[Agriculture Fact Book 98]

3.    The U.S. Farm Sector

Government Payments by Program and State

Government payments of $7.3 billion in 1995 and 1996 were the lowest they had been since 1982. Total payments in both years were only 8 percent below those of 1994 but 41 percent lower than the $13.4 billion in 1993. Direct government payments were expected to begin declining after 1996, but are now expected to begin declining in 1998. Payments in 1996 and later years were to have reflected production flexibility payments provided under the 1996 Farm Act, but unanticipated adjustments for deficiency payments owed to farmers in 1996 and repayments owed by farmers under the previous farm program are included in 1996 payments and the influence also extended into 1997. After 1997, the influence of the deficiency repayment adjustments should be concluded and the payment totals will begin to follow the declining levels of production flexibility contract payments specified in the 1996 Farm Act. The payment totals will be constrained by the funding set forth in the Federal Agriculture Improvement and Reform Act of 1996 (the 1996 Act) through the year 2002.

The 1996 Act fundamentally redesigned income support and supply management programs for producers of wheat, corn, grain sorghum, barley, oats, rice, and upland cotton. Government payments to producers who signed up for the program are now fixed and are scheduled to decline through 2002. Dairy policy was also changed as price support is to be phased out and milk marketing orders consolidated. The 1996 Act also altered the sugar and peanut programs. Farmers are freer to alter their crop production in response to relative price signals from the marketplace. Farm income is likely to become more variable under the Act in response to year-to-year changes in the supply and demand for commodities. Marketing alternatives to manage price and production risk are becoming more important for many farmers.

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