If the cost of grain continues to rise in response to speculation and expectations of a diminished harvest this year because of the drought, Uncle Sam could come out a winner - of sorts.
Officials of the Agriculture Stabilization and Conservation Service in Washington, D.C., told the Deseret News Wednesday they had expected to spend as much as $17.5 billion in subsidies and support payments to grain farmers this year.The payments are given when the market price of wheat, corn, oats, sorghum, barley and other commodities is lower than a target price set up by the Department of Agriculture.
The target price is what farmers and farm experts believe the price should be if farmers are to make a profit. The federal government, for many years, has paid farmers the difference between the market price and the higher, target price.
ASCS officials said they could
save as much as $5 billion or more if the price of grain reaches the target price. Then, they explained, they won't have to pay subsidies, including loans and direct cash payments, to farmers.
There is another side to the coin, however. That is, the government may have to help drought-stricken farmers in the Midwest, Southeast and other areas of the nation if they lose their grain crops this year.
At least, federal officials say, if grain prices continue to rise and target prices are met or exceeded, the government will have the money they have not paid out in subsidies to pay stricken farmers.
Many farmers who are signed up for support and deficiency loan programs have already received deficiency payments.
They have put up their crops as collateral for the loans with the expectation that if they can't get a good enough price for their crops they However, if a farmer who has put up his crop as collateral loses his crop to drought, he will have nothing for the government to take over and may have to pay the loan back to the government. This could put some farmers out of business.