Subsidies for Cereal Grain Farming

Prior to the 2014 Farm Bill, the two largest components of aid were direct payments and countercyclical payments. Direct payments were calculated based on the farm's base acreage, which reflects the historical planted area and average yields. This means that farmer payments stayed the same under this program even after they had reallocated their plantings. Multiple payments are issued if a farm has base acres and yields in more than one commodity. Between 2008 and 2012, wheat growers, in particular, were eligible for payments of $0.52 per bushel on approximately 85.0% of their land. Payment rates were set at $0.35 per bushel for sorghum, $0.24 per bushel for barley and $0.24 per bushel for oats.

Counter-cyclical payments were made to farmers whenever the price of crops (including the direct payments) fell below a predetermined value. These rates were set at $4.17 per bushel for wheat, $2.63 per bushel for barley and sorghum and $1.79 per bushel for oats. Farmers were also often eligible for further assistance in the form of subsidized disaster insurance, price support loans and marketing assistance.

The 2014 Farm Bill eliminated direct and countercyclical payments in favor of two new programs called Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC). Under the 2014 Farm Bill, farmers are required to select between one of these two new programs. The one-time selection will stand for the entire duration of the farm bill. Under the Price Loss Coverage program (PLC), farmers receive payments if the average US price falls below a certain reference point; for wheat, this threshold is $5.50 per bushel. Under the Agricultural Risk Coverage program (ARC), ARC payments are determined by county and kick in when actual crop revenue is below a guarantee for a crop year. The guarantee is calculated at 86.0% of county ARC benchmark revenue. Additionally, coverage is capped at 10.0% of the benchmark revenue, meaning coverage is only between 76.0% and 86.0%.

If farmers neglect to select between PLC and ARC, they default to PLC. Additionally, yearly coverage is capped at $125,000 for an individual or $250,000 for a married couple. If an individual's three-year average adjusted income is greater than $900,000, they are not eligible for payments.

Of the crops included in this report, wheat is planted in the greatest quantity and the most heavily subsidized. As a result, about 81.0% of the outlays in 2014 have been for wheat, with sorghum accounting for 13.0%, barley 5.0% and oats with less than 1.0%. The precise percentage fluctuates in each year because these subsidies are based on prices being below certain thresholds. For example, in 2010 and 2011, the relative weakness in sorghum and barley prices shifted the balance of payments away from wheat.

More recently, the 2018 Farm Bill was passed resulting in some modifications. For instance, ARC and PLC are authorized from 2013 to 2023. Producers can make a new election to obtain ARC or PLC for the 2019 crop year, which also applies to the 2020 crop year. Producers can change elections annually during the 2021 through 2023 crop years. In addition, owners can update the farm’s PLC payment yield as of the 2020 crop year. In addition, in July 2019 the USDA authorized up to $12.0 billion in financial assistance as part of a trade aid package for certain agricultural goods producers, including sorghum and wheat. In 2021, subsidies for cereal grain farming increased significantly as the government aimed to assist with the fallout of the COVID-19 (coronavirus) pandemic. During 2022, the Russian invasion of Ukraine prompted the Biden administration to propose sending farmers $500.0 million to boost production to make up for the crops lost in Ukraine. Part of this subsidy includes wheat; however, many farmers and politicians have questioned the action due to crops already fetching high prices. As a result, 2022 and 2023 experienced decreases. During 2024 however, outlays growth returned but over five years to 2025, subsidies for cereal grain farming is expected to have decreased 39.4%.