MISSISSIPPI STATE, Miss. — High commodity prices and high government payments usually don't happen simultaneously, but some Mississippi crops experienced both in 2003.
John Anderson, an agricultural economist with Mississippi State University's Extension Service, said there is a good reason for this seemingly impossible event.
"A lot of people will think it's odd that the projected government payments are so much higher than in 2002 when we're also seeing considerable improvement in commodity prices," Anderson said. "The reason is that a lot of the payments are related to the 2001 and 2002 crops, and not the 2003 crop."
The U.S. Department of Agriculture's Economic Research Service is projecting that Mississippi producers will receive almost $828 million in government payments. That amount is over 200 percent more than the 2002 government payments, which totaled just under $250 million. In 2001, the government paid producers $517 million.
The 2002 farm bill allowed producers to update their base acre and program yield numbers, which are the result of historic production on farms. Landowners had until April 2003 to complete the process of base updating, and payments on 2002 crops could not be received until this process was complete.
"The bottom line is that due to the schedule of base updating, very few farmers were able to receive any program payments on their 2002 crops until well into 2003," Anderson said. "This is the main reason why the 2002 government payments figure is so low and the 2003 figure is so high."
The long-awaited crop and livestock disaster assistance program went into effect in 2003, meaning producers who claimed weather-related losses in 2001 and 2002 did not receive those payments until 2003.
"In other words, a lot of payments received in 2003 had nothing to do with the 2003 crop, but rather were the result of losses in the two previous years," Anderson explained.
Anderson said rice producers likely will receive significant counter-cyclical government payments, which are tied to marketing year average cash prices. Most other commodity crops will receive very little or no counter-cyclical payments.
Cattle producers and catfish producers also benefited from the 2003 crop and livestock disaster assistance program, further increasing the total amount of government payments for the year.
"Virtually all cattle producers and catfish producers in the state were eligible for some level of payment under the 2003 disaster assistance program. Typically, these producers do not receive any commodity program payments," Anderson said.
Keryn Page writes for Mississippi State University.