Considered a key component for the 2018 farm bill negotiations, the Congressional Budget Office has released its 10-year baseline farm bill math for expected spending on selected farm programs titles.

According to John Kran, Michigan Farm Bureau National Legislative Counsel, CBO's estimate shows the largest share of projected farm bill expenditures, 76.5% of all farm bill spending, will support the Supplemental Nutrition Assistance Program with spending on nutrition programs at $664 billion over the 10-year baseline period.

"While nutrition programs still represent the largest title of the farm bill, SNAP outlays are also projected to be $93 billion lower from when the 2014 Farm Bill was signed into law," Kran says. "CBO's projection for a reduction in nutrition outlays is anticipated due to the strength of the U.S. economy, a 17-year low unemployment rate and projections for continued tightness in the labor market."

Kran says CBO estimates project that unemployment will remain below 5% over the next decade, and for overall SNAP participation to drop by 8.8 million people by 2028.

"Despite what you might hear in news reports, SNAP benefits per person are expected to keep pace with inflation, from $125 to $158 dollars per person," he says. "But overall expenditures are less because fewer Americans are expected to need access to nutrition programs. In fact, by 2025, CBO estimates that SNAP participation will be below recessionary levels experienced in 2009."

According to CBO's projections, total farm bill spending for all titles from 2018 to 2028 is pegged at $867 billion, down nearly $90 billion from when the current farm bill was passed in January 2014. At that time, CBO projected total farm bill outlays at $956 billion.

After SNAP spending, the remaining 23% of the 10-year farm bill spending is earmarked for crop insurance, conservation and commodity programs, totaling $199 billion. The remaining titles, including trade, credit, rural development, research, forestry, energy and horticulture, currently represent less than one half of 1% of farm bill spending at $4.4 billion — $3.7 billion lower than the 2014 estimates.

Farm bill costs less
"Based on CBO projections, the farm bill will cost nearly $90 billion less over the next 10 years than when it was passed into law in 2014," Kran says, adding that savings can be attributable to several titles, as well as a number of economic changes in the U.S. and farm economies. 

Federal crop insurance, the second-largest title of the farm bill and representing just 9% of total farm bill dollars, is also projected to see a $12 billion reduction in spending, dropping to $78 billion over 10 years.

Ironically, the reduction in crop insurance outlays hinges solely on double-digit percentage drops in crop prices in recent years, resulting in a reduction of total liability for crop insurance policies sold, according to MFB Field Crops Specialist Kate Thiel.

"Total crop insurance liabilities fell by 9% from the 2014 to 2017 for corn, soybeans and wheat," Thiel explains. "Expenses related to crop insurance are a function of the liabilities and the risk environment. So with lower liabilities, crop insurance outlays are expected to decline."

Direct farm program commodity title spending, the third-largest title, is expected to cost $61 billion over 10 years — $17 billion more than originally anticipated. The direct farm program commodity title includes programs such as Agriculture Risk Coverage, Price Loss Coverage , the Dairy Margin Protection Program, and Marketing Loan Assistance programs.

With farm income at a 12-year low and commodity prices declining since the 2014 farm bill was enacted, Thiel says farmers have unfortunately had to rely more heavily on the safety net protection provided by commodity title programs. "That means commodity program spending is expected to be higher than when the farm bill was originally passed in 2014," she says.

The CBO increase also anticipates a majority of producers switching base acreage out of ARC and into the PLC program beginning with the 2019 crop year, when they expect 85% of corn base acres to enroll in PLC, up from 7% in the 2014 farm bill, and for 82% of wheat base acres to enroll in PLC, up from 43% during the last farm bill.

Kran says the most recent CBO baseline on farm program outlays is an important indicator of the budget outlook for farm programs and sets the table for the 2018 farm bill debate.

"From now through the farm bill's passage, any proposed change in policy will require an estimate of the budgetary impact relative to this April 2018 baseline," he says. "The House-released farm bill is considered budget neutral, meaning any new amendments that increase spending in one title are likely to require a decrease in spending elsewhere in the same title."

All eyes will now turn to the respective committees and to the members of Congress to get a farm bill passed on time that provides the important safety net protection, technical and financial assistance for conservation efforts, foreign market development and nutritional assistance to both farm and non-farm families.

Source: MFB