In the early 1930s, when American agriculture was hit hard by drought and economic disaster, Congress enacted legislation to protect farmers against the risks of low crop prices and bad weather, among other things. Since then, Congress has periodically passed legislation to help farmers manage the risks inherent to agriculture.
The U.S. Department of Agriculture (USDA) administers programs to support farm income, assist farmers after disasters, and conserve natural resources. USDA provides this support through agricultural subsidies and insurance, which cost about $20 billion annually.
Increased federal budget deficits and record levels of farm income and prices for major crops have heightened the need to ensure that farm program funds are spent as economically, efficiently, and effectively as possible. However, USDAs implementation and oversight of these programs is not always effective, and some programs may have unintended consequences or work at cross purposes to other programs. For instance, of the roughly 875,000 farmers participating in the crop insurance program in 2011, 3.9 percent received 32.6 percent of the $7.4 billion provided for premium subsidies (see figure 1).
Figure 1: Percentage of Farmers and Value of Premium Subsidies, by Individual Farmers Receiving Subsidies of $40,000 or Less, or More than $40,000 in 2011
Figure 2 shows the locations of the farmers who received more than $40,000 in crop insurance premium subsidies for 2011. According to officials of USDAs Risk Management Agency, regions such as the plains states might include more farmers who received more than $40,000 in premium subsidies because farmers in the region have large-acreage farms; produce high-value crops, such as sugar beets; or have higher premium rates.
Figure 2: Locations of Farmers Receiving Premium Subsidies of More Than $40,000, 2011