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Farm Bill's Subsidy Costs May Rise
Billions More Could Be Paid Through Little-Noticed Provision

By Dan Morgan
Special to The Washington Post
Wednesday, May 21, 2008

A major new program in the recently enacted farm bill could increase taxpayer-financed payments to farmers by billions of dollars if high commodity prices decline to more typical levels, administration and congressional budget officials said yesterday.

The potential costs came to light as administration officials pored over details of the 673-page, $307 billion legislation. President Bush has promised to veto the measure, which he called "bloated." The House and Senate passed the bill by bipartisan margins large enough to override him unless dozens of lawmakers switch sides.

The final details of the new program were approved at the end of four months of House-Senate negotiations over the legislation and received almost no attention during floor debate last week. The voluntary program guarantees farmers a subsidy if they suffer losses because of low prices or poor crops.

Since the amount of the subsidy for 2009 is tied to recent record prices, farmers could reap a windfall if prices drop suddenly.

"I don't think many people on the House side who voted for the farm bill realized there were $16 billion in potential higher costs in there," said Deputy Secretary of Agriculture Charles F. Conner. "The budget exposure is tremendous."

A blog item posted Monday by the agricultural magazine Pro Farmer described the new program, known as Average Crop Revenue Election (ACRE), as "lucrative beyond expectations," and said it is a "no brainer" for farmers to sign up for it.

The Agriculture Department estimates that subsidy payments to corn farmers alone could reach $10 billion a year if prices -- which have been $5 to $6 a bushel -- were to drop to $3.25 a bushel, a level seen as recently as last year. The $10 billion figure assumes most farmers would participate in the program, a view disputed by key lawmakers.

Kate Cyrul, spokeswoman for Senate Agriculture Committee Chairman Tom Harkin (Iowa), the leading congressional champion of the program, called USDA's projections a "doomsday scenario."

She noted that USDA's forecasts of corn, wheat and soybean prices suggest that they will stay too high for farmers to qualify for any benefits.

"From our evaluation, the program does not look excessively expensive for the lifetime of the farm bill," said Rep. Bob Goodlatte (Va.), ranking Republican on the House Agriculture Committee. He said the program will be reviewed and evaluated as the new farm bill nears expiration in 2012.

But fellow Republican Rep. Jeff Flake (Ariz.), a strong critic of the new farm bill, accused House and Senate negotiators of "unbelievable gall."

"I don't think any of us had a clue this was in there. It was simply dropped into the conference report," he said.

Currently, corn farmers receive a government subsidy when prices drop below $2.63 a bushel. But critics say that subsidy does not protect farmers who bring in low yields in a year when prices are high.

Some farm organizations and agricultural reformers have voiced support for a wider safety net along the lines of the new program.

"It's a program that is more responsive to the problems that farmers face, and the principle is widely supported even in the administration," Harkin said.

But as the farm bill moved through Congress, lawmakers sweetened the subsidy provisions, in part to encourage more farmers to sign up. The final version of the program is more generous than ones proposed earlier by the House and the Bush administration.

The new program insures a farmer's revenue at close to the current high prices. USDA estimates that a farmer could draw a payment even with corn prices at $4.39 a bushel.

"They have taken a good idea and gone to an extreme in terms of creating an opportunity for revenue flows at the highest possible level," Conner said.

Morgan is a contract writer for The Post and a fellow of the German Marshall Fund, a nonpartisan policy institute.

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