Farm Programs:

Observations on Market Loss Assistance Payments

RCED-00-177R: Published: Jun 30, 2000. Publicly Released: Jun 30, 2000.

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Pursuant to a congressional request, GAO provided information on the financial assistance to farmers called Market Loss Assistance (MLA), focusing on how MLA payments would have changed if they had been based on current-year planting information instead of the current funding formula.

GAO noted that: (1) if MLA payments had been based on current-year planting information instead of historical data, some farmers would have received less assistance while others would have received more; (2) in 1999, about 27 percent of the $4.5 billion in ad hoc MLA payments included in GAO's analysis went to farms that would not have received this assistance if the payments had been based on current-year plantings; (3) specifically, about 893,000 farms received about $1.22 billion more than they would have received had the payments been based on the type or amount of crops planted during 1999; (4) conversely, some farmers adversely affected by price losses received less in MLA payments than they would have received had the payments been based on current-year planting, rather than historical information; (5) for example, in 1999, about 400,000 farms adversely affected by falling prices would have received about an additional $300 million in MLA payments if the payments had been based on that year's plantings; (6) basing MLA payments on acres planted in the current year rather than on historical information would better target payments to those farmers affected by declining prices; (7) however, because this approach would more directly link the types and quantities of crops actually grown with government payments, it may create incentives that run counter to the philosophy underlying the 1996 Farm Bill, namely, encouraging farmers to base their planting decisions on market signals rather than on government payment levels; and (8) Congress will have an opportunity to examine policy options to address this dilemma during the upcoming deliberations on the next Farm Bill.

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