Commission on 21st Century Ag Issues Final Recommendations

The Commission on 21st Century Production Agriculture recently released its recommendations for the next step following “Freedom to Farm.”

Established by the 1996 Farm Bill, the purpose of the commission was to conduct a comprehensive review of production agriculture in the U.S. since “F2F” was enacted, and issue recommendations to the president and congress. The Commission was composed of 11 members, with Kansas State University ag economist Barry Flinchbaugh as chair.  Hearings and “listening sessions” across the country helped the commission in developing its recommendations.

In its final report, the commission said that “Given the importance of agriculture to the general economy, the inherent volatility of the sector, its reliance on markets that transcend national boundaries, and the inability of individual producers to have an impact on the overall forces of supply and demand, the federal government will likely remain involved in activities that directly affect the marketplace for agricultural products and the economic well-being of producers.”

The Commission recommends the continuation of a fixed Agricultural Market Transition Act (AMTA) payment consistent with existing baseline budget allocations and the adoption of an additional counter-cyclical income support program.

Specifically, the Commission recommends a program referred to as a Supplemental Income Support (SIS). As envisioned, the SIS program would provide supplemental payments to producers when aggregate program crop gross income falls below some percentage of the historical income level calculated over a fixed-base reference period.

SIS payments would be counter-cyclical in that no payments would be made if aggregate income is above the fixed-base reference level. SIS payments would be decoupled from current prices and yields for any specific commodity and, as such, the Commission believes they would meet requirements of the World Trade Organization.

The Commission also recommends retaining the current marketing assistance loan program, including loan deficiency payments (LDP) and marketing loan gains, while adjusting marketing loan rates to reflect a closer balance between the historical market value of individual crops. The Commission also recommends removing limitations on all government payments to producers.

Other recommendations:

•  That a study be conducted to examine the possibility of movement to an actuarially sound crop/revenue insurance program with products provided by private companies. Under this program, the government would not underwrite a portion of the insurance companies’ risk but instead provides farmers with a voucher to offset the cost of insurance premiums.

•  The establishment of a tax preferred savings account such as the Farm and Ranch Risk Management (FARRM) account without restrictions on how long money may be left in the account. The removal of the time restriction on monies in the account would allow the FARRM account to serve both as a cash reserve for low-income years and an alternative retirement fund for the producer.

•  Continuation of the current Conservation Reserve Program, but under the advisement that any possible increase in CRP acreage be designated towards buffer strips, filter strips, wetlands, grass waterways and partial field enrollments.

The report may be found online in its entirety (PDF format) at http://www.usda.gov/oce/21st-century/index.htm.

CWB Investigation Petition to Proceed Despite Pasta Company Vote
The recent vote by Dakota Growers Pasta Company to allow Canadian growers to participate in its company and supply durum wheat makes it more difficult for the U.S. to argue that it has the quality and quantity of durum available to meet processors’ needs. A petition led by the North Dakota Wheat Commission to launch a Section 301 investigation of Canadian Wheat Board trade practices continues, however.

“(The DGP vote) is not insurmountable, but it’s certainly not helpful,” says Ellen Huber, NDWC public information specialist. Looking at the vote from a different perspective, however, she also points out that the fact that Canadian producers would want to get a higher price for their durum through an American-based company, and that American-based durum processors look to Canada for cheaper-priced durum, is indicative of the type of pricing advantages afforded through the CWB’s single-desk selling structure.

A key objective now is educating the new administration and congressional staffers about the issue, says Huber. One economist estimates that inappropriate activities of the CWB are single-handedly depressing wheat prices in U.S. and foreign markets by at least 8%. This translates into losses to U.S. wheat farmers of more than half a billion dollars in each of the last four years.

Among steps sought by the NDWC: Elimination of both the supply and export monopolies of the CWB; a change in the definition of the CWB’s acquisition costs under the U.S.-Canada Free Trade Agreement; and full transparency of CWB operations, including full and equal access to Canada’s grain marketing and transportation system. If Canadian grain trade practices that are the subject of the 301 petition are not immediately resolved by the investigation, the NDWC wants a tariff rate quota established for two crop years, and then adjusted or eliminated in subsequent years as fundamental reforms of the CWB are implemented.