When Payments Do More Harm Than Good, Consider Other Options

By Jonathan Coppess and Otto Doering

Maybe history can provide handrails in turbulent, difficult times. For many farmers, this harvest season threatens such times. Some of the crops being combined in fields lack the market demand expected at planting because the Trump Administration’s tariff policies and trade conflicts have damaged commodity exports (farmdoc daily, Sept. 22, 2025; Huneke and Johnson, Sept. 20, 2025; Bradner, Seger, Robertson, and Herb, Sept. 20, 2025; Rappeport, Sept. 15, 2025; Cao, Thukral, and Plume, Sept. 10, 2025; Bradsher, Sept. 4, 2025; Thukral and Cao, Aug. 13, 2025; Gowen and Carioti, May 21, 2025; Rappeport, April 10, 2025; American Soybean Association, Aug. 20, 2025; Huneke and Johnson, Aug. 30, 2025; Morgan, Aug. 27, 2025). Unfortunately, the only response at the ready in national conversations appears to be the siren’s call for additional payments to farmers.

The discussion that follows summarizes much previous work on the history of the Farm Bill and the conservation policies in it (Coppess, 2018; Coppess, 2024; Schertz and Doering, 1999), as well as covered in previous farmdoc daily articles too numerous to cite. At the core are sincere concerns with issuing more payments. This discussion seeks to apply lessons from history to the tough reality in American agriculture today. The timing is notable: Tuesday, Sept. 22, 2025, marked the fortieth anniversary of the first Farm Aid concert, which was held at Memorial Stadium in Champaign Illinois, on Sept. 22, 1985 (see e.g., Spurlock Museum of World Cultures, “Songs of Solidarity: The 1985 Farm Aid Concert”). We have seen this play out before and should avoid repeating past mistakes that make matters worse.

Identifying the problem at hand is key to the discussion. It begins with basic economics and imbalances between supply and demand. Generally, expectations for markets are that when there is too much supply prices drop, reducing supplies and restoring balance. The tough realities of agriculture and farming complicate this basic expectation. Among these realities are those involving the land — land in production tends to stay in production, there is little incentive to leave it idle even when prices are low—and the biological nature of production prevents simply (or easily) curtailing supply when demand is lost, especially once the crop is planted or livestock has been bred.

This is not a new problem, nor one unique to today. Since its founding, the United States has usually produced a surplus of basic agricultural commodities over and above the demand from its citizens. This has penalized American farmers and led to multiple farmer movements from the National Grange to the American Agricultural Movement. At various points in history, farmers have tried to reduce supplies but with little success given the many individual decision makers who all have a motivation to let others reduce their production (i.e., the free rider problem). The federal government has tried as well, also with limited success. On the demand side, farmers and government have tried to increase exports but those efforts have faced numerous geopolitical and other challenges throughout history. Both have also attempted to increase domestic demand, from bourbon, to the school lunch program and Food Stamps, to the Renewable Fuels Standard (RFS).

For many good reasons, these realities have driven a belief among farmers that the economy treats them unfairly and that government should assist them through policies. Often, this gets narrowed by self-interested actors to simply issuing payments that appear to alleviate some of the pain. Payments do not address the basic supply/demand problems. Payments also cause problems for farmers and have long-term impacts on the agricultural sector. In general, payments become capitalized into the value of the land, impacting both purchases and annual leases. Payments can also keep input costs (seeds, fertilizers, pesticides, etc.) high, giving suppliers more pricing power and preventing adjustments in those markets. Increased costs for land and inputs can escalate the demands for government payments, and so forth.

Additionally, payments scaled to farm size reinforce existing competitive advantages for large farms compared to moderate and small sized farms. For example, larger farms with owned acres can leverage those acres into additional land purchases while also cutting better deals with input suppliers based on scale. The most disadvantaged by government payments are those in the earlier stages of their careers and those desiring to enter farming who face land prices and other costs elevated by government subsidies. Payments can also entrench existing production systems and punish or stifle innovation.

History’s reminders run with the land. Federal policies and payments can have outsized impacts on the land use decisions of farmers. Figure 1 provides an historical overview of agricultural acreage. It combines the total acres of cropland used for crops reported by ERS (USDA-ERS, “Major Land Uses”) with the planted acres data reported by the National Agricultural Statistics Service (NASS), grouped into feed grains (corn, barley, oats, rye, and sorghum), wheat, southern crops (cotton, rice, and peanuts), and soybeans (USDA-NASS, Quickstats). Total acres removed from production by federal policy are also included (green area), such as acres enrolled in the Conservation Reserve Program since 1985, the Soil Bank previously, as well as the acreage reduction programs of the 1960s and 1980s (see e.g., USDA-ERS, “Agricultural Resources and Environmental Indicators, Chapter 1.1”; Bigelow and Borchers, 2017; USDA-FSA, “Conservation Reserve Program (CRP) Statistics”).

The 1920s and the 1970s present prominent warnings. In both eras, international demand drivers led to significant acreage expansion that caught farmers when demand faded. First with World War I, wartime demand collapsed after the war due to devastated export markets for U.S. grains in Europe. Second, brief export enthusiasm in the early 1970s resulted from changes in monetary policy, the controversial grain deal with the Soviet Union, and other anomalies. Congress moved farm policy to a payment design in August 1973, just before the OPEC oil embargoes began in October. Before the decade ended, the U.S. placed an embargo on the sale of grains to the Soviet Union and the Fed drastically raised interest rates to combat inflation. In each episode, the fallout fell on farmers, in terms of bankruptcies and lost farms, but also on the land, with the Dust Bowl and an erosion crisis in the 1970s and 1980s.

In between, Congress enacted the Soil Bank in 1956. It was a response to growing surplus commodity problems after a brief demand boost from the Korean War collided with increasing production under the technological revolution in farming—technology rendered acreage allotment policy designed in the Depression more ineffective. The Soil Bank combined both a temporary acreage reserve that annually diverted excess acres out of production and into conservation, along with a long-term conservation reserve. Southerners in Congress, led by Representative Jamie Whitten (D-MS), sabotaged the program but subsequently applied the acreage reserve policy to feed grain acres beginning in 1961. That policy became the set-aside acreage policy in 1971 that was eliminated in the 1973 Farm Bill.

A final era offers another useful comparison. The free trade exuberance of the early 1990s boosted crop prices, impacting development of the 1996 Farm Bill. In that Farm Bill, Congress decoupled farm subsidy payments from production decisions and market prices. Those drastic changes to farm policy were followed by damaged export markets from the Asian financial crisis that began in 1997. Congress responded with what was then considered massive ad hoc payments (essentially doubling the annual direct payments), but did not reattach payments to planted acres. Potentially more important, any acreage expansion was muted by CRP, and total acres in production declined after 1997.

For most of the last 20 years, American farmers have experienced a relatively anomalous period of high crop prices and strong incomes. The RFS has been a massive domestic demand driver for corn. At the same time, China’s increasing demand for soybeans has exerted a strong export pull on that crop. Acres for both have increased, pulling acres from other crops, creating competition for acres that lifted prices for all crops. Those times have likely ended. Farmers face the potential loss of the Chinese export market for soybeans (and other crops) to tariffs and Brazil for the foreseeable future. New domestic demand drivers, like the RFS, are not on the horizon, while questions swirl around the existing policies (see e.g., farmdoc daily, Feb. 5, 2025; Neely, Sept. 16, 2025; EPA, Aug. 22, 2025; Kaiser and Parga, 2024; Ramsey et al., 2023).

The direction of farm policy in this perilous moment tends to treat the farmer as a pass-through entity, with each additional round of payments simply extracted from the farmer by land and input costs. Farm program payments have remained decoupled from planting decisions but the extraordinary ad hoc and supplemental payments in recent years have all been tied to planted acres. An increasingly generous crop insurance program further complicates matters. By necessity, it is directly coupled to planting decisions. The design of crop insurance may also have unintended consequences that lock farmers into production systems or rotations, limiting their ability to innovate, adjust and adapt to changing circumstances. Worse, Congress has been driving the program more in the direction of over-insuring the highest risk areas and crops.

An ounce of prevention is worth a pound of cure. Like it or not, supply-side policy responses always arise at some point after demand-side problems rip through the farm economy; the question is not if, but rather when and how drastic. The New Deal policies after 1933 provide one reminder. The temporary Payment-in-Kind (PIK) program created by the Reagan Administration, which paid farmers to remove nearly 80 million acres from production in 1983, another. Considering options other than more payments to farmers should begin sooner rather than later to avoid more drastic responses down the road.

History has not been kind to supply-side policies. Farmers often reduce the least productive acres for the policy benefit and maximize production on the remaining acres. Maximization through intensification has considerable consequences, including increased costs to the farmer for inputs, as well as the resulting costs to natural resources. It also diminishes or completely offsets any potential reductions in supply, wasting federal support and failing to achieve its purposes. The worst of these policies have been commodity-specific because they also spread surplus problems to other commodities, farmers, and regions.

Supply-side policies have come close to effectiveness when the designs incorporated conservation. This was the legacy of the Soil Bank and the set-aside, although those policies encountered fierce opposition and tended to be short-lived. More consequential, Congress enacted the Conservation Reserve Program (CRP) and conservation compliance in the landmark Food Security Act of 1985. For the entire forty years since, CRP has provided an important acreage buffer against unfortunate increases in acres by farmers under financial stress. Its protections are at serious risk, however, because Congress did not reauthorize the CRP in the Reconciliation Farm Bill this year and it is scheduled to expire next week.

If payments were the answer, then the problems should be solved by now. At the end of last year, Congress authorized over $30 billion in ad hoc/emergency supplemental payments, including $10 billion for economic assistance (farmdoc daily, Jan. 7, 2025). Out of that $10 billion, USDA created the Emergency Commodity Assistance Program (ECAP) and began the process of providing assistance in March (USDA-FSA, ECAP). USDA reports that more than $8 billion in payments have been made to farmers under ECAP (USDA-FSA, ECAP Dashboard).

Since 2018, USDA and/or Congress have paid nearly $176 billion (real 2025) in inflation-adjusted economic assistance to farmers. Those payments amount to an average of $6.5 billion per year from the commodities subsidy programs and an astounding $15.5 billion per year in ad hoc or supplemental assistance (USDA-ERS, Farm Income and Wealth Statistics). On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (P.L. 119-21), which included the Reconciliation Farm Bill’s massive increase in commodities subsidies (farmdoc daily, July 15, 2025). The Congressional Budget Office (CBO) projected that the changes to just one subsidy program—the Price Loss Coverage (PLC) program—would add $5 billion per year on average in direct payments to farmers starting in October 2026 (CBO, July 21, 2025). Figure 2 provides a snapshot of the last 50 years of federal farm payments, adjusted for inflation by USDA’s Economic Research Service.

Ultimately, federal taxpayer-funded payments are no match for the tough reality of lost demand or damaged markets. For example, in 2024 alone, the U.S. exported almost $176 billion worth of agricultural products; soybean exports that year were $24.6 billion, followed by corn at $14 billion (USDA-ERS, Foreign Agricultural Trade of the United Status (FATUS); USDA-FAS, “Soybeans”; farmdoc daily, Feb. 20, 2024). If this latest round of trade and tariff conflicts have substantially damaged export markets for the foreseeable future—ceding them to competitors or worse—then farmers are going to need adjustments more than payments, beginning with the costs farmers manage to produce crops. Allowing farm price and income declines to force adjustments, which often involve many farm foreclosures and bankruptcies as in the mid-1980s, is not politically palatable. Doing so is also likely to fall hardest on early-stage farmers and those adopting conservation. Policy should respond without preventing timely and manageable adaptations, innovations, and adjustments. Policy responses, like payments, that keep costs high while prices and incomes drop are paying farmers to drive combines over the proverbial cliff and into crisis. Can we do better this time around?

History & Tough Reality: When Payments Do More Harm Than Good, Consider Other Options was originally published by Farmdoc.