Farm program costs rise on price declines, disaster aid

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Jan. 26, 2015 - Farm programs will cost $18 billion more over the next decade than previously estimated, due to lower commodity prices and a surge in demand for livestock disaster assistance, congressional budget analysts say.

The farm bill that President Obama signed into law a year ago revived a lapsed disaster aid program and created new subsidy systems to protect producers of grain, oilseed and other crops from a developing downturn in market prices.

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Mandatory spending for agricultural programs reached $19 billion in fiscal 2014, $1 billion more than the Congressional Budget Office forecast last August. The programs' costs are expected to dip to $11 billion for this fiscal year, which ends Sept. 30, before jumping to $16 billion in 2016 and $19 billion in 2017.

In August, CBO expected spending on those programs to fall to $12 billion this year, rise to $15 billion in 2016 and then remain at about $14 billion a year.

“The relatively high spending last year included significant payments for livestock disaster assistance for drought-related losses since 2012 and crop insurance payments for crop losses in 2013,” CBO said in its new economic and budget outlook.

The higher costs for commodity programs have been widely expected as producers start receiving payments under the new Agricultural Risk Coverage and Price Loss Coverage programs.

CBO expects the cost of the Supplemental Nutrition Assistance Program, formerly known as food stamps, to rise from $76 billion in fiscal 2014 to $78 billion this year with 46 million people receiving benefits. Some 46.7 million people were on SNAP rolls as of October, the latest month for which data are available.

CBO continues to expect that number to gradually decline in coming years, but the average benefits will increase annually because of inflation adjustments. CBO's long-term projection is that the program will shrink to 33 million recipients at a cost of $75 billion a year by 2025.

In the larger picture, CBO is forecasting that the federal budget deficit will hold steady relative to the size of the economy through 2018 but then begin to grow as government spending increases outstrip revenue.

 

The deficit this year is estimated at $468 billion, or about 2.6 percent of GDP. By 2025, the deficit is expected to reach $1.1 trillion, or 4 percent of GDP.

 

Spending is expected to rise from 20 percent to 22 percent of GDP over the next decade, due in large part to higher Social Security and Medicare spending, the expansion of federal health increase subsidies, increased health-care costs and rising interest rates on government debt.


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