an overview of federal farm bill titles chad hart center for agricultural and rural development iowa...
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![Page 1: An Overview of Federal Farm Bill Titles Chad Hart Center for Agricultural and Rural Development Iowa State University June 1, 2007 ISU ANR Lunch and Learn](https://reader036.vdocuments.mx/reader036/viewer/2022070412/5697bf821a28abf838c85cfa/html5/thumbnails/1.jpg)
An Overview of Federal Farm Bill Titles
Chad HartCenter for Agricultural and Rural Development
Iowa State University
June 1, 2007
ISU ANR Lunch and LearnAmes, Iowa
E-mail: [email protected]
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History of Farm Bills
• Basic framework of farm bill started in 1930’s
• Programs have evolved to address various issues in agriculture and rural communities
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Current Farm Bill
• Became law May 13, 2002
• Governs Federal farm programs for 6 years (2002-2007)
• Has 10 titles covering many aspects of agriculture
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Big Changes for 2002
• Creation of new programs– Price countercyclical payments– Conservation Security Program
• Greater emphasis on conservation than ever before
• 1st Energy title in the farm bill
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Farm Bill Titles
I. Commodity
II. Conservation
III. Trade
IV. Nutrition
V. Credit
VI. Rural Development
VII. Research
VIII.Forestry
IX. Energy
X. Miscellaneous
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Title I. Commodity
• Income support for program crops– Direct payments– Price countercyclical payments– Marketing loans
• Dairy and sugar programs are also covered by this title
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Key Commodity Title Numbers
Crop Target Price
($/bu.)
Direct Payment
Rate ($/bu.)
National Loan Rate
($/bu.)
Corn 2.63 0.28 1.95
Soybeans 5.80 0.44 5.00
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Title II. Conservation
• Programs for working lands– Environmental Quality Incentives Program
(EQIP)– Conservation Security Program (CSP)
• Programs for land retirement– Conservation Reserve Program (CRP)– Wetlands Reserve Program (WRP)
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Title III. Trade
• Programs to develop and expand market for U.S. agricultural products– Export credit guarantees– Market development programs– Food aid
• Language to adjust farm support to fit within WTO guidelines
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Title IV. Nutrition
• Food stamps and commodity distribution programs
• Largest part of agriculture budget
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Title V. Credit
• FSA farm loan programs– Lending partially targeted to beginning
farmers
• Farm credit system– Cooperatively owned financial institutions
specializing in agricultural lending
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Title VI. Rural Development
• Funding for strategic planning, feasibility studies and coordination activities across several layers of government
• Development programs, such as:– Water and Wastewater Treatment– Broadband Internet Service– Value-Added Agriculture– Training for Rural Emergency Personnel
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Title VII. Research
• Funding for agricultural research and extension programs– State Ag. Experiment Stations– Initiative for Future Agriculture and Food
Systems (IFAFS)• Future food production• Environmental quality and resource management• Farm income
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Title VIII. Forestry
• Funding for agricultural programs in forestry– The U.S. Forest Service is part of USDA– But the vast majority of its budget come from
the Interior Department
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Title IX. Energy
• Funding for bio-refineries and bio-based products– Established grants and loan programs for bio-
refineries and procurement of bio-based products
– Established grants to assist in small renewable energy systems for rural communities
– Extended the biomass research and development and bioenergy programs
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Title X. Miscellaneous
• Crop insurance and disaster assistance changes– Crop insurance is not part of the farm bill
• Country-of-origin labeling
• Animal and plant protection
• Food safety
• Organic agriculture
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Projected Spending - March 2002
21%
5%
68%
6%
Commodity Conservation Nutrition Other
Average Budget$77.5 Billion/Year
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Projected Spending - March 2007
Average Budget$69.9 Billion/Year
10%
6%
76%
8%
Commodity Conservation Nutrition Other
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When Payments Are Triggered
-$100.00
-$50.00
$0.00
$50.00
$100.00
$150.00
$200.00
$1.50 $1.70 $1.90 $2.10 $2.30 $2.50 $2.70 $2.90 $3.10 $3.30 $3.50
Price ($/bushel)
Ret
urns
($/
acre
)
Market Return less Variable Costs Direct PaymentCountercyclical Payment Marketing Loan BenefitNet Crop Insurance Benefit
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Farm Bill Budget
• Budget determined by Congress, but based on projections of spending for current farm bill
• With crop prices projected to remain high, current farm support program cost are projected to be low
• This doesn’t leave much room for farm bill changes
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Farm Bill Proposals
• There are many proposals out there– USDA– National Corn Growers Association– American Soybean Association– National Association of Wheat Growers– American Farmland Trust– American Farm Bureau
• Can be divided into two camps– Modify current structure– Move to revenue-based farm support
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Soybean Proposal
• Higher target prices– Higher of current target price or 130% of 2000-2004
Olympic average of season-average prices
• Higher loan rates– Higher of current loan rate or 95% of 2000-2004
Olympic average of season-average prices
• No change on direct payments
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Soybean Proposal
Crop Target Price
($/bu.)
Direct Payment
Rate ($/bu.)
National Loan Rate
($/bu.)
Corn 2.75 0.28 2.01
Soybeans 6.85 0.44 5.01
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Why Switch to Revenue?
• Critics of the current farm bill point to two main factors– Continuing need for disaster assistance– Possible overcompensation from price-based
programs• Example: 2004 for corn, record corn yields, 3rd highest corn
crop value, large corn government payments
• Targeting revenue, instead of price, can address these factors
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Corn Proposal
• Revenue-based support program– County-level (Revenue Counter-Cyclical
Program)
• Marketing loans changed to recourse loans (means farmers could not forfeit crop as payment for loan)
• No change on direct payments
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Revenue Counter-Cyclical Program
• Somewhat like current counter-cyclical program
• Revenue guarantee = 95%*County trend yield*Projected price
• Projected price based on 3-year average with cups and caps
• Actual county revenue = County yield*National price
• Payments made when actual county revenue is below revenue guarantee
• Integrated with crop insurance– Premiums and indemnities reduced by payments from revenue
counter-cyclical program
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USDA Proposal
• Set loan rate at minimum of loan rates in House-passed version of 2002 farm bill or 85% of 5-year Olympic average prices
• Change marketing loan program from daily price settings to monthly price settings
• Increase direct payment rates
• Change counter-cyclical program to be revenue-based
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USDA Proposal
Crop Target Price
($/bu.)
Direct Payment
Rate ($/bu.)
Max. Nat. Loan Rate
($/bu.)
Corn 2.63 0.30 1.89
Soybeans 5.80 0.50 4.92
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USDA’s Revenue Counter-Cyclical Program
• Revenue guarantee = 2002-2006 National Olympic average yield*Effective target price– Effective target price = Target price – Direct payment rate
• Actual revenue = National yield*Max(Season-average price, National loan rate)
• Payments made when actual revenue is below revenue guarantee
• Pays on base acres and yields, not planted acres and actual yields
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Legislative Action Thus Far
• House Ag. subcommittees have begun to craft language on conservation, credit, energy, and research titles
• Senate Ag. Committee has held hearings on various titles and will begin markups soon
• Lack of budget agreements has limited action on farm bill
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Debates Shaping Up
• Neither committee has tackled the commodity title yet– Price vs. revenue targeting
• Conservation will grow, but where– House prefers CRP, EQIP; not CSP– Senate would likely expand CSP
• Energy title will expand– General guidelines vs. specific targeting– How best to manage agriculture’s role in the energy
market?
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The Next Farm Bill?
• May look like some of the farm lobby proposals– As time proceeds, the odds increase for packages that look like
the current farm bill
• Congress usually blazes its own trail– USDA proposals do not carry significant weight in Congress– But leadership in both houses did not dismiss the proposals out-
of-hand
• Cost will be a major consideration– Hard to find political support for new programs, when they would
require budget offsets