Category: Policy

Authors: Bart L. Fischer and Joe Outlaw

Over the last few weeks, much of the attention around reciprocal tariffs has centered on the Supreme Court’s ruling about President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to levy tariffs. While many questions have been raised about the impact of the court’s ruling on tariff revenue already collected—with a federal judge on the U.S. Court of International Trade ruling on this issue just yesterday—this article focuses on where tariff revenue goes once it’s collected. Interestingly enough, the answer to that question is rooted in the Agricultural Adjustment Act (AAA) of 1935.

How much tariff revenue has been collected?

From 2017 to 2019, during the first Trump Administration, customs duties more than doubled (from $34.6 billion to $70.8 billion, respectively).  From 2024 to 2026, the Congressional Budget Office (CBO) estimates that customs duties will increase by 443% (from $77 billion to $418 billion, respectively), a reflection of President Trump’s renewed use of tariffs in his second term.

Figure 1. Customs Duties by Fiscal Year.

Where does the tariff money go?

So, if billions of dollars are collected in tariff revenue, where does it go?  Section 32 of the AAA of 1935 requires that 30% of tariff revenue be used to:

1. encourage the export of agricultural products;
2. encourage the domestic consumption of farm products by diverting surpluses and increasing usage; and
3. reestablish farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption.

In 2017, Section 32 amounted to roughly $10.4 billion (or 30% of the $34.6 billion in tariff revenue collected in 2017).  If $413 billion in tariff revenue is collected in 2026, the Section 32 amount would balloon to $125 billion, all of which is required to be set aside for the purposes/priorities listed above.

How are these priorities being met?

While 30% of customs duties flow to USDA, USDA then transfers a small amount off the top (30% of customs receipts from fishery products) to the Department of Commerce. USDA is then required to retain a portion of the funds (roughly $1.8 billion in fiscal year 2026) as reserved spending authority to support farmers and domestic food assistance programs primarily through commodity purchases. This amount is limited and indexed to inflation. The vast majority is then transferred to the Food and Nutrition Service (FNS) for the child nutrition programs. For example, in fiscal year 2024, 94% of the Section 32 funds (or $28.785 billion) flowed through to the child nutrition programs. Otherwise, USDA has virtually no discretion in the use of Section 32 funds. 

With the tariff revenue projections for fiscal year 2026, the Section 32 funds available will dwarf total spending on the child nutrition programs at USDA. So, where does that leave farmers?

How are the tariffs being used to help farmers?

As noted above, clause 3 authorizes the use of Section 32 funds to reestablish farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption. One would think Section 32 funds would be an obvious choice for helping farmers given (1) other countries have retaliated against U.S. products with their own tariffs in response to reciprocal tariffs and (2) farmer purchasing power has been decimated by inflation over the last 5 years.  INSTEAD, since fiscal year 2018—including in the fiscal year 2026 agricultural appropriations bill that was signed into law in November 2025—the appropriators have mandated that no more than $350 million in carryover from Section 32 can be used for clause 3 activities. In other words, if CBO’s projections for fiscal year 2026 hold, Congress will essentially be dictating that no more than 0.28% of the $125 billion in tariff revenue flowing to USDA can be used to help farmers.

While the Trump Administration has drawn on authority and funding from the Commodity Credit Corporation (CCC) to provide trade and economic relief via the new Farmer Bridge Assistance (FBA) program, it begs the question of why Congress continues to insist that virtually none of the tariff revenue that flows to USDA via Section 32 be used to help farmers. 

Sources:

The Budget and Economic Outlook: 2026 to 2036, Congressional Budget Office, February 11, 2026 (https://www.cbo.gov/publication/61882)

Farm and Food Support Under USDA’s Section 32 Account, Congressional Research Service, August 5, 2025 (https://www.congress.gov/crs_external_products/IF/PDF/IF12193/IF12193.5.pdf)

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Fischer, Bart L., and Joe Outlaw. “Where is All the Tariff Money Going and Is it Being Used to Help Farmers?” Southern Ag Today 6(10.4). March 5, 2026. Permalink

Under the 2025 One Big Beautiful Bill (section 10302), producers will have a voluntary opportunity to add new base to their operation, with up to 30 million new base acres allowed nationwide. The return of unassigned base into producers’ program eligible crop base is included in this total. A general question and answer guide was previously published in Southern Ag Today. Here, I focus specifically on unassigned base acres for cotton producers. 

First, it helps to look back on how today’s unassigned base acres were created. In 2018, the Bipartisan Budget Act reinstated ‘seed cotton’ as a covered commodity eligible for participation in Agricultural Risk Coverage (ARC) or Price Loss Coverage (PLC). Cotton producers converted ‘generic base’ from the 2014 Farm Bill back to seed cotton or to other commodities. The calculation for seed cotton base resulted in a residual number of acres classified as ‘unassigned base’. Records for unassigned base were retained by the Farm Service Agency (FSA), but those acres were ineligible for ARC or PLC participation. 

Each year since 2019, seed cotton producers have enrolled in either ARC or PLC, with the percentage of acres enrolled in each program varying over time. ARC payments for seed cotton peaked in 2022 [1] in the Southern states (total payments $52 million, with 26% of acres enrolled in ARC-CO) followed closely by 2023, driven heavily by weather related crop losses. Acres harvested and prices are shown in the figure. PLC payments peaked in 2019 ($981 million, with 99% of acres enrolled in PLC) during a period of low prices.  

Fast forward to today. For cotton producers across the Southern region, the chance to voluntarily restore unassigned base into safety net programs is a meaningful opportunity. In 2025, there were 2.51 million unassigned generic base acres and 12.31 million seed cotton base acres in the U.S. The likelihood of unassigned base acres returning as seed cotton base acres varies geographically. 

The National Cotton Council 2026 Economic Outlook [2] provided some encouraging signs that global demand may expand, but price pressure is expected to remain. With the increase in the seed cotton reference price from $0.367/lb to $0.42/lb in the One Big Beautiful Bill, expanded safety net eligible acres for cotton producers with a 5-year history of production may help cover a portion of breakeven costs that remain above historical average levels.  

Figure 1. Upland Cotton 

[1] USDA Farm Service Agency. 2019-2026 ARC and PLC Program Data. Available online: https://www.fsa.usda.gov/resources/programs/arc-plc/program-data

[2] Campiche, J., S. Boyd, and M. Huffman. 2026. “The Economic Outlook for U.S. Cotton 2026.” The National Cotton Council. Available online: https://www.cotton.org/econ/reports/annual-outlook.cfm

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Hagerman, Amy. “Bringing Unassigned Base Back into Program Eligibility for Cotton Producers.” Southern Ag Today 6(8.4). February 19, 2026. Permalink

Bart L. Fischer and Joe Outlaw

While farmers have been dealing with inflation in input costs since the onset of COVID-19, relatively high commodity prices (in large measure resulting from the war in Ukraine) helped blunt the pain through 2022. The perfect storm arrived as commodity prices started plummeting in 2023. Over the last 3 years—from 2023 to 2025—the losses have been piling up. As noted in Table 1, the average corn, soybean, and wheat producer has accumulated roughly $300 per acre in total losses over the last 3 years. For cotton producers, that estimate is roughly $1,000 per acre.  After all their crops have been sold and all their bills have been paid, that’s how far in the hole they remain. Thankfully, the federal government has stepped in at various times to help. But, this all begs the question of what the net result over the last 3 years has been. This is especially the case as calls continue to circulate on Capitol Hill about the need for additional bridge assistance.

As noted in Table 1, Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) provided little assistance for 2023 and 2024 largely because the reference prices had not been updated since the 2018 Farm Bill.  While ARC and PLC will deliver significantly more assistance for the 2025 crop year—owing to improvements in the One Big Beautiful Bill from last summer—that assistance is not slated to arrive until later this year (October 2026). Congress also stepped up in December 2024 and created the Emergency Commodity Assisstance Program (ECAP), providing $10 billion in assistance for economic losses incurred in the 2024 crop year. More recently, Secretary Rollins announced an additional $11 billion for row crop producers via the new Farmer Bridge Assistance (FBA) program for economic losses incurred in the 2025 crop year.

That is a tremendous amount of assistance. Is more really needed? While we will leave the question of “need” to policymakers to debate, we do offer the following observations. As reflected in Table 1 and Figure 1, despite all of the aid provided, we estimate that it is covering roughly 35% of the total loss for cotton and soybeans and roughly 45% of the loss for corn and wheat. In other words, farmers have had to shoulder roughly 55% to 65% of the loss on their own over the last 3 years. If nothing else, this should bring into focus the magnitude of the challenge they’ve been facing. Perhaps most daunting: they are facing a situation where the outlook suggests the losses will grow even larger next year. 

Table 1. Cumulative Farm Losses for the Major Row Crops, 2023-2025F.

2023-2025F Cumulative Totals	Corn	Soybeans	Wheat	Cotton
Total Revenue ($/ac)	2,333.29	1,675.04	883.67	1,760.67
Total Cost ($/ac)  a/	2,677.12	1,971.53	1,183.80	2,797.21
Net Returns ($/ac)	-343.83	-296.49	-300.13	-1,036.54
ARC/PLC ($/ac) – 2023-24 Crop Years	10.98	10.50	4.94	30.72
ARC/PLC ($/ac) – 2025 Crop Year b/	65.66	28.97	54.52	133.05
ECAP ($/ac) – 2024 Crop Year	42.91	29.76	30.69	84.74
FBA ($/ac) – 2025 Crop Year	44.36	30.88	39.35	117.35
Total Farm Bill & Ad Hoc Assistance ($/ac)	163.91	100.11	129.50	365.86
Share of Loss Covered by Aid	48%	34%	43%	35%

Figure 1. Share of Cumulative Farm Losses for the Major Row Crops Covered by Federal Assistance and Borne by Producers, 2023-2025F.

Now, for a couple of technical points. First, some may ask why we didn’t include crop insurance indemnities or natural disaster aid (think the Supplemental Disaster Relief Program) in our analysis. The reason: our total revenue estimates in Table 1 use marketing year average prices and harvested yields. Our assumption is that any crop insurance indemnities or disaster aid payments simply help partially restore producer revenue. As a result, total revenue is an appropriate proxy. Second, some may ask why we focused only on the 4 major row crops with more than 10 million base acres. The primary reasons for this were that the ARC/PLC average payments are very sensitive to acreage assumed, and there is a significant difference between base and planted acreage for these smaller-acreage crops. While that will likely change with the new addition of base acres in the One Big Beautiful Bill, it remains a limitation for analyzing the 2023-2025 period that would likely skew our results. Further, for some of the smaller-acreage crops, payment limits are significantly binding. Without a reliable way to incorporate the effects of payment limits into this analysis, the estimated payments would be significantly over-stated. While some of these challenges also impact the major row crops, in our opinion, they are less pronounced. So, while we may follow up on this analysis in the future, for today we focused on the 4 major row crops.

Bottom line: for the major row crops, while the federal government has provided a significant amount of assistance, farmers are shouldering even more of the loss, and they are facing a growing season in 2026 that may well compound the loss even more. In dealing with the uncovered losses already incurred, producers have only so many options: (1) watch their equity erode in proportion to the losses they’ve faced; (2) to the extent that equity is gone they can [try to] borrow money to cover the losses; or (3) they go out of business. They are going through that mental math while also trying to cash flow the upcoming year.

One final point: we appreciate more than most the difficulty of getting anything done in Washington, D.C.  We also encounter producers every day who are very grateful that policymakers have stepped up to the plate to help keep them on their farms during these very trying times. But, we’d be remiss if we didn’t also note that over the last 3 years, as a nation,  we’ve essentially been asking farmers to put their livelihoods on the line – with very little hope for profits – to keep raising food and fiber…while hoping that the federal government will deliver relief at the 11^th hour to help keep them there.  One of us is married to a rocket scientist…but it doesn’t take a rocket scientist to know this isn’t sustainable.

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Fischer, Bart L., and Joe Outlaw. “Is More Bridge Assistance Really Needed?” Southern Ag Today 6(6.4). February 5, 2026. Permalink

Authors Joe Outlaw and Bart L. Fischer

We have all heard the old proverb “it takes a village to raise a child.”  Indeed, an entire community is needed to interact with and guide a young person to grow into a well- rounded adult.  If the last 2 years are any proof, the same could be said about farm policy. Against the backdrop of exploding input costs and falling prices, the various components of the Federal government ultimately came together to begin addressing the bleak economic outlook. For example:

• While Congress was unable to get a farm bill done in 2024, they ultimately provided $30.78 billion in assistance for both economic and natural disaster losses from the 2023 and 2024 crop years.  Within 90 days of passage, the newly minted Secretary of Agriculture, Brook Rollins, had implemented the Emergency Commodity Assistance Program (ECAP) and quickly followed with the initial round of the Supplemental Disaster Relief Program (SDRP).

• As 2025 unfolded, when it became apparent that a bipartisan farm bill was unlikely, the Chairmen of the House and Senate Agricultural Committees along with the leadership in each chamber and the administration worked to include more than $60 billion in enhancements to the farm safety net in the One Big Beautiful Bill Act (OBBBA). OBBBA was passed through the reconciliation process and was signed into law on July 4^th of last year, with the enhanced provisions taking affect for the 2025 crop which was already well underway. While the marketing year average prices that determine the amount of assistance are still being determined, it is safe to say that all of the efforts that were put into getting the enhanced safety net provisions in the OBBBA will be felt and greatly appreciated by producers when payments are distributed after October 1^st for those crops that trigger assistance. And, at the moment, it looks like virtually all crops will trigger.  

• As we approached the end of 2025 with economic and trade-related losses still outstripping the assistance that will eventually arrive under the OBBBA, the Trump Administration stepped in and announced the creation of the Farmer Bridge Assistance (FBA) program that will inject an additional $12 billion of operating capital on farms by the end of February. 

• The agricultural leaders in the U.S. Congress are considering taking this even further, with some reports suggesting yet another $15 billion in assistance could go out the door to address other 2025 crop year losses, including those of special crop and sugar producers that were not included in FBA and have yet to be addressed by USDA.

Getting the regulations completed for all of these program changes—and for the new programs—takes the effort of everyone from the Farm Service Agency (FSA) and Risk Management Agency (RMA) at USDA to the Office of Management and Budget (OMB) in the White House to the congressional agricultural committee staff, just to name a few. Despite all of the disfunction and infighting in Washington, “the village” has still managed to come together to make positive changes to address the bleak outlook facing U.S. farmers.

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Outlaw, Joe, and Bart L. Fischer. “It Takes a Village.” Southern Ag Today 6(4.4). January 22, 2026. Permalink

Authors Natalie Graff and Henry Nelson

Program decisions for the 2026 crop year are fast approaching. This article considers the risk management options for cotton producers in light of current price projections and relevant changes in the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025.  Given the commodity program and crop insurance changes in OBBBA, producers likely will want to re-evaluate their Title I program and crop insurance decisions for 2026 and beyond. 

OBBBA strengthened the Title I programs Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) by raising reference prices and increasing the coverage ARC provides, along with other changes. The Stacked Income Protection Plan (STAX) is an area-wide crop insurance policy exclusively for upland cotton producers, and cotton acres with a STAX policy are not eligible to sign up for ARC or PLC on the upland cotton base acres. In light of the recent improvements to ARC and PLC (and the prohibition on combining coverage with STAX), cotton producers should evaluate potential ARC/PLC payments before making their decision about STAX.

The Supplemental Coverage Option (SCO) is another area-wide supplemental crop insurance policy available for cotton and other major commodities.  OBBBA improved SCO in two significant ways.

1) The premium subsidy increased from 65% to 80%, now equal to the STAX premium subsidy. 

2) The restriction on ARC and SCO was removed. Prior to OBBBA, producers could combine SCO and PLC, but not SCO and ARC.  

Cotton producers, especially those that utilized STAX in the past, may wish to consider SCO for 2026 instead (note that producers cannot have both STAX and SCO for the same crop on the same acres).  SCO provides supplemental area-wide coverage – operating similarly to STAX – without causing producers to forgo potential ARC or PLC payments. 

As a result, one strategy to consider involves (1) enrolling cotton base in ARC or PLC, (2) purchasing an individual crop insurance policy like Revenue Protection (RP) on your cotton acres, and (3) supplementing the RP policy with an area-wide endorsement like SCO. Producers may also wish to add a supplemental Enhanced Coverage Option (ECO) endorsement as well. 

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Graff, Natalie, and Henry Nelson. “Producer Decisions for 2026 – STAX or SCO in light of OBBBA Changes.” Southern Ag Today 6(2.4). January 8, 2026. Permalink