The U.S. Department of Agriculture (USDA) administers a number of programs to support farm income, assist farmers after disasters, and conserve natural resources. USDA has also provided ad-hoc assistance to farmers who faced trade disruptions or who have lost sales due to the COVID-19 pandemic. In 2020, USDA spent about $46 billion in payments to farmers ($30 billion of which came from COVID-19 relief programs).
However, USDA could improve how it administers some of these programs.
The federal crop insurance program is required to provide the same level of premium subsidies to participants, regardless of income. In contrast, some other USDA farm programs have limits on the income participants can earn and remain eligible for payments. Not having an income limit for the crop insurance program sometimes results in relatively large subsidies for high-income participants. Reducing crop insurance subsidies for participants whose income exceeds such a limit would save millions of dollars while affecting less than 1% of program participants.
To implement the federal crop insurance program, USDA partners with private insurance companies that sell and service policies to farmers in order to subsidize these policies. In 2010, USDA negotiated a set rate of return with these companies—that is, how much companies can profit from these insurance policies. However, this expected rate of return was too high compared with market conditions. Reducing this expected rate of return could save the federal crop insurance program hundreds of millions of dollars a year.
The Coronavirus Food Assistance Program (CFAP) provided producers $31.0 billion for various commodities. USDA’s Farm Service Agency (FSA) conducted spot-check reviews of CFAP payments to ensure that producers' claims were accurate, but these reviews had limitations. For example, officials from FSA’s national office selected producers for spot checks without fully considering risk factors, such as large claims for livestock. FSA should conduct additional spot checks of CFAP payments and use a more risk-based approach to selecting producers for review.
For certain farm programs that help support farmers’ income, payment recipients are required by law to be actively engaged in farming. However, USDA has had difficulty in the past verifying whether recipients were actively farming. USDA has improved its reviews since then, but some issues remain. For example, USDA waived 251 reviews that it said had been done recently and didn't need re-review yet. But there wasn’t a record of a recent review for 76 of them.
Draining wetlands can harm water quality and wildlife habitat. To receive certain farm program benefits, farmers must not drain wetlands on their property. USDA determines where wetlands exist on farmers’ land and checks farmers’ compliance for a random sample of land subject to this requirement. However, USDA could more efficiently ensure compliance by using a risk-based approach for its annual compliance check—i.e., checking land most likely to have violations rather than a random sample of land.