Iowa Ag Review Creation of a Wto-friendly Farm Safety Net Purpose of U.s. Farm Programs Three Kinds of Payments: Direct, Countercyclical, and Loan Deficiency

Bumper crops have quickly turned the corn and soybean price boom into a bust. Newcrop corn and soybean futures contracts are down 40 percent and 35 percent respectively in just a few short months. Of course, those farmers that had the foresight to lock in at high prices are completely unaffected by the drop in price. For them, market volatility has created profit opportunities. But all is not lost for the majority of farmers who did not lock in at those prices. The farm safety net created by the 2002 Farm Security and Rural Investment Act will cushion the financial shock of lower prices. It looks certain that Corn Belt farmers will receive substantial payments from all three sources of federal farm support in this coming crop year. Iowa farmers will definitely receive more than $512 million in direct payments because these payments arrive regardless of what happens to price or yield. In fact, direct payments arrive even if a farmer’s land remains idle. As indicated by mid-October price levels, Iowa farmers could also receive almost $700 million in countercyclical payments and about $900 million in loan deficiency payments. Nationally, corn and soybean farmers should expect to receive more than $11 billion in total payments, including $2.7 billion in direct payments, $3.8 billion in countercyclical payments, and about $4.6 billion in loan deficiency payments. There is a good chance that corn and soybean farmers will actually be made “more than whole” this year. At current prices, corn and soybean revenue from the Creation of a WTO-Friendly Farm Safety Net