Since 2013, farm bill ‘safety net’ mostly ensures need for ‘safety net’

The opening lines in an April 11 farmdocDAILY post should have raised an eyebrow or two among farm bill geeks both in and out of Congress: “The U.S. crop safety net,” it begins, “has undergone a profound transformation.”

That’s a belt-high fastball for farm bill writers arguing over cuts in food aid programs instead of questioning the very foundation of farm program spending: Does the American farm safety net even work anymore?

The well-researched paper only requires two sentences to render its verdict: “From 1975 to 2006, crop safety net payments were negatively correlated, or countercyclical, with private market returns.”

That’s by design. Government support programs — crop insurance, ad hoc or emergency payments — kick in when market prices are low.

The inverse is also true; payments dry up when market prices go up. That’s countercyclical in a nutshell.

But that’s not been happening for nearly 20 years. “Since 2006,” the paper explains, “no correlation has existed. Payments have been high even when market returns were high.”

Subtle though it sounds, that’s a bomb. It means that for at least part or all of four farm bill cycles — 2002, 2008, 2014 and 2018 — there’s been little to no countercyclical balance between government program payments and farmer needs.

In short, billions of taxpayer money has been sent to American farmers, ranchers and landowners since 2006 despite market conditions.

That’s a dark discovery by Carl Zulauf, an ag economist emeritus at Ohio State University, and three other ag finance, economics and policy experts at the University of Illinois, explain in the report.

Zulauf arrived at his conclusion by “aggregating” a pool of U.S. Department of Agriculture data kept by its Economic Research Service.

That pool included “private market returns at harvest, crop safety net payments and combined returns” for the nine key field crops ERS tracks: barley, corn, cotton, oats, peanuts, rice, sorghum, soybeans and wheat.

The data showed Zulauf “four distinct private market return periods” from 1975 to 2023. In ascending order they were:

• From 1975 through 1980, “private market return was positive in all six years, averaging 11% a year for the cost of production crops as a group.” This was the tail end of the export-driven “go-go 70s.” During this period, “safety net payments approached zero, averaging 2% per year,” exactly as you’d expect in a countercyclical payment scheme during profitable years.

• From 1981 to 2006, “private market return was negative for 25 years, averaging -16% per year.” This was a lost generation of farming: a land price crash, the lending crisis, high interest rates, a strong dollar, weak exports. Countercyclical payments, however, did their thing; they averaged a +15% across the period to balance losses.

• Profits returned from 2007 to 2013 when “private market return was positive in all seven years, averaging 13% per year.” The rocket fuel was the Renewable Fuels Standard; it supercharged ethanol production and altered cropping patterns nationwide. Here’s where the farm bill’s countercyclical wheels first wobbled, before falling off: Program “payments averaged 9% per year even though private market returns averaged 13% per year.”

• And, finally, from 2014 through 2023, “private market return was negative in eight of the 10 years, averaging -3% per year over the 10 years.” The larger causes were a rising U.S. ag trade deficit, the first Trump tariff war and the COVID pandemic. Despite -3% market returns, “safety net” payments again defied countercyclical balance by “averaging 10% per year” to “more than offset private market returns.” Why? Politics, writes Zulauf: “Congress decided to continue the direct payment program,” despite “private market returns that notably exceeded the economic cost of production.”

Where does this leave the 2025 farm bill? If Congress doesn’t do its job, on very shaky ground.