USDA Parity Price Determination — How USDA Calculates the Historical Benchmark Prices Used in Farm Price Support Programs
Legal Authority
- 7 U.S.C. § 1301 (Agricultural Adjustment Act of 1938, as amended) — Defines "parity price" and "parity income" for agricultural commodities; establishes the 1910–1914 base period ("Golden Age of Agriculture") as the reference point for calculating parity; requires USDA to calculate and publish parity prices monthly
- 7 CFR Part 5 — USDA National Agricultural Statistics Service (NASS) implementing regulations; governs the methodology for calculating and publishing parity prices and parity payment rates for covered commodities
Key Mechanics
7 CFR Part 5 implements the parity price calculation system established by the Agricultural Adjustment Act of 1938 (7 U.S.C. § 1301). "Parity price" is defined as the price for an agricultural commodity that would give the commodity the same purchasing power relative to goods farmers buy (farm inputs, consumer goods) as it had during the 1910–1914 base period — the period Congress designated as the "Golden Age" when farm and non-farm income were in equilibrium. USDA's National Agricultural Statistics Service (NASS) calculates monthly parity prices using a formula: take the average price received by farmers during 1910–1914, multiply by the ratio of the current index of prices paid by farmers to the 1910–1914 price-paid index. The resulting parity price is published monthly in USDA's Agricultural Prices report. Parity prices are not currently used as actual support levels in any major Farm Bill program — they were largely superseded by commodity loan rates, ARC/PLC program reference prices, and crop insurance indemnity levels. However, parity prices remain legally required to be calculated and published because certain statutory provisions (including emergency loan and disaster payment authorities) still reference parity as a ceiling or trigger. They also serve as a historical benchmark and policy debate reference point in discussions about farm income adequacy.
Current Rule (2026)
| Parameter | Value |
|---|---|
| Citation | 7 CFR Part 5 |
| Issuing agency | USDA (National Agricultural Statistics Service and Agricultural Marketing Service) |
| Statutory authority | 7 U.S.C. § 1301 (Agricultural Adjustment Act of 1938, as amended) |
| Last major amendment | No recent Federal Register amendments (methodology established 1959/1976) |
What This Rule Does
"Parity" is an agricultural economics concept that measures whether farm commodity prices are maintaining their purchasing power relative to the prices farmers pay for production inputs. A parity price of 100 would mean a bushel of wheat buys the same amount of production inputs today as it did during the base period (1910–1914, which served as the historical reference era).
Seven CFR Part 5 establishes the official methodology for calculating and publishing parity prices, which remain part of U.S. agricultural law and are referenced in several price support, marketing quota, and commodity program statutes. While parity-based price supports are less central to current farm policy than they were mid-century, parity price calculations are still published monthly by NASS and are used as reference benchmarks in specific commodity programs.
Key Provisions
- § 5.1 — Basic calculation methodology: parity prices are calculated using indexes published in the monthly NASS report "Agricultural Prices"; the calculation uses the May 1976 revision of the Prices Paid Index (the index tracking prices farmers pay for production inputs, including interest, taxes, and farm wages), applied to all parity calculations after May 1, 1976; the January 1959 revision of the Prices Received Index is used to measure the general level of prices farmers receive after January 1, 1959; parity prices published for periods before January 1, 1959 are not changed
- § 5.2 — Adjusted base prices and marketing seasons: for certain commodities, adjusted base prices use marketing-season average prices rather than calendar-year averages; price support payments are included in adjusted base prices; specific base prices are established for cigar binder tobacco (37.9 cents/pound for marketing seasons 1949–1958); commodities covered include basic program crops (extra-long staple cotton, peanuts, rice, tobacco types), designated nonbasic items (tung nuts, honey), wool and mohair, citrus and other fruits, seed crops, sugar beets and sugarcane, tree nuts, vegetables, and numerous other commodities
- § 5.3 — Yearly average price computation: the annual average price for each commodity is the simple average of the 12 monthly NASS price estimates, plus amounts for unredeemed loan deliveries, purchase agreement deliveries, price support extra payments, and the value of marketing certificates; special provisions apply for milk, milkfat, beef cattle, sheep, and lambs (which must include wartime subsidy payments)
- § 5.4 — Covered commodities: parity prices must be calculated for an extensive list of farm products, including the basic program crops (wheat, corn, upland and extra-long-staple cotton, rice, peanuts, and designated tobacco types), milk and milkfat, tung nuts, honey, wool, mohair, citrus and non-citrus fruits, seeds, sugar beets, sugarcane, tree nuts, fresh and processing vegetables, livestock, poultry, eggs, beeswax, potatoes, hops, peppermint and spearmint oils, grains and oilseeds, hay, sweetpotatoes, popcorn, and crude pine gum
- § 5.5 — Publication schedule: USDA publishes new adjusted base prices on or about January 31 each year; official parity prices, related indexes, and price data are published monthly in NASS's "Agricultural Prices" report; complete parity prices for all computed commodities appear in the January and July issues; other monthly issues may contain selected prices based on NASS consultation with AMS, FSA, and other interested agencies
- § 5.6 — Hearing procedure: producers who believe a commodity's parity price is seriously out of line with other commodities can request a public hearing; a substantial number of interested producers must submit a written request with supporting data to the Secretary of Agriculture; USDA will do a preliminary review and, if reasonable grounds exist, the Secretary must hold a hearing; the hearing is conducted by a Hearing Examiner, and proceedings are transcribed; the examiner recommends a decision to the Secretary, and the Secretary's final decision is published in the Federal Register
How It Affects You
Commodity program participants in programs that reference parity price thresholds should monitor the monthly "Agricultural Prices" report published by NASS. When commodity market prices fall below specified percentages of parity, certain program mechanisms can trigger — including marketing orders, price support loan rates, and related protections. Understanding how your commodity's parity price is calculated helps you anticipate when program support might be triggered.
Agricultural policy researchers and economists use parity prices as a historical benchmark to assess the long-term purchasing power trends facing farmers. The calculated parity prices allow comparison of today's commodity prices against the 1910–1914 base period, showing how farm income has shifted relative to production costs over time.
Producers in specific tobacco, peanut, and specialty crop programs that still use parity-referenced program formulas need to track their commodity's parity price closely. Some older-generation program provisions — including emergency price support triggers and marketing quota reference prices — are still drafted in parity terms.
Anyone requesting a parity price hearing must organize a substantial group of interested producers, compile supporting data, and submit the request formally to the Secretary. The burden of showing that a commodity's parity price is "seriously out of line" is high — the modernized parity calculation (using 10-year rolling averages) makes large anomalies less common than under earlier methodologies.
Statutory Authority
This rule implements:
- 7 U.S.C. § 1301 — Agricultural Adjustment Act of 1938, as amended; defines parity price and parity income for agricultural commodities and directs the Secretary of Agriculture to calculate and publish official parity prices; establishes parity as a reference standard for various commodity program provisions throughout federal agricultural law
Recent Rulemakings
The current parity price methodology was established by amendments published in 1959 (Prices Received Index revision) and 1976 (Prices Paid Index revision). No major Federal Register amendments since 1976. The calculation methodology and publication framework have been stable for decades.