Payment Limits and Benefit Targeting

Payment limits and benefit targeting restrict producer income.

Published: September 10, 2001
Updated: November 26, 2001
Payment limits of all kinds should be eliminated in the interest of maintaining a viable, internationally competitive U.S. agricultural sector. If payment limits cannot be totally eliminated:
  • Reasonable limits should be established for fixed and counter-cyclical payments as well as marketing loan gains without any form of means testing; and
  • Provisions for loan redemptions with marketing certificates should be continued.

Restrictive payment limits harm producers

  • Payment limits bite hardest when commodity prices are lowest;
  • The addition of soybeans to commodities eligible for fixed and counter-cyclical payments means more producers than ever will be harmed by payment limits;
  • Payment limits prevent the marketing loan from working correctly; and
  • Limitations on marketing loan gains will lead to loan forfeitures and the accumulation of huge government inventories of commodities unless steps are taken to ensure that producers can redeem their loans and market their commodities.

Limiting farm program benefits serves as a disincentive to the pursuit of economic efficiencies through economies of scale, and it undermines U.S. farmers’ efforts to compete with heavily subsidized foreign agricultural products. Payment limitations are incompatible with market-oriented farm policy.Marketing certificates enhance competitiveness of U.S. agricultural commodities

The underlying goal of the marketing loan program is to permit CCC loans to be redeemed and sold by the owners of the commodities at market-clearing prices rather than have them forfeited to CCC and auctioned. The use of marketing certificates for loan redemptions permits the underlying goal of the marketing loan program to be achieved, while:

  • Facilitating the efficient movement of commodities to market;
  • Promoting international competitiveness of U.S. agricultural products;
  • Facilitating USDA’s move toward automated, electronic loan processing; and
  • Underpinning the entire U.S. agricultural infrastructure.

Primary concerns with payment limitations

  • Breaks the link between farm programs and public policy;
  • Punishes business integration and economic diversity;
  • Impedes economies of scale;
  • Sets arbitrary limits without economic basis; and
  • Produces significant administrative difficulties