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Corn+Soybean Digest

House Farm Bill Version: No Bull's-Eye

The proposed House version of the 2002 Farm Bill, calling for target prices and counter-cyclical payments, is “putting Freedom to Farm in reverse,” says Harlan Anderson, Cokato, MN.

Anderson, known as the “father” of the 1996 Freedom To Farm Bill, believes farmers liked the provisions of that farm legislation, which is set to expire in September 2002.

“There was 97% signup and they were prepared for a transition from government control to a free market system. But to me, it looks like this House version is trying to put the farmer back into the box it had him in before — to go back to target prices and government controls,” he says.

Target prices and counter-cyclical payments may help the “big guys,” says Anderson, but rarely small farmers. “The big guys need target prices because they're heavily leveraged; they're in need of guarantees higher than they've had in the past. They say target prices are a floor, but the floor becomes a ceiling, as we've learned in the past.”

The '96 Farm Bill's AMTA (Agricultural Market Transition Act) payments were to be transition funds for farmers trying new marketing ideas, he remembers. But when prices went down, extra AMTA payments were made, making farmers more dependent on government, Anderson says.

So will the Senate come up with a better 2002 Farm Bill? Anderson hopes it will come in with “a little bit more of a business approach. I still have hopes that it will extend the loan period from nine to 36 months, plus another nine-month extension at the option of the secretary of agriculture.”

In the '96 Farm Bill, loan deficiency payments (LDPs) weren't to be made until after the nine-month loan had expired. But pressure from non-farm interests to tweak the Farm Bill took away that safety net, he says. “It's one of the mistakes that got in the last Farm Bill.”

The reason for the 36 months? “I see very few farmers with the desire to hold three years of crop at their own risk,” Anderson adds. “The idea is that once they put their crops under loan, it's under their discretion as to when to market. It helps create market uncertainty as to when that farmer is going to sell.”

What's In The House Version

The House Farm Bill version advocates counter-cyclical payments, derived from target prices, that are not tied to current production acreages. According to the House Ag Committee, the proposed bill provides both “flexibility and predictability.”

Counter-cyclical payments would be triggered when a crop's price, adjusted for the fixed decoupled payment (formerly known as AMTA), is below the target price. A crop's payment rate would be figured as the difference between its target price and the sum of: a) the higher of the national 12-month season average price received by producers, or the national average loan, and b) the fixed decoupled payment rate.

The House proposal also:

  • Maintains AMTA (Agricultural Market Transition Act) payments, now called fixed, decoupled payments, for the life of the 10-year bill.

  • Retains the marketing loan program for all commodities except oilseeds, which are reduced to a level equivalent to other commodities; and grain sorghum, which is raised to be equal to corn. The soybean loan rate would drop from $5.26/bu to $4.92.

  • Gives producers the option to update their base acres. Producers can choose to stay with their current base acres — including grains and cotton, not soybeans — as set under the 1996 Farm Bill. Or, they can opt for a payment base that encompasses average planted area of all crops, including soybeans, grown on the farm between 1998 and 2001.

  • Sets payment limits for fixed decoupled payments at $50,000; counter-cyclical payments at $75,000, and marketing loan gains and loan deficiency payments at $150,000.

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