In 1970, a $55,000 per limitation on direct payments was established largely in response to Wilcox's Congressional testimony indicating the magnitude of direct income subsidies by different-sized farms. The payment limit was reduced to $20,000 per person in the 1973 farm bill, increased to $40,000 in the 1977 farm bill, and then subsequently raised to the present limit of $50,000 per person (Knutson et al.). As U.S. farm program costs exceeded $20 billion per year in the 1980's, questions again rose as to who was receiving these payments (Ambus; United States General Accounting Office, 1987a, 1987c, and 1987d; Lin, Johnson and Calvin; Johnson and Short). Due to loopholes in the payment limit regulations, they have not been effective in limiting direct payments to producers (United States General Accounting Office 1991; Johnson and Short). However, interest in legislation that would effectively cap direct farm program payments continues to be discussed (United States General Accounting Office 1987b, 1987c, and 1994). Given the current interest in reducing government costs, it is expected that methods to more effectively target farm program payments will be debated in the 1995 farm bill. Because payment limits have not been effective in the past, policy analysts have not analyzed the impacts of alternative payment limit levels on supply and prices. However, if effective payment limits are established, supply response models will need to be augmented. The literature includes numerous supply response models that explicitly quantify the impacts of target prices, loan rates, and acreage reduction programs, but none of the reviewed literature includes payment limitations (e.g., Subotnik; Bailey and Womack; Shideed and White; Morzuch, Weaver, and Helmberger; Evans; Chembezi and Womack; Lee and Helmberger; Garst and Miller; Houck and Ryan; McIntosh and Shideed; Duffy, Richardson, and Wohlgenant). The purpose of this article is to develop a simple graphical model of the supply impacts caused by legislation that effectively limits farm program payments to individual producers without inducing changes in farm ownership and control.' Without resorting to empirical proofs, this analysis unambiguously demonstrates that if payment limitations can be effectively enforced without changes in farm ownership and control, the aggregate supply curve will shift to the left. Effectively enforced payment limits, therefore, could act not only as a targeting mechanism, but also as a vehicle for supply management.