The Farm Security

1
The Farm Security Rural Investment Act of 2002

• Analysis from Ohio State University
• Department of Agricultural, Environmental, and
  Development Economics
• Barry K. Goodwin
• [phone]

2
Key Attributes of FSRIA

• Six year bill adding 47.7 billion to the ag
  budget baseline
• Conservation spending increased by 13.2 Billion
• U.S. 8 major crop payments predicted to increase
  (over FAIR) 6.6 billion (67) in 2002
• Ohio major crop payments predicted to increase
  198.2 million (43) in 2002
• Source CBO FAPRI

3
Other Provisions

• Country of origin labeling
• Reinstitutes wool, mohair, honey programs
• Reforms peanut program
• Bioenergy program (ethanol and bio-diesel)
• Extends dairy price support at 9.90 creates a
  dairy market loss assistance program
• Increases research funds for IFAFS program from
  120 million to 200 million per year
• Disclosure of livestock and poultry contract
  information
• Food benefits for legal immigrants, increase in
  funding

4
What is not in the Bill

• Significantly more restrictive payment limits
• Acreage controls
• Packer control limitations
• Farm Savings Accounts
• Northeast Dairy Compact was not reauthorized

5
Three Crop Payment Programs

• Continued
• Non-recourse Loan deficiency payments (LDPs)
• Decoupled Fixed Payments (essentially a
  continuation of PFC)
• New
• Counter-cyclical payments

6
Continued Non-recourse Loans - LDP paid on
actual acres yields
7
Continued Decoupled Fixed Payments - Paid on
85 of base acres PFC yields
8
New Counter-Cyclical Payments

• Target Price
• Decoupled Fixed pmt. rate higher of Season
  avg. price or loan rate 85 Base
  acres payment yield

9
Payment Limits(?)

• 40,000 per person fixed payment
• 65,000 per person counter-cyclical payment
• 75,000 per person LDP/marketing loan gains
• Marketing certificates authorized
• Three-entity rule continued
• Creates a commission to investigate the impact of
  payment limits.

10
Base Acres and Payment Yield Decision ( Applies
to Fixed Counter-cyclical payments)
 
                           
Retain PFC base add oilseed acreage
Update base acres using 1998-2001 average planted
and prevented acreage
Base Acres
Oilseed acreage is the 1998-2001 average planted
and prevented acreage.
 
Fixed Direct Payment Yields
No yield update is allowed for Fixed Direct
Payments on PFC crops.
No yield update is allowed for Fixed Direct
Payments on PFC crops.
Oilseed yield is the 1998-2001 average farm yield
multiplied by 0.78.
Payment yield updated by 70 of the difference
between the 1998-2001 average yields the PFC
yield (75 of the county average yield used in
1998-2001 average when actual yields are lower).
Payment yield equals 93.5 of the 1998-2001
average yields the PFC yield (75 of the county
average yield used in 1998-2001 average when
actual yields are lower).
No yield update is allowed.. Counter-cyclical
payment yields will be the same as for Fixed
Direct Payments.
Keep current payment yields
Counter-cyclical Payment Yields
11
Yield/Payment Update Calculators

• We are working on one for Ohio
• FAPRI has one
• http//www.fapri.missouri.edu/FarmBill02/PetersWor
  ld/BaseYield_6_02.xls
• Nebraska has one
• http//farmbill.unl.edu/FSRI.XLS
• LSU/MSU have one
• http//www.agecon.lsu.edu/Extension_Pubs/FARM_UPDA
  TE.xls
• Pro-Farmer has one for subscribers
• Use at your own risk, accuracy of these has not
  been verified

12
Rural Development

• Rural local TV Broadcast Signal loan guarantees -
  80 Million
• Broadband service in rural areas - 100 Million
• Value-Added Agricultural Market Development
  Grants - 240 Million
• Rural Strategic Investment Program - 100 Million
• Rural Business Investment Program - 100 Million
• Funding for Rural Development Backlog of water
  and waste water program - 360 Million
• Rural Firefighter and Emergency Personnel Grants
  - 50 Million

13
Conservation Provisions Total 17.1 Billion

• Expands Conservation Reserve Program (CRP) from
  36.4 million acres to 39.2 million acres --
  1.52 Billion
• Expands Wetlands Reserve Program (WRP) by 2.275
  million acres -- 1.5 Billion
• Farmland Protection Program (FPP) to protect
  farmland from development --985 million
• Wildlife Habitat Incentives Program (WHIP) 10
  fold increase - 700 million
• Environmental Quality Incentives Program (EQIP)
  Funds are allocated 60/40 to livestock/crops --
  9 Billion

14
Conservation Security Program (CSP) - 2 Billion

• Nutrient management integrated pest management
• Water conservation quality
• Grazing Pasture management
• Soil conservation invasive species management
• Fish wildlife habitat conservation
  restoration
• Air quality, energy conservation, biological
  resource conservation
• Contour farming, strip cropping, rotational
  grazing, resource conserving crop rotation
• Conversion to soil-conserving uses such as cover
  crops
• Partial field conservation practices
• Native grassland protection
• Other conservation practices approved by
  Secretary of Ag.

15
Credit

• Reauthorizes USDA farm lending programs
• Increases the percentage USDA may lend for the
  down payment
• Pilot program to encourage beginning farmers to
  purchase farms on a land contract basis.

16
Longer term issues

• Will prices recover?
• How has public opinion been influenced?
• Will payment limits be revisited?
• How will the bill affect trade negotiations?
• Will there be more ad hoc disaster payments?

17
WTO Concerns

• Large increases in support clearly at odds with
  philosophy of WTO
• Already statements of protest around the world
• Canada, EU, Brazil, Australia
• Concerns about developing countries
• Combest said his concern is for rural Americans,
  not rural Canadians, Europeans, and Australians

18
WTO Concerns

• Policies limited according to how they are
  classified
• There has been dispute over this classification
  scheme and this will intensify
• Much policy constructed to skirt the limits
  imposed by WTO disputes likely to intensify
• Country of origin labeling may be seen as
  discriminatory

19
WTO Concerns

• Steel import tariffs and farm bill raising
  concerns with competitors
• US agreed to reductions in domestic support in
  URAA have been near to the 19 billion limit in
  recent years (FAPRI says 19.3 chance US is over
  in 2002)
• Concern the new bill will push us over, depends
  on future prices though
• USTR Zoellick says not to worry Farm Bill
  includes language to keep support within limits

20
WTO Concerns

• Useful to examine the language
• If Secretary determines expenditures will
  exceed allowable domestic support levels under UR
  agreement the Secretary will to the maximum
  extent practicable make adjustments to ensure
  expenditures do not exceed allowable levels
• But before making any adjustment, the Secretary
  shall submit to Senate and House Ag. Committees
  a report on determination and extent of
  adjustment

21
Farm Asset Value Concerns--

• Payment benefits capitalized into land values
• In some areas, gt20 of land values accounted for
  by policy benefits
• Our research for post-FAIR shows
• 1/acre LDP raises land price about 9.50/acre
• 1/acre market loss assistance raises land price
  6.50
• In 1998 1/acre AMTA raised prices 3.25

22
Tenant/Owner Issues

• Much discussion of absentee owners
• Remember in U.S.
• 45 of U.S. farmland operated by tenant
• 18 of farmers rent more than 75 of their land
• Benefits generally intended for the farmer, but
• Our research shows 1 direct payment raises rent
  by 0.40-0.70
• 1 LDP raises rent by 0.60
• Owners are benefiting substantially, even if they
  do not produce

23
Acknowledgements/Further Info

• Helpful info was obtained from Dr. Keith Coble
  (MS St)
• ERS website (www.ers.usda.gov/features/farmbill/a
  nalysis/)
• Other good resources
• www.agriculturelaw.com/
• www.senate.gov/agriculture/Briefs/2001FarmBill/FA
  PRI.pdf/
• http//fb-net.org/index.html