Direct and Counter-cyclical Program

The Direct and Counter-cyclical Payment Program (DCP) of the USDA provides payments to eligible producers on farms enrolled for the 2002 through 2007 crop years. There are two types of DCP payments – direct payments and counter-cyclical payments. Both are computed using the base acres and payment yields established for the farm.

DCP was authorized by the 2002 Farm Bill and is administered by the Farm Service Agency (FSA).

To be eligible for payments under DCP, owners, operators, landlords, tenants, or sharecroppers must:

Base acres and payment yields are established for the following commodities: barley; corn; grain sorghum, including dual purpose varieties that can be harvested as grain; oats; canola, crambe, flax, mustard, rapeseed, safflower, sesame and sunflower, including oil and non-oil varieties; peanuts, beginning in 2003; rice, excluding wild rice; soybeans; upland cotton; and wheat.

The 2002 Farm Bill replaced production flexibility contract (PFC) payments (which were established by the Federal Agriculture Improvement and Reform Act of 1996) with direct payments.

Direct payments are not based on producers’ current production choices, but are tied to acreage bases and yields. Because direct payments provide no incentive to increase production of any certain crop, the payments support farm income without distorting producers’ current production decisions.

For the 2002-crop year only, producers’ final direct payments were reduced by the 2002 PFC payments they had already received.

The Farm Bill added counter-cyclical payments, which provide support counter to the cycle of market prices as part of a “safety net” in the event of low crop prices. Counter-cyclical payments for a commodity are only issued if the effective price for a commodity is below the target price for the commodity.

The counter-cyclical payment rate is the amount by which the target price of each commodity exceeds its effective price. The effective price for each commodity equals the direct payment rate plus the higher of: the national average market price received by producers during the marketing year, or the national loan rate for the commodity.

For each commodity, the countercyclical payment for each crop year equals 85 percent of the farm’s base acreage times the farm’s counter-cyclical payment yield times the counter-cyclical payment rate.

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