A Primer on US Government Funding in Agriculture & Land Use
The government is extremely influential in the agricultural industry. In a political economy, policy and legislation establishes the rules by which businesses must operate. If commerce is the river, policy and legislation are the riverbanks, canyons, dams, and aqueducts. The contents of legislation, the funding and subsidies, tilt the scales in favor of certain commodities and industries over others. Like meltwater down a mountainside, capital in a market economy takes the path of least resistance (highest profit).
My friend, Tad Cooke, and I mapped out the major sources of government funding in agriculture to understand the primary bodies of legislation in agriculture and land use and how the government incentivizes what is produced on the land in the US.
Overview of Government Funding
The US government comprehensively influences food, agriculture, and land use through a web of legislation, policy, and executive action. Although the most notable piece of legislation is the Farm Bill, a $428Bn spending package up for renewal this year, Congress embeds additional sums of funding in expansive packages of legislation and the executive branch directs discretionary buckets of funding according to administrative priorities. For example, the 2021 American Rescue Plan Act / pandemic relief package (“ARPA”), the 2021 Infrastructure Investment Jobs Act (“IIJA”), and the 2022 Inflation Reduction Act (“IRA”) quietly appropriated an additional $49Bn into agriculture and land use. These pieces of legislation increased Farm Bill funding by 11% and almost doubled funding for Farm Bill conservation programs from $29Bn to $53Bn.
Executive action has also funneled substantial funding into regenerative food systems and climate-smart agriculture. The USDA under Tom Vilsack, a presidential appointee, appropriated $3Bn of conservation funding to run the Climate-Smart Commodities Program, directly incentivizing responsibly-produced crops and meat, and $3Bn from ARPA, in large part to regionalize meat processing and food systems.
Within direct funding and subsidies for commodities, public money perpetuates a commodity corn, soybean, wheat, and cotton industrial agriculture system. ~76% of all Crop Insurance and Commodity Farm Bill funding funnels into these Big 4 crops. Although beef is not substantially subsidized directly, industrial beef heavily benefits from feed subsidies. Corn feed, soybean, and other feed crops receive ~62% of funding. Fruits and vegetables only receive ~5%. Insured and subsidized crops are generally conventionally-grown as organic growing methods are incompatible with the stipulated management practices to qualify for these programs.
The Farm Bill
The Farm Bill is the cornerstone piece of legislation for agriculture, nutrition, conservation, rural development, and forestry policies in the US. The Farm Bill is reauthorized and updated every 5 years, with the most recent version being the Agriculture Improvement Act of 2018. It establishes and funds a wide range of programs that impact farmers, ranchers, and rural communities, as well as consumers who rely on the safety net and nutrition programs it provides.
The 2018 Farm Bill mandated $428Bn of government spending over the 5-year life of the law, of which $102Bn (24%) fund agriculture and land use programs. The remaining $326Bn funds nutritional assistance programs. The breadth of Farm Bill programs positions the government to affect both the supply and demand of food & agriculture and take transformative action in specific commodities.
Within agriculture and land use, $38Bn (37%) funds federal crop insurance, $31Bn funds commodity risk management, $29Bn (28%) funds conservation programs, and $5Bn (5%) funds a smattering of other initiatives including research, international trade, forestry, horticulture, and energy programs.¹
Nutrition ($326Bn)
The Supplemental Nutrition Assistance Program, SNAP or food stamps, comprises ~97% of nutrition program spending. SNAP provides electronic benefits redeemable for SNAP-eligible foods at SNAP-eligible retailers. Households with gross monthly income must be at or below 130% of the federal poverty level with assets of $2,250 or less. Specific benefit amounts are calculated based on household monthly income, number of people in the household, and housing/childcare costs.
The benefit amount is based on the Thrifty Food Plan (“TFP”), which the USDA developed to represent a “nutritious, practical, cost-effective diet prepared at home.” The TFP represents a market basket of 24% vegetables, 14% fruits, 16% grains, 25% proteins, 14% dairy, and 7% other.³
Crop Insurance ($38Bn)
Crop insurance is a public-private partnership in which the Federal Crop Insurance Program (“FCIP”) subsidizes farmers’ premiums to obtain insurance coverage against crop loss risk from 16 authorized private insurance carriers. In 2019, FCIP subsidized 2M policies covering $116Bn of crop and livestock and 375M acres, or 28% of all US agricultural production.
Crop insurance policyholders tend to be large growers of conventional corn, soybean, cotton, and wheat. Although FCIP nominally supports 124 commodities, crop insurance covers more than 90% of corn, soybean, and cotton and 85% of wheat planted acres, comprising 70% of insurance liabilities.4 Per the USDA’s Risk Management Agency, 81% of total federal crop insurance premium subsidies go to these 4 crops.
The vast majority of farms with $100k+ of gross receipts buy crop insurance whereas small farmers rarely purchase. In total, only 19% of farms buy crop insurance. Additionally, organic farms are less likely to purchase crop insurance due to incompatibility of the insurance products with organic farming practices.⁴
Crop insurance pays out for losses due to natural events including “adverse weather conditions (e.g. hail, frost, drought, flooding), failure of irrigation water supply, fire, plant diseases (provided the farmer followed guidance on proper application of disease control measures), and insect and wildlife damage (provided the farmer followed guidance on proper application of pest and wildlife control measures).”⁴ Control measures vary by policy type, crop type, and region, but it safe to say that these policies often mandate the use of agrochemicals and other ecologically destructive practices. The USDA heavily influences growing practices with crop insurance rules because farmers are required to follow their guidance on “good farm management practices” to be eligible.
Taken together, crop insurance funnels $39Bn of public money into the industrialized, extractive production of corn, soybean, cotton, and wheat, most of which is not even consumed by humans. When it is used for human consumption it’s often in processed, unhealthy forms. 88% of corn is used for animal feed and industrial uses (ethanol). Of the remaining 12%, the majority is high-fructose corn syrup and corn oil. The vast majority of soybean production ends as animal feed and soybean oil. Most wheat is consumed by humans, albeit wheat varieties with inflammatory properties relative to heirloom wheat.¹⁰ All categories are commonly laden with chemical fertilizers, pesticides, and herbicides.
Commodities ($31Bn)
The Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) comprise 67% and 19%, respectively, of Commodities spending. Whereas crop insurance protects against natural disasters, the PLC and ARC protect against uncontrollable declines in market price and farm revenue. The PLC pays farmers when a commodity’s market price declines below a “reference price” based on historical prices and production. The ARC pays farmers when their crop revenue declines below a guaranteed threshold based on historical commodity price and acreage yield. Commodities programs only cover 22 eligible crops and, similar to crop insurance, corn, soybean, cotton, and wheat dominate the beneficiaries.¹ These 4 crops comprise 89% of enrolled acreage.⁶
Conservation ($29Bn)
The USDA provides financial funding and technical assistance to incentivize landowners to protect soil, water, wildlife, and other natural resources on privately owned land. The programs encourage ecologically responsible practices on working lands, land retirement, and creation of easements. The Environmental Quality Incentives Program (EQIP), Conservation Reserve Program (CRP), and Conservation Stewardship Program (CSP) comprise 38%, 35%, and 17%, respectively, or 90% combined.
EQIP assists producers in the form of cost-share agreements on restorative agricultural practices e.g. reimburse 75% of the costs to plant cover crops or transition to rotational grazing. CSP also reimburses landowners for conservation programs, but focuses on long-term, comprehensive conservation plans versus specific projects in EQIP. CRP pays landowners to conserve environmentally-sensitive land rather than farm it.⁷
The EQIP program received an incremental $20Bn from the IRA and funded the $3Bn of Climate-smart Commodity Grants.
Other ($6Bn)
Includes $2.0Bn for Trade, $1.9Bn for Miscellaneous, $1.0Bn for Horticulture, $0.7Bn for Research, $0.5Bn for Energy, and $0.1Bn for Forestry.
The $2.0Bn Trade title mostly refers to international food donation programs, including the $1.5Bn Food for Peace program. Additionally, the Farm Bill appropriates funding for marketing and technical assistance to support agricultural exports.⁸
The $1.9Bn Miscellaneous title is a diverse bucket of programs including sheep industry grants, emergency livestock feed assistance, livestock and aquatic animal health laboratories, technical assistance to socially disadvantaged farmers ($50M), beginning farmer and rancher development programs ($190M), and support for urban and regional food systems ($125M).1 Although the Miscellaneous title comprises <0.5% of Farm Bill funding, it can still funnel hundreds of millions of dollars into un- and under-supported cultivation methods and crops.
The $1.0Bn Horticulture title provides cornerstone support for specialty crops, organic agriculture, and local food systems. Provisions include specialty crop grants and research ($425M), funding for the USDA organic certification ($125M), farmers’ market and CSA marketing funding ($250M), additional support for urban food systems, and hemp industry support.⁹
The $0.7Bn Research title sanctions federal funding of agricultural research through cooperative research with and grants to educational institutions. The bill identifies high priority areas of research such as macadamia tree health, cattle fever ticks, etc.¹
The $0.5Bn Energy title supports agricultural biofuels and rural solar.
The $0.1Bn Forestry title establishes forestry research priorities and provides technical and financial assistance to nonfederal forest landowners.¹ Major acts include:
Cooperative Forestry Assistance Act: forest resource assessments, forest landscape restoration grants, forest conservation funding.
Forest and Rangeland Renewable Resources Research Act: wood fiber recycling research and forestry student grants.
Health Forests Restoration Act: hazardous fuel reduction for wildfire prevention, watershed restoration, the Health Forests Reserve Program (forest restoration and conservation programs), and disease protection.
Budget Neutral Titles
The Credit title governs eligibility for USDA farm ownership loans, farm operating loans, and conservation loans.
The Rural Development title establishes rural revitalization priorities including improving health outcomes, broadband deployment, and economic development and infrastructure.
Sources
¹ CRS - 2018 Farm Bill Side-by-Side Comparison.
² CRS - Farm Bill Primer.
³ USDA - Thrifty Food Plan 2021.
⁴ CRS - Federal Crop Insurance: A Primer.
⁵ USDA Risk Management Agency Summary of Business.
⁶ USDA ARC/PLC program data.
⁷ Farmraise blog.
⁸ CRS - Trade title primer.
⁹ CRS - Horticulture title primer.
¹⁰ USDA ERS corn, wheat, oil crop sectors at a glance.
Non-Farm Bill Funding
USDA Action
In addition to the specific uses of funds in the Farm Bill, the USDA sequesters funding from discretionary buckets in the Farm Bill and other pieces of legislation to pursue administration policy objectives. In June 2022, Secretary of Agriculture Tom Vilsack announced the details of the USDA’s Food System Transformation framework¹, which includes:
“Building a more resilient food supply chain that provides more and better market options for consumers and producers while reducing carbon pollution: … in order to be more resilient, the food system of the future needs to be more distributed and local. Having more capacity to gather, process, move and store food in different geographic areas of the country will provide more options for producers to create value-added products and sell locally, which will support new economic opportunities and job creation in rural communities. Additional regional capacity will also give consumers more options to buy locally produced products - helping ensure food is available to consumers - and reduce the climate impact of our food supply chain.”
“Creating a fairer food system that combats market dominance and helps producers and consumers gain more power in the marketplace by creating new, more and better local market options: Just 14 cents of the food dollar go to producers on average… Today, just a handful of companies dominate meat and poultry processing and just a few multi-national companies produce most brands and products on supermarket shelves… USDA’s investments will deliver a better deal for farmers, ranchers, growers and consumers.”
“Making nutritious food more accessible and affordable for consumers: the pandemic exposed and exacerbated the challenges of food and nutrition insecurity in this country… the framework includes programs to ensure that all consumers are able to access fresh, healthy, nutritious food.”
“Emphasizing equity: …rural communities, underserved communities, communities that experience persistent poverty, and the people who live there have been left behind… it is in these communities where most of our food comes from; where most of the water that we drink comes from; and where most of the energy we consume comes from. USDA’s Food System Transformation investments will create more economic opportunities for these communities and allow them to retain more of the food system dollar.”
To support execution of administration priorities, the USDA declared $3.1Bn⁶ of investments funded by the 2021 American Rescue Plan Act pandemic relief package. Specific investments include:
Food Production ($0.4Bn total)
$300M to fund technical services to support farmers’ transition to organic.
$75M to supplement urban agriculture grant programs in the Farm Bill.
Processing ($1.7Bn total)
$775M to build independent meat and poultry processing capacity.
$375M in grants for independent meat and poultry processing plant projects.
$275M to subsidize private loans in meat and poultry processing plant projects.
$25M to fund technical assistance of independent meat and poultry processing.
$100M in worker training and job safety.
$700M for other supply chain infrastructure projects.
$600M in grants for other independently operated infrastructure projects such as cold storage, mills, etc.
$100M in loan guarantees for other supply chain infrastructure projects.
Distribution and Aggregation ($0.7Bn total)
$400M to create regional food business centers that will provide technical assistance to build regional food systems.
Markets and Consumers ($0.4Bn total)
$155M in grants to offer healthy food in food deserts.
$100M to schools to improve the nutritional quality of school meals.
The USDA also committed $3Bn of EQIP conservation grants for the Partnerships for Climate-Smart Commodities grants program, which finances “pilot projects that create market opportunities for U.S. agricultural and forestry products that use climate-smart practices and include innovative, cost-effective ways to measure and verify greenhouse gas benefits… [the program] defines climate-smart commodities as being produced using agricultural practices that reduce greenhouse gas emissions or sequester carbon.” The USDA anticipates reaching 60,000 farms, 25M acres of working lands, sequester 60M tons of CO2 equivalent, and involve 100 universities and 20 tribal groups through grants and technical assistance.⁵
The USDA ultimately invested $3.1Bn into 141 projects.
Inflation Reduction Act (2022)
The $770Bn Inflation Reduction Act (“IRA”) included $40Bn for agriculture including $20Bn of incremental funding for the Farm Bill’s conservation programs (EQIP, ACEP, CSP, and RCPP) and forest management (wildfire risk mitigation and old-growth forest protection), $14Bn for Farm Bill rural development programs (renewable energy, biofuels infrastructure), and $4Bn to mitigate impacts of drought in the West (grants for water use reduction, conservation, habitat restoration).
This would increase spending in conservation programs 9.4x over the next 4 years relative to the 2018 Farm Bill. In particular, the Regional Conservation Partnership Program benefits from $400M annual spending to $2.7Bn in 2026.²
Source: American Farm Bureau Federation.
Infrastructure Investment and Jobs Act (2021)
The Infrastructure Investment and Jobs Act (“IIJA”) allocates $1.2Tn in spending over 10 years, including $550Bn over the next 5 years, to improve the country’s surface-transportation network ($284Bn) and core infrastructure ($266Bn).³ The law allocates $5.5Bn for infrastructure projects on Forest Service land to reduce the risk of wildfires and repair watershed infrastructure.⁴
Sources
¹ USDA.
² Farm Bureau.
³ McKinsey.
⁴ USDA.
⁶ USDA.
