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A crop surplus is creating a slump in U.S. grain prices that is worsening to the point where farmers will soon get more in government aid than at any time in the past decade, analysts say.

About $13.9 billion of net farm income this year will be from federal payments, or about 25 percent of total profit estimated at $54.8 billion, according to figures provided by the U.S. Department of Agriculture. That's the biggest payout and highest ratio since 2006, as programs authorized by Congress two years ago cost more than originally forecast.

Farmers will earn less than half what they did three years ago, before global surpluses sent commodity prices plunging. Corn and soybeans, the biggest U.S. crops, are so cheap now that farmers are expecting to lose money on every acre they plant this season. That's putting a bigger strain on government safety nets for agriculture.

"This is a sign of a weak farm economy that is much weaker than even a couple years ago," said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri in Columbia.

Since corn and soybeans touched record highs in 2012, global output has increased faster than demand, and prices have tumbled. Income for U.S. farmers is headed to a 14-year low, the USDA estimated in February. A subsidies law approved in 2014 scrapped an aid program that wasn't tied to prices. The replacements were payments tied to market swings, which raise expenses in less-profitable years.

In a different measure of government farm payments, a report from the Congressional Budget Office last month said the cost of price-support programs will peak at $10.2 billion in the fiscal year that starts Oct. 1. That was 13 percent more than the agency's October 2015 estimate for the same period.

Subsidies should decline as oversupply abates and prices recover, the Congressional Budget Office said. Payments will bottom out at $5.2 billion in fiscal 2024, though that's still a deeper trough than in the October estimate and still more expensive than the old direct-payment program, which sent checks to producers regardless of price, the office said in its report.

Lawmakers should have seen the higher expenses coming because it was clear when the new programs were approved that farmers were headed for reduced income, said Vincent Smith, an agricultural economist at Montana State University in Bozeman.

Whether the government's percentage of farm income increases or declines in coming years will largely depend on the price of corn, he said. The grain is the most valuable crop in the U.S., which is its biggest grower and exporter. Under the new farm program, certain price points trigger higher subsidy payments.

According to USDA estimates, corn will average $3.60 and $3.75 a bushel until 2025. Futures in Chicago were at $3.6275 at 7:55 a.m. Tuesday, more than a dollar below the average over the past decade. Prices reached a record $8.49 in 2012.

If corn stays above the USDA's forecast, payments may remain similar to what they would have been under previous farm programs, and the portion of farm profits attributable to the government may decline, Smith said. If they plunge near $3, "you would see the cost rise dramatically," he said. "That's the snake in the woodpile."

Crop oversupply and the accompanying low prices that boost payments may persist for several years, said Harwood Schaffer, an agricultural economist at the University of Tennessee in Knoxville.

Lawmakers in agricultural states are still looking for ways to provide safety nets for farmers.

One request is to have the USDA allow cottonseed, which is used for oil or meal rather than fiber, to be added to the list of commodities covered under new farm programs. Agriculture Secretary Tom Vilsack has said that isn't legally possible.

Prospects for additional government relief through disaster bills or one-time payments, a standby during previous farm slowdowns, are less likely this time, Schaffer said.

"This Congress won't do anything," he said. "Prices haven't been low enough for long enough to force them."

A Section on 04/13/2016

Print Headline: As crop prices fall, farms relying more on U.S. aid

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