Senate Republicans are drafting legislation to expand USDA's power to deliver a massive farm bailout funded by tariff revenue. The focus is on Section32, a Depression-era authority that allows USDA to support farmers using customs receipts. But since FY 2018, Congress has capped direct payments to farmers at just $350 million annually.

That cap is far below what's needed to counteract trade damage and falling prices. Experts estimate at least $20 billion could be required, especially if Chinese retaliation and input cost spikes continue.

Senator John Hoeven (R-N.D.), chair of the Senate Agriculture Appropriations Subcommittee, confirmed he's working to modify USDA's spending authority. "We're working to make sure that we're ready to go," Hoeven said, referencing past changes that allowed the Trump administration to tap the Commodity Credit Corporation (CCC) during the 2018 trade war.

While Section32 is funded by tariffs, most of its revenue is automatically allocated to nutrition programs under the Food and Nutrition Service (FNS). The discretionary amount available to farmers - known as reserved spending authority - is projected to be just $1.76 billion in FY 2026, compared to over $23 billion for FNS.

A senior Democratic aide noted that USDA cannot legally reallocate money from FNS to farmers, making Congressional action essential. The only workaround would be through the CCC's Section 5 borrowing authority, which the USDA used in 2018-2019 to distribute $23 billion via the Market Facilitation Program.

However, the CCC is already stretched. The USDA can borrow up to $30 billion, but a significant share is earmarked for commodity payments in 2026. Forecasts suggest up to $14 billion could be needed for ARC/PLC payments alone. Conservation payments also flow through the CCC, adding more pressure.

"The borrowing limit could be a problem," Hoeven admitted, especially as USDA must reserve funds for farm bill programs.

Despite legal and budget hurdles, former House Agriculture Committee aide and current Texas A&M economist Bart Fischer believes action is likely:

"Whether it's restoring and plussing up CCC, or taking the shackles off Section 32, there's a tremendous amount Congress could do."

The message to China is also strategic. "They're not going to pressure us by using our farmers," Hoeven said. A strong farm aid package signals resilience in ongoing trade negotiations and domestic economic stability.

The path forward likely requires bipartisan cooperation and legislative clarity, especially as Congress races against the clock to finalize any spending changes before year-end.

The coming weeks could determine whether tariff revenues will once again be deployed as a lifeline for U.S. agriculture.