Anticipated Increase in Crop Subsidy Reference Prices Poses Potential Billion-Dollar Boost to Subsidy Costs

A passive increase in crop subsidy payments, potentially impacting almost every farm in the US, could occur if Congress merely extends the current farm law, according to Jonathan Coppess, an associate professor at the University of Illinois. The escalator provision embedded within the 2018 farm law could see corn and soybean growers receiving a maximum increase of 15% in so-called reference prices, which act as triggers for payments, amidst continuous high market prices initiated in 2020 due to factors such as the end of the Sino-U.S. trade war and Russia’s invasion of Ukraine in 2022. Although farm groups advocate for higher reference prices due to current elevated production expenses, an ascent in these prices might substantially amplify the financial burden of crop supports, potentially adding billions to subsidy costs. The discussion around enhancing reference prices often sidesteps the query of how to counterbalance the cost, bringing into question whether funding should be derived from the USD 20 billion designated for USDA land stewardship programs in the 2022 climate, health, and tax law, or risk it on crop prices and the Price Loss Coverage baseline. This unfolding scenario generates concern about potential impacts on valuable climate mitigation initiatives, especially considering the ongoing discussions for enacting a new farm bill by year’s end.