Wheat Growers Take Farm Policy Recommendations to Washington

Leaders of the National Association of Wheat Growers took their farm policy recommendations to Capitol Hill this spring, underlining the need for farm income support this year, and highlighting a counter-cyclical market price support plan for federal lawmakers to consider as they draft a new farm bill.

Producers from wheat states across the nation met with federal lawmakers and administration officials, and outlined their policy recommendations in a U.S. House Agriculture Committee hearing. In testimony at the hearing, NAWG president and Colorado producer Dusty Tallman said farm policy should encompass four elements: it needs to be equitable, fiscally responsible, counter-cyclical, and compliant with the World Trade Organization. To that end, the NAWG outlined the following recommendations:

•  Continued support of the market-oriented approach implemented in the 1996 FAIR Act. NAWG does not support any form of mandatory set asides, an expansion of CRP, the establishment of a Farmer Owned Reserve, or other proposals that would limit farmer flexibility.

•  The NAWG plan, which would extend from 2003 to 2010, calls for securing a guaranteed fixed payment, similar to the current AMTA system in order to safeguard the wheat producer’s ability to secure operating capital. NAWG would continue fixed payments at the 1999 AMTA level. This plan would also be extended to oilseeds.

•  The plan recommends the elimination of all payment limitations.

•  The cap on the wheat marketing loan would be raised to $3.05 and a floor would be established at $2.85. This plan raises most marketing loan levels while tying them to a market-based formula. Proposed loan caps and floors for other crops: Corn, $2.09-$1.09; Barley, $2.08-$1.90; Soybeans, $5.26-$4.92; and Sunflower, $9.30-$8.70. The Secretary of Agriculture’s discretionary authority to set commodity loans would be eliminated and the loan rates would be 85% of the five-year Olympic price average, but no less than the stated floor or higher than the stated cap.

•  In addition to current farm programs, a Market Loss Support program would be implemented to make annual emergency spending unnecessary. A Market Support Level would be established for each eligible crop and would increase by 1% each year. Support payments would be calculated by subtracting the fixed payment and the higher of either the national average marketing loan level or the national average yearly price from the Market Support Level.  For example, a 64-cent fixed payment and a $2.85 marketing loan rate would result in a 76-cent counter-cyclical payment for wheat in 2003 if the national average cash price fell below the marketing loan rate. All counter-cyclical payments under this plan would be decoupled from current production. Market support levels would include as follows:

Wheat: 2003-$4.25, 2010-$4.56

Corn: 2003-$2.65, 2010-$2.84

Barley: 2003-$2.72, 2010-$2.92

Soybeans: 2003-$5.55, 2010-$5.95

Sunflower: 2003-$9.82, 2010-$10.53

The NAWG stresses that immediate action should be taken on several issues. First, the USDA baseline should be increased. Next, remaining AMTA payments should be frozen at 1999 levels.  An 81-cent Market Loss Assistance payment should be authorized for the current crop year. Finally, presidential trade negotiating authority should be secured, sanctions policy reformed, and tax relief provided.

NAWG recommends focusing federal spending in these four areas:

Fixed Payments
$5.885 billion a year would be dedicated to fixed payments. This is $2.361 billion more than the current budget estimates. Producers would receive a payment equal to the 1999 AMTA and a payment for oilseeds producers would be added.

Commodity Marketing Loans
An average of $727 million would be saved each year over the current budget estimates.

Counter-Cyclical Payments
An average of $3.497 billion each year would be spent on counter-cyclical payments.

Equity Among Commodities
Equity would be restored among commodities by spending additional funds to support each program crop. On an annual average, Commodity Credit Corporation outlays would raise for wheat by $1.477 million, corn by $1.169 million, grain sorghum by $235 million, barley by $147 million, oats by $23 million, upland cotton by $811 million, rice by $469 million and soybeans by $808 million.

 Leaders of the National Association of Wheat Growers fielded questions on the NAWG’s farm policy proposals in testimony on Capitol Hill earlier this spring.  From left are Wayne Hammon, former NAWG government affairs director, now state FSA director in Idaho; Colorado producer and NAWG president Dusty Tallman; and Allan Skogen, a Valley City, ND producer and chair of the NAWG’s domestic policy committee.

NAWG Answers Tough Questions on Farm Policy
The National Association of Wheat Growers answered a volley of tough questions put forth by U.S. House Ag Committee members, when the NAWG presented its counter-cyclical payment plan and other farm policy recommendations to the Committee this spring. Following are some of the House Ag Committee questions, followed by NAWG responses.  A complete list of the Q&As, as well as more background on the NAWG’s farm policy recommendations, can be found on the Internet at www.smallgrains.org.

In your testimony you propose new floors and caps for national loan rates. Do you intend to realign county loan rates, and, if so, how would you do that?
NAWG believes that current methodology for determining county loan rates is, for the most part, sufficient. However, in a limited number of cases, large discrepancies exist between neighboring counties – mostly across state lines.  USDA should evaluate these areas and make adjustments where needed to ensure that all farmers are treated equitably.

Would the national average cash price in your counter-cyclical plan be calculated in a manner similar to how national average prices were calculated under the old target price concept?
NAWG anticipates the plan using the existing USDA calculations to establish the national average cash price.

When would counter-cyclical payments be made?  Would these payments be made at different times of the year for different commodities?
NAWG anticipates that the counter-cyclical payments would be made at the end of each crop’s marketing year.  The timing of payments would differ depending upon the commodity.

If we calculated loan rates as you proposed, with floors and caps, do you think wheat acreage will increase and, if so, by how much and what impact will this have on prices?
Yes. Preliminary analysis by FAPRI (Food and Agricultural Policy Research Institute) has indicated that the NAWG loan rates would result in a limited increase in wheat planted acres.  While the full impact will not be determined until the FAPRI study is completed next month, we believe that it would have only a very small impact on prices.

Are currency exchange rates the single largest factor that impacts our ability to competitively export agriculture products?  If not, what is?
No.  While currency exchange rates do directly impact the purchasing ability of our export customers other factors, such as the government funded export programs and monopoly trading practices, have a greater impact on our exports.  For example, the European Union funds its export promotion programs at a level at least 20 times more than the U.S.

Since the Agriculture Risk Protection Act of 2000 provided substantial improvements to crop insurance, do you believe that ad hoc disaster legislation should be authorized for crops currently covered by insurance? If yes, why?
While NAWG has no policy on this specific subject, it believes that the improvements made as part of the Agriculture Risk Protection Act of 2000 was the first step towards a reliable farm policy that would make such ad hoc assistance unnecessary at some future time. The completion of a reliable counter-cyclical reauthorization of the commodity title of the Farm Bill would be the second step towards this ultimate goal.

Do you believe your counter-cyclical program distorts market signals and causes producers to grow crops that they might not otherwise grow in the absence of the program? 
No.  The NAWG plan, with its de-coupled fixed and counter-cyclical payments, allows producers to make planting decisions on the basis of market signals and best agronomic practices. In addition, equitable marketing loans would further reduce any such distortion.

From a practical standpoint, when is the earliest date you believe any changes in permanent farm law should become effective?
NAWG believes that the recommended changes in current law should be implemented as soon as possible, conceivably for the 2002 crop year.

The FAIR Act covered 7 crop years. How many years do you think the next farm bill should cover?
NAWG supports extending the next Farm Bill to include the 2010 crop year.

The original Agricultural Market Transition Act payments were designed as transition payments, in both amounts and beneficiaries, to a market with no government involvement.  In your testimony, you propose a combination of counter cyclical income assistance, potentially increased loan rates and well as a continuation, and increase, of the current transition payments. What is your justification for these payments since there is clearly no transition involved?  If these payments were continued, they would apply even when wheat prices rose above $4.25. What is the justification of producer need under these circumstances?
The continuation of a guaranteed fixed payment is essential to the ability of most producers to receive operating credit on an annual basis.  In addition, such payments are consistent with our WTO obligations.  It is also important to note that no creditable forecast currently available (neither by USDA, FAPRI or other scholarly sources) project prices rising to the levels proposed in this question.

You mention in your discussion of payment limitations to the Freedom to Farm contracts that “such limits are a necessity in the preservation of some romantic vision of the ‘family farm.’” Do you ever envision a need to utilize payments limitations in a situation where there may not be enough federal resources to operate the type of commodity program at the funding level you’d like to see?
No. Analysis continues to show such limitations do not save money, only make programs more complicated to administer.

The NAWG’s counter-cyclical price support plan, proposed for a seven-year span from 2003 to 2010, would supplement the cash price (estimated in this example to range from $3.03 in 2003 to $3.55 in 2010) with a 64-cent fixed payment (same as the 1999 AMTA level) and a Market Loss Support payment, which would decline if the wheat cash price increases (as the example illustrates) or increase if the wheat cash price decreases—hence, the counter-cyclical support.