Farm Management

Economic Assistance for Alabama Row Crop Producers

4 min read
close up shot of between two rows of cotton plants.

Financial difficulties faced by US agricultural crop producers in 2024 created an urgent need for financial support. Articles in Southern Ag Today have highlighted some of the challenges facing peanut and cotton producers in the South, although farm financial challenges are not unique to this region. Farmers across the country are dealing with lower commodity prices, continued elevated input costs, and higher interest rates. Together, these have exerted significant financial strain on agricultural producers and the rural economy.

Government safety net programs through the Farm Bill aim to alleviate financial burdens and ensure income stability for farmers. Programs such as the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) have previously provided revenue and price support to farmers in times of low revenue or low prices. However, the delay in the passage of an on-time Farm Bill has left the current safety net lacking to provide the support necessary for farmers to navigate the current farm economy. As a result, US Congress passed a one-time economic assistance payment for producers of eligible commodities in the 2024 crop year, with an allocated budget of $10 billion. Eligible commodities are crops covered by Title I of the Farm Bill. The legislation was signed by President Joe Biden December 21, 2024. Producers are expected to receive payment before the end of the first quarter of 2025.

Payment Calculations

The economic assistance payment for farmers is determined from a combination of an expected national economic loss and the individual farmer eligible acres. Payment is calculated as follows:

Economic Assistance Payment = Economic Loss x Eligible Acres  x 0.26

Based on the approved legislation, these payment terms are defined as the following:

  • Economic loss is the difference between the expected national average cost of production and the expected gross return. The gross return is calculated using a national average price and a 10-year national average yield. Given this calculation, the economic loss is not farmer or state specific.
  • Eligible acres are determined as the total of all planted acres plus 50 percent of prevented acres. This is based on the 2024 planting history for an individual farmer.
  • The total payment is adjusted to be 26 percent of the product of economic loss and eligible acres.

There is also a clause that allows for a minimum payment rate for each covered commodity. No producer will receive less than the minimum payment, which is defined as 8 percent of the national reference price multiplied by the national average payment yields for the eligible commodity multiplied by the eligible acreage.

Table 1 shows the estimated payment rates for eligible commodities most relevant to Alabama producers. Higher payment rates reflect a wider margin between production costs and expected returns. Among the commodities considered, cotton is projected to have the highest payment rate followed by oats, peanuts, and corn. Soybeans is projected to have the lowest payment rate. While the payment rates are calculated using national averages, the final payment to each producer will depend on the eligible acres planted to a specific commodity during the 2024 crop year.

Table 1: Estimated Payment Rate for Eligible Commodity Most Relevant to Alabama

Note. The USDA has not released official payment rates and some terms are open to interpretation. In this table, the estimated payment rates were calculated using 10-year national average yields from 2014 to 2023. Using a different calculation for yields might change the payment rates. The minimum payment rate applies to peanuts because the estimated payment rate was less than the minimum rate. 

Eligible CommodityEstimated Payment Rate
Corn$43.80
Cotton$84.70
Oats $78.42
Peanuts$76.30
Sorghum$41.85
Soybeans$30.61
Wheat$31.78

Even producers who do not experience economic loss (where the expected gross return exceeds the expected cost) are guaranteed the minimum payment. The total payment an individual or legal entity can receive is capped at $125,000 if less than 75 percent of their average gross income (AGI) for the 2020, 2021, and 2022 tax years comes from farming-related activities. However, if 75 percent or more of their AGI is derived from farming-related activities, the payment cap increases to $250,000.

Implications for Farmers in Alabama

This financial assistance is targeted to provide much-needed stability to Alabama’s agricultural producers during these challenging financial times. Figure 1 presents the total payments expected for Alabama with substantial support projected for the major row crops produced in the state, including cotton, corn, peanuts, and soybeans. The estimated total payments to Alabama producers are based on the number of eligible payment acres. Cotton and corn payments are projected to be approximately $33.6 million and $11.5 million, respectively. Peanut producers in Alabama are expected to receive a little more than $14 million under the proposed one-time economic assistance program.

Bar graph depicting available payments for eligible commodities

Note. Estimated total payment for selected eligible commodity might change given changes in the eligible acres.

The higher payment for cotton, corn, and peanuts not only reflect higher payment rates but also the higher number of acres planted of these crops in Alabama. Although oats are estimated to have the second-highest payment rate, the total payment to oat producers in Alabama is expected to be the lowest compared to other crops. This is due to the significantly smaller acreage planted to oats in the state. On the other hand, soybeans are estimated to have the lowest payment rate, yet the total payment to soybean producers in Alabama ranks third, following cotton and corn.

It is important to note that the final payments farmers receive may differ from the initial estimates, as the assistance is subject to a budget cap. With a total allocation of $10 billion, the economic assistance program aims to support producers of all covered commodities. An article from the Rural & Farm Finance Policy Analysis Center estimates total payments of $9.7 billion across the nation for selected crops, suggesting the possibility of total payments exceeding the allocated budget. As a result, farmers could receive less than 100 percent of the estimated economic assistance outlined in this article and should plan conservatively until the assistance has been disbursed.

More Information

For more information and to sign up for the free, digital periodical, visit southernagtoday.org/. Learn more about the Alabama Extension Farm and Agribusiness Management team and read more from them by visiting the Farm Management section of www.aces.edu.

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