Crop forecast sends corn prices to near taxpayer subsidy trigger
By Alan Bjerga
WASHINGTON — The U.S. government Friday increased its forecast for a surplus of corn, raising the prospect prices will tumble to levels that would trigger subsidy payments to farmers.
Corn supplies in 2015 will reach 1.801 billion bushels, 4.3 percent larger than forecast last month, the U.S. Department of Agriculture said, even as it cut the estimate for the size of this year’s crop.
Futures sold in Chicago briefly fell under $3.83 a bushel, nearing the $3.70 support price contained in legislation known as the farm bill that Congress passed this year.
Payouts are based on a longer-term average, so a dip will not immediately add to taxpayer costs. Still, as U.S. grains such as corn and rice head toward bigger surpluses, an era of low crop-subsidies may be ending.
“This could wipe out any savings we had in the farm bill,” said Scott Faber, government affairs vice president for Environmental Working Group, which opposes most payments to growers. “The current prices are certainly a reminder that this bill could become a budget-buster.”
Farm-bill supports shield growers from market declines, with federal subsidies closing the gap between actual prices and a target. Corn reached a record $8.49 a bushel in 2012 as drought withered crops. Futures have since declined 54 percent through Thursday, as better weather and stagnant demand for ethanol made from the grain has rebuilt inventories.
The $956.4 billion farm bill was touted as changing the subsidies that watchdog groups called excessive government support for farmers who last year had record profits. A $5 billion annual program to pay farmers regardless of crop price was eliminated, replaced by aid for insurance programs and a so- called Price Loss Coverage program, a vestige of the old subsidies approach that would still be an option for producers.
Booming prices for corn, soybeans, wheat and other commodities has led to less spending on traditional forms of payouts in recent years. Corn growers received $2.7 billion in 2012, down from a peak of $10.1 billion in 2005, according to Environmental Working Group, which tracks farm payments.
Assuming continued high prices, the farm bill was estimated to save $23 billion over 10 years, according to congressional estimates.