September/
October 1998
Farm Crisis Remedies: Some Pills, Placebos, Snake Oil
By Tracy Sayler
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
Don't expect a magic cure to be found this fall. Congress is targeted for adjournment October 9, and lawmakers will have all they can do to pass 13 appropriations bills for the 1999 fiscal year, which begins October 1. A few pills, placebos, and snake oil have been put forth and more is sure to come before election day. But the farm crisis as well as meaningful remedies is sure to be an issue that will carry into the next Congress and state legislatures next year. Following is a summary of leading actions and discussion points:
Clinton wheat donation
President Clinton announced in July that the government will help ease the big US wheat supply by purchasing more than 80 million bushels of wheat to be donated for overseas humanitarian assistance to about 18 countries. The announcement didn't immediately affect the market, but will be positive in the overall scheme of things, lending a boost to the 1998/99 export projection and a snip to carryover stocks.
Early AMTA payments
Here's the snake oil mentioned earlier. The president and Congress rolled out a bill mid-August to help farmers cash flow by providing 1999 transition payments early, around October 1, instead of waiting until later. The early payments may lag anyway, by federal writing and processing of the new rule and downsized FSA offices that will be hard-pressed to administer it and work through different land owner-tenant contracts.
Indemnity payment
Before it adjourned for the August recess, the Senate included an amendment to its FY99 ag funding bill offered by Sen. Kent Conrad (D-ND) to earmark $500 million to compensate farmers who received crop insurance payments in at least three out of the past five years, with the benefit equaling 25% of the total received during those years. The plan has more momentum than other measures, but still has a tough road to hoe. Indemnity language was not included in the House ag funding bill, and drought in southern Plains states could balloon the price tag to an amount budget hawks may find unacceptable. If the indemnity plan is passed, how the eligibility rules are written may include some producers and exclude others.
Scabby land in CRP
Rep. Collin Peterson (D-MN) introduced a bill before the House recess that would permit scab-infected wheat and barley acreage into the next enrollment round of the Conservation Reserve Program, which could come as early as this fall. The bill has real possibility, as it has the support of House Ag Committee Chair Bob Smith (R-OR). CRP has been criticized for hurting the rural economy more than it helps, however, and efforts may be made to reduce contract length or allow other uses for scab-infected land enrolled in the program.
Crop insurance changes
Federal crop insurance officials in August unveiled new program changes for next season: a higher 85% federal crop insurance coverage level, 25% premium reduction for enterprise (whole farm) coverage, expanded Income Protection program coverage, increased yield floors based on actual production history, elimination of the non-standard classification system, proposed change to the prevented planting "20/20 rule," and greater crop eligibility for written agreements in counties where crops aren't eligible for coverage. The measures are steps in the right direction. However, premiums in many cases will go higher, and changes will be offset by a price election next year that will likely be lower. More affordable, better coverage of production costs through crop insurance is still lacking.
Economic sanctions
Congress in July passed emergency legislation to exempt agricultural credit guarantee programs, medicine and fertilizers from US economic sanctions. The measure assured US credit availability to India and Pakistan to allow US wheat purchases. The debate of self-imposed economic sanctions is not over, however, as 11% of the world wheat market is still closed shut to US grain.
EEP
A trade war simmering with the European Union has US wheat leaders urging US trade officials to use the Export Enhancement Program, or at least boost funding to send a message to the Europeans, going into the next round of global trade talks in late 1999. The program is more likely to be used for US wheat flour now than bulk wheat, but the EEP cabinet will probably stay locked unless the Europeans get too brash with their export subsidies.
Fast track
A vote on whether to grant President Clinton fast-track negotiating authority on trade agreements is scheduled for late September. Fast-track authority allows the president to submit trade agreements to Congress for up-or-down votes within 90 days, with no amendments allowed. Without it, fast-track supporters say other countries would be reluctant to negotiate trade agreements with the US, fearing Congress would force additional bargaining to seek concessions beneficial to their states or districts. If Republicans don't have the votes, fast-track could be shelved until next year.
IMF funding
Many ag groups and lawmakers want the US government to provide $18 billion to the International Monetary Fund, to help fallen Asian economies (and US grain exports) recover. Some budget hawks are against such a move, however, until it can be proven that doing so won't be a bad US investment and that the troubled countries can demonstrate that they will operate in a more economically-sound manner.
Tax relief
Republicans want to help economically hard-hit farmers through tax relief: lengthening the time a farmer can claim deductions for losses, making income averaging permanent, reducing the capital gains tax, and either eliminating the estate tax or accelerating the timetable that exempts estate transfers up to $1 million. The tax cuts would come from projected federal budget surpluses. But some lawmakers would rather the surpluses be allocated to other measures, including fixing Social Security.
Loan rate hike & extension
One of the most partisan issues on Capitol Hill. Democrats contend that lifting the cap on marketing loans and extending terms by six months would help protect farm income without distorting the market, increase producers' marketing flexibility, and give farmers a better opportunity to market grain when prices have improved. Republicans balk at the potential price tag, as much as $7 billion, which would be over and above Freedom to Farm transition payments and which would require a budget offset, such as cutting transition payments, unless declared emergency spending. A congressional vote to raise current loan rates from levels capped in the 1996 Farm Bill, and to extend nine-month marketing loan terms to 15 months, failed in July. The issue will be campaign fodder, and could be raised again in a vote this fall or next year, depending on market conditions and makeup of the next Congress.
State level
State lawmakers next year may look to help address the farm economy through such means as tax relief, debt interest write-downs, or an indemnity plan such as Minnesota's reimbursement of 1997 crop insurance premiums to wheat and barley producers in the state. Actions taken by states may be precipitated by actions or the lack thereof at the federal level, says Bruce Kleven, legislative strategist for the Minnesota Association of Wheat Growers and Minnesota Barley Growers, St. Paul. n