Mandatory Spending

Function 350 - Agriculture

Limit ARC and PLC Payment Acres to 30 Percent of Base Acres

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021–
Change in Outlays 0 0 0 0 0 -4.6 -4.2 -4.1 -3.9 -3.8 0 -20.6

This option would take effect in crop year 2024.

The Agriculture Improvement Act of 2018 (known as the 2018 farm bill) provides support to producers of certain covered commodities through the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. Eligibility under the ARC and PLC programs is determined by a producer’s planting history. Only producers who have established base acres with the Department of Agriculture (USDA) under statutory authority granted by previous farm bills may participate.

The ARC program pays farmers when revenue in a crop year falls short of guaranteed amounts at either the county level (ARC-County, or ARC-CO) or the individual farm level (ARC-Individual Coverage, or ARC-IC). (A crop year begins in the month that the crop is harvested and ends 12 months later.) The PLC program pays farmers when the national average market price for a covered commodity in a given crop year falls below a reference price specified in the law. When a payment is triggered, total payments are calculated by multiplying the payment per acre by a producer’s payment acres for that crop. For ARC-CO and PLC, the number of payment acres equals 85 percent of base acres; for ARC-IC, it is 65 percent of base acres.

This option would limit payment acres for ARC-CO and for PLC to 30 percent of base acres and payment acres for ARC-IC to 23 percent of base acres. Under the current programs, producers enter into contracts with USDA that extend through 2023. Therefore, the Congressional Budget Office assumes that the option’s new limits on payment acres would take effect in crop year 2024, when the current farm bill expires. Savings would begin in fiscal year 2026, when ARC and PLC payments for crop year 2024 would be made.