HTML _ RS20452 - Agriculture and the 106th Congress: A Summary of Major Issues
15-Dec-2000; Jean Yavis Jones; 5 p.

Abstract: Most congressional interest in agriculture in the 106th Congress was focused on persistent low prices for major commodities and proposals to redress declining farm income. Six emergency farm aid bills were approved, increasing agricultural spending by nearly $27 billion for fiscal years 1999-2001. These bills provided disaster relief along with short term ¨market loss payments¨to farmers to shore up farm income. Some longer term changes also were enacted as part of emergency farm legislation. Among these were the extension of the dairy price support program beyond 2000, increases in the farmer payment limit so farmers could receive the supplemental payments, and the exemption of agriculture products from unilateral U.S. trade sanctions. The Congress also approved a new law (P.L. 106-224) increasing coverage and premium subsidies for crop insurance, which added another $8.2 billion to agriculture spending over the next 5 years. Animal Plant Health Inspection reforms were part of the crop insurance measure. Other legislation (H.R. 4444) strongly supported by the farm sector that approved permanent normal trade relations with China also was adopted (P.L. 106-286). Overview For the last 3 years, abundant world supplies and declining export demand have kept prices for most U.S. farm commodities and farm income quite low. Despite economic recovery in world markets and some growth in export demand, the USDA projects that current supplies, especially of major field crops, are likely to maintain downward pressure on farm prices. In response, the 106th Congress approved several multi-billion dollar emergency farm aid laws. It also expanded crop insurance coverage and premium subsidies. Longer term efforts were less successful. These included proposals for farm policy changes that would provide automatic counter-cyclical farm income relief and restrict mergers in the agriculture sector (which some see as a contributor to low farm prices). Tax relief, in the form of Farm and Ranch Risk Management (FARRM), also was proposed but not enacted. These proposals are expected to resurface in the 107th Congress. The ¨Farm Safety Net¨. The 1996 farm law established a system of guaranteed annual lump-sum payments to wheat, feedgrain, cotton, and rice farmers. (1) These ¨contract¨ or ¨AMTA¨ payments replaced the longstanding system of price supports for individual commodities that paid farmers the difference between target prices and market prices when the latter were lower than target prices set by law for each commodity. In return for giving up price supports linked to market prices, eligible farmers were given nearly total planting flexibility, and acreage reduction programs were eliminated. The idea was that farmers would be able to plant in response to market signals, rather than federal program benefits. Opposition to this approach came from some who worried about what would happen without an automatic ¨safety net¨ for farmers if prices fell, which began to happen late in 1997. Advocates of the new approach contended that contract payments made to farmers when prices were good would provide a cushion for lean years, and that there still would be marketing loan assistance for field crops, albeit at capped loan rates. (2) After record highs in 1996 and 1997, U.S. farm income and prices for many major commodities began a sustained period of decline. Unusually good worldwide growing conditions had expanded supplies and an Asian financial crisis that spread to much of the rest of the world reduced demand. As farm income fell, the Congress stepped in. For FY1999, it approved emergency farm aid packages that added $6.6 billion to farm spending, most of which went for so-called ¨market loss payments,¨ and raised the 1999 crop year limit on the maximum amount of marketing loan assistance a farmer could receive (from $75,000 to $150,000 per farmer per farm, or $300,000 per farmer for up to 3 farms). For FY2000, another $15 billion was added to farm program spending for emergency assistance. As before, most of this aid went to farmers receiving AMTA payments (i.e.,grain, cotton, and rice farmers), regardless of their income situation. Some also went to oilseed, tobacco, peanut and dairy farmers, and for disaster relief. The distribution of most of this aid to AMTA recipients, without regard to their income situation, was viewed as the quickest way to get payments out to farmers. Some, including the Administration and some congressional Democrats objected to this approach, favoring instead more targeted assistance to those farmers in economic distress, and the use of the marketing loan program to provide this aid. Complaints also were heard that ¨non-program¨ producers (i.e. fruit, vegetable, and livestock producers) who had suffered losses from natural disasters (droughts and floods), as well as falling prices received too little of the emergency assistance funding. For FY2001, the Congress again approved an emergency farm aid package adding some $3.8 billion in assistance to farmers, and raised the limits on how much farmers could receive in federal farm payments. [read report]

Topics: Agriculture, Economics & Trade, International

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