Earlier this week, USDA Secretary Brooke Rollins told the Senate Appropriations Committee supplemental farmer aid is meant to be a springboard, not a new floor for government support.
The administration is requesting $11.1 billion in additional supplemental agricultural assistance, including:
- $10 billion in temporary economic assistance for 2026 row crop and specialty crop producers
- $1.1 billion for producers hit by catastrophic freeze losses this past winter
If approved, that money would come on top of the $44.3 billion in government payments USDA’s Economic Research Service has estimated for farmers this year. Combined, that would total $55.4 billion.
If spread evenly across 153.8 million U.S. taxpayers, that total would equal roughly $360 per taxpayer.
For decades, U.S. farm programs have been defended as countercyclical tools: support that kicks in when prices fall, disaster hits or trade flows break down. But new and expanded payments, layered on top of crop insurance and other safety-net programs, are raising a more uncomfortable question: Is government support still a temporary bridge through hard times, or is it becoming a structural part of how U.S. farm income is generated?
“The U.S. farm safety net was always designed to be countercyclical,” says Wes Davis, economist at Meridian Ag Advisors. “The thing we are now starting to run into is the question of whether it is at risk of becoming more structural and becoming part of how the farm economy functions and works.”
What Makes Up the Farm Safety Net?
U.S. farm support is not one single program; it is a collection of programs, policies and risk-management tools, including:
- traditional crop insurance subsidies
- market price support mechanisms
- historical entitlements
- conservation programs
- a small amount of subsidies from protectionist policies on inputs and commodities such as sugar
Historically, Davis’s analysis shows those programs together have contributed about 7% to 8% of total farm gross receipts. But that share is moving higher.
“For 2025 and 2026, we are looking at that ratio moving more toward 10% to 12%. If we compare that to other countries around the world, Brazil is about 4% to 5%, and the EU is around 16% to 18%, give or take the year,” he says.
But Davis says the direction of travel matters.
“The main open question is whether we are moving toward a system that is much more about government payments as a sustained source of revenue that sustains portions of the agricultural economy,” he says.
Bridge or Pier?
The administration’s argument is that temporary support is necessary while markets reset, especially as trade tensions weigh on demand for major U.S. agricultural exports.
“When I listened to Secretary Rollins’ testimony, there was a pretty strong focus on the payments being used to smooth out the friction we are having with trade policy and the loss of markets for some of our major agricultural exports,” Davis says.
That is where Davis’ bridge-or-pier question begins.
“If we are talking about a bridge, then we will be able to get to something that has sustained exports or another way to make up for the demand we have lost because of trade conflicts,” he says. “If it is a pier, then we will get farmers to a certain point, and then we will have to shift more toward government sources for farm income, or we will have a mass exodus of farmers.”
In other words, if the payments buy time for new demand or input supply chains to be built, they may function as intended. But if they simply allow production to continue without addressing lost markets or oversupply, they could delay the correction.
“My open question is whether we are moving more toward the European model, or whether we are creating a bridge to something where we have more demand sinks or are able to control supply in a way that rebalances our farm economy,” Davis says.
Why the Design of U.S. Support Matters
The debate is not simply whether farmers receive government support. Davis says the larger question is how that support is delivered.
Unlike some global systems that provide more decoupled support based on land, farm size or historical payments, the U.S. safety net is more closely tied to production, yields, prices and insurable output.
“The way agricultural support works in the U.S. is based on output,” Davis says. “The presence of output-based support mechanisms drives more output. More output means higher stocks-to-use levels in grains, for example, and lower prices.”
That structure can create a feedback loop. If the safety net helps farmers keep planting through low-price periods, acres may not shift or come out of production. If acres stay in production, supplies remain high. If supplies remain high, prices stay lower for longer. And if prices stay low, farmers need more support.
“The U.S.-based system incentivizes more production, which actually digs the trough deeper instead of helping smooth producers through the cycle,” Davis says.
Davis says one sign government payments are becoming structural would be repeated losses when farm income is measured without those payments.
“One sign that these payments are becoming structural would be consistent year-over-year losses when we look at farm profits less government payments,” he says.
Both Farmdoc and the American Farm Bureau Federation have published analyses showing recent years would have looked significantly weaker for farmers without government payments.
“As an economist, that would tell me one of two things,” Davis says. “One, we are oversupplying in some way and producing too much, and we would need some type of market-driven rebalancing. Or two, our government payments are actually creating a surplus of product.”
Davis says the structure of crop insurance also matters, particularly the use of Olympic averages, which remove the highest and lowest years from a multi-year average.
“If you take the way insurance products use the Olympic average of the last five years, it slows down the way prices help reset supply and demand in a trough period like this,” he says.
That smoothing effect can help farmers manage volatility. But Davis says it can also slow the market’s ability to correct.
“The way those insurance mechanisms are structured does slow down and extend the troughs we go through,” he says.
Output: Payments per unit of current production.
Input: Subsidies on credit, insurance, fertilizer, fuel, and equipment.
Area/Income: Payments tied to current acres, herd size, or revenue.
Decoupled: Payments based on historical entitlements; no production required.
Other: Conservation, drought relief, R&D, and environmental programs.
Real Stress, Real Trade-Offs
Davis is not arguing the farm economy is healthy or that farmers do not need support. The stress is real, he says.
“It is certainly true, factual and data-driven to say that the farm economy is under stress right now,” Davis says. “We have the quantitative data and the qualitative data from the Federal Reserve Beige Book. We see it in the farm banks’ data.”
But he says the industry should be clear-eyed about what the support does next.
“While some of those payments are certainly warranted and part of our policy process, the open question we should be asking as an industry is whether we are okay with those payments distorting what could potentially be a faster resolution to a down cycle,” he says.
Davis says another signal is that payouts have become more consistent and more common.
“If we look at payout rates on insurance or government payment programs in the past 10 years, we have had them more consistently and at a higher rate than we have historically,” he says.
That support is important for keeping farms operating, Davis says, but it also changes how the market responds.
“More often than not, farmers are getting some type of payout because of insurance, government emergency support or disaster support than they have historically,” he says. “That is great for the farm safety net, and it keeps us all in business. But the trade-off is that it slows down market-based mechanisms to reset supply.”
The concern is not just the cost of support this year. It is whether support prolongs the conditions that made the payments necessary.
“The concern is whether we are adding a more extended version of the cycle that ends up being lower for longer because we continue to overproduce and do not solve some of the underlying challenges, such as trade friction and demand opportunities for these products,” Davis says. “Ultimately, that is what is driving prices lower.”
Current Policy Is Not a Redesign
Recent policy changes included in the One Big Beautiful Bill reset statutory reference prices, which Davis says was helpful for commodities such as rice and cotton. But he does not see the current policy path, including the pending Farm Bill, as a fundamental redesign of the farm safety net.
“When you look at the current farm bill, it is a continuation of output-based and output-linked policy and risk support,” he says. “That has worked historically, but with higher indemnity payments and more support going into the system, it means we are going to have more production and longer troughs in the agricultural cycle.”
A Warning From the Last Major Support Spike
Davis points to the late 1990s and early 2000s as a period when U.S. farm support also rose sharply, driven in part by export weakness and currency pressures during the Asian financial crisis.
“In the 1998 to 2002 period, farm support really jumped to around 20% of gross farm receipts,” he says. “That was when the Asian financial crisis and currency crisis were happening, and we lost a lot of exports to developing countries. Our currency also hardened compared to others. That created a significant dent in our export markets.”
Commodity prices fell sharply, and ad hoc payments helped carry producers through the downturn. But when payments later came down, some farm businesses were still not economically viable without them.
“In 2002, we saw the largest farm bankruptcy levels since farm bankruptcies were created in the 1980s,” Davis says. “A lot of that was driven by producers who had used government payments throughout that period. Then, when government payments started to come down, it drove a lot of farmers to the end of the pier. They fell off the end of the pier instead of having a bridge to something better because, ultimately, the economics of their farms did not work.”
Davis describes that as a “snowplow effect.”
“You keep pushing and pushing, and then the snowplow has way too much snow on it, and you have to do something to fix it,” he says.
Is the U.S. Moving Closer to Europe?
Farmers often think of the European Union as heavily subsidized and the U.S. as more market-based. Davis says that distinction still matters, the two systems use different mechanisms, but the gap in overall support levels is narrowing.
Davis points to the U.S. moving from a historical 7% to 8% of farm gross receipts toward 10% to 12%, compared with roughly 16% to 18% in the EU. If the U.S. intends to remain more market-based, Davis says that trend should raise questions.
“If you believe in a market-based system, you would expect that number to go the opposite direction or stay flat,” he says.
The bigger distinction is how payments are structured.
“The mechanisms for EU agriculture are decoupled from production,” Davis says. “They have more subsidies based on a per-farm, per-land-area or per-head-of-animal basis.”
That difference matters because decoupled payments do not carry the same incentive to produce more bushels.
“The mechanisms are different, but the bottom line is that the EU, as a share of farm revenue, is closer to the U.S. today than the U.S. has been over the last 10 years,” Davis says. “The mechanisms are important, but the level is just as, if not more, important.”
What Farmers Should Watch Next
Davis says farmers and policymakers should watch three areas closely: farm bill design, asset values and input prices.
“One thing people should be paying attention to is the current farm bill and what that safety net looks like,” he says. “They should ask whether we are making decisions that are market driven, or whether policy is helping smooth out a cycle in a way that distorts the overall agricultural cycle from playing out like it has historically.”
Land and equipment values are another signal.
“People should pay attention to how the farm policy safety net shapes up over the next few months,” Davis says. “Congress is going into August recess, so it may be a bit before we see more there. They should also watch land values and other collateral, like equipment, where we have already started to see some softness. You would also expect to see some softness in land values if the cycle plays out like it has historically.”
Input prices are the third piece.
“The third thing to watch is the relationship between input prices and commodity prices for farmers,” Davis says.
Davis says the farm economy needs support during periods of stress. But he says the design of that support determines whether it helps farmers cross a difficult period or makes government payments a more permanent part of the business model.
“The level of support that we have does suggest that we are moving away from a de-risking stance and more toward an indemnity approach to U.S. agriculture,” Davis says. “That is fine if that is the direction we want to go, but it has downstream implications for how much taxpayers need to fund agriculture and how reliant the industry becomes on agricultural policy as a major way to generate revenue and sustain businesses.”
