Farm Bill Math Updated in New Congressional Budget Office Baseline

The change in farm bill outlays is due to a variety of factors. First, price expectations for several covered commodities have changed due to different supply and demand conditions. For example, consider that record yields and larger domestic inventories have weakened corn prices in recent years and led to higher ARC-CO payments. CBO’s June 2017 projections are for marketing year average corn prices to remain below $4 per bushel over the next decade. These lower corn prices contribute to an additional $4.8 billion in ARC-CO and PLC outlays over the next 10 years. While government costs of the corn program have increased due to weaker prices, other commodities saw their outlays decrease due to higher market prices. For example, tighter supply conditions in peanut markets resulted in the CBO raising their price forecasts in nearby years. In March 2016, CBO estimated the five-year average peanut price at 17.4 cents, and in the most recent baseline, the five-year average price was 21.5 cents per pound, Figure 2. These higher peanut prices lowered forecasted PLC payments by $1.7 billion over 10 years. This reduction in baseline spending was expected as forward contracts to peanut producers have been reported in the range of $400 to $500 per ton.