Is the Pendulum Swinging on Ad Hoc Direct Payments?
The U.S. debt ceiling drama has surfaced questions that many of us never anticipated needing to think about, such as “What is the 14th amendment?” For agriculture, the latest D.C. showdown comes as efforts to reauthorize the Farm Bill are underway. While many have wondered if the debt ceiling debates will have a direct effect on Farm Bill efforts, recent events may signal a shift in the largest category of direct farm payments: ad hoc.
Ad Hoc Programs
“Ad hoc” – a Latin phrase meaning “for this” – refers to solutions that have a specific purpose, task, or problem. Figure 1, which plots direct government payments since 2010 by category, includes two ad hoc programs. The first was Market Facilitation Payments (MFP, in purple) from the trade war era. The second category – “supplemental & ad hoc” – is shown in orange.
Ad hoc programs themselves aren’t new or usual. Between 2010 and 2013, annual ad hoc payments were $2.3b. What is new, however, are the magnitudes. Since 2018, ad hoc programs have averaged $17.4b annually, compared to an average of $10.0 billion annually from non-ad hoc programs since 2010. Most recently, ad hoc programs totaled $11.9b in 2022 and are expected to be $5.9b in 2023.
Perhaps the most shocking statistic is that since 2019, 73% of direct payments have been ad hoc. This means the majority of direct payments made during the 2018 Farm Bill program years bypassed the Farm Bill. To clarify, this average wasn’t wildly distorted by the 2020 situation, when total payments set a new record of $51b. Ad hoc programs have accounted for the majority of direct payments in each year since 2019. Even in 2023, ad hoc payments are estimated at 57% of total direct payments.
There are two factors at play. First, funding from ad hoc programs has been high. Secondly, traditional Farm Bill program dollars have been significantly lower. Between 2015 and 2021, the ARC and PLC programs collectively paid an average of $5.8b annually, ranging from a high of $9.9b (2016) to a low of $2.4b (2021). More recently, ARC and PLC activity has been barely measurable at $383m (2021) and $69m (2022).
Wrapping It Up
It’s important to keep in mind how significant ad hoc programs have been since 2018.
After several years of persistently strong ad hoc payments – for a host of reasons – it’s time to wonder when the pendulum will swing back to something more normal. While it’s always risky to bet against Congress – especially when it comes to spending – it seems very unlikely that the last few years represent a new normal or paradigm.
To that point, the debt ceiling debates could signal less congressional interest in passing agricultural ad hoc programs moving forward. Even if the Farm Bill is unscathed, ad hoc programs – and total direct payments made to the farm sector – could still decline.
Still curious? You can read more about the 2023 Farm Bill and direct payments. Also, join the conversation (and make your forecast) about the probability of a five-year farm bill being signed into law on or before September 30, 2023 (the current bill’s expiration).