The 1996 omnibus farm bill, the Federal Agriculture Improvement and Reform (FAIR) Act (P.L. 104-127),
prescribed farm commodity support policy through 2002. Most significantly, producers of
wheat, corn and other feed grains, rice, and cotton would receive annual fixed payments
(contract payments) starting at $5.6 billion and declining gradually to $4 billion, for a
total of about $36 billion over the 7-year life of the law. At the time of enactment,
market prices for these commodities and most others were high and expected to remain high.
By the middle of 1998, prices for many commodities began a sharp decline and remain at
low levels. Compounding the depressed market conditions were production disasters in some
regions caused by droughts, floods, and diseases. Congress responded to the deteriorating
farm revenue situation with a series emergency economic and disaster relief measures.
The 105th Congress included nearly $5.7 billion in emergency farm aid in the
omnibus FY1999 appropriation law (P.L. 105-277).
The 106th Congress provided more assistance. The FY1999 supplemental
106-31) included $574 million in farm assistance. Another supplemental aid package,
totaling about $8.7 billion, was incorporated into the FY2000 USDA appropriations bill (P.L. 106-78). An
additional $576 million, largely for Hurricane Floyd farm victims, was included in H.R. 3425 and
incorporated into the Consolidated Appropriations Act for FY2000 (P.L. 106-113).
The Agriculture Risk Protection Act of 2000 (P.L. 106-224)
included about $7 billion in farm relief, in addition to crop insurance provisions
estimated to cost $7.2 billion over the coming 5 years. Finally, approximately $3.5
billion in additional assistance for farmers was included in the FY2001 USDA appropriation
October 28, 2000).
Nationally, total direct government payments to farmers are estimated to be about $23.3
billion in calendar year 2000, providing 42% of net cash farm income. Included in the
government payments figure is $8.9 billion in emergency assistance. Due largely to these
government payments, the farm economy is in comparatively strong financial condition.
However, not all producers have received federal farm subsidies. Indeed, critics charge
that farm income support policy as implemented by the 1996 farm bill and supplemented by
recent emergency assistance has not necessarily reached farms in need, while those not in
need may receive assistance. Others point out that farm support is intended to preserve
the productive and competitive integrity of the sector, not be welfare for individual
farms. What nearly all policy makers agree upon is the desire to end the pattern of
frequent ad hoc relief with more predictable federal farm support. Numerous
policy options were offered but none developed a consensus of support during the 106th
The task of developing future farm support policy now moves to the 107th
MOST RECENT DEVELOPMENTS
On October 28, 2000, the President signed the FY20001 USDA appropriations Act(P.L. 106-387).
It includes approximately $3.5 billion in new supplemental farm aid. The law also doubles,
for the 2000 crop year, the per-person annual limit on USDA marketing loan gains to
Previously, on June 22, 2000, the President signed the Agricultural Risk Protection
Act of 2000 (P.L.
106-224). Initially, it was a crop insurance reform bill, authorizing $7.219 billion
in new crop insurance spending over 5 years. Subsequently, an amendment adopted by
conferees added $7.113 billion in supplemental farm income and related agricultural
assistance. The farm assistance provisions specify that $5.5 billion is to be used in
FY2000 and most of the remainder in FY2001. This follows the $9.3 billion in emergency and
disaster assistance already provided in two earlier FY2000 appropriations bills. The
crop insurance title provides for higher premium subsidies to attract more farmers to the
program and higher coverage for producers with multi-year losses.
BACKGROUND AND ANALYSIS
The last omnibus farm bill, the Federal Agriculture Improvement and Reform (FAIR) Act
of 1996 (P.L.
104-127), prescribed farm commodity support policy through 2002. The key farm income
support feature was Agricultural Market Transition Act (AMTA) payments (also called
"contract payments" and "freedom to farm" payments), which total about
$36 billion over seven years. The fixed annual AMTA payments gradually decline each year.
As prescribed by law, about $5.5 billion in payments were made in FY1999, $5.1 billion are
programmed for FY2000, and $4.1 billion are scheduled for FY2001. (See CRS Report RS20271,
Support Programs for Major Crops: Description and Experience.)
Low commodity prices coupled with natural disasters in some major growing regions
(which cut many farmers' income) prompted the 105th Congress to include about
$5.7 billion in additional "emergency" farm assistance in the omnibus FY1999
appropriations law (P.L. 105-277,
October 21, 1998), over and above the levels authorized under the 1996 farm bill. The 106th
Congress passed another major supplemental package of $8.7 billion in emergency farm
relief in the FY2000 USDA appropriation act (P.L. 106-78,
October 22, 1999). Additional farm assistance, amounting to $576 million, was included in
the Consolidated Appropriations Act for FY2000 (P.L. 106-113,
November 29, 1999). The $576 million were targeted primarily at eastern producers hurt by
Hurricane Floyd and by drought in 1999.
Economic forecasters expected weak markets and relatively low farm prices for major
crops to persist through 2000. That prospect led Congress and the President to propose
more assistance to the agricultural sector. The 2000 election cycle added to the momentum.
In order to avoid the requirement for an emergency designation, the congressional budget
290) reserved over$7 billion expressly for additional income assistance for farmers.
Of the total, $5.5 billion was set aside for FY2000. Instead of providing this money
through either the annual USDA appropriation or a supplemental spending bill, House and
Senate conferees attached it to an authorizing bill, the crop insurance reform legislation
(H.R. 2559) titled
the Agriculture Risk Protection Act of 2000 (P.L. 106-224,
June 22, 2000). More recently, approximately $3.5 billion in additional assistance for
farmers was included in the FY2001 USDA appropriation (P.L. 106-387,
October 28, 2000).
During calendar 2000, as with 1999, there was little debate over whether or not
additional farm income assistance was needed. The disagreements revolved around the design
of the assistance program (who should get it, and what should be the delivery mechanism).
Only a few critics argued against additional farm assistance, claiming that the problems
would self-correct through reduced production and increased domestic and export sales
caused by low prices. Others maintained that U.S. taxpayers already were making large
direct farm payments to farmers that may not be financially needy. Furthermore, some
argued that higher farm spending would leave fewer dollars for other national priorities,
such as tax relief, debt reduction, or spending on social programs.
The fact that large supplemental payments have been passed for 3 years in a row has
caused a critical examination of domestic support policy. A substantial portion of the
farm relief has been disaster assistance, which is not related to commodity support
policy. However, about $17 billion in supplemental relief has been paid to farmers solely
in response to low prices. This spending has caused the congressional agriculture
committees to focus on policy alternatives long before expiration of the 1996 farm bill.
Farm Economic Situation
Overall, depressed agricultural export values and low U.S. farm prices will help to
hold total farm commodity receipts to a forecast $194.5 billion in 2000, an improvement
from last year's $188.6 billion but substantially below the 1997 record high of $207.6
billion. USDA data show that total livestock receipts have risen, but that prices and
receipts for major crops have been relatively flat.
U.S. agriculture's prosperity is heavily dependent on exports, which account for about
20% of the value of U.S. farm production, and for an estimated 30% of all harvested crop
acreage. However, export value is down, from the record of $60 billion in FY1996, to a
projected $50.9 billion in FY2000 and a projected $53 billion in FY2001. Much of the
decline was explained by financial crises in key overseas markets, particularly Asia
(which had been the fastest growing market for U.S. farm goods), and in Russia (where U.S.
imports declined by about 80% between 1997 and 1998). The high value of the U.S. dollar
relative to other exporting countries' currencies adds to the competitive difficulties.
USDA forecast data show that 2000 net cash farm income will be $55.4 billion, $800
million more than in 1999 and close to the 1998 level, largely due to record high direct
government payments to farmers. Also, U.S. agriculture's overall farm business balance
sheet looks strong. According to USDA, the value of farm real estate and other farm assets
have continued to rise, while debt stabilized in 1999 and 2000. Farm debt, measured as a
percentage of farm assets (the so-called debt-to-asset ratio), is forecast by USDA to be
15.9% in 2000, generally regarded by credit experts as a highly favorable level.
Total income for the average farm operator household (taking into account off-farm as
well as on-farm sources) rose from $52,562 in 1997, to $59,734 in 1998, to $64,347 in
1999, and a forecast $64,645 in 2000, according to USDA. Farm household incomes remain
above the average U.S. household's income, which was $51,855 in 1998. However, on average,
off-farm income now makes up over 90% of all household income received by farm operators.
According to USDA, calendar 2000 direct federal farm payments amounting to $23.3
billion -- which will exceed the previous record levels of $20.6 billion in 1999 and $16.7
billion in 1987 -- have offset income losses due to low commodity prices. Another measure
of taxpayer support to the farm sector is spending by USDA's Commodity Credit Corporation
(CCC), which finances price and income support programs. Analysts estimate that CCC net
outlays for FY2000 exceeded $32.3 billion, eclipsing the previous record of nearly $26
billion set in FY1986.
(See the most recent monthly issue of Agricultural Outlook,
published by USDA's Economic Research Service, for more detailed data on farm economic
Farm Relief Legislation
Emergency Farm Financial Relief Act of August 12, 1998. As farm income
in some sectors and regions was declining (albeit from generally record highs in 1996),
Congress began to debate the adequacy and design of farm assistance under the 1996 farm
bill. During the summer of 1998, for example, Democrat farm state Senators attempted
several times to win increases in the loan rates for major commodities. Although these
were not adopted, Congress did pass the Emergency Farm Financial Relief Act (P.L. 105-228,
signed August 12, 1998), which allowed AMTA contract holders to receive all of their
FY1999 payments ahead of schedule, in October 1998.
Omnibus Consolidated and Emergency Appropriations Act of October 21, 1998.
The FY1999 Omnibus Consolidated and Emergency Appropriations Act (P.L. 105-277,
signed October 21, 1998) contained $5.8 billion in new emergency spending for producer
assistance, most of it to shore up farm income and to indemnify producers for natural
disasters (see Table 1 at the end of issue brief for details). Nearly $2.9 billion were
direct "market loss payments" (disbursed in late 1998) to compensate grain and
cotton producers enrolled in AMTA for "regional economic dislocation, unilateral
trade sanctions and the failure of the government to pursue trade opportunities
aggressively." Another $200 million was made available to dairy farmers for the same
purposes; USDA released the dairy funds in 1999 after milk prices declined from 1998's
record highs. Another nearly $2.4 billion in the Act was for direct payments to crop
farmers who experienced 1998 disaster-related losses higher than 35% of normal yields or
who had losses in three of the past 5 years. The money was disbursed in spring 1999.
Farmers who had not purchased crop insurance were included in the program even though they
had signed agreements declining future assistance when they refused to purchase insurance.
The rest of the $5.9 billion was designated for livestock disaster assistance ($200
million), commodity loans for honey and mohair ($28 million), and additional funding for
farm operating loans ($31 million to support new lending of $540 million), among other
Supplemental Appropriations Act of May 21, 1999. More assistance was
provided for calendar 1999 through the FY1999 Supplemental Appropriations Act (P.L. 106-31, May
21, 1999). Although primarily for Kosovo military operations and for Central American and
Midwestern storm victims, the measure also included $574 million in new funding for USDA
farm relief, including: $106 million to support $1.1 billion in farm loans; $145 million
for Section 32 assistance for hog producers; $74 million for livestock disaster
assistance; $43 million in USDA salary and expense money to expedite delivery of disaster
aid; and $120 million for conservation programs to restore farmland and watersheds damaged
by natural disasters.
Agriculture Appropriations Act of October 22, 1999. An $8.7 billion
emergency farm assistance package was included as Title VIII in the FY2000 agriculture
appropriations act (P.L. 106-78, H.R. 1906, H.Rept. 106-354, October 22, 1999).
It is estimated that about $6 billion of the $8.7 billion reached farmers during calendar
1999, with the remainder going out in calendar year 2000 (see Table 2 at the end of the
issue brief for details). Supplemental market loss payments effectively doubled the AMTA
payments. Crop disaster victims received $1.2 billion. For the first time, AMTA contract
holders received direct payments for soybean and minor oilseed production. The limit on
marketing loan gains was doubled to $150,000 per person. Other beneficiaries included
dairy, tobacco, peanut, and sugar producers, and domestic cotton buyers.
In addition to the provisions shown in Table 2, the package included "sense of
Congress" language calling on the Administration to: request "fast track"
trade negotiating authority from Congress; to use World Trade Organization (WTO)
negotiations to reduce barriers to agricultural trade; to conduct a comprehensive
evaluation of current U.S. export and food aid programs; and to use existing authority
under these programs to promote the export of additional quantities of soybeans, beef,
pork, and poultry products. Also, in the bill were provisions: mandating that meat packers
report, several times per day, the prices they pay for live animals (see CRS Report
RS20079, Livestock Price Reporting Issues); changing
operating and funding procedures for the National Sheep Industry Improvement Center; and,
authorizing USDA's Farm Service Agency to reserve up to $56 million of the emergency aid
money for administration.
Consolidated Appropriations Act of November 29, 1999. Damage from
Hurricane Floyd prompted additional emergency assistance for farmers and rural communities
in the southeast. The FY2000 Consolidated Appropriations Act (P.L. 106-113,
November 29, 1999), included $576 million for USDA-administered assistance largely to
repair and replace storm-caused damage to crops, buildings, and land.
Agricultural Risk Protection Act of June 20, 2000. Early in the 2nd
session of the 106th Congress, supplemental farm assistance, totaling $7.113
billion, was provided not through appropriations legislation but rather through an
amendment - added during conference - to a crop insurance reform bill (H.R. 2559). The details
of this supplemental farm spending were not reviewed by the full House and Senate, until
they reached the floor as part of the crop insurance conference report. The Agricultural
Risk Protection Act of 2000 was signed into law as P.L. 106-224 on
June 20, 2000. The funds were made possible with passage of the FY2001 budget resolution (H.Con.Res. 290).
As typical with such measures, some of the spending was earmarked for purposes other
than farm price and income support, such as: grants for research and for marketing
assistance, conservation, nutrition; new biomass research and development (Title III),
enhanced USDA authority to regulate plant health (Title IV).
Table 3 (at the end of the issue brief) highlights the major supplemental spending
provisions contained in Title II of P.L. 106-224.
Market loss payments were disbursed in September 2000 to AMTA contract holders ($5.466
billion) and soybean and minor oilseed producers ($500 million). The balance of the $7.113
billion is to be spent in later years, most of it in FY2001, according to CBO estimates.
initially was designed as crop insurance "reform" legislation. Early in 1999,
many Members of the House and Senate Agriculture Committees indicated that improvements in
crop insurance would be a legislative priority. An important objective was to alter the
program to raise participation and eliminate the need for virtually annual ad hoc
emergency disaster assistance. CBO estimates the crop insurance provisions (Title I), will
cost $7.219 billion over the FY2001-05 period. The law increases the premium subsidy for
all levels of crop insurance above the basic (catastrophic) coverage level; subsidizes
some of the additional cost of revenue insurance products; improves coverage for farmers
affected by disasters in multiple years; authorizes pilot insurance programs for livestock
producers; and eases eligibility requirements for permanent disaster aid for noninsurable
farmers. (See CRS Issue Brief IB10033, Federal Crop Insurance:
Reform Issues in the 106th Congress.)
Agriculture Appropriations Act of October 28, 2000. Approval of the
Agricultural Risk Protection Act was not the end to farm relief from the 106th
Congress. The FY2001 agriculture appropriations act (P.L. 106-387, H.R. 4461, H.Rept. 106-948, October 28, 2000)
included Emergency and Market Loss Assistance as Title VIII. About $1.7 billion was for
crop disaster losses during crop year 2000. Livestock producers suffering disaster losses
received about $500 million. Milk and specialty crop producers received more than $900
million in income support due to low prices. Total supplemental farm relief in this law
amounted to about $3.474 billion (see Table 4). The per person limit on marketing loan
gains was doubled to $150,000 for only the 2000 crop year.
(For more information on emergency assistance legislation, see CRS Report RS20269, Emergency Funding for Agriculture: A Brief History of Congressional
Action, 1988-June 1999; and CRS Report RS20416, Emergency Farm Assistance in
FY2000 Appropriations Acts.)
U.S. trading partners are watching closely to assess whether the emergency farm
assistance is compatible with U.S. commitments under the Uruguay Round (UR) Agreement on
Agriculture. Generally, that agreement places countries' domestic farm support programs
into one of several broad categories, based on their relative likelihood to distort trade.
Most major agricultural trading countries are required to "discipline," (limit)
total spending (i.e., their aggregate measure of support, or AMS) for their most
trade-distorting (so-called "amber box") policies. Countries report to the World
Trade Organization (WTO) on their domestic farm spending for each year (although such
reports are often submitted 2 to 3 years after the end of the marketing year in question).
The United States, like virtually all other countries, has been below its allowable
annual levels. U.S. amber box programs have included dairy, peanut, and sugar price
supports; crop marketing loans, loan deficiency payments, and other direct crop payments
linked to per-unit levels of production; storage payments; and crop insurance and loan
interest subsidies, among others. The least trade-distorting programs, in the so-called
"green box" category, are exempt from AMS reductions. These programs include
income supports not coupled to current production, such as AMTA payments; conservation and
environmental activities, such as the Conservation Reserve Program (CRP); farm disaster
relief payments; and domestic food aid.
The UR agreement provides latitude to U.S. policymakers in developing both the
emergency farm measures and proposed changes in long-term farm policy. Many analysts
predict that this latitude will enable the United States to claim that its 1998, 1999, and
2000 supplemental farm relief payments are exempt from AMS commitments because they were
not tied to current production of a specified commodity. Nonetheless, some member nations
of the WTO could argue that the payments were made specifically in response to immediate
price and supply conditions and were so large as to affect world trading patterns, thereby
undermining the objectives of the agreement. The question could become a point of
contention in the ongoing negotiations among WTO member nations to further reform
agricultural trade - although the United States might counter that others (notably the EU)
continue to subsidize their farm sectors at substantially higher levels. (See CRS Report
RL30612, Farm Support Programs and World Trade Commitments, July 26, 2000.)
Other Policy Proposals
Supporters of the policy changes made by the 1996 farm law saw benefits to farmers
because it released them from the planting and cropland set-aside requirements of earlier
price support and supply management policies. The new law's transition (or contract)
payments to farmers were expected to provide a stable and known amount of income support
while farmers would make their planting and selling decisions based on market price
signals. Policymakers recognized that commodity prices would continue to fluctuate from
year to year, as they always have. However, there also was the expectation that farmers
would use some portion of the transition payment received during high price years as a
cushion to help them during low price periods. Additional risk protection was maintained
by continuation of the marketing assistance loan programs, revision of the crop insurance
program, and adoption of pilot revenue insurance projects, also authorized by the 1996
Opposition to the 1996 farm law -- enacted during a period of high farm prices for most
commodities -- came from those concerned that AMTA contract payments would not increase
but would continue to decline when market prices fell. Although almost all farmers and
policymakers recognize that the farm economy will always be subject to periods of low
prices caused by excess production or weak demand, few predicted that the recent price
declines would be so steep, affect so many commodities, and last so long.
While some accuse Freedom to Farm of not adequately protecting farmer incomes, few
believe that the 1996 law was the cause of these problems. While some policy makers have
argued that Washington should "stay the course" and not change the basic,
market-oriented premise of the 1996 farm bill, they also have expressed support for
substantial ad hoc farm aid. Others are calling for more fundamental policy
changes, but few are seeking a return to past supply management and government
The emergency farm relief measures approved in 1998, 1999, and 2000 advanced the time
frame and increased the size of payments to farmers primarily by utilizing the policy
framework established by the 1996 farm bill. That framework benefits farms that had land
in the former grain and cotton programs. Critics argue that AMTA does not attempt to
target assistance to farmers most in need. Farm bill supporters note that market loss
assistance payments are the most efficient method for quickly channeling badly needed
funds to the farm sector. Furthermore, supporters argue, federal farm programs are
intended to maintain the productive and competitive capacity of U.S. agriculture, not
serve as welfare for individually needy farms.
Still, some Members of Congress favor fundamental design changes to current support
programs to make assistance counter cyclical to market prices, and/or targeted to farms in
the greatest financial need. Also, among the many questions before policymakers are the
budgetary and trade impacts of additional assistance.
Administration Views. The Clinton Administration was among those
calling for changes in permanent farm policy. Secretary Glickman criticized the 1996 farm
law for failing to offer "counter cyclical assistance," and for not targeting
assistance to smaller farmers and those producers most in need. However, not until the
Administration sent its FY2001 budget to Congress in February 2000 did the Secretary make
any specific proposals for change.
The "centerpiece" of the Administration's proposals was a new Supplemental
Income Assistance Program (SIAP) that compensates farmers for current low prices based on
actual production, not on past production as with AMTA payments. It was similar in concept
to the "Supplemental Income Payment" program proposed by Representative Stenholm
in H.R. 2792. SIAP
would make payments to grain, cotton, and oilseed producers if projected gross income for
the crop falls below 92% of the preceding 5-year average. Gross income would include gross
market revenues plus government payments. Payments to individual farmers would be based on
current production. Annual SIAP payments would be capped at $30,000 per person.
Furthermore, SIAP payments would be adjusted downward to zero as AMTA payments reached and
exceeded $30,000. SIAP would only make up for the difference that Agriculture Market
Transition Act (AMTA) payments were below $30,000. Legislation also was requested to
extend the dairy price support program to 2002. In addition, the Secretary stated his
intention to use his existing authority to preserve grain, cotton, and oilseed marketing
assistance loan rates in 2000 at their 1999 levels, as well as to implement a grain
storage facility loan program for farmers. Together, these so-called farm income support
proposals were estimated to cost $3.264 billion in FY2001 and $2.695 billion in FY2002.
The Administration's proposal did not gain much momentum in Congress. Nor did any other
proposals for major changes in the 1996 farm law. However, federal farm policies,
including the 1996 law and possible alternatives to its basic structure, did become the
subject of extended debate. For example, on August 3, 4, and 5, 1999, Senate Agriculture
Committee Chairman Lugar held three days of comprehensive hearings on the farm income
situation. Secretary Glickman was the lead witness at these hearings. The House
Agriculture Committee conducted a lengthy series of farm policy hearings that began
in September 1999. The Chairman of the House Committee indicated that no consensus on how
to change farm policy emerged from these hearings.
Crop Loan Program Changes. The 1996 farm bill continued marketing
assistance loans for major crops, which are designed to facilitate marketing by providing
short-term financing to farmers. When market prices fall below the commodity loan rates
(now capped at 1995 levels), repayment may be made at the lower market price, instead of
the higher loan rate. The marketing loan gain is an income subsidy to the farmer-borrower.
Farmers eligible for, but who forego, the loans can receive loan deficiency payments
(LDPs), equal to the marketing loan gains. (See CRS Report 98-744, Agricultural Marketing Assistance Loans and Loan Deficiency Payments.)
Several bills (S. 30, H.R. 1299, H.R. 1468, H.R. 4979) would remove
or raise the farm bill cap on loan rates for grains, cotton, and oilseeds. Also, S. 30, H.R. 1299, and H.R. 4979 would permit
the Secretary of Agriculture to extend the term of a loan (now nine months) for additional
periods. H.R. 2704
would restore the farmer-owned reserve (FOR) for grain, which was suspended by the 1996
farm bill. The FOR effectively functions as a 3-year extension of the marketing loan,
during which time farmers might not accrue interest on the loan, and also could receive
storage payments under certain conditions.
Such loan proposals appeal to those who want more of a link between commodity prices
and government payments than is the case under Freedom to Farm. Eliminating the cap on
marketing loan rates was proposed but not adopted at the end of the 105th Congress,
largely because of the cost (then estimated at about $5 billion), its potential for
reversing the decoupled design of farm policy and, in some views, possibly exacerbating
the oversupply/low price problem -- i.e., longer loan periods can lead to the build-up of
more surplus stocks, further lengthening the duration of depressed prices.
Raising Payment Limitation. The 1996 farm bill imposed a per person
limit on marketing loan/LDP gains at $75,000 per year. This counts against all crops, not
each one. (A separate limit of $40,000 is in place for AMTA payments.) Low prices (below
established crop loan rates) have meant large marketing loan/LDP gains for farmers, many
of whom reach this annual payment limit. In contrast to limits on payments, there is no
maximum on the quantity of commodities that a farmer can place under loan and then forfeit
to settle the loan obligation and thereby circumvent the payment limitation. However, few
policy officials want to see the CCC acquiring forfeited grains, cotton, or oilseeds.
The farm relief provisions of last year's P.L. 106-78
doubled the per-person limit on loan gains to $150,000 for the 1999 crop year only. Then,
in February 2000, the Secretary approved the sale of commodity certificates to farmers for
use in repaying nonrecourse commodity loans. This was done to avoid forfeiture of
commodities to CCC. The action effectively eliminated the per person payment limitation on
loan gains. However, certificates have their own constraints and administrative
requirements that make them unworkable in some situations and burdensome in others.
Legislation (such as H.R.
4895 and S. 3049)
was introduced to continue the higher cap, and the FY2001 USDA money bill (P.L. 106-387,
Sec 837) again doubles it to $150,000, but only for the 2000 crop year.
Those who want to retain lower payment limitations note that the combination of
marketing loan and AMTA payment limits already effectively double the "three-entity
rule," which allows for the full limit on the first farm plus half on each of two
additional farming operations. This, they argue, is already a generous government subsidy
-- particularly when it is available regardless of a farmer's financial situation.
Supplemental Income Payment Program. Representative Stenholm
introduced, on August 5, 1999, a bill (H.R. 2792) to establish
a new system of supplemental income payments for producers of crops eligible for marketing
assistance loans -- wheat, feed grains, cotton, rice, and oilseeds. The payments would be
made whenever the current year's national gross revenue for a crop falls below 95% of its
previous 5-year average. A per-acre payment rate would be calculated, based on the
difference between 95% of that 5-year average and the current year's revenue per acre.
This calculation would be used to set a per-unit payment for each producer's harvested
production; in addition, the bill attempts to ensure that farms with weather-reduced
yields receive the same level of assistance as other participants. Representative Stenholm
unsuccessfully offered a version of his bill as an amendment to the crop insurance
legislation (H.R. 2259)
marked up prior to the August 1999 recess by the House Agriculture Committee. This
proposal served as the conceptual framework for the Secretary's SIAP proposal.
Farm Income and Trade Equity Act. Senator Conrad on July 26, 1999,
introduced the Farm Income and Trade Equity Act (S. 1436), aimed at
altering the basic long-term provisions of the 1996 farm bill. This bill would permit
farmers to forgo their AMTA contract payments in exchange for a new, two-tiered system of
subsidies. The first tier would provide marketing loans for grains, cotton, and soybeans
set at 100% of past market prices. A second tier of "transitional international
marketing equity" (TIME) payments would be based on the USDA-calculated difference
between the new loan rate and the level of support received by European Union (EU)
producers for the same crops. The payments would be designed as a direct challenge to EU
domestic farm subsidies, which have been much higher than those in the United States. The
Senator in 1999 tentatively estimated the annual cost of the plan at $7 billion more than
the scheduled AMTA payments.
Risk Management. Crop insurance is one way farmers can manage their
financial risk. Other examples include participating in the federal farm income and price
support programs, utilizing the private futures market to cushion themselves against
future price declines, and entering into production or marketing contracts with food
processors or other buyers of their commodities. Early in the crop insurance debate,
Senate Agriculture Chairman Lugar had promoted his bill (S. 1666) that would have
made a direct payment to any producer who adopts at least two of a variety of risk
management strategies. However, his committee opted instead to focus on crop insurance
program improvements as contained in S. 2251. Ultimately, the
Agriculture Risk Protection Act of 2000 (P.L. 106-224)
Tax and Regulatory Proposals. The comprehensive tax relief bill (H.R. 2488, adopted by
Congress on August 5, 2000, but vetoed by the President on September 23) contained several
provisions of interest to farmers. Farm, Fishing, and Ranch Risk Management Accounts
(FFARRM), introduced in the 106th Congress as S. 642 (Grassley) and H.R. 957 (Hulshof), would
have modified federal tax law by permitting farmers to set aside money in higher income
years without having to pay taxes on it until the money is withdrawn -- presumably in
years when taxable income is lower. Also in the tax bill was the acceleration to 2000 of
full deductibility of health insurance premiums (now set to take effect by 2003). Farm
organizations supported H.R.
8, a measure to end estate taxes that they contend make it difficult for farmers to
pass their businesses to their children. On July 19, 2000, Chairman Lugar introduced S. 2894, a wide-ranging
bill to provide tax and regulatory relief to farmers.
Producer interests such as the American Farm Bureau Federation also believe that
long-term improvements in farm income could be achieved if the federal government relaxed
a variety of regulatory requirements affecting producers' costs. Overly stringent
application of the federal pesticide, endangered species, and water quality laws are often
cited (although supporters of these laws argue that changes proposed by agricultural
groups would jeopardize the health of consumers, natural resources, and the environment).
Competition Policy. Agricultural businesses, like other sectors of the
economy, have long been subject to organizational changes, including consolidation of
processing and production into fewer and larger operations; more vertical control of the
various stages of production, processing, and marketing; and the shift from open cash
markets to closed systems involving contractual arrangements between buyers and sellers.
Many economists, and many within the industry itself, believe that such changes create a
more efficient resource allocation, make U.S. agricultural exports more competitive on
world markets, and benefit consumers by providing a wider variety of lower-priced, and
However, many producers believe that such changes stifle competition, cause lower farm
prices and farm incomes, and force families out of agriculture. Concern about structural
change, and its potential to adversely affect many farmers, intensifies during periods of
low farm prices. Many farm groups have called on government to strengthen enforcement of
existing antitrust and competitiveness authorities, and/or to adopt new laws if necessary.
Both the House and Senate Agriculture Committees have held a number of hearings in the
106th Congress on concentration and competition problems and policies, and
several bills have been introduced. For example, S. 2252 and S. 2411 both would provide
USDA with expanded authority to address business mergers in agriculture. S. 2252, along with H.R. 2829, would extend
to poultry the same types of oversight USDA's Grain Inspection, Packers and Stockyards
Administration (GIPSA) now has over livestock markets. H.R. 3159 would impose a
18-month moratorium on large agricultural mergers and acquisitions; S. 1738 and H.R. 3324 would ban the
ownership of slaughter animals by meat packers. S. 3091 would implement
General Accounting Office recommendations aimed at improving GIPSA's ability to address
livestock market competition issues. S. 3243 addresses
agricultural contracts, strengthens bargaining associations, and brings poultry under
USDA's enforcement authority. (See CRS Report RS20562, Merger and
Antitrust Issues in Agriculture.)
Table 1. Selected Farm Relief Provisions in the FY1999 Omnibus
Consolidated and Emergency Appropriations Act (P.L. 105-277,
October 21, 1998)
|Crop market loss assistance: direct payment's equal to about
50% of 1998 crop AMTA payments [Sec. 1111]
|Dairy market loss assistance: direct payments for dairy
farmers [Sec. 1111]
|Alaska salmon assistance: payments to salmon fishermen [Sec.
|Crop disaster loss payments: for 1998 quantity and quality
losses [Sec. 1102]
|Crop disaster loss payments: for multi-year losses [Sec.
|Crop insurance premium subsidy: additional premium subsidy for
growers purchasing insurance on 1999 crops [Sec 1102]
|Crop insurance purchase requirement: cost of requiring
uninsured producers receiving disaster payments to buy crop coverage, plus [Sec. 1102]
|Livestock feed assistance: for livestock producers to
replace damaged forage and feed [Sec. 1103]
|Dairy disaster assistance: for the dairy production
indemnity program [Title XIII]
|Georgia cotton payments: producer payments for 1998 and 1999
cotton lost due to the financial failure of a warehouse in Georgia [Sec. 1121]
|California raisin assistance: authorizes noninsured crop
assistance payments for qualified producers unable to meet deadlines [Sec. 1123]
|Honey recourse loans: authorizes recourse loans for 1998
crop honey [Sec 1122]
|Mohair recourse loans: authorizes no-interest recourse loans
for mohair produced during or before FY1999 [Sec. 1126]
|Farm operating loan subsidy: for increased direct and
guaranteed low interest farm operating loans [Title XIII]
Source: Congressional Budget Office (CBO) estimates.
Table 2. Selected Farm Relief Provisions in the FY2000 Agriculture
Appropriations Act (P.L. 106-78,
Title VIII, October 22, 1999)
|Crop disaster loss payments: coverage for 1999 losses [Sec.
|Crop market loss assistance: 100% increase in 1999 AMTA
payments [Sec. 802]
|Peanuts: direct payments equal to 5% of the loan rate for
quota or additional peanuts produced in 1999 [Sec. 803(a)]
|Sugar: 2-year suspension of assessments (0.2475-cent/lb. on
raw cane sugar; 0.2654-cent/lb. on refined beet sugar) [Sec. 803(b)]
|Tobacco: distributions to growers based on formulas in
National Tobacco Grower Settlement Trust [Sec. 803(c)]
|Soybeans/oilseeds: payments to 1999 AMTA crop producers
|Livestock: emphasis on feed losses through grants or other
in-kind assistance [Sec. 805 & 825]
|Dairy relief: direct assistance as determined by Secretary
[Sec. 805 & 825]
|Cotton: replenish "Step 2" funding, which provides
incentives for U.S. exporters and processors to buy U.S. cotton when U.S. prices are above
world prices [Sec. 806]
|Dairy price support: one-year extension of expiring price
support program; (also, delay of recourse loans results in FY2000 savings) [Sec. 807]
|Advance AMTA payments: permits payment of full annual
contract payment on Oct. 1 each year rather than in two separate installments [Sec. 811]
|Commodity certificates: permits farmers to receive loan
deficiency payments as certificates in lieu of cash. Certificates can be redeemed for USDA
commodities or, at USDA's discretion, cash; certificates are not subject to payment limits
|Payment limit: doubles the per-person limit on gains from
1999 crop marketing loans and loan deficiency payments to $150,000 per farm; $300,000 for
up to three farms [Sec. 813]
|Crop insurance: assist producers to buy more 2000 crop
coverage [Sec. 814]
Source: Congressional Budget Office (CBO) estimates.
Table 3. Selected Farm Relief Provisions in Agricultural Risk
Protection Act (P.L.
106-224, Title II, June 20, 2000)
|Market loss assistance (grains/cotton): increase payments to
AMTA contract holders [Sec. 201(a)]
|Soybeans/oilseeds: payments to producers of 2000 year crops
|Fruits/vegetables: $71 million for the Perishable
Agricultural Commodities Act reserve fund and for licensing costs and inspection services
so that fees charged to industry participants do not have to be increased; $200 million to
purchase various fruits and vegetables from producers experiencing low prices in 1998 and
1999; $25 million compensation for fruit and grape growers for certain disease losses; $5
million in low interest loans for apple growers [Sec. 203(a-f)]
|Peanuts: direct payments of $30.50/ton for quota and $16/ton
for additional peanuts produced in 2000 [Sec. 204(a)]
|Tobacco: payments via states to tobacco quota owners,
lessees, & growers [Sec. 204(b)]
|Honey: recourse loans at 85% of recent market prices [Sec.
|Wool & mohair: payments for 1999 marketings at 20¢/lb.
for wool and 40¢/lb. for mohair [Sec. 204(d)]
|Cottonseed: 2000 crop year assistance (likely direct
payments) to producers & first handlers [Sec. 204(e)]
|Loan deficiency payments (LDP): wheat, oat and barley LDP
benefits permitted if eligible acreage is grazed rather than harvested in 2000 and 2001;
also, expansion of LDPs to those growing grains and cotton but not on AMTA land [Secs. 205
|Conservation: $10 million for the Farmland Protection
Program; $40 million in cost-share or incentive payments to farmers for water & other
conservation activities [Sec. 211]
|Research: funding for various earmarked projects, such as
construction of a corn-based ethanol research pilot plant, and carbon cycle research
|Marketing: competitive grants to producers for value-added
marketing [Sec. 231]
|Animal diseases: Texas boll weevil eradication loan
losses($5 million); pseudorabies and for Michigan bovine TB control ($13 million) [Sec
|Domestic nutrition programs: additional purchases of school
lunch commodities and changes in other programs [Subtitle E]
|Flood compensation: payments (capped at $40,000 per person)
for year 2000 losses due to floods on certain crop and pasture lands [Sec. 257]
Source: Estimates by CBO as published in June 20, 2000, transmittal to Congress.
Table 4. Selected Farm Relief Provisions in the FY2001 Agriculture
Appropriations Act (P.L. 106-387,
Title VIII, October 28, 2000)
|Farm disaster payments: year 2000 crop quantity and quality
losses [Sec. 815]
|Livestock feed assistance: to replace forage lost or damaged
by natural disaster [Sec. 806]
|Livestock loss indemnity: payments to replace livestock
killed by natural disasters [Sec 813]
|Direct payments to dairy farmers: Low commodity price
assistance [Sec. 805]
|Apple and potato payments:
Direct payments to compensate for low 1998 and 1999 apple prices [Sec. 811]
Direct payments for 1999 and year 2000 apple and potato quality losses [Sec. 811]
|Wetlands reserve program: Increase enrollment by 100,000
acres [Sec. 806]
|Emergency watershed program: Repair flood damage to
waterways [Title VIII]
|Emergency conservation program: Rehabilitate farmland after
a disaster [Title VIII]
|Crop disease and insect assistance:
$26 for each tree removed to combat citrus canker [Sec. 810]
Mexican fruit fly, plum pox, Pierce's disease, watermelon wilt, and crickets [Sec. 804]
|Tobacco farmer assistance:
Burley crop loan forfeitures [Sec. 844]
Market loss payments for quota holders not producing a year 2000 crop [Sec. 841]
|Honey producer assistance: Nonrecourse loans and loan
deficiency payments [Sec. 812]
|Wool & mohair producer assistance: $0.40/lb payment for
marketing year 2000 [Sec. 814]
|Cranberry producer assistance: Direct payment for low
commodity prices [Sec. 816]
|California fruit growers: Direct payments for lost sales due
to insolvency of a coop buyer [Sec. 843]
|Crop insurance: Additional premium subsidies [Title VIII]
|Hawaiian sugar transportation assistance: Payment to a sugar
transportation cooperative [Sec. 822]
|Vermont sheep producers: Indemnity payments to producers for
sheep lost to disease [Sec. 809]
|Shared appreciation agreements: Low-interest loans and
extension of repayment period for shared-appreciation agreements [Sec. 818]
|Payment limit: doubles the per-person limit on gains from
2000 crop marketing loans and loan deficiency payments to $150,000 per farm; $300,000 for
up to three farms [Sec. 837]
Source: Estimates by CBO as published in the October 10, 2000, transmittal to Congress.
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