Also referred to Freedom to Farm
Developed by: Joe L. Outlaw
Associate Professor and Extension Economist –
Management and Policy
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 $)
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
Total
|
5,570
|
5,385
|
5,800
|
5,603
|
5,130
|
4,130
|
4,008
|
35,626
|
Allocation of Payments by Crop
Crop
|
Percent
|
Corn
|
46.22
|
Grain sorghum
|
5.11
|
Barley
|
2.16
|
Oats
|
0.15
|
Wheat
|
26.26
|
Upland cotton
|
11.63
|
Rice
|
8.47
|
TOTAL
|
100.00
|
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)