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Letters to Senate Conferees Regarding Payment Limits

March 7, 2002

The Honorable Tom Harkin
Chairman, Senate Committee on Agriculture, Nutrition & Forestry
328A Russell Senate Office Building
Washington, DC 20510

The Honorable Richard Lugar
Ranking Member, Senate Committee on Agriculture, Nutrition & Forestry
306 Hart Senate Office Building
Washington, DC 20510

Dear Chairman Harkin and Senator Lugar,

During the Senate debate on the Farm Bill, we joined both of you in a bipartisan effort to limit the amount of payments farmers can receive from the federal government. We voted to limit payments because we believe millionaires who do not live on a farm and do not work the land should not receive government assistance.

We hope the Senate’s overwhelming support for payment limitations will prevent millionaires from receiving federal farm assistance, but we are concerned about the impact payment limitations will have on family farmers in California and respectfully request that you recede to the House provisions where the Senate language hurts California. As you know, payment limits disproportionately affect family farmers of highly capital-intensive crops, particularly rice and cotton, which are the two most expensive program crops to grow. The $275,000 limit will hit rice and cotton growers first and would hit them hardest.

We are also concerned about the Senate Farm Bill language restricting the use of commodity certificates to provide a safety net for our farmers. When California family farmers bump up against their limitations, the loan program turns into a recourse loan, eliminating a farmer’s safety net. We should not deny essential financial assistance to commercial-sized farming operations in California when prices are extraordinarily low, while farmers in other regions of the country receive assistance on every bushel.

California’s farming operations are large, by some standards, because they must achieve economies of scale. Our costs of production per acre are significantly higher than many parts of the country because of our high land values and input costs. It would be discriminatory for Congress to penalize some family farmers based on a one-size-fits-all limitation on eligibility for benefits based on an arbitrarily selected acreage or faulty perception of what constitutes a "family" farm.

One cotton farmer we met from California’s Central Valley has a ten million dollar annual budget to farm 12,000 acres, yet he only draws a salary of approximately $50,000. His sons and son-in-law are partners and work on the farm, and his daughters run the office. He has farmed for over 50 years in California, but payment limitations in the Senate Farm Bill will force him to cut the amount of acres he grows of cotton by two-thirds and put his farm at risk. The bottom line is that large cotton and rice farms in California are family farms which should continue to receive payments, and not be discriminated against because of their size. These are not millionaires, but hard working family farmers.

Under the restrictions in the Senate Farm Bill, rice and cotton farmers in the West would be discouraged from planting these higher value crops on land beyond a certain number of acres. At some point, because of payment limitations, farmers would be forced to reduce their planting of rice and cotton. Instead, their land would have to lay fallow or be dedicated to other crops, such as specialty crops. As a result of this shift, prices for specialty crops in California could plummet.

It is important for Congress to ensure federal farm programs work for those who need them most, and we are glad the system has been scrutinized extensively during this year’s Farm Bill debate, but we do not want California farmers to be hurt disproportionately when cotton and rice farmers need these payments to compete on the world market.

We respectfully request that you recede to the House language which limits payments to $550,000 and allows the continued use of commodity certificates, while retaining the Senate Farm Bill provisions preventing payments from being paid to millionaires who make more than $2.5 million for three consecutive years and do not farm.

Thank you both for your continued hard work on the Farm Bill and for your attention to this issue.

Sincerely,

Senator Dianne Feinstein
Senator Barbara Boxer

March 1, 2002

The Honorable Tom Harkin
Chairman, Senate Committee on Agriculture, Nutrition & Forestry
328A Russell Senate Office Building
Washington, DC 20510

The Honorable Richard Lugar
Ranking Member, Senate Committee on Agriculture, Nutrition & Forestry
306 Hart Senate Office Building
Washington, DC 20510

Dear Chairman Harkin and Senator Lugar,

In an era when family farmers of all crops are finding it increasingly difficult to make a living, it is inconceivable to us that the new farm bill would include a provision that makes it more difficult for farmers to achieve the very competitiveness they need to survive. As you near conference negotiations on the new farm bill, we urge you and your fellow conferees to eliminate the Grassley-Dorgan payment limitations amendment for the following reasons:

First, payment limits disproportionately affect family farmers of highly capital-intensive crops, particularly rice and cotton, which are the two most expensive program crops to grow. Because of their relatively high costs of production, these crops require larger economies of scale. Since the Grassley-Dorgan amendment would apply an arbitrary, uniform limit across all program crops, it would hit rice and cotton growers first and would hit them hardest. Federal farm policy should seek to treat all regions fairly.

Second, limits on marketing loan benefits are counterproductive because they hit hardest when times are toughest. The lower the market price, the more costly the loan deficiency payment. Generic commodity certificates resolve this problem by extending loan support to all of a farmer’s crop. Yet, the Grassley-Dorgan amendment would cripple the marketing loan program that has been the cornerstone of farm policy for two decades by rendering generic commodity certificates useless and undermining the safety net for all crops. Rice and cotton farmers in both the Deep South and in the West would be discouraged from planting these higher value crops on land beyond the limitation threshold of acres. In some cases, farmers would be discouraged from planting any land in rice or cotton. Instead, their land would be dedicated to lower value crops, such as corn, soybeans, or specialty crops. As a result, prices for these other crops could plummet. For the other program crops, this would mean that their loan deficiency payments are that much more costly, so that corn farmers and wheat farmers would hit their own marketing loan limitations that much sooner. This is one reason why every major commodity organization opposed the Grassley-Dorgan amendment. It is also why farmers of crops such as peanuts and potatoes likewise oppose it. In short, the smaller farmers from grain states would not be protected from the predations of larger farmers who may outbid them for land. To the contrary, they would become more vulnerable to volatile prices due to the entrance into the grain markets by former rice and cotton farmers desperate to find a way to hang on.

Thus, the Grassley-Dorgan amendment would produce a bitter irony for all farmers. Imposing stricter payment limitations would not necessarily save the smaller farmers of feed grains and other low value crops. For that matter, putting the Arkansas rice farmer or the California cotton farmer out of business will not save the Iowa corn farmer or the North Dakota wheat farmer. These farmers are struggling because prices are lower worldwide and because current farm policy has inadequately responded to the crises these prices created. Freedom to Farm thrust our farmers into a distorted, volatile global marketplace without protections comparable to those depended upon by more heavily subsidized foreign competitors. Nothing the Grassley-Dorgan amendment could accomplish would change this. Yet, it would make it more likely that our farmers would go out of business, and that is not what federal farm policy is about.

We urge you to eliminate the Grassley-Dorgan payment limitations from the farm bill.

Sincerely,

Senator Blanche Lincoln
Senator Jeff Sessions
Senator Mary Landrieu
Senator Christopher Bond
Senator Zell Miller
Senator Richard Shelby
Senator Strom Thurmond
Senator Max Cleland
Senator Tim Hutchinson
Senator John Edwards


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