Farm Level Impacts of Farm Bill Proposal HR 2646

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Farm Level Impacts of Farm Bill Proposal HR 2646
2001 Southern Regional Agricultural Outlook
Conference Atlanta, Georgia September 24-26, 2001
James W. Richardson Professor and TAES Faculty
Fellow jwrichardson_at_tamu.edu Joe Outlaw Associate
Professor and Extension Economist joutlaw_at_tamu.edu
Ph 979-845-5913 Fx 979-845-3140 AFPC
www.afpc.tamu.edu FAPRI www.fapri.missouri.edu FA
PRI www.fapri.iastate.edu
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Outline

• January 2001 Baseline Prices
• January 2001 Baseline for Representative Farms
• H.R. 2646 Overview
• Comparison of Baseline to H.R. 2646 for
  Representative Farms

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U.S. Commodity Prices January 2001 FAPRI
Baseline
1999
2000-02
1981-85
1986-90
1991-95
1996-98
2.48
2.82
Wheat, per Bu
3.42
3.01
3.50
3.44
Corn, per Bu
2.62
2.12
2.49
2.36
1.82
2.00
Soybeans, per Bu
6.10
5.90
5.95
6.28
4.63
4.61
Cotton, per Lb
0.59
0.60
0.64
0.65
0.45
Rice, per Cwt
8.02
6.39
7.48
9.50
6.11
6.21
Sorghum, per Bu.
2.34
1.91
2.35
1.91
1.57
1.83
73.38
65.56
NE Steers, per Cwt
63.99
69.83
72.20
64.28
BG, per Cwt
51.21
51.97
46.29
48.52
34.00
39.95
12.22
All Milk, per Cwt
13.44
12.91
12.80
14.51
14.38
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January Baseline 2001Summary of Overall Economic
Viability for Representative Crop, Dairy, and
Livestock Farms 2001-2005
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H.R. 2646 Provisions

• Continue marketing loan program and extend to
  peanuts
• Continue AMTA program and extend to soybeans and
  peanuts
• Create Counter Cyclical Payment (CCP) for all
  program crops

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H.R. 2646 Permits Base Re-Alignment

• Base acres for fixed payments and CCPs
• Current base or
• Average planted acres 1998-2001
• Farm Program Yields remain frozen at 1985 levels
• Soybeans and Peanuts receive FPY based on
  comparable AMTA yields in area historical
  yields 1976-1984

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Loan Rates, Fixed Payment Rates and Target Prices
Under H.R. 2646
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General Assumptions for Analysis

• Analysis incorporates the provisions that address
  loan rates and direct payments for grains, cotton
  and oilseeds (excluding peanuts) as well as an
  increase in the CRP enrollment cap.
• The analysis does not include any proposed
  changes to other conservation programs, other
  crops, dairy, trade programs, research,
  nutrition, and rural development.

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FAPRIs AnalysisImpacts on Net Farm Income

• H.R. 2646 increases farm income by an average of
  4.5 billion above baseline levels.
• For 2003-10, farm income under H.R. 2646 averages
  47.9 billion. By comparison, farm income over
  the 1996-00 period average 47.4 billion.

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FAPRIs AnalysisImpacts on Production Price

• Marginal increases in grain and cotton area with
  oilseed area declining from baseline levels.
• Total planted area increases by less than 1.
• Changes in crop prices reflect shifts in acreage
• Grain prices fall by 2-4 cents/bu
• Soybean prices rise by 4 cents/bu
• Cotton prices fall by less than 1 cent/lb

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Farm Level
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Representative Farm Assumptions

• 44 Farms Analyzed under risk 2000-2006
• 13 Feed grains/oilseeds
• 10 Wheat
• 11 Cotton
• 10 Rice
• 20 term and 100 operating debt 2000
• Base acreage chosen to maximize benefit
• MPCI 50/100
• Baseline 1996 FAIR ACT continued through 2006
• Does not include MLA for 2001
• Provisions of H.R.2646 plus the 2001 MLA
• Payment Limits assumed nonrestrictive

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Comparison of the H.R. 2646 Farm Bill to a
Continuation of the 1996 Farm Bill for
Representative Cotton Farms, 2002 - 2006
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Comparison of the H.R. 2646 Farm Bill to a
Continuation of the 1996 Farm Bill for
Representative Rice Farms, 2002 - 2006
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Comparison of the H.R. 2646 Farm Bill to a
Continuation of the 1996 Farm Bill for
Representative Wheat Farms, 2002 - 2006
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Comparison of the H.R. 2646 Farm Bill to a
Continuation of the 1996 Farm Bill for
Representative Feed Grain Farms, 2002 - 2006
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Summary

• 13 of 44 crop farms retained current Base acres
  while 31 farms changed Base to their 1998-2001
  average planted acres
• All crop farms benefit from H.R. 2646 Farm
  Program, relative to continuing the 1996 Farm
  Bill
• Higher net cash farm incomes (44 of 44)
• Lower probability of cash flow deficits (37 of
  44)
• Lower probability of decreasing net worth (40 of
  44)

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