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Corn+Soybean Digest

Analysis Of House And Senate Versions Of The Farm Bill

A comparison of House and Senate versions of new proposed farm legislation finds many common elements, yet many differences as lawmakers begin the debate over a final bill for 2002, according to analysis conducted by a group of land-grant agricultural policy think tanks.

The Agricultural Food and Policy Center (AFPC) at Texas A&M University, the Food and Agricultural Policy Institute of the University of Missouri and Iowa State University recently completed a Congressional request to analyze the two versions of the farm bills.

"We focused on comparing the economic impacts of the two farm bills on cotton, grain and rice farms in Texas as well as farms in the major production regions of the U.S.," says James Richardson, professor of agricultural policy at Texas A&M and a member of the AFPC team. "What we found was a majority of the cotton and rice farms in Texas would support provisions in the House bill, while the feed grain farms would be evenly split between the House and Senate bills."

The analysis found both bills would provide increased government spending on commodity and conservation programs; both would create a new counter-cyclical payment program and continue to provide support to commodities through marketing loans and through payments not tied to production or prices; and provisions related to peanuts, the conservation reserve program and other programs.

However, the analysis did reveal some differences between the House and Senate versions:

* The House bill provides most of its additional commodity support in payments not tied to current production. The Senate bill provides much of its additional support through higher loan rates only available on crops actually produced.

* Conservation spending is higher in the Senate bill. In their analysis of the Senate version, the AFPC economists at Texas A&M focused on tighter payment limitations on program recipients. The House bill allows up to $550,000 of annual support under a three-entity rule. The Senate modifies this limit to $275,000 under a direct attribution to one person.

The Texas A&M team found the Senate bill with a direct attribution provision is estimated to significantly reduce government payments to cotton and rice farms, while not affecting most wheat and feed grain farms. Further analysis revealed among the U.S. farms surveyed:

* Six of the 12 cotton farms have high probabilities of exceeding the payment limit with losses ranging from $36,000 to $423,000 per year.

* Eleven of the 16 rice farms have high probabilities of exceeding the payment limit with losses ranging from $69,000 to $438,600.

* Two of the 16 feed grain farms would have government payments ranging from a loss of $19,000-$90,200. None of the 10 wheat farms lose payments in excess of $1,000 per year, according to the analysis.

"If you go from a direct attribution to a three-entity payment limit in the Senate, rice and cotton farms will almost totally switch their preference from the House to the Senate bill," Richardson says.

Other financial analysis of the farms suggest the following rankings or preferences of the two bills:

* Ranking based on net cash income for the period from 2002 to 2010 shows 10 of 15 feed grain farms prefer the House version, 10 of 10 wheat farms prefer the House version, eight of 12 cotton farms prefer the House, and 12 of 16 rice farms prefer the House.

*Rankings based on real net worth over the same period indicate that eight of 15 feed grain farms favor the House, eight of 10 wheat farms prefer the House, eight of 12 cotton farms favor the House, and 12 of 16 rice farms favor the House.

In considering net income risk over the 2002-2010 period, 38 crop farms preferred the House bill, 13 preferred the Senate bill, and eight were indifferent.

The Texas A&M analysis notes the House bill maintains a dairy price support for the 10-year life of the bill. The Senate bill includes direct payments over the 2002-2005 period and ends price support in 2006.

*Seventeen of the 26 representative dairies experienced a greater increase in real net worth (2002-2010) under the Senate bill.

*Five of the seven representative hog farms experienced slightly greater growth in real net worth under the House farm bill. For each farm, the difference in real net worth growth was very small. Also, five of the seven hog farms are involved in producing program crops. Hog farms with extensive crop operations could hit payment limits, however only one 1,200-sow operation in Indiana appeared to have hit the limit.

*There was little measured difference between the Senate and House farm bills' impacts on representative beef cattle operations. The analysis suggests most of the hog and cattle farms would be indifferent to either of the bills. The cotton and rice industry would see a projected 1.25 million acres of land shift out of cotton production in the near term and approximately 250,000 acres shift out of rice production. The result is directly related to the Senate bill direct attribution payment limitation, which would result into higher prices for both cotton and rice than would have occurred in the absence of tighter payment limits.

The analysis conducted by the land-grant universities focused on commodity market, government cost and farm income effects dealing with commodity conservation programs, including the implications they would have for a large number of U.S. representative farms in major production regions.

For more information and analysis, go to the Web at

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