs more than
$5 billion a year (
Graph 4
).
Programmes pay producers for things like
improving land in production or taking land
out of production.
Disaster aid
The government operates disaster aid pro-
grammes for various types of producers,
from wheat growers to livestock producers
to orchard operators. In addition to disaster
programmes already in law, congress often
distributes more aid after adverse events.
Disaster aid amounts fluctuate, but such aid
has averaged $1,9 billion a year since 2010
(Graph 4).
Marketing and
export promotion
The Agricultural Marketing Service spends
$1,2 billion a year on farm and food promo-
tion activities. The Foreign Agricultural Ser-
vice spends about $300 million a year on
marketing activities for USA farm and food
products, including operating more than
90 foreign offices.
Research and support
Although most American industries fund
their own research and development, the
USA government employs thousands of sci-
entists and other experts to aid the agricul-
tural industry.
Graph 3: Selected direct payments for the USA.
Source: FAPRI, 2017
Graph 4: USA net government outlay conservation, insurance and disaster payments.
Source: FAPRI, 2017