Resolved: That the United States should substantially change its federal agricultural policy.
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|Source: Feedstuffs, August 23, 1999 v71 i35 p8(1).
Title: Expanded trade is solution to farm crisis.
Full Text COPYRIGHT 1999 Rural Press Limited
With the U.S. Senate having already passed an emergency farm assistance bill and the House poised to begin its discussions when it returns to work after Labor Day, there is little question that debate over the need and scope of farm aid will be substantial this fall.
Undoubtedly, one of the biggest targets of the debate will be the Federal Agricultural Improvement & Reform Act (FAIR Act).
The FAIR Act, a seven-year program that is currently into its fourth year, ended federal production controls while creating a safety net for farmers by setting a minimum price floor. When the commodity price falls below that floor, the federal government pays the difference between the market price and government mark. Additionally, the government pays farmers an annual market transition payment, which totals about $5 billion a year.
The current farm program, which this year will include at least $16.6 billion in federal payments to farmers, represents 38% of the total 1999 projected net farm income of $43.8 billion. The average net farm income for the 1990s has been $45.7 billion. The assistance package passed by the Senate raises projected net farm income to more than $50 billion.
Even with the 1996 farm bill in place, the total outlay of federal dollars for farm programs - when loan deficiency payments, costs of loan settlements, emergency transition payments and the regular transition payments are included - was greater in 1998 than in any of the seven years from 1989 to 1995, according University of Minnesota educator Kent Thiesse.
Thiesse figures the average corn deficiency payment in the seven years before the current farm bill was 44 cents/bu., which translates to about $20-24 per tillable acre for a farm operator with a corn base of about 50%. The average annual per bushel payment for corn under the current farm bill is about 33 cents/bu., which Thiesse estimates amounts to a payment per tillable acre of about $14-17 per acre.
In 1998, farm operators received a regular transition payment for corn of about 37 cents/bu. and an emergency payment of nearly 19 cents/bu., which amounted to a total payment of about $30 per tillable acre. Total payment in 1998, according to Thiesse, was similar to 1989, 1990 and 1994. It was lower than 1992, which was 73 cents/bu., but significantly higher than 1991 when it was 41 cents, 1993 when it was 28 cents and 1995 when nothing was paid.
Farm operators also received significant loan deficiency payments on corn and soybeans in 1998 that were sold at market prices below county loan rates. Likewise, they were able to gain by putting grain under Commodity Credit Corporation loan and then releasing it at a price below the county loan rate.
Another thing Congress did not anticipate when it passed the FAIR Act was that the decoupling of farm payments from production controls meant that 15 million acres of U.S. cropland, which bad been idled under the previous program, returned to production. The fact that acreage was being brought back into production was hailed by U.S. farmers, but it came just as farmers around the world also were adding acreage and adopting high-tech genetics and farming practices at a dizzying pace. The Food & Agricultural Policy & Research Institute reports "approximately 50 million acres of land was added to global planted area in 1996."
When all things are considered, is it hard to see how the FAIR Act can be to blame for the current economic state of U.S. agriculture. Rather, it appears to be the inability of Congress and the Clinton Administration to take the necessary action to expand trade of U.S. agricultural products that has led to tough times for U.S. grain and livestock producers.
The FAIR Act was passed with the understanding that Congress and the President would work to expand trade. It was specifically designed to put farmers in the driver's seat as suppliers of products to meet a growing global demand. If Congress and the Clinton Administration had done their job of upholding the intent of the FAIR Act, chances are there would be no discussion today on whether to pour billions of dollars into a bailout of the U.S. farm economy.
The U.S. Department of Agriculture itself estimates farm income would be expanded $50-60 billion if trade for U.S. farm exports was expanded. That would increase commodity prices by as much as 25%, according to USDA.
The time is now for Congress and the Clinton Administration to set their sights on expanding trade for U.S. agricultural products. There is no question that the end result would be long-term stability for U.S. agricultural producers and the overall U.S. economy.
A temporary injection of cash, as many in Congress and the Clinton Administration are advocating, would do little more than provide temporary relief to U.S. producers. Expanded trade, on the other hand, would ensure the U.S. remains a leading world supplier of agricultural products and maintains its competitive position to up-and-coming agricultural producers, such as Brazil, which are quickly mobilizing production to fill any global trade that the U.S. happens to leave void.
World markets are never going to be the same. U.S. farmers will face cutthroat competition from now on. That's why an aggressive stance on opening - and keeping - U.S. export markets is critical. Market share for U.S. agriculture is at stake.