Economic Issues in Agriculture
Agricultural & Applied Economics

1. The bill is designed to maintain the flexibility that is so popular with producers -- plus bring predictability back to the government's farm support programs while enlarging participation in soil and water conservation.

2. It would provide for counter-cyclical payments that would be authorized based on target prices.

Supporters say the bill will "bring together a coalition of interests that will be needed to pass it in the full House and see it signed into law".

Provide producers with the option to update base acreage. Current base yields are maintained. Both fixed-decoupled and counter-cyclical payments would be based on the producer's base.

Keep marketing loan rates for all commodities except oilseeds;

For oilseeds and farms without a current AMTA payment base and yields, the Secretary would be directed to develop payment yields that are comparable to current AMTA yields in the area.

Counter cyclical payments would be triggered when a crop's price, adjusted for the fixed decoupled payment is below the target price. The payment rate for a crop would be calculated as the difference between its target price and the sum of the following: a) The higher of the national twelve-month seasonal average price received by producers, or the national loan rate, and b) the fixed decoupled payment rate. 

Payments limits would be set at: $50,000 for fixed decoupled payments, $75,000 for counter-cyclical payments and $75,000 for marketing loan gains and loan deficiency payments.
 

Proposed Loan Rates, Fixed Decoupled Payment Rates and Target Prices
Crop	Loan Rates	Fixed Decoupled Payment Rates	Target Price
Wheat (bu.)	$2.58	$0.53	$4.04
Corn (bu.)	$1.89	$$0.30	$2.78
Sorghum (bu.)	$1.89	$0.36	$2.64
Upland Cotton (lb.)	$0.5192	$0.0667	$0.736
Soybeans (bu.)	$4.92	$0.42	$5.86

Other Commodities:

PEANUTS: Would make a historic reform to the peanut program to make peanuts similar to other traditional program crops. Would provide a fixed decoupled payment of $0.018 per pound; a counter cyclical program with a target price of $480 per ton, and a marketing loan of $350 per ton. 
It would terminate the marketing quota program and compensate the quota holders for the loss of the quota asset value at $0.10 per pound for five years.

DAIRY: Extend the milk price support program at $9.90 per cwt. through 2011.

FRUITS & VEGETABLES: It would give the Secretary sole decision authority to combat outbreaks of plant and animal diseases with emergency funds, retain planting restriction of fruits and vegetables on base acres, provide an additional $200 million in spending authority for surplus commodity purchases under Section 32, increase the Market Access Program (MAP) by $110 per year, and create a Technical Assistance Specialty Crop (TASC) fund to assist with trade barriers.

This section would devote $16.5 billion over 10-years to soil, water and wildlife programs. This would be a 75% increase in baseline spending.

Reauthorize the Conservation Reserve Program (CRP) through 2011 with a 39.5-million-acre enrollment cap.

Reauthorize the Environmental Quality Incentive Program (EQIP) through 2011 at $1.2 billion annual program level, with livestock receiving 50% of the annual funding. In addition, a $675 million fund would be created in EQIP to address groundwater conservation issues, including cost share for more efficient irrigation systems.

Reauthorize the Wildlife Habitat Incentive Program (WHIP) to provide cost share for landowners to enhance wildlife habitat at a program level of $25 million annually. 

Provide for a Strategic Planning Initiative to provide for regionally planned rural development projects - $150 million;

Authorize Broadband Direct Loans to facilitate the expansion of high-speed internet access to rural communities - $100 million;

Increase funding for the Value Added Grants Program to provide grants for start-up farmer-owned value added processing facilities - $370 million.

. Reauthorize the Renewable Resources Extension Act through 2011 at $30 million annually.

Provide enhanced Community fire protection by directing the Secretary to coordinate with local communities in implementing rural fire protection and control strategies.

And, there are a host of other programs in the proposal - Research, Nutrition and Trade. 

The guess here is that the House may vote on a bill sometime later this year. Action in the short term by the Senate is less certain. We don't know what a Senate bill will look like - and for that matter - we don't know that the final House bill will look like what the Agriculture Committee has proposed.

As the bill passed by the two legislative bodies will most likely be different, we would then have a conference committee to work out the differences.

Spending for the House Committee bill would be close to what is currently being spent - for fixed annual payments plus supplemental aid appropriated by Congress to support farm income. This will be challenged by budget constraints and WTO limits on domestic farm supports. WTO will insist that payments are trade distorting - and should be subject to the $19 billion limit to avoid violating WTO rules. 

And there will be battles over who gets AMTA payments - by those who want to ensure that small farmers their fair share.

We would guess that the chances for a final bill to be passed and signed by the president during this calendar year are slim. More likely to occur next year -- and look for the total costs to be pared. 

The average family living expenses jumped 4.1% last year according to data from the Illinois Farm Business Management Association.

The increase was the largest since since 1996 - due in part to surging fuel and home heating costs. Non-capital expenses totaled $42,544, or $3,545 per month. More than 1,000 operators provided the data. Average family size was 3.3 members. The average age was 50.

When we add capital items - such as automobiles, furniture, etc., we add $4,982 to the expense agenda - making the grand total family living expense climb to $47,526 in 2000 - up from $45,225 in 1999.

Income taxes and Social Security taxes, averaging nearly $11,000 were not included in the family living costs.

William Givan, Editor
Extension Economist

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