|
 |
Farm Security and Rural Investment Act of 2002
Keith Gray
(334) 434-8212
On May 1, the House of Representatives passed the Farm Bill with a vote of 280-141. With a vote of 64-35, the Senate passed the bill on May 8. The bill, officially titled the Farm Security and Rural Investment Act of 2002, was signed by President Bush on May 13. The Farm Security and Rural Investment Act of 2002 will govern federal farm programs for the next six years.
OVERVIEW
When does the Farm Bill take effect, replacing the 1996 bill?
Some provisions of the 2002 Farm Bill take effect immediately. Other provisions, such as the new loan rates, take effect upon harvest. Other provisions, such as direct and counter-cyclical payments, will take effect when producers sign contracts later this fall. Certain provisions in the 1996 farm bill will continue for the balance of this fiscal year, such as availability of production flexibility contract payments.
What is FSA doing to prepare for changes under the bill?
FSA is developing policies and procedures to implement the provisions; developing software for county offices to update producers' bases and yields; implementing eGovernment under which producers will be allowed to complete and submit certain forms online; developing new forms and fact sheets and posting them on-line as soon as possible.
What do producers need to do to prepare for the changes?
In the coming months, FSA will provide to producers instructions on calculating new bases and yields and information on payments and other issues. Producers should also visit the FSA website to obtain more information.
Are any changes being made to payment limitation/payment eligibility provisions?
The Farm Bill establishes some payment limitations; however, the Farm Bill makes no changes to the current "person" and "actively engaged in farming" provisions. The 3-entity rule, which restricts the number of entities through which a "person" may receive payments, still applies. A new provision is added which will prohibit payments and benefits to certain individuals and entities whose average adjusted gross income exceeds $2.5 million, effective for 2003 and subsequent years.
What are the major provisions in the 2002 bill?
Major provisions include:
- Higher loan rates for most crops.
- Direct payments for wheat, feed grains, cotton and rice (previously called production flexibility contract payments).
- Expanded eligibility for direct payments to producers of oilseeds and peanuts.
- Counter-cyclical payments to farmers when commodity prices fall below their target prices.
- An option for producers to update the bases and yields used to calculate counter-cyclical payments.
- New programs for dairy, peanuts, honey, wool and mohair.
- Reauthorizing the Conservation Reserve Program and expanding the acreage cap from 36.4 million acres to 39.2 million acres.
- Authorizing the Grassland Reserve Program at 2 million acres for restored, improved, or natural grassland, rangeland, and pastureland, including prairie.
- Authorizing the Conservation Security Program to assist producers in maintaining or adopting practices on private agricultural land and to incidental forested land.
- Reauthorizing the Wetlands Reserve Program and increasing the acreage cap to 2.275 million acres.
- Reauthorizing the Environmental Quality Incentives Program and increasing the funding from about $200 million to $400 million this year, ranging to $1.3 billion in fiscal year 2007.
- Reauthorizing the Wildlife Habitat Incentive Program and increases the funding to $85 million by FY 07.
A provision enacted for the 2000 crop allows the loan deficiency payment rate to be determined as of the earlier of the date (a) the producer lost beneficial interest or otherwise marketed the crop, or (b) the producer requested an LDP.
Will this provision continue for the 2002 through 2007 crops?
No. A provision in the Farm Bill makes this applicable only for the 2001 crop. No such provision exists in the bill for the 2002-2007 crops. Therefore, for 2002-2007, LDP rates will be determined on the date of the request for an LDP. If beneficial interest is lost prior to the date of the request, no LDP will be forthcoming.
DAIRY
Will dairy farmers receive payments under the dairy market loss payment program for low prices of 2002?
The 2002 Farm Bill requires payments to dairy farmers if the Class I milk price (i.e., the price of milk for beverage use) is below $16.94 per cwt in Boston under the applicable federal milk marketing order. The price of Class I milk has been below $16.94 per cwt since the benefit period began on 12/1/01, therefore, dairy farmers will receive payments for milk marketings from that date until the price moves about $16.94 per cwt.
CONSERVATION
How does the 2002 Farm Bill change conservation programs?
The bill provides an additional $9 billion through 2007 to help farmers adopt and maintain conservation systems that protect water quality, reduce soil erosion, protect and enhance wildlife habitat and wetlands, conserve water and sequester carbon.
Does the Farm Bill include changes to the Conservation Reserve Program?
Yes. USDA has been authorized to increase CRP from 36.4 to 39.2 million acres. The bill allows for limited haying and grazing on CRP lands. In addition, the Farmable Wetlands Pilot Program is expanded to 1 million acres and to all states.
DIRECT AND COUNTER-CYCLICAL PAYMENTS
How do counter-cyclical payments work?
The counter-cyclical payment rate is the difference between the target price and the sum of the direct payment plus the higher of the loan rate or the 12-month average market price. Both counter-cyclical and direct payments are made on 85 percent of base times the payment rate times the program yield.
When are counter-cyclical payments made and how are they calculated?
Counter-cyclical payments will be made when the effective price for a crop year is less than the target price. They will be paid on 85 percent of the base acres (the payment acres) and not necessarily on land currently planted to that crop. Payments will be calculated by multiplying the counter-cyclical payment rate for the covered commodity times the payment acres times the counter-cyclical payment yield.
How do producers update their bases and yields?
Producers will be notified by their FSA county office on actions required by producers to update bases and yields. Producers will be informed of base and yield data on file in their local FSA offices for the 1998-2001 crop years and asked to verify the data's accuracy. Accordingly, prior to receiving this information, producers may want to take this opportunity to organize their farm records for the 1998-2001 crop years to compare and verify against FSA records. Producers should not begin providing information to county offices until the county offices notify them.
If a producer wants to update bases for direct and counter-cyclical payments, are they required to update yields as well?
The Act does not authorize updating existing yields for direct payments. The legislation provides the option to update yields for counter-cyclical payments without regard as to the producer's election to update bases. However, if a producer chooses to update the yield for one crop on the farm, all crops must be updated using the same method.
Will direct payments be received this fall based on the new contract acres and yields?
The Act provides that no production flexibility contract payments for current contracts will be issued after the 2002 fiscal year ending September 30, 2002. Payments issued after Sept. 30 will be based on base and yield calculations under the new Farm Bill program.
What are the national loan rates for crops?
| Commodity |
Unit |
2002-2003 |
2004-2007 |
| Wheat |
$/bu. |
2.80 |
2.75 |
| Corn |
$/bu. |
1.98 |
1.95 |
| Grain Sorghum |
$/bu. |
1.98 |
1.95 |
| Barley |
$/bu. |
1.88 |
1.85 |
| Oats |
$/bu. |
1.35 |
1.33 |
| Soybeans |
$/bu. |
5.00 |
5.00 |
| Other Oilseeds |
$/cwt. |
9.60 |
9.30 |
| Upland Cotton |
cents/lb. |
52.00 |
52.00 |
| ELS Cotton |
cents/lb. |
79.77 |
79.77 |
| Rice |
$/cwt. |
6.50 |
6.50 |
| Wool (graded) |
$/lb. |
1.00 |
1.00 |
| Wool (ungraded) |
$/lb. |
0.40 |
0.40 |
| Mohair |
$/lb. |
4.20 |
4.20 |
| Honey |
$/lb. |
0.60 |
0.60 |
What is a target price?
The target price is a safety net price used to calculate the counter-cyclical payment rate. For some crops, including soybeans, upland cotton, rice and peanuts, the target prices are set for the duration of the 2002 Farm Bill, 2002-2007. For the other crops the target prices will change for 2004-2007.
| Commodity |
Unit |
2002-2003 |
2004-2007 |
| Corn |
$/bu. |
2.60 |
2.63 |
| Sorghum |
$/bu. |
2.54 |
2.57 |
| Wheat |
$/bu. |
3.86 |
3.92 |
| Barley |
$/bu. |
2.21 |
2.24 |
| Oats |
$/bu. |
1.40 |
1.44 |
| Soybeans |
$/bu. |
5.80 |
5.80 |
| Minor Oilseeds |
$/lb. |
.0980 |
.1010 |
| Upland Cotton |
$/lb. |
.7240 |
.7240 |
| Rice |
$/cwt. |
10.50 |
10.50 |
| Peanuts |
$/ton |
495.00 |
495.00 |
For covered commodities, the counter-cyclical payment rate is the difference between the target price and the effective price. The effective price is the higher of the 12-month average market price, or the loan rate, plus the direct payment rate. (Direct payments are similar to the previous annual production flexibility contract payments.)
Will "tools" be provided to assist landowners in selecting bases and yields options?
Tools will be provided that will allow landowners and producers to compare options. However, FSA will not recommend a particular option. Future market prices of the various commodities have a direct impact on the amount of any counter-cyclical payment, which obviously plays a role for landowners in determining their "best" option.
Are direct or counter-cyclical payments affected by planting choices in 2002?
No. The payments through 2007 are based on the landowners' one-time option they will select this fall, which is based on information from previous years. A producer's planting choices (other than restricted crops) in 2002 will have no effect on the 2002 and subsequent years' direct or counter-cyclical payment amounts.
Are there any changes to current planting flexibility provisions?
The provisions are similar to current planting flexibility provisions. However, there are a few changes. For example, in addition to fruits and vegetables, wild rice is now also included as a prohibited crop unless an exception applies.
CREDIT
My direct farm ownership loan has been approved but I am told there is no money to fund it right now. When will the money be available?
The new farm legislation does not appropriate any money for farm loans. Because farm loans are made available only through appropriations bills, it is unlikely that funds will be available for your loan until after October 1, 2002, when the government's new budget year starts. However, you should stay in contact with your local FSA office in the event that additional funding is made available.
I have had several FSA operating loans over the years and my local FSA office has told me that unless the law changes I cannot get additional operating loans after December 31, 2002. Did the Farm Bill change that?
The bill allows a one-time waiver of the operating loan "term limits." The waiver is good for two years. To receive a waiver you must have a viable operation, have been denied an operating loan by two commercial lenders, be unable to obtain a loan with an FSA loan guarantee, and have completed or agree to complete a borrower training program.
I plan to sell my farm by land contract and I read that the Farm Bill created an FSA program to guarantee land contract sales for beginning farmers. How do I apply for a guarantee?
The bill establishes a pilot project in ten states, for up to four guarantees per state per year over a 5-year period. The bill also requires a study of the risk of land contract guarantees before the program is implemented. New procedures will also have to be written, so it will be several months before the program is available.
Will the changes caused by the bill allow farm loan officers to spend more time with the borrowers who are in the greatest need for individual assistance?
Yes, in the past the local farm loan managers spent much of their time doing loan assessments twice a year on all farm borrowers. Since farmers mainly produce annual crops, Congress reduced the requirement for loan assessments to only once a year. Loan managers will now have more time to work with the farm borrowers who have the greatest need for individual assistance.
How will the bill help beginning farmers?
The bill allows FSA more time to market inventory properties, giving FSA a chance to divide large inventory properties into smaller tracts, more suitable for sale to beginning farmers. It also allows FSA to assemble small tracts of land into a more suitable size farm that would be economically viable for a beginning farm operation.
MISCELLANEOUS
Are there any disaster programs in the Farm Bill?
The 2002 Farm Bill does not contain any provisions for crop disaster programs.
These Frequently Asked Questions were taken from the USDA web site and are not intended to be definitive interpretations of farm legislation, rather they are preliminary and non-binding. To the extent that they interpret or construe new legislation, those interpretations and constructions are subject to change as USDA develops implementing policies and procedures.
Visit the USDA Website for more Farm Bill Information
|
|
|
|
|
