Dayton Introduces Farm Bill

November 8, 2001

A farm bill advertised as reflecting the Upper Midwest's hopes for policy changes in the next farm law has been introduced by Sen. Mark Dayton (D-MN). A major feature of the bill would establish marketing loan rates at not less than 80% of the economic cost of production, allowing loan rates to adjust annually to changes in producer input costs and productivity. The bill got the immediate public support of the National Farmers Union.

"When I was elected to the U.S. Senate, I promised the family farmers of Minnesota that I would push for higher farm prices so that they could make a living, and so that our rural communities could survive," Dayton said. "This bill would help them do that."

Dayton's bill is designed to target benefits to "family farmers, not large agribusinesses," limiting the amount of crops a farmer can enter into the program. In addition, the bill creates a reserve program, allowing producers to store their commodities. Dayton says the program is "counter-cyclical," helping farmers when prices are low, but phasing out when prices rise, reducing the cost to the taxpayer.

The loan rates in his bill, says Dayton, "are far more equitable than current rates, as well as the rates proposed in the farm bill passed by the House of Representatives and even those being suggested by the Senate Agriculture Committee."

To discourage overproduction, the bill directs the Secretary to establish limits on the crop amounts for which individual producers can receive nonrecourse marketing loans. The limit is calculated by multiplying a producer's 1996-2001 crop years average acreage base by the 1996-2001 crop years average yield base. If market prices for a commodity decline below the marketing loan rate set, producers with nonrecourse loans can "sell" their commodity to the federal government at the rate of the loan.

The bill seeks to target its benefits by limiting the amount of a crop for which farmers can receive nonrecourse loans. Producers who exceed these production limits would be eligible only for recourse loans, which must be paid back, with interest, to the federal government. The targeting provision also prohibits program participation by anyone whose annual gross income exceeds $2 million of which agricultural production accounts for less than 75%.

A farmer-owned reserve provision allows producers to store a specified amount (up to 20% of their annual production) of program commodities when they are in excess supply and supplements the Federal Crop Insurance Program by providing additional risk protection to producers who suffer production losses.

Dayton said the Congressional Budget Office is calculating a cost estimate for the bill. However, the Agricultural Policy Analysis Center at the University of Tennessee has projected the 10-year cost of a very similar program at about $50 billion over current expenditure levels for the next 10-year budget cycle, according to Dayton. By comparison, the House farm bill's commodity title, which covers comparable issues, has been scored at $48.8 billion, he added.

"Senator Dayton's farm policy proposal provides a secure safety net for farmers in the erratic worldwide marketplace by offering aid during low price cycles and phasing out as prices increase," said NFU President Leland Swenson. "The Dayton bill would remove much of the uncertainty of farmers and their lenders by boosting marketing assistance loan rates."

The proposal "is based on what farmers are planting today, as well as today's yields and markets," Swenson said. "The loan rates in this proposal are much more equitable than current rates, those in the House farm bill and others introduced in the Senate Agriculture Committee."