deficiency payment

A payment made by the Commodity Credit Corporation to farmers who participate in wheat, feed grain, rice, or cotton programs. The payment rate is per bushel, pound, or hundredweight. It is based on the difference between the price level established by law (target price) and the higher of (1) the price support (loan) rate, and (2) the market price during a period specified by law. The total payment was equal to the payment rate, multiplied by a farm’s eligible payment acreage and the program payment yield established for the particular farm. In the latter years of the program, farmers could receive up to one-half of their projected deficiency payments at program signup. If actual deficiency payments, which were determined after the crop year, were less than advance deficiency payments, the farmer was required to reimburse the government for the difference, except for zero, 50/85-92 payments. The FAIR Act of 1996 eliminated deficiency payments and replaced them with production flexibility contract payments.

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