Department of Agriculture's Payment-In-Kind Program

Gao ID: 122983 November 3, 1983

In response to a congressional request, testimony was given concerning the Department of Agriculture's (USDA) Payment-In-Kind (PIK) Program for 1983. Since 1980, record harvests and decreased domestic and foreign demand have resulted in low commodity prices, decreased farm incomes, and a large buildup of Government-held food stocks. USDA increased its farm program payments fourfold between 1980 and 1982, and potential payments for 1983 were estimated at seven times those of 1980. Therefore, GAO was asked to estimate the cost of the 1983 PIK Program, identify farms that would receive large PIK payments, and review the reasonableness of the USDA estimated budget savings attributable to the program. The 1983 PIK Program will cost between $10 and $11 billion. However, final cost data will not be available until after March 1984. In a survey of large PIK payments to 708 farms in 9 States, GAO found that 35 will receive commodities valued at over $500,000 each, including 7 farms that will receive commodities valued at more than $2 million each. Because there will not be a 1984 PIK Program for corn and grain sorghum, USDA estimates that the 1983 and 1984 PIK Programs would result in $14.9 billion savings in farm program outlays for the 4-year period ending in 1986 will have to be revised. Furthermore, budget savings on farm programs for a 4-year period are very difficult to project because of program changes and the uncertainties surrounding the agricultural sector. If the same set of assumptions had been used by USDA to compare the PIK Program with a non-PIK program, the savings attributable to the PIK Program would be less.

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