Tuesday, December 30, 2008

Impact of Payment Limitation Change

From the FSA interim final rule on payment limitation changes comes a conservative estimate of the economic impact:

The motivation for this change [in the farm bill] is twofold:
(1) Increase transparency by allocating payments made to farming entities to their members.
(2) Moderate payments by adding another layer of payment limits. For example, the 2008 Farm Bill maintains payment limits on the corporations themselves and adds additional limits on the owners of farming corporations.

USDA will be required to track payments made to entities, such as farming corporations, to the owners of those entities. Such tracking is called direct attribution. Both entities and their owners will now have payment limits. Direct attribution will involve extensive USDA staff resources, and consequently cost, in the implementation phase and has the potential for some reduction in Government outlays. Reductions in outlays will diminish as farmers reorganize their operations in order to capture the highest possible payments. Due to uncertainty about the costs it is difficult to estimate annual impacts.
Seems to me at one point USDA analysts were using a figure of about $125 million as the impact of payment limitations. The statement above is perhaps more realistic, as it explicitly admits that farmers will reorganize their operations.

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