Congress, Ag Sector Ponder Proposals
Tuesday, August 1, 1995
filed under: Marketing/Risk Management
The “Freedom to Farm Act” introduced by House Republicans before the August congressional recess was a thunder-bolt aimed at the heart of conventional U.S. farm policy. In one stroke, leading farm state congressmen endorsed replacing the old system of supporting farm income through supply-management programs with guaranteed payments based solely on how much money Congress approves.
Even more startling was the fact that the lead sponsor of this “radical” proposal is a staunch supporter of traditional farm programs: Pat Roberts, chairman of the House Agriculture Committee.
Initial reactions to “Freedom to Farm” in the Northern Plains and High Plains were favorable. The prospect of throwing out the red tape and paperwork involved with certifying acreage and program signup is extremely attractive. Many farmers are ready for broader planting flexibility without base and ARP restrictions. In addition, the likelihood that future annual cuts in farm program spending will carve further into the “muscle” of federal support makes the option to lock in fixed payments over seven years look like a good trade.
During the August recess, however, questions began to be raised about the details of the House proposal:
• Would the federal government continue to provide a basic safety net for agriculture after the seven-year “transition contracts” expired?
• What would be the impact on produc-tion and prices for various crops if planting on base acres is limited to only program crops and oilseeds?
• What would sustain small industries like sunflower in years when their tradi-tional acreage shifted to wheat and barley?
Unfortunately, these and other questions cannot be answered before Congress makes a final decision on farm programs in the 1995 farm bill this fall.
Concerns about the short-term impact which such a sharp departure from current programs could have on farm income and land values have some observers urging a “field test” of the “Freedom to Farm Act” through a pilot program. A phased-in approach could be important for oilseed producers, who have less payment history and would be eligible only for marketing loans at $7.30 per hundredweight for minor oilseeds and $3.94 per bushel for soybeans.
Before committing to one approach on farm policy, it’s important to look at the likely development of the farm bill process in Washington over the next few months. The “Freedom to Farm Act” may be finding some support in the Plains; but it is playing to mixed reviews in the Midwest — and has run into a brick wall in the South.
In addition to “Freedom to Farm,” two very different proposals were advanced prior to the August recess by senators from Southern and Midwestern states. The “Agricultural Competitiveness Act,” intro-duced by Mississippi Sen. Thad Cochran and 12 others, would maintain the current farm program structure. Normal Flex Acres would increase from 15 to 25 percent, with producers able to “flex” an equal percentage of soybean acres to program crops.
For sunflower, the Cochran proposal would maintain the current provision allowing planting of minor oilseeds on wheat and feed grain base acres under the 0-92 program. The floor for oilseed marketing loan rates would $8.90 per hundredweight for sunflower and other minor oilseeds and at $5.00 per bushel for soybeans — slightly above current loan levels.
Another farm program alternative is the “Targeted Marketing Loan” proposal of seven Midwest Democratic senators led by Tom Daschle of South Dakota. Under this plan, target prices would be replaced by marketing loans at or near 100 percent of average prices for the crop in the previous five years. (For sunflower, average prices would place the 100-percent loan level at $10.40 per hundredweight.) In addition, a limited amount of production would be supported at a higher loan level to protect the income of small to mid-sized farmers. ARPs would be authorized, but USDA would have the option of limiting cost by reducing the percentage of each year’s crop eligible for loan.
As farmers consider the relative benefits and drawbacks of these proposals, it also is important to remember that Congress and the Clinton Administration have not yet reached agreement on the amount by which the cost of farm programs must be cut. The Congressional Budget Resolution would reduce agricultural spending by $13.4 billion over the next seven years. President Clinton’s budget, however, cuts farm programs by only $4.2 billion.
The final reduction likely will end up somewhere in the middle. In that case, the more extreme cuts anticipated in “Freedom to Farm” may not be necessary; but the smaller savings provided under the Cochran and Daschle proposals would have to be increased.
All of this should become easier to follow (and explain) once Congress returns in September and begins to address the budget for the coming fiscal year. We can expect the President to veto several Republican spending bills, and the government may shut down for a few days in late September or early October. Then there will be a “summit” to come up with a budget compromise. In the process, the agriculture committees may have to write two different farm bills to fit different budgets. As with past farm bills, the final version may not be signed into law before late December.
By then, all concerned will be grateful for not having to write another farm bill for five to seven years. For now, however, sunflower producers should keep their options open as to which farm program to endorse. While the process may be frustrating and you personally may prefer to scrap the whole thing, remember this: Other producers growing other crops are working to get the best deal possible under the circumstances. It may be wise to “look before we leap,” get the best deal we can — and then decide whether it was worth it.