Overview

• As with other farm bills, 1996 farm bill was an amendment to permanent legislation (1949 farm bill)
• 7 year farm bill beginning in 1996 and ending in 2002
• Major change in commodity programs relative to previous 22 years (starting with 1973 farm bill)
  • Fixed “decoupled” payments in lieu of target price/deficiency payment program
  • Fewer production controls

Crop Provisions

• Eliminated Target Prices
  • No longer pays deficiency payment based on the target price minus the higher of the loan rate or market price times base acres
• Eliminated acreage bases
• Eliminated annual supply control programs (e.g., ARPs)

Crop Provisions (cont)

• Initiated decoupled payments
  • Also referred to as AMTA payments or production flexibility contract (PFC) payments
• Provided full planting flexibility on previous crop acreage bases
  • All program crops plus haying and grazing
  • Limits on fruits and vegetables

Crop Provisions (cont)

• Continued nonrecourse marketing assistance loans and loan deficiency payments
  • Maximum loan rate levels determined by formula
  • Minimum loan rate levels set for cotton and soybeans at $0.50 per lb and $4.92 per bu
  • Fixed loan rate for rice at $6.50 per cwt

Contract Payments by Fiscal Year

(million $)

Allocation of Payments by Crop

Payment Limitations

• Fixed payments – $40,000
• Marketing loan gains or Loan Deficiency Payments – $75,000
  • Can use marketing certificates
• Continues 3-entity rule

Crop Insurance

• Eliminate mandatory CAT coverage
  • But producer who opts not to purchase CAT waives all future disaster assistance
• Expanded to cover seed crops
• Eligibility no longer links to conservation compliance and swampbuster for nonparticipants in farm program

Peanut Program

• Set quota rate at $610 per ton through 2002
• Eliminated national poundage quota floor and undermarketing provisions
• Allowed quota sales outside the county but within the same state

Sugar Program

• Eliminated marketing allotments
• Loan rates for raw cane and refined beet sugar frozen at $0.18 and $0.229 per pound, respectively
• Nonrecourse loans are provided to processors if imports exceed 1.5 million pounds otherwise a recourse loan is provided
• A $0.01 per pound penalty assessed on forfeited sugar

Dairy Program Provisions

• Price support reduced by $0.15 per cwt per year beginning on January 1, 1997 declining to $9.90 per cwt on January 1, 1999
• Terminated price support January 1, 2000 to be replaced by a recourse loan (never happened)
• Eliminated marketing assessments beginning May 1, 1996
• Continued dairy export incentive program (DEIP)
• Mandated a reduction in federal milk marketing orders from 33 to no more than 14 or less than 10 by April 4, 1999
• Authorized the Northeast Dairy Compact

Conservation Reserve Program

• Authorized through 2002 at a maximum 36.4 million acres
• New enrollment permitted at fair market rental rates
• Producers with less environmentally sensitive lands and at least 5 years in the program may terminate

Wetlands Reserve Program

• Authorized through 2002 with a maximum enrollment of 975,000 acres
• One-third of new enrollments must be in permanent easements
• One-third in 30-year easements or less
• One-third in wetland restoration agreements

Environmental Quality Incentives Program (EQIP)

• Funded at $130 million in FY 1996 and $200 million per year thereafter
• Funds to be split evenly between crops and livestock
  • Large livestock operations ineligible for cost sharing for animal waste management
• 5 to 10 year contracts
• Payments limited to $10,000 per year and to $50,000 over the duration of the contract

WTO/URAA Issues

• Historically very important
• Cut amber box subsidies by 20% from 1986-89 base
• Means $19.1 billion cap for amber box subsidies which includes:
  • LDPs
  • Other direct payments
  • Crop insurance subsidies

Wool and Mohair

• Wool Act provided payments that began in 1954
• Wool Act was repealed in 1993
  • 3 year phase out of payments
• Was not part of 1996 Farm Bill
• Have been Ad hoc payments over the last four years (market loss assistance)