Extension Communications
3614 Administrative Services Building
Ames, Iowa 50011-3614
(515) 294-9915
10/25/99
Contacts:
Mark Edelman, Extension Economics, (515) 294-3000, x1edelma@exnet.iastate.edu
Del Marks, Extension Communication Systems, (515) 294-9807,
dkmarks@iastate.edu
PLAIN ECONOMIC SENSE
For immediate release
Editor's Note: This is a revision of a column previously
released on Oct. 18. Three changes were made in the fourth
paragraph. The previous numbers were based on national
averages. These numbers are based on Iowa averages.
Column 385
Emergency Farm Aid and Payment Limit Impacts on Iowa
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
Last week, Congress approved and sent to the President $8.7 billion in emergency aid to the nation's farmers, including $5.5 billion in market loss payments. The emergency aid package was attached to the regular agricultural appropriations bill that totaled $69 billion for Fiscal Year 2000. Of this total $29 billion is for farm programs and $35 billion is for School Lunch, Food Stamps, and other food assistance programs.
Media reports suggest that Iowa's farmers will receive an additional $610 million over and above what already was allocated for farm programs. ISU's Center for Agriculture and Rural Development has estimated the 1999 direct payments for Iowa farmers will total $1.5 billion and that federal farm assistance will likely account for about 62 percent of Iowa's estimated $2.4 billion net farm income for 1999.
Dividing Iowa's direct payments by Iowa's 90,792 farms--using the $1,000 in ag sales Census definition of a farm--means the average payment per farm will be about $16,500. An average Iowa county will receive about $15 million in total federal farm assistance.
Averages don't tell the whole story. Because farm program payments are primarily distributed on the basis of production volume, larger farms receive larger payments. A previous column examined farm size and indicted that 4.3 percent of Iowa's farms account for 36.2 percent of production. Visits with local FSA officials confirm that only a few farmers in their counties bump up against farm program payment limits, but then it only takes 75 of the largest farms in an average Iowa county to account for half the county's production, including livestock.
The 1996 Farm Bill imposed a $40,000 payment limit on Agricultural Marketing Transition Act (AMTA) payments and a separate $75,000 payment limit on Loan Deficiency Payments (LDP) and Marketing Loan Gains--for a combined limit of $115,000 per farm entity. In 1999, the AMTA payment rate is 33 cents per bushel for corn. Assuming a program yield of 120 bushels per acre, a farm could have had a historical acreage base of up to 1,010 corn acres before the farmer would have received the $40,000 maximum AMTA payment.
Media reports indicate 1999 Emergency Assistance legislation may double the AMTA payment rate as well as the AMTA payment limit. This means a farmer with a 1,010 historical corn acreage base could receive $80,000 under the new maximum AMTA payment limit.
In addition, the limit on LDP and marketing loan gain payments is to be doubled to $150,000. Thus, the combined AMTA and LDP limit would increase up to $230,000 per entity, according to the media reports. LDP payments are based on the farmer's actual yields and harvested crops rather than the historical program base and program yields. If a farmer takes an LDP payment of $.40 cents per bushel and has a harvested yield of 140 bushels per acre, this farmer could farm up to 1,339 acres of corn before the old $75,000 payment limit became binding. Doubling this payment limitation means an Iowa farmer could farm up to 2,678 acres of corn and receive $150,000 in federal LDP assistance before the new limit became binding.
Many larger operations have several family members and spouses working together on part of their farming operations. USDA allows such individuals who meet special criteria to accept payments from up to three entities. Thus, federal farm program payment limits can be exceeded under special circumstances. A father and son or husband and wife in a large operation could potentially receive up to $460,000 if they meet the special criteria
The bottom line is that half of Iowa's farms are non-commercial farms and rely primarily on off farm sources of income. They will be receiving less than the $16,500 average farm payment. Most of Iowa's commercial grain farms will receive two to three times the average payment. Larger grain farms will potentially receive about nine times the average payment.
While targeting federal assistance to medium and small farms and those that are financially vulnerable is often discussed during the outbreak of a farm crisis, the bulk of the emergency payments is not distributed according to those criteria. Up to this point, Congress and farm interests have not been willing to target the bulk of the farm program payments in ways that exclude or penalize larger farmers, or that arbitrarily reward medium, small or financially vulnerable farmers.
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