Direct Payments
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Direct payments (DPs) are available to producers with eligible
historical production of wheat, corn, grain sorghum, barley, oats,
upland cotton, rice, soybeans, other
oilseeds, and peanuts. USDA's Farm Service Agency (FSA)
administers the program. Under the 2008 Farm Act, DPs are reduced
by 20 percent for producers who elect to participate in the
Average Crop Revenue Election (ACRE) program.
Program Overview
For crop years (CY) 2008-12, producers enroll annually in the
program to receive payments based on the respective producer's
historical program payment
acres and yields
and payment rates specified in the 2008 Farm Act.
A DP is equal to the product of the payment rate for the
specific crop, the historical payment acres (85 percent of base
acres in CYs 2008 and 2012 and 83.3 percent in CYs 2009-11), and
the historical payment yield for the farm. For example, the payment
for corn base is as follows:
DPcorn = (Payment rate)corn x (Payment
yield)corn x (Payment acres)corn
Where (Payment acres)corn = (Base
acres)corn x (85% in CY 2008 and CY 2012 and 83.3% in CY
2009-11)
Base acres and payment yields are unchanged from those specified
in the 2002 Farm Act. If the Secretary of Agriculture designates
any new oilseeds, base acres and payment yields will be established
in a manner similar to the provisions used for minor oilseeds in
the 2002 Act.
Farmers are given almost complete flexibility in deciding which
crops to plant. Participating producers can plant all cropland
acreage on the farm to any crop(s), except for some limitations on
planting fruits, vegetables, and wild rice. The land must be kept
in agricultural uses (which include fallow), and farmers must
comply with certain conservation and wetland provisions. A pilot
project has been developed for certain States to permit the
planting of cucumbers, green peas, lima beans, pumpkins, snap
beans, sweet corn, and tomatoes grown for processing on base acres
during each of the 2009-12 crop years.
DP rates are unchanged from the 2002 Farm Act. However, the DP
rate is reduced by 20 percent for producers electing to enroll in
the ACRE program.
Direct payment rates
|
Commodity
|
Unit
|
Direct payment
rate
|
Direct payment rate if
enrolled in ACRE
|
Wheat
|
Bushel
|
$0.52
|
$0.42
|
Corn
|
Bushel
|
$0.28
|
$0.22
|
Grain sorghum
|
Bushel
|
$0.35
|
$0.28
|
Barley
|
Bushel
|
$0.24
|
$0.19
|
Oats
|
Bushel
|
$0.024
|
$0.017
|
Upland cotton
|
Pound
|
$0.0667
|
$0.0534
|
Medium-grain rice
|
Hundredweight
|
$2.35
|
$1.88
|
Long-grain rice
|
Hundredweight
|
$2.35
|
$1.88
|
Soybeans
|
Bushel
|
$0.44
|
$0.35
|
Other oilseeds
|
Hundredweight
|
$0.80
|
$0.64
|
Peanuts
|
Ton
|
$36.00
|
$28.80
|
DPs for the 2008 crop were to be made as soon as practicable
after enactment of the 2008 Farm Act. For CY 2009-12, payments are
to be made no sooner than October 1 of each crop year. Advance
payments of up to 22 percent can be made beginning December 1 of
the preceding calendar year for each CY 2008-11. Advance payments
are not available for CY 2012.
The payment
limit on DPs is $40,000 per person per crop year for producers
not participating in ACRE. The three-entity
rule is repealed. Payments are attributed directly to the
individual. Spouses qualify separately for payments. Producers with
adjusted nonfarm gross income of over $500,000 averaged over 3
years or with adjusted farm gross income of over $750,000 averaged
over 3 years are not eligible for DPs. For more information, see
Payment Limitations.
Economic Implications
Fixed DPs are not tied to current production or prices and do
not require any commodity production on the land. With planting
flexibility, farmers are not confined to growing the historically
produced crops for which they are receiving DPs. They could receive
a payment based on historical corn acreage, for example, but plant
soybeans on those acres. Thus, farmers' planting decisions will be
based on expected market prices and variable costs of
production.
On a per acre basis, the value of DPs varies by the commodity
associated with the historic base and by payment yields, which vary
by location. Since payment rates and yields are unchanged from the
2002 Act, the impacts of the distributions of payments per acre and
region are likely representative of the impacts under the 2008 Farm
Act.
The primary economic impacts of DPs are increases in farm income
and land values. However, because DPs also increase producer
wealth, they could facilitate additional investment and may
influence a farmer's risk aversion. If so, DPs could indirectly
affect crop production decisions overall, but are not likely to
affect decisions about a specific crop mix. Research indicates that
any impacts on production would likely be small.
For More Information...