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Farm bill: Fundamental change in farm policy

Farmers will have some new terms to learn as they begin working under the new Farm Security and Rural Investment Act of 2002. But they are glad to have the opportunity judging from comments at a National Cotton Council informational meeting in Memphis, Tenn.

“We think the new bill will provide an effective safety net for production agriculture and provide a benefit delivery mechanism and level of support that will be consistent with the WTO commitments,” said Kenneth Hood, a farmer from Gunnison, Miss., and NCC chairman. “The legislation strikes a balance between budgetary restraint and the needs of commercial-size operations,” said Hood, one of the speakers at the NCC meeting at the Memphis AgriCenter. “We are especially pleased with the cotton provisions that maintain our marketing loan and improve our competitiveness provisions.”

NCC officials like Hood said USDA is beginning the task of developing regulations for implementing the act, which will be in effect for the 2002-07 crop years. But some details about the new farm bill won't be ready for a while.

“This is a change in farm policy that is as fundamental and important as what happened in 1996 when the FAIR Act was supposed to be major watershed in farm policy,” said Mark Lange, the council's vice president for policy analysis and program coordination.

“What we have now is something of a rejection of (the FAIR Act). The bill says we're going to do things a little differently.”

A few changes of note:

  • AMTA payments will now be called direct payments. “The key in the AMTA payment (Agricultural Marketing Transition Act) was the word transition,” Lange said. “We were transitioning out of a period of government supports to an almost complete reliance on the market.”
  • The counter-cyclical payment is similar to the old target price concept with one exception, according to Lange. “You do not have to plant the crop to be eligible for the counter-cyclical payment.”
  • A new conservation plan called the Conservation Security Program — which is funded at $2 billion over the length of the bill — will pay producers for the benefit from a conservation act that the producer performs, rather than paying him for the act itself.

“You can't say sign me up, I'll do this,” Lange said. “You're going to have to do it first; then you're eligible.”

What does the new farm bill mean to cotton producers? According to Lange, cotton producers will be guaranteed a cotton price that hovers around 72 cents.

For example, assuming equal program yield and actual yield, a producer who plants all base acres and is not impacted by payment limitations, a basis off New York of 6.5 cents, and New York trading at a 4-cent discount to the A Index:

  • A cash price of 33.5 cents would bring an LDP of 22 cents, a direct payment of 5.7 cents and a counter-cyclical payment of 11.7 cents for a total of 72.9 cents to the farmer.
  • A cash price of 53.5 cents would bring an LDP of 2 cents, a direct payment of 5.7 cents and a counter-cyclical payment of 10.4 cents for a total of 71.6 cents to the farmer.
  • A cash price of 68.5 cents would bring a zero LDP, a direct payment of 5.7 cents and a counter-cyclical payment of 0 cent for a total of 73.2 cents to the farmer.

“My initial take is that it's good, strong bill,” said Larry McClendon, Marianna, Ark., cotton producer and ginner. “It puts us on solid footing for the next six years.”

The payment limitations could result in some changes on McClendon's operation. “I'm going to have to address that. I don't know how yet. But overall, I thought the bill was very equitable. We're going to continue very strong with cotton. It's been our strong suit in the past.”

“I think it's good for farmers,” said Cecil Williams, Arkansas cotton producer and executive vice president of the Agricultural Council of Arkansas. “The real problem is that we are losing farmers so fast. We're going to get to the point where there is nobody to work this ground.”

Some Arkansas farmers weren't able to put together financing for 2002 prior to the signing of the bill, “and some farmers went out,” Williams said. “But if we hadn't gotten the bill, there would have been a lot more gone out.”

The bill caps payments at $40,000, $65,000 and $75,000, respectively, for direct payments, counter-cyclical payments and marketing loan gains/loan deficiency payments. The three-entity, wife eligibility and actively engaged rules are unchanged.

However, entities (excluding general partnerships and joint ventures) with three-year average adjusted gross income in excess of $2.5 million, if less than 75 percent is derived from farming ranching or forestry activities, are ineligible for all programs.

The restrictions will be a concern for some Arkansas growers, noted Williams. “We have some of the biggest operations in the country in Arkansas.”

While the passage of the bill does little to change agriculture's faltering public image, apparently Congress recognized the importance of the U.S. farmer, noted Williams.

“If we had been faced with three more years of what we've faced, there would be hardly anybody left farming. We'd have the big corporations running agriculture.

“The biggest beneficiaries of the farm bill are consumers,” Williams added. “If we go to corporate agriculture, they're going to charge prices high enough to make a profit. And that's going to mean much higher prices at the supermarket. The press doesn't understand that and the taxpayers don't understand that.”

Online information: USDA has launched a farm bill web site at

e-mail: [email protected].

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