FARM BILL FINE PRINT
Following are some of the finer points of the recently passed Farm
Security and Rural Investment Act of 2002, otherwise known as the Farm
Bill. The following comments are drawn from the Commodity Title of the
bill; future articles will examine the other titles of this legislation,
including Conservation, Research, Trade and Energy.
The bill continues fixed payments and marketing loans from prior bills,
and adds a counter-cyclical payment to the toolbox. The fixed payments and
counter-cyclical payments are determined on fixed base acreage and yield,
so they will not fluctuate with production during the 2002-2007 period.
Loan rates and Loan Deficiency Payments will be based on actual
production.
DETAILS FOR WHEAT:
Acreage bases: producers will have the option to maintain current
program base acres, or update to the actual acres planted to the program
crop plus the average of any oilseed acres actually planted in 1998-2001.
This total cannot exceed the actual cropland acres on the farm, and CRP
acres are considered as cropland for the determination. There is an
exception for double-cropped acres to protect those farms from
double-counting. The update election must the same for all crops on the
farm. Prevented plant acres are counted as planted acres for this
determination of average plantings, as are years when no crop was planted.
If the producer makes no base election, it is assumed that the producer
wishes to remain with program base acres and add any oilseed plantings.
The updated base acre numbers will be used for both fixed payments and
counter-cyclical payments. NAWG is on record asking that program acres
diverted to conserving use or other permitted use still be considered as
planted to the program commodity for purposes of calculating the updated
bases. Producers will be offered one chance for a base election. The
Secretary is required to make an adjustment in base acres for acres that
retire from the Conservation Reserve Program. Payment acres are 85% of the
base acre total.
Program Yields: if producers elect to update base acres, they also will
have an option to update program yields or retain their present program
yield. The update options include (1) add 70% of the difference between
your program yield and your 1998-2001 actual yields to your program yield,
or (2) use 93.5% of your actual yields from 1998-2001. If the actual yield
in any of these years was less than 75% of the county average, the
producer may substitute 75% of the county average for that year’s yield
number. The yield election will apply to all crops on the farm.
Direct Payments: payments will be based on whichever base acre option
the producer elects, and will be paid on existing program yields (before
any update). Wheat’s payment rate is 52¢ per payment bushel. Fixed
payments are to be made available sometime after October 1 of the year
when the crop is harvested, but producers may elect to receive 50% of the
fixed payment after December 1 of the year prior to harvest. NAWG will
request that the producer have the option of receiving the payment either
in December or after January 1. If a producer who receives and advance
payment quits farming or his/her share of risk in the enterprise changes,
an adjustment or refund of the advance payment will be required. For the
2002 crop year, USDA will issue a 6¢ payment; this amount, added to the
already-received AMTA payment under the previous law, will bring the total
wheat fixed payment to 52¢.
Loan Rates: Wheat loan rates are $2.80 for 2002 and 2003, and $2.75 for
2004-2007.
Target Prices: Wheat target prices are $3.86 for 2002 and 2003, and
$3.92 for 2004-2007.
Counter-cyclical payments: payments will be determined by establishing
an Effective Target Price, which is the target prices less the fixed
payment rate. For wheat in 2002 and 2003, this rate is $3.86-0.52, or
$3.34; in 2004-2007, the effective price is $3.92-.52, or $3.40. From this
Effective Target Price, subtract the greater of (1) the 12-month national
average price for the commodity, or (2) the national average loan rate for
the commodity. For 2002 and 2003, the maximum counter-cyclical payment is
$3.34-$2.80, or 54¢ per bushel. Counter-cyclical payments are based on
whichever base option the producer has elected, and the updated program
yield numbers. Up to 35% of the advance counter-cyclical can be received
after October 1 of the year of harvest, and the producer may draw a total
of up to 70% of the projected counter-cyclical payment after February 1 of
the following year. The balance will be available at the end of the end of
the 12-month marketing year (May 31 for wheat). Unfortunately, the October
and February dates are specifically written into the law, rather than a
certain number of months after the start of the marketing year; in effect,
wheat producers will have to wait further into their marketing year for
advance payments than will producers of summer crops. Any excess advance
payments on counter-cyclical payments must be repaid to USDA.
Conservation Compliance: producers must comply with conservation
requirements and wetland provisions under the Food Security Act of 1985,
agree to use the land for an agricultural or conserving use (not a
nonagricultural commercial or industrial use), and agree to effectively
control noxious weeds to qualify for payments.
Acreage Reports: annual acreage reports are required.
Planting flexibility: Planting flexibility requirements are largely
unchanged from current law. Section 106(b)(2) prohibits the planting of an
agricultural commodity produced from a tree or other perennial plant; this
is aimed at tree fruits and nuts, but may inadvertently impact development
of perennial wheats. Planting fruits and vegetables on contract acres will
require and acre-for-acre reduction in contract payments. For 2002 only,
if a producer has overplanted base, fixed and counter-cyclical payments on
the excess base will not be paid.
Marketing Loans: Nine-month nonrecourse marketing loans are continued
with the newly-established loan rates. Extensions of loans are prohibited.
USDA is directed to operate the program in a way that (1) minimizes
forfeitures, (2) minimizes stock accumulation, (3) minimizes storage cost,
(4) allows commodities to be marketed freely and competitively, and (5)
minimizes discrepancies in benefits across state or county borders.
Beneficial interest in the commodity is required, though there is an
exemption for the 2001 crop year to clean up unresolved questions.
Graze-out on LDP: Receiving LDPs for grazed-out crops continues for
wheat, barley, and oats. Triticale was also added to the program, and will
paid at the same LDP rate as wheat. Crop insurance indemnities and any
Noninsured Assistance Program (NAP) payments on grazed-out acres are
prohibited. Generic certificates are clearly authorized for cotton, but
are not mentioned for other commodities; NAWG is researching this apparent
omission.
Implementation: USDA is required to publish implementation rules not
later than 90 days after enactment. With May 6 as the enactment date, the
deadline is August 6, 2002.
Uruguay Round Trade Agreement Compliance: If the Secretary determines
that the United States will exceed its limits for support under the World
Trade Organization agreement, the Secretary is required to propose
adjustments to spending that will maintain compliance with the agreement.
Prior to enacting those adjustments, the Secretary is required to consult
with Congress.
Payment Limitations: Limits on payments are established as follows:
$40,000 on direct payments; $65,000 on counter-cyclical payments; and
$75,000 on marketing loan gains or LDPs. If a person or entity exceeds
$2.5 million in average Adjusted Gross Revenue, that person/entity is not
eligible to receive direct or counter-cyclical payments, LDPs, marketing
loan benefits, conservation payments, or payments under Title XII of the
1985 Food Security Act. However, if at least 75% of the person or entity’s
income comes from farming, ranching, or forestry operations, the limit
does not apply. Producers are required to certify their compliance with
this limitation by providing documentation or an approved third-party
certification. The payment limitation for an entity will be pro-rated if
one or more of the participants in the entity exceeds the limitation, with
the reduction based on the share of ownership of the exceeding person(s).
Commission on Payment Limitations: The law also establishes a
Commission on Application of Payment Limitations, which is charged with
studying the impact of additional payment limitations on farm income, land
value, rural communities, agribusiness infrastructure, planting decisions,
and market effects. The Commission is to be named by the two Agriculture
Committees and the Secretary of Agriculture, with a deadline of July 2.
The Commission is to issue its report in May 2003.
Reconstitutions: Farm reconstitutions are permitted for the 2002 crop
only.
Tracking of Benefits: The Secretary is required to establish procedures
to “track the benefits provided, directly or indirectly, to individuals
and entities under titles I (Commodity) and II (Conservation)”. NAWG will
be recommending some confidentiality protections, which would allow
publication of aggregate data and names of recipients, but not allow
linking of actual payment data with a particular producer.
Hard White Wheat: A Hard White Wheat incentive program is established
for the 2003-2005 crop years. It provides $20 million to be spread over no
more than 2 million acres over the life of the program. Producers must
meet minimum quality criteria and demonstrate that buyers and end-users
are available for the crop before qualifying for the incentive payment.
NAWG will play a pivotal role in providing advice to USDA on
implementation of this program.
