New Farm Bill Could Come Too Late for 2002 Crop

In any case, it could feature disaster aid and the option to update proven yield/base—and offer more work for lawyers

By Tracy Sayler

While there is much to be sorted out yet before a shiny new farm bill rolls onto the showroom floor, there are some prospective features for farmers to consider now for a smoother ride down the road.

Both the House and Senate bill would provide annual fixed, decoupled payments (similar to the current Agricultural Market Transition Act payments), and both bills would maintain the current structure of CCC Marketing Loans and the use of loan deficiency payments (LDPs). The Senate Bill would increase CCC loan rates for corn and wheat compared to current levels.

Both the House and Senate Farm Bills would establish a new counter-cyclical payment, a concept first advanced by the National Association of Wheat Growers. In the Senate version, this payment would be based on the “safety net price” for a commodity crop and would not be initiated until 2004, because of higher levels of fixed payments in 2002 and 2003. The counter cyclical payment in the House bill would be based on target prices per bushel for each commodity crop, and would begin in 2002—that is, if the new farm bill is approved and can be implemented in time for this year’s crop season. 

Kansas State University ag economist Art Barnaby, who is well-versed on farm policy and risk management issues, points out that after the new farm bill wins Congressional approval and the President’s signature, USDA’s Farm Service Agency will have the extensive undertaking of administering the new law. Procedures will need to be implemented for carrying out various provisions of the new law. Forms and software will need to be created, and county FSA staff across the country will need to be trained on administering the new farm program. 

Thus, it could be June or later before signup begins.  “It’s conceivable that Congress could stay with the current bill (which is scheduled to run through 2002 anyway) and put a new one in place for the 2003 crop year,” says Barnaby. If that happens, a second AMTA program payment, just as in the last few years, is likely.

Disaster aid is also possible in the new bill. A provision included in the Senate’s version of the farm bill would provide $2.4 billion in assistance to crop and livestock producers who had losses in 2001. The House Farm Bill does not include an ag disaster package, so lawmakers will have to be convinced to accept the Senate language, and it will need to approved in the final bill, as well as funded. Barnaby expects the disaster provision to survive, and if so, it will likely be implemented similar to disaster programs the last few years.  Producers who had crop losses last year should prepare documents and records to claim possible disaster payments, says Barnaby.

Farmers may have the option to update both proven yield and crop base acreage. The Senate version of the farm bill would allow producers that update base acreage to establish a new program yield for each eligible commodity crop. The yield would be the greater of a four-year average yield for that commodity (1998-2001) or program payment yield that would be in effect for the 2002 crop year. The House version of the farm bill maintained current base yields for existing program crops, such as corn and wheat, and would establish new soybean base yields that are comparable to corn and wheat.

It appears that updating base acreage would be optional, not required. Giving producers that flexibility to update their base acreage would be best, says Barnaby, because in some cases it will be beneficial (for example, producers who have switched from wheat/fallow to continuous wheat would be able to prove more base) and in other cases, it wouldn’t (for example, a producer who has established alfalfa on his corn base, in which case he’d lose that base in the event it was updated).

The Senate version includes an amendment to limit direct and counter-cyclical payments to $75,000; marketing loan gains and loan deficiency payments to $150,000; and any husband-and-wife partnership an additional $50,000 payment limit. The overall program payment limit for a farm would thus be $275,000, if the provision survives to be included in the final bill.  If it does, Barnaby says he wouldn’t be surprised if lawyers find a way around it.  “Farmers have created new legal entities and arrangements in the past to get around payment limitations.  Supposedly the new  limitation is going to be a hard and fast number, but I guess I’m a little skeptical that lawyers won’t find a way to work around it. They’ve been pretty good at it in the past, so I’m still betting on them.”

While they’re at it, lawyers might also be helping farmers create new names for their farming entities.  The publicity of farm program payments on the Environmental Working Group’s web site may prompt more farmers, especially those who are incorporated, to remove mention of their names from the operation.

“Instead of listing it under their name, like ‘Barnaby Corp.,’ I’m sure many people, if they knew it was going to be headline news, would have come up with something like ‘Poor Boy Farm,’” says Barnaby.  “People have thought those payments are confidential, but now they realize the fact that any time you’re dealing with the government anymore, you just have to assume that there’s nothing confidential.”

A comparison of the House and Senate farm bill proposals, written by Kent Thiesse of the University of Minnesota Extension Service, can be found online at www3.extension.umn.edu/county/blueearth under “farm management.” The web site agriculture http://agriculture.house.gov/farmbill. htm has updated information regarding the House-Senate conference on the new farm bill.

USDA Revises Dockage Standards For Wheat Food Aid Purchases
The USDA has announced revised standards of cleanliness for U.S. wheat exports destined for overseas food aid.  Beginning with invitations to purchase issued on Feb. 5 and through the remainder of fiscal year 2002, the maximum acceptable dockage level for wheat made available by USDA’s Commodity Credit Corporation for international food assistance will be 0.6%, down from 0.7%.

Dockage includes all matter other than wheat that must be removed prior to milling the wheat into flour.  USDA’s Grain Inspection, Packers and Stockyards Administration measures and reports dockage on each export shipment.  USDA launched a “Clean Wheat Initiative” in June 2000 that tightened the standards for wheat purchased by the CCC.