The Latest on the Farm Bill

Agricultural and Food Policy CenterTexas A&M University

Dr. Edward G. SmithExtension Economist Marketing and Policyhttp://afpc.tamu.edu979-845-5913

Southern Regional Outlook ConferenceAtlanta, GeorgiaSeptember 24, 2001

Presentation Outline

Current Situation

Issue in the Debate

Timetable

Current Situation

Chronic Liquidity Problem

Pro forma cash flow severe for crop producers

Not as bad for livestock and dairy

Solvency issues not as bad due to ad hoc emergency spending and lower debt service

US House Ag Committee Strategy

Bipartisan: Combest/Stenholm

Ask the stakeholders

Encourage buy in by special interest

Develop a bill based on what was said

What the US House Ag Committee Heard

Maintain flexibility

Maintain export competitiveness

Maintain WTO commitment

Incorporate a better safety net that reduces the need for ad hoc assistance

What does H.R. 2646 Do?

Maintains flexibilitySame rules

Maintain export competitivenessMarketing loans retained

Maintains fixed payments

Allows base update

Adds counter-cyclical target price program for income support

Extends thru 2011

How Much Money?Budget Resolution

$5.5B 2001$7.35B 2002$66.1B 2003-2011 if

Surplus greater than SS/MC surplusSS lockbox opened due to war

Who Gets the Money?

(AP) Lubbock Avalanche Journal 9-10-2001“Congress has touted the checks as a way to help

small –and medium- size farms cover losses associated with natural disasters and prop up the price of certain low paying crops”

But

“AP’s analysis…showed that 63% of the money went to the top 10% of recipients”

Who Gets the Money?

Per unit of production

Per farmer

Can new players join the game?

Can old players return?

Could the Money be Spent Better?

August 22,2001 Des Moines Register“a rare chance to stop financing environmental

harms and start financing environmental benefits”

“fundamentally flawed because the cropping of fragile and marginal lands is reinforced by grain subsidies that stimulate production and reduce NCFI”

More Issues

Flexibility vs Inventory management

Remain Export CompetitiveTPA/WTO

Value of the dollar

Marketing loan

What color are the payments?

Timetable

This year or next?Congress adjourn in Oct/NovTerrorist ResponseBudget impactSenate using corn/soybeans as basis that ag is

not togetherFebruary 2002 critical1996 FAIR Act expires December 2002