Ranking Agricultural Commodities by Farm Payments and Federal Food Aid Purchases

CRS Report for Congress
Ranking Agricultural Commodities by Farm
Payments and Federal Food Aid Purchases
Jim Monke
Analyst in Agricultural Policy
Resources, Science, and Industry Division
Summary
The federal government affects the supply and demand of various agricultural
goods through farm income support and food donation programs. The U.S. Department
of Agriculture (USDA) provides payments to farmers and landowners for producing
certain program commodities. Ranking commodities by the level of support depends on
the criteria and time period. Over FY2003-FY2005, USDA expects to spend about $11
billion annually on farm payments. In total outlays, feed grains receive the most support
(29% of the total), followed by wheat, dairy, and cotton (15%-18% each). However,
using different criteria based on the proportion of crop revenue from government
payments, rice, peanuts, and wool and mohair receive a higher percentage of revenue
from the government (42%-51%) than cotton, wheat, and feed grains (12%-25%).
USDA also purchases some of these program commodities and other non-program
commodities and processed products for use in domestic and international food aid
programs. In FY2003, USDA purchased commodities totaling $1.5 billion for domestic
food assistance, and $1.3 billion for international food aid. Beef was the most-
purchased commodity for domestic programs (15% of the total), followed by cheese
(14%) and chicken (9%). The child nutrition and school lunch programs were
significant users of these commodities. Wheat is the most-purchased commodity for
international food aid programs (33%). This report will not be updated.
The federal government intervenes in agricultural commodity markets most visibly
by making income support payments to the growers of certain commodities and
purchasing those and other commodities for nutrition assistance programs. These actions
affect both the supply and demand of certain commodities, and can be central to debates
over equitable or preferential treatment by commodity and food aid interest groups.
Commodity-specific payments and purchases result from a combination of statutory
directives and administrative determinations by USDA. In this report, “payment” refers
to the income support programs for farmers who grow, or have a history of growing,
certain eligible crops. Commodity “purchase” refers to the government acquisition of
crop or livestock products for food distribution and nutrition programs.

Congressional Research Service ˜ The Library of Congress

Congress specifies in statute the commodities eligible for payments and the payment
formulas (see, e.g., the 2002 farm bill, P.L. 107-171). Market conditions determine actual
outlays. Provisions for commodity purchases in food assistance programs are more
general, and USDA has more discretion over the basket of items purchased (see, e.g.,
Section 14 of the Richard B. Russell National School Lunch Act, 42 U.S.C. 1751 et seq.,
and Section 32 of the Act of August 24, 1935, 7 U.S.C. 612c). Reauthorization of various
child nutrition authorities, including the commodity distribution programs, is under
consideration by the 108^th Congress (H.R. 3873 and S. 2507).¹
Payments for Farm Income Support
Background. Federal law has authorized farm income and commodity support
programs for over 70 years, using various approaches and covering various commodities.
Congress alters key provisions of these laws through multiyear farm bills or
appropriations acts. The most recent revision of the commodity payments is Title I of the

2002 farm bill (P.L. 107-171, the Farm Security and Rural Investment Act of 2002).

The “program commodities” currently include wheat, feed grains (corn, sorghum,
barley, oats), cotton, rice, soybeans, other oilseeds (sunflower seed, rapeseed, canola,
safflower, flaxseed, mustard seed, crambe, and sesame seed), wool, mohair, honey, dry
peas, lentils, and chickpeas. Dairy, sugar, and tobacco are also eligible for other support.²
For example, depending on which of the program crops farmers grow or have a
history of planting, farmers can receive three types of payments:
^!Direct payments are unrelated to (decoupled from) current
production or current market prices. The payment is made based
on each farm’s historical number of acres planted and yields.
^!Counter-cyclical payments make up the difference between a
crop’s statutory target price and the season-average market price,
if the market price is lower. As with direct payments, farmers are
not obligated to grow the crop to earn counter-cyclical payments.
^!Marketing loans provide minimum price guarantees on the crop
actually produced through nonrecourse loans, discounted
repayment options, and loan deficiency payments (LDPs).
Ranking. Any ranking of commodity payments depends on the unit of
measurement. For example, payments could be ranked by total dollars spent, dollars per
bushel, dollars per acre, dollars per farm, or percent of crop receipts. Table 1 presents net
outlays by the USDA Commodity Credit Corporation (CCC), ranked by total dollars
allocated to each commodity. Direct payments, counter-cyclical payments, and marketing
loan benefits to farmers comprise most of these amounts. Because spending can vary
greatly from year to year as market conditions change, the table includes actual outlays

¹ For more on child nutrition, see CRS Report RL31577, Child Nutrition and WIC Programs.
² For more information about the farm programs, see CRS Report RS21779, Grains, Cotton,
Oilseeds and Peanuts: Payments Under the 2002 Farm Bill. For dairy programs, see CRS Report
IB97011, Dairy Policy Issues. For sugar, see CRS Report IB95117, Sugar Policy Issues. For
tobacco, see CRS Report 95-129, Tobacco Price Support.

for FY2003 (the first year under the new farm bill) and USDA estimates for FY2004-
FY2005. The average from those years is used for ranking.
Table 1. Farm Commodity Payments,
Ranked by Average Spending Over FY2003-FY2005
($ million)
F Y 2003 F Y 2004 F Y 2005 Average P ercent
Commodityactualest.est.FY03-FY05of Total
Feed grains¹1,5723,7784,4163,25529%
Wheat 1,118 1,796 3,176 2,030 18%
Dairy 2,494 1,919 1,237 1,883 17%
Cotton, upland and ELS2,8541,2158511,64015%
Rice 1,279 1,198 1,327 1,268 11%
Soybeans, minor oilseeds9496016567356.5%
Peanuts²341606332426 3.8%
T obacco 179 20 -100 33 0.29%
Wool and mohair201414160.14%
Honey16-020.02%
Suga r -84 -25 0 (36) -0.32%
Tot a l³ 10,723 11,128 11,909 11,253 100%
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In total dollars, feed grains receive the highest commodity payments over the
FY2003-FY2005 period, accounting for $3.2 billion (or 29%) out of $11 billion on³
average annually. Wheat is second at $2 billion (or 18%), followed closely by dairy at
$1.9 billion (or 17%) and cotton at $1.6 billion (or 15%). However, this ranking is
sensitive to the years chosen. Using a two-year average of FY2003-FY2004, the ranking
of the top four commodities changes to feed grains, dairy, cotton, and wheat.
Total outlays reflect the size of the program in the federal budget, but not necessarily
the relative impact among commodities. For example, the “program crops” are tied to a
base acreage and can be ranked by the average payment per acre. The left side of Table
2 reveals a much different ranking, with rice and peanuts receiving over $200/acre in
payments, followed by cotton at $87/acre. Feed grains, wheat, and soybeans all fall below
$30/acre. This ranking helps explain why rice and cotton growers are affected more often⁴
by payment limitations than other commodity growers. However, it fails to account for
costs of production, which may be significantly higher for certain commodities and may
be used to support arguments for higher payments.

³ The $11 billion figure includes only payments associated with a single commodity, and does
not include other activities such as the Conservation Reserve Program (CRP), export programs,
and disaster assistance. Over FY2003-FY2005, USDA expects average total spending by the
Commodity Credit Corporation (CCC) of about $15.7 billion.
⁴ Payment limits restrict the dollar amount of farm subsidy that an individual can receive.
Congress sets the limits, most recently in the 2002 farm bill, and the issue continues to be
controversial among commodity groups. For more information, see CRS Report RS21493.

Table 2. Alternative Rankings of Farm Commodity Payments,
Average Annual Amounts for FY2003-FY2005
Criterion: Government Payment per AcreCriterion: Government Payments as aPercent of Gross Income
Program crop$/acreCommodity% of Gross Income
Rice282Rice51%
Peanuts 278 Peanuts 44%
Cotton87Wool and mohair42%
Feed grains29Cotton25%
Wheat27Wheat23%
Soybeans13Feed grains12%
Dairy8.3%
Soybeans4.1%
Tobacco2.0%
Honey1.4%
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A more comparable ranking is the percentage of gross income (farm sales plus
government payments) that comes from the government. The right side of Table 2 shows
that about half of gross income for rice is government payments, and over 40% for
peanuts and wool and mohair. Cotton and wheat receive about a quarter of their income
in government payments, feed grains about 12%, dairy about 8%, and soybeans 4%.
Thus, in the current time period, feed grains are clearly the largest program
commodity in total spending. However, programs for other commodities that are less
expensive in total outlays, such as rice, peanuts, and wool and mohair, provide the largest
shares of gross income and may have more of an impact on individual growers.
Purchases for Food Assistance Programs
The USDA buys commodities or donates them from government inventories to
supplement domestic food aid programs and for international food relief. In addition,
such purchases also have the dual role of supporting farm income by increasing demand
for the commodity and removing surplus stocks from the market. This report includes
only direct USDA purchases of commodities for in-kind distribution.
Domestic Assistance. Nine domestic feeding programs currently incorporate
commodity purchases, including the National School Lunch Program (NSLP), Child and
Adult Care Food Program (CACFP), Summer Food Service Program, Commodity
Supplemental Food Program (CSFP), The Emergency Food Assistance Program
(TEFAP), Food Distribution Program on Indian Reservations (FDPIR), Nutrition Service
Incentive Program (NSIP), Disaster Assistance Program, and the Summer Camps,
Charitable Institutions, Bureau of Prisons, and VA Hospitals programs.
The Farm Service Agency (FSA), Agricultural Marketing Service (AMS), and Food
and Nutrition Service (FNS) work together to purchase and provide commodities in the
quantity needed to meet planned levels of assistance. In addition, USDA provides bonus
commodities that are acquired through surplus removal programs.

Schools receive the bulk of federally donated commodities. They and other
providers are “entitled” to a specific dollar value of commodities based on the number of
meals they serve. The inflation-indexed commodity entitlement is a minimum of 15¾
cents a meal for the 2003-2004 school year. The “bonus” commodities donated from
USDA’s discretionary purchases (by the Section 32 program) are in addition to the
planned “entitlement” purchases requested by the feeding programs.⁵
Table 3 presents the most-purchased commodities for all of the above-named U.S.⁶
domestic food assistance programs in FY2003, ranked by dollars. Beef was the most-
purchased commodity, accounting for $212 million (or 15%) of $1.5 billion in commodity
purchases. Cheese was a close second at $207 million (or 14%), and chicken a distant
third at $128 million (or 9%).
Table 3. Purchases for U.S. Domestic Food Aid
for FY2003 Ranked by Commodity Value
Value PercentValue Percent
Commodity($ million)of TotalCommodity($ million)of Total
Beef 212.4 15% Raisins 20.8 1.4%
Cheese 206.7 14% T una 19.1 1.3%
Chicke n 128.0 8.8% Pineapples 18.7 1.3%
Pudding71.84.9%Fruit cocktail, mix18.01.2%
Turkey71.24.9%Flour and farina15.51.1%
Peaches 69.2 4.8% Cereal 15.4 1.1%
Nonfat dry milk52.43.6%Apricots14.81.0%
Fresh produce ^p^ilo^t51.83.6%Walnuts14.11.0%
Pork 47.7 3.3% Orange s 13.8 1.0%
Potatoes 40.3 2.8% Noodles 12.4 0.9%
T oma toes 31.5 2.2% Bison 12.1 0.8%
Beans 30.9 2.1% Eggs 11.3 0.8%
Pears 30.8 2.1% Almonds 10.5 0.7%
Fruit-nut mix28.21.9%Salmon8.50.6%
Peanuts 28.1 1.9% Rice 8.0 0.6%
Apples27.01.9%Spaghetti sauce7.90.5%
Corn, cornmeal25.91.8%Other¹79.85.5%
continued... Total 1,454.4 100%
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International Assistance. Over 50 types of commodities including grains,
oilseeds, dairy products, fruits and vegetables, and blended foods have been provided

⁵ For more on domestic feeding programs, see CRS Report RL31577, Child Nutrition and WIC
Programs, and CRS Report RL30164, Emergency Food Assistance Programs. For more on
USDA bonus purchases, see CRS Report RS20235, Farm and Food Support Under Section 32.
⁶ Although purchases for food assistance programs vary from year to year, the variation is not as
great as for the farm payments. Thus, only one year is presented for the food aid programs.

through the U.S. food aid programs. Commodity composition varies over time due to
country needs and commodity availability.
The Agricultural Trade Development and Assistance Act of 1954, the Food for
Progress Act of 1985, and the Agricultural Act of 1949 established the three main U.S.
food aid programs: Public Law 480 (P.L. 480), Food for Progress (FFP), and Section
416(b). Two other international food aid programs are the Bill Emerson Humanitarian
Trust, and the Food for Education program.
P.L. 480, also known as the Food for Peace Program, provides U.S. agricultural
commodities to countries with differing economic development levels. Food for Progress
provides commodities to developing countries that are emerging democracies. Section
416(b) provides donations of food commodities acquired by the Commodity Credit
Corporation (CCC) through price support programs. The Bill Emerson Humanitarian
Trust is a commodity reserve used to meet emergency humanitarian food needs in
developing countries. The Food for Education program provides food to improve
nutrition for mothers, infants, preschoolers, and schoolchildren in developing countries.⁷
Table 4 presents the most-purchased commodities by the U.S. for international food
aid programs in FY2003, ranked by dollars. Wheat is the most-purchased commodity,
accounting for $420 million (or 33%) of $1.3 billion in U.S. international food aid during
FY2003. It has been the highest-value item in this listing for more than a decade.
Table 4. Purchases for U.S. International Food Aid for FY2003,
Ranked by Commodity Value
Value PercentValue Percent
Commodity($ million)of TotalCommodity($ million)of Total
Wheat and flour420.933%Bulgur49.73.9%
Vegetable oil258.020%Beans45.83.6%
Nonfat dry milk141.311%Lentils35.52.8%
Corn and meal112.08.7%Soybeans & meal31.42.4%
Rice 81.9 6.4% Peas 24.4 1.9%
Corn-soy blend57.74.5%Other¹29.42.3%
continued... Total 1,288.0 100%
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⁷ For more information about international food aid, see CRS Report RL31927, Trends in U.S.
Foreign Food Aid, FY1992-FY2002.