Administration Analysis Details Impact on USDA Programs without a New Farm Bill

At the request of senior House and Senate agriculture committee staff, the U.S. Department of Agriculture today provided a detailed document developed from Administration analysis of impacts to current USDA programs - in the absence of enactment of a new farm bill or an extension of the 2002 farm bill past March 15, 2008.

As stated in the USDA analysis, the provisions of the Agricultural Adjustment Act of 1938 and the Agricultural Act of 1949, which have been repeatedly suspended by several farm bills, would again become legally effective if a new farm bill is not enacted or Congress fails to extend the 2002 farm bill by March 15, 2008. Often described as a reversion to “permanent law,” such a result would “dramatically narrow the universe of producers who receive support, and would do so in a way that most producers will view as irrational,” according to the 14 page paper prepared by USDA and approved by the Office of Management and Budget.

For instance, only those wheat producers who happen to have wheat acreage allotments would be eligible for minimum price support of $7.80 per bushel, as compared to the current price support loan rate of $2.75. Price support rates for corn would almost double, from $1.95 to a minimum of $3.78 per bushel, while the upland cotton price support rate would go from 52 cents per pound to a minimum of $1.34 per pound. Dairy price support would more than triple from $9.90 per hundredweight to over $30. No price support could be offered for sugar or oilseeds.

The 1938 Act is a supply control statute with marketing quota provisions that are applicable when the supplies of wheat and cotton are excessive. For the 2008 crops of these commodities, the Secretary has already announced that these quotas would not be in effect. But, for the 2008 crop of wheat, the 1938 Act still requires the Secretary to establish acreage allotments since these allotments are part of the price support program established for wheat under the 1949 Act. One of the critical factors which the 1938 Act requires the Secretary to take into account when establishing a farm’s 2008 wheat allotment is whether or not the farm had an allotment in 1958. Acreage allotments for wheat have not been declared since 1971 and USDA does not possess acreage reports dating back to 1971. Accordingly, it is unclear how USDA could meaningfully translate these historical allotments, while taking into account other required provisions in the 1938 Act, into 2008-crop price support benefits.

The permanent authority for price support to producers of agricultural commodities is provided in the Agricultural Act of 1949. The date when permanent law becomes effective for a commodity is not uniform across commodities. The 1938 Act operates on a marketing year basis, rather than a crop year basis. Price support rates under the 1949 Act, in contrast, are crop year specific.

Commodities

* Wheat – To receive price support benefits, producers must have a 2008 acreage allotment and must plant wheat in an amount no greater than the size of the allotment. Only farmers able to produce records of 1958 wheat allotments as well as having wheat plantings in crop years 2005, 2006 and 2007 would be eligible for price support benefits.
* Sugar and oilseeds (including soybeans) – Due to the manner in which the 1949 Act has been amended, price support may not be offered with respect to oilseeds (including soybeans, sunflower seed, and canola, rapeseed, safflower, flaxseed and mustard seed), sugar beets and sugarcane.
* Cotton, feed grains, honey and rice – Because marketing quotas are not in effect for the 2008 crop of upland cotton, all upland cotton is eligible for price support as well as all production of 2008 crops of rice, corn, oats, rye, barley and grain sorghum. All production of honey would also receive price support.
* Dairy – Price support would be offered with respect to dairy products through government purchase of dairy products.
* Other commodities – Price support for other commodities such as peanuts, wool and mohair would be at the discretion of the Secretary of Agriculture.

Other Programs

The mandatory programs that would be most severely impacted would be conservation and trade programs. However, in general, for programs that receive annual appropriations, the impacts would be less severe if new law is not enacted by March 15, 2008.

Conservation

New enrollments in most conservation programs would cease as of March 16, 2008. Producers currently enrolled in both the Conservation Reserve Program (CRP) and the Wetlands Reserve Program (WRP) would continue to receive technical assistance and program payments. Enrollment and payments for the Environmental Quality Incentives Program (EQIP) and the Conservation Security Program (CSP) would continue.

Trade

Mandated funding for certain trade and international development programs would expire on March 16, 2008: export credit guarantees, export credit guarantees for emerging markets, market access, foreign market development cooperator, technical assistance for specialty crops, food for progress, dairy export incentives, and facilities credit guarantees. Authority to finance sales and provide additional international food aid under Public Law 83-480 (“PL 480”) would expire. The authority to release assets from the Bill Emerson Humanitarian Trust continues, yet, the authority to replenish the Trust expires. However, McGovern-Dole Food for Education program authority is permanent, using appropriated funding available through September 30, 2008.

Food Stamps and Nutrition

Most child nutrition programs (including school lunch, school breakfast, WIC) are controlled by child nutrition reauthorization, which is on a different schedule from the farm bill and does not expire until the end of FY 2009. Basic functions of providing assistance under the Food Stamp Act will continue in the 50 states and the District of Columbia. However, the authority to provide food assistance to Puerto Rico and American Samoa under the Food Stamp Act would expire at the end of March.

Rural Development

Nearly all of the rural development programs would continue.

FSA Farm Loan Programs

The basic farm loan program activities would continue. However, a number of farmers currently eligible for farm loan program loan guarantees would cease to be eligible because term limits on the number of years for these guarantees would be reinstated without a new farm bill. Beginning farmers and ranchers would no longer benefit from set-asides of direct loan funds.

Crop Insurance

The core insurance activities of the Federal crop insurance program are not affected.