How CBO scoring affects a Farm Bill

In early May, the Congressional Budget Office (CBO) released its baseline projections for farm bill programs, estimating 10-year spending of $1.47 trillion. The projections have major implications for the 2023 Farm Bill process; all changes to spending under the next farm bill will be measured against the baseline. This article provides an overview of the CBO scoring process, a summary of the latest CBO score, and what it means for the farm bill process.

What is the CBO baseline?

The CBO baseline provides a projection of government spending for the current fiscal year and the 10 years following. Importantly, CBO’s baseline estimates the cost to continue existing programs. Spending projections increase and decrease based on a variety of economic factors. For example, Price Loss Coverage (PLC) spending projections are based on expected price, yield and base acre enrollment. If CBO projects higher crop prices, PLC spending estimates will be lower.

Since 1981, farm bills have been negotiated under strict budgetary rules. Any changes to farm bill spending are measured against CBO’s baseline. If Congress is required to produce a budget neutral farm bill, changes resulting in increased spending will have to be offset within the bill. Because the farm bill coalition consists of farm, consumer and conservation interests, the agriculture committees are often expected to offset spending increases within the same farm bill title.

Finally, it is important to note that supplemental spending is not built into the farm bill baseline. Ad hoc programs, such as the Market Facilitation Program (MFP), Coronavirus Food Assistance Program (CFAP), and Wildfire and Hurricane Indemnity Program Plus (WHIP+) are not factored into the baseline. So, while NDFU and others have argued for increased safety net spending to reduce the need for ad hoc programs, recent spending for those programs is not factored into the baseline.

Summary of the May CBO baseline

Spending from the Supplemental Nutrition Assistance Program (SNAP) is projected to account for over 80% of farm bill spending at $1.2 trillion. SNAP spending projections have risen in recent years due to stress in the broader U.S. economy. Crop insurance and commodity spending totals $101.3 billion (6.9%) and $68.6 billion (5.4%), respectively. While the

Source: Congressional Budget Office, NDFU Calculations

2023 Farm Bill will likely be the largest farm bill to date, farm bill spending accounts for less than two percent of the federal budget.

Projected spending for farm safety net programs is slightly lower than spending projections under the 2018 Farm Bill at the time of passage. That reduction in spending is due to relatively high commodity prices. As Figure 1 illustrates, soybean prices are expected to be well above the PLC effective reference price. Corn prices are projected above the reference price in seven of the 10 years, while wheat base acres are expected to receive only modest payments throughout the period.

Figure 2 shows that the majority of farm program spending is projected to go toward corn base acres. This is largely because corn base acres comprise 38% of all base acres nationally and corn is a high yielding crop. On the other hand, cotton, peanuts and rice are slated to receive 24% of safety net payments, despite totaling just 6% of base acres.

The CBO baseline and the 2023 Farm Bill NDFU’s priorities for the next farm bill include establishing an ARC/PLC “dual enrollment option,” increasing PLC reference prices, and strengthening permanent disaster programs. Each of these proposals will require additional funding. The recent CBO baseline may help and hinder those efforts.

It is important to acknowledge that the 2023 Farm Bill will almost certainly be the first farm bill to authorize over $1 trillion in spending. While a big chunk of that spending comes from nutrition programs, the overall price tag could create challenges for achieving improvements to farm programs. In that way, CBO’s baseline may hinder NDFU efforts to strengthen critical support for farmers and ranchers.

On the other hand, commodity program outlays are modest in comparison to the overall price tag. Typically, price-related stress drives farm policy improvements. However, in the early stages of the 2023 Farm Bill debate, discussions have focused more on high costs of production rather than crop price. Relatively strong prices for most commodities has translated to lower projected outlays for commodity programs. This could create opportunities for relatively inexpensive improvements to farm programs.

Finally, recent years have plainly shown that the current safety net is inadequate in the face of severe market and weather challenges. As a result, Congress has provided a series of non-farm bill programs, beginning with the MFP and WHIP+ in 2018. Addressing those needs within the farm bill will provide more consistent, reliable relief and should result in overall cost savings.

Conclusion

With CBO’s latest baseline projections in hand, the work to sort out the math of the next farm bill will ramp up. As consumers and producers face macroeconomic pressures, the 2023 Farm Bill is slated to be the country’s first trillion-dollar farm bill. At the same time, the CBO baseline offers justification for strengthening farm programs to reflect current margin pressures.

— Government Relations Director Matt

Sources

Perdue

Congressional Budget Office. (2023, May). Baseline Projections, USDA Mandatory Farm Programs. Retrieved from https://www.cbo.gov/system/files?file=202305/51317-2023-05-usda_0.pdf.

Congressional Budget Office. (2023, May). Baseline Projections, Supplemental Nutrition Assistance Program. Retrieved from https://www.cbo.gov/system/ files?file=2023-05/51312-2023-05-snap.pdf.