Reduce by 20 Percentage Points the Share of a Farmer's Base Acreage Eligible for USDA Payments

The Department of Agriculture's (USDA's) direct and countercyclical payments to agricultural producers for certain commodities (cotton, feed grains, oilseeds, peanuts, wheat, and rice) are expected to cost $51 billion over the next 10 years. Beginning with the 2012 crop (harvested in fiscal year 2013), those payments will be calculated, in part, on 85 percent of a producer's base acreage, which in general is determined by the average number of acres planted with each eligible crop between 1998 and 2001.

This option would reduce the portion of a producer's base acreage eligible for direct or countercyclical payments by 20 percentage points. The option would reduce spending for farm programs by $4 billion over the 2012- 2016 period and by about $10 billion over the 2012- 2021 period, the Congressional Budget Office estimates.

The primary advantage of reducing the portion of a producer's base acreage that is eligible for payments is that the reduction would affect all participants in the program in proportion to their expected payments instead of disproportionately affecting the producers of any particular commodity.

One disadvantage of this option is that producers would receive less income from the government. Another is that other USDA payments, such as marketing loan benefits, essentially guarantee minimum prices for certain crops and therefore tend to send more market-distorting signals to producers than direct and countercyclical payments do. Consequently, some would argue that changing other USDA payments would be a better approach because it could generate greater reductions in market distortions.