BOZEMAN – Three Montana State University agricultural economists are the authors of one of the year’s top articles in the Journal of Applied Economic Perspectives and Policy.
The article, “Does Farm Size Matter? Distribution of Crop Insurance Subsidies and Government Program Payments Across U.S. Farms,” examines distribution payments from farm risk management programs through the Agricultural Act of 2014, also known as the 2014 Farm Bill. The bill funds the nation’s federal farm programs through the end of this year.
Associate professors Eric Belasco and Anton Bekkerman and professor Vince Smith, each in the Department of Agricultural Economics and Economics in MSU’s College of Agriculture, are co-authors of the article.
Each year, the U.S. government spends $20 billion on programs to protect the nation’s food supply and farmers from risks to production, price and income, Belasco said. MSU’s study examines how funding was allocated in 2015 to farms of different incomes and sizes. The study focused on three primary safety net programs in the 2014 farm bill: federal crop insurance (FCI), agricultural risk coverage (ARC) and price loss coverage (PLC). Bekkerman said there wasn’t yet an in-depth study on the 2014 Farm Bill’s existing policies.
Belasco, Bekkerman and Smith found that farms in the top 10 percent for crop sales received more than two-thirds of the total payments from these programs. According to the article, that was approximately $55,000 per farm in 2015 -- totaling about $3 billion in FCI, ARC, and PLC payments.
“Historically, farm subsidies have been directed toward larger-scale commercial farms and relatively high-income households,” Belasco said. “This a pattern we’ve seen for about the last 65 years when it comes to federal agricultural payments.”
Despite little change in government payment distribution over the years, Smith said it’s critical to continue objectively reviewing economic policy and dissecting government payments. That’s especially true, he said, since farm safety net programs exist to protect all agricultural producers.
“The results of our research do raise substantive questions about the economic equity of the distribution of the benefits of federal farm programs and whether those programs play a substantial role in sustaining smaller, less financially secure farms,” Smith said.
Belasco said that their findings are intended to inform farm policy debates, providing an evaluation of one piece of a complicated, national decision-making process.
“We were surprised by finding that not only do large farms get more money on a per-acre basis, but per-acre crop insurance subsidies for large farms can be four times larger than the average farm,” Belasco said.
He added the quality of farmland, concentration of agricultural production, and value of production make each situation somewhat unique, in addition to the fact that some farms just need greater insurance coverage.
Additionally, the article examines the potential effect of proposed legislation to limit how much money the federal government gives to individual farmers. A proposed $40,000 cap to individual farms and $125,000 cap to total subsidy payments could save $2.5 billion, the researchers write.
“We found that although the proposed caps would save a significant amount, further research is needed to better understand the extent of possible implications to those who would experience the majority of these cuts,” Bekkerman said.
Bekkerman added that he hopes the results of the paper “can provide direction for continued efforts to design cost-effective, equitable agricultural safety net policies.”