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Comparison and Assessment: Payments on Base vs. Planted Acres, 2014-2016 Crops


An on-going issue in U.S. crop policy is whether payments should be made on historical base acres, as generally done under recent U.S. farm bills, or on current planted acres. Sizable differences can occur between these measures of acres due to changes in cropping patterns, combined with Congressional and Executive decisions to allow farmers to choose whether they update base acres when such a choice is permitted. This article contains a short term comparison of payments made on base vs. planted acres within the context of the 2014 farm bill and 2014-16 crop years. Payments are estimated to be approximately 10%, or between $0.5 and $1.1 billion per year, smaller if made on planted than base acres. Longer term and World Trade Organization (WTO) considerations also apply. Tying payments to planted acres raise the issue that expected program payment differences across crops will cause farmers to plant crops with the highest expected payments, potentially causing government cost to grow larger over time. Tying payments to planted acres is also likely to result in the U.S. notifying crop commodity program payments as product specific to the WTO, increasing the likelihood the U.S. may violate its WTO limit on certain farm support. A third policy option exists that can generate cost savings yet limit the undesirable effects of using planted acres. Specifically, base acres could be rebased by mandating that farmers must update base acres to planted acres during a recent historical period. Like all base update provisions, impact of this third policy option will vary by farm, crop, and region.

Read the entire article here.

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