The Department of Agriculture's 1983 Payment-in-Kind Program--A Review of Its Costs, Benefits, and Key Program Provisions

In response to a congressional request, GAO reviewed the Department of Agriculture's (USDA) Payment-in-Kind (PIK) program, focusing on the costs, benefits, and key provisions of the program. The program, aimed at reducing production, paid farmers not to grow certain crops such as corn, grain sorghum, wheat, rice, and cotton, and paid the farmers a prescribed percentage of crops they would have grown instead of cash.

GAO found that the cost of the PIK program was about $10 billion and the largest cost element, the commodities, was used to make payments to participating farmers. The distribution of these payments was proportional to the amount of land taken out of production. Analysis indicated that participation rates varied and, when farmers received direct payments for land that was taken out of production or when they anticipated that commodity price deficiency payments would be substantial, participation was high. Two options were available to farmers who participated in the program, including: (1) whole-base PIK, which placed a farm's entire base acreage in the program; and (2) the regular PIK, which placed 10 to 30 percent of a farm's base in the program. GAO found that: (1) 93 percent of the soil and 94 percent of the water conserved on the farms participating in the program was attributable to the decreased planting resulting from the program; (2) participation in the PIK program significantly exceeded original USDA expectations and resulted in underestimates in the amount of commodities needed to meet PIK payment obligations, but USDA was able to meet the payments through purchases of commodities from farmers; and (3) the overall objective of the program was to reduce production, but USDA set no specific objectives for the level of participation and production control.