Major Commodity Groups Heard at House Hearing

July 20, 2000

Corn, soybeans, wheat and cotton were the commodities represented Wednesday when the House Agriculture Committee held yet another hearing on future farm policy. The hearings, which have been going on most of this year, could set the stage for changes in farm laws next year, but that is by no means certain.

Lee Klein, Battle Creek NE, president-elect of the National Corn Growers Association (NCGA), wants Congress to support changes to the marketing assistance loan program "to ensure that a producer’s full production is eligible for loan deficiency payments (LDPs). Current payment limitation rules will restrict marketing options, increasing loan forfeitures and storage and interest costs," he said.

The NCGA also wants a storage facility loan program restored and an "orderly marketing program" enacted that will provide short-term storage assistance without encouraging the stockpiling of grain. All corn would be eligible for the six-month program, said Klein. Participating farmers would receive a sliding-scale payment of three cents for each bushel stored for the first two months, two cents per bushel for the third and fourth months, and one cent per bushel for the fifth and sixth months – or a maximum of 12 cents per bushel over six months.

Congress also should support full utilization of the Conservation Reserve Program at its current 36.4 million acre cap. In addition, NCGA recommends that continuous enrollment acres be fully supported and removed from the existing acreage cap.

Marc Curtis, chairman of the American Soybean Association, said Congress’ failure to fulfill promises made after the 1996 farm law was passed, promises to enact other relief measures to support production agriculture, at least partially contribute to the outlook that with record soybean plantings on almost 75 million acres "a return to historic low prices and soybean producer income with this fall’s harvest" is likely.

ASA supports "examining income safety net concepts that would provide increased support when prices or revenue decline," Curtis said. "However, there are many unanswered questions and issues about the effects and implications of such counter-cyclical income support proposals. Both the Supplemental Income Program advanced by Rep. (Charles) Stenholm (D-TX) last year and the (Clinton) Administration’s proposed Income Assistance Program base payments to producers on a percentage of the difference in revenue for a crop between the current year and the Olympic average during the previous five years. This approach would provide a greater degree of protection in years following a period of relatively high prices and revenues, such as 1998, 1999 or even 2000. However, the revenue base will decline sharply as the lower prices for these years are included in the five-year average."

A further major problem with the administration’s proposal is that it "subjects payments to the AMTA cap of $40,000 per producer," said Curtis. "This limitation would effectively means-test a program that is intended to compensate producers for economic loss, based on a farmer’s actual production, and preclude participation by growers representing a substantial percentage of U.S. production. Any income support program must be equitable with regard to the size of a producer’s operation."

ASA wants a farm program that would "provide additional income support to producers who voluntarily implement appropriate conservation practices. We believe that pursuing the public policy goals of protecting the environment while supporting farm income through sensible, voluntary measures is a concept that farm groups, environmental groups, and the Congress should further explore. In this regard, ASA has taken a first step by establishing a Conservation and Income Support Program Task Force, which will be exploring alternative approaches for developing this concept over the coming year," said Curtis.

Terry Detrick, president of the National Association of Wheat Growers, said a new farm law "must preserve the planting flexibility of the 1996 FAIR Act." Also, "every effort must be made to increase the federal baseline for farm support. Simply reallocating existing USDA funds is not enough. Neither should farmers or their lenders be expected to rely on an annual emergency declaration. Likewise, farm policy improvements should provide more financial assistance to individual producers."

NAWG does not support re-establishing the farmer owned reserve or similar paid storage program as the basis of the farm safety net, Detrick said. "Paying farmers to store their commodities indefinitely only postpones the problem and can, if done incorrectly, increase the financial impact of the eventual day of reckoning."

Nor does NAWG support re-establishing a set aside program which would pay farmers to idle ground – beyond the CRP. "NAWG continues to support CRP and encourages the Secretary to enroll the full 36.4 million acres allowed for in the 1996 act. However, NAWG does not believe that idling additional acres in exchange for a federal payment or similar types of non-market oriented approaches are, in the long-term, advantageous to wheat producers," he said.

All domestic policy decisions must be made "in careful consideration of the U.S.’s status as an exporter of wheat," he added. "We must not allow any policy to jeopardize our reputation as a reliable supplier of first priority or our compliance with international trade agreements. Likewise, NAWG believes that we should use the full extent of all trade agreements to our advantage and that U.S. farm support should be at the highest levels allowed. Where appropriate, U.S. farm support should match that of its foreign competitors."

The most significant step lawmakers can take to craft responsible, effective farm policy is to obtain adequate budget authority, the National Cotton Council (NCC) told the committee. "If the last three years have taught us anything, they have shown we cannot hope to develop effective farm programs without significantly more budget authority than might have been envisioned in 1996 under the Freedom to Farm law," NCC President Robert McLendon said. "We urge Congress to re-establish agriculture's priority in this country's budget process and provide the necessary foundation for rational, long-term policy development."

McLendon said the budget baseline for farm programs is slated to be only $4 billion by 2002 when current law is set to expire. He said that is well below the baseline established for development of the 1996 farm bill and far short of what will be needed.

He also said the NCC is still early in its farm policy development process but urged Congress to continue effective marketing loan programs and cotton's competitiveness provisions in future farm law. "Cotton's three step competitiveness provisions, coupled with the marketing loan program and the issuance of marketing certificates, continue to play a central role in the ability of U.S. cotton to compete worldwide and in our ability to prevent an excessive build up of stocks," he testified. "Without the marketing loan, the financial situation in rural America would be significantly worse. Our sector would have been reduced."

McLendon said cotton producers remain concerned about the inadequacy of the 1996 farm law's downside price protection – "its weakest link." He said it was the NCC's hope that the next farm bill also would end the discrimination against commercially sized farming operations. As examples, he pointed to the limitations on marketing loan gains that made a bad situation worse for cotton producers in 1999 and to recent farm policy proposals by the administration that would introduce an even stricter notion of benefit targeting.