ECONOMIC ISSUES IN AGRICULTURE
Agricultural & Applied Economics
June, 2000
THE AGRICULTURAL RISK PROTECTION ACT OF 2000...
...Provides $7.1 billion in farmer assistance, $5.5 billion
this fiscal year, and makes significant changes in the crop insurance
program. No disaster monies are included - maybe later.
At this writing, the bill has not been signed by the President. But
when signed, USDA will be given a limited time to distribute the funds.
The legislation approved by Congress says the money will be distributed
during September. This means no checks before 9/1 but all checks sent
out before 9/30. And the payments will be based on 1999 transition
payments.
The way we read the bill, other payments will be made after 9/30/00, which include:
I. The bill provides producers with current transition payment contracts to receive a payment equal to, and in addition to, their 1999 payment. But don't look for payments before September, 2000.
II. Peanut producers are provided payments for the 2000 crop - $30.50 per ton for quota peanuts and $16 per ton for additional peanuts.
III. Another $340 million is to compensate tobacco farmers for economic losses. But no word yet on how it will be distributed (quota owners vs growers).
IV. Oilseed producers eligible to obtain a marketing assistance loan in the 2000 crop year will be eligible to receive payments estimated at 15 cents per bushel.
V. Producers of wheat, oats and barley who graze their crop rather than harvest it mechanically will be eligible for loan deficiency payments on the grazed production. These payments are only for the 2001 crop.
VI. About $15 million will be used for competitive grants to producers
to facilitate greater participation in markets for value-added agricultural
commodities. (Several of you have inquired in the past about this type
assistance available) But no word yet on details of this.
The New Crop Insurance Reforms... means you'll pay less for coverage in future years.
To illustrate: Take the highest level of coverage 85/100 (85% yield coverage at 100% of market price).
Under the old law, if coverage were $10 per acre gross premium, the farmer would pay $8.70 and the government $1.30.
For coverage for the 2000 crop year, the old law was amended last fall to boost the premium subsidy. For this example, the premium this year would cost the farmer $6.50 and the government $3.50 of the $10 premium.
Under the new law, the farmer will pay $6.20 and the government
$3.80 of the $10 premium. These figures are according to a private insurance
executive. Also, crop revenue coverage (CRC) becomes more attractive under
the new law due to a larger government subsidy. (Nathan Smith)
Farm Income Highly Dependent on Government Assistance
Last year's direct payments to farmers accounted to 38% of the U.S. total cash farm income. Market-based net cash income has dropped from $51 billion in 1997 to an estimated $32 billion this year, the lowest level since 1984. The dismal market situation triggered last year's record government payments of $22.7 billion. Experts tell us payments will have to be higher this year to prevent a significant decline in farm income.
To give an example: Participants in the Minnesota Farm Business Management Association reported an average net farm income in 1999 of $43,762. Government payments of all types to these producers was $44,674, an increase from $30,021 in 1998 and $12,257 in 1997.
Similar numbers were released by the North Dakota Farm Business Management
Association.
There's One Bright Spot in Georgia Agriculture...
... Farm real estate values are at a record high.
The average value for farm real estate for the state of Georgia was $1,800 per acre, as of January 1, 2000.
This was 10.4% above the 1999 value of $1,630 per acre and well above
the $1,510 in 1998. Apparently off-farm demand is driving up land prices
during the economic problems facing farmers.
| Farm Real Estate Values per Acre, Selected States | |||||
| State | 1996 | 1997 | 1998 | 1999 | 2000 |
| Georgia | $1,360 | $1,430 | $1,510 | $1,630 | $1,800 |
| Florida | 2,150 | 2,200 | 2,240 | 2,260 | 2,400 |
| Southeast States | 1,580 | 1,630 | 1,700 | 1,770 | 1,920 |
| Corn Belt States | 1,510 | 1,610 | 1,730 | 1,830 | 1,840 |
| Delta States | 1,020 | 1,070 | 1,130 | 1,180 | 1,230 |
| United States | 887 | 926 | 974 | 1,020 | 1,050 |
William Givan, Editor
Extension Economist
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