The Non-Wonk Guide to Understanding Federal Commodity Payments

Published May 2005. Written by Scott Marlow, this 30-page publication explains how field crop commodity programs work.

As recent farm bills shift more toward conservation spending and other programs, the historically rooted and highly funded commodity programs receive an increasing amount of criticism. Since 1933, when they were introduced in the first farm bill, commodity programs have worked to stabilize the market and provide farmers with fair prices. Their function has not changed over the years. The government generally has used three different mechanisms for supporting farmers through commodity programs: control supply, fix prices, or pay the difference between market and a fair price. The mechanism of support has drifted more toward the government paying the difference. The formulas to determine a farmer’s payments and the payment limitations show that the government is required to increase its spending in order to continue adequately supporting farmers. The price for commodities has fallen below the cost of production, and farmers have come to rely on the government’s support. As commodity programs are re-evaluated, the whole system around these programs also needs to be considered.

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