Agriculture Payments: Effectiveness of Efforts to Reduce Farm Payments has been Limited.

The federal government has supported the incomes of farmers since the 1930s. Deficiency payments are designed to protect producers incomes when crop prices fall below a legally established target price. The amount of the deficiency payment generally varies with the producers level of production, the market price, and the target price. Concerned about large payments to farm operators and the overall cost of federal farm programs, in 1970 the Congress established an annual limit. In 1980 the deficiency payment limit was set at 50,000 per person and applied to the combined program payments for wheat, feed grains, cotton, and rice. The Food Security Act of 1985 continued this limit. Besides the 50,000 payment limit for these commodities, separate limits have been established for other agricultural programs, such as wool, honey, and disaster assistance. See app. II. Payment limits became a significant issue in the mid-1980s when deficiency payments increased significantly because farming operations became eligible for larger total payments. For example, the corn deficiency payment rate increased from 43 cents a bushel to 1.09 a bushel between 1984 and 1987. Without reorganizing their operations to create additional legal entities that qualified as persons for payments, farmers would have been limited to receiving 50,000 each.