- In the wake of the Great Depression came the New Deal and the farm legislation that followed.
- With the adoption of the 1996 Farm Bill, agribusiness achieved their goal anyway—the elimination of set-asides.
- The federal crop insurance program may be as hard to defend as the Direct Payment program.
In the wake of the Great Depression came the New Deal and the farm legislation that followed. It was during the New Deal that it was generally recognized that the rationale behind the need for farm legislation was a market failure in the crop sector—the lack of timely response on both the supply and demand side to changes in price, especially large changes in price. Market failure in and of itself is not sufficient justification for governmental response. Thus the second crucial factor is that agriculture produces an essential product for the nation’s well-being—food.
With the advent of the New Deal in the decade after McNary Haugen, much of the support for farm legislation came from farmers. Farmers and farm groups lobbied for various policy changes over the decades that followed as the bi-partisan Farm Block developed in Congress to respond to their concerns.
That began to change as agribusiness reasserted its influence following the 1983 planting season, when a combination of a) farmers responding to the Reagan administration’s offer of Payment In Kind grain from CCC stocks in exchange for reduced planting and b) bad weather that further reduced agricultural activity resulted in lower sales of farm inputs, fewer repairs, and reduced sales of farm equipment. Agribusiness firms did not want to see a repeat of 1983 and thus they lobbied against policies like set-asides that would reduce the need for farm inputs.
Beginning with the 1985 Farm Bill, their influence began to be felt as they lobbied against the then current high loan rates, which they blamed for the reduction in agricultural exports that began in 1980. They blamed the higher loan rates for keeping the price of U.S. agricultural commodities above the world price. Increased exports driven by lower loan rates, they believed, would use up any surplus production and allow farmers to keep all their land in production and thus keep farmers in the market for their products.
Farmers did not get the expected increase in exports, but with the adoption of the 1996 Farm Bill, agribusiness achieved their goal anyway—the elimination of set-asides. Some of the acreage that had been in set-asides was put back into production; prices plummeted followed by massive LDPs and emergency payments between 1998 and 2001. Not wanting to return to policies that would limit surplus production in times of low prices—and actually deal (with) the root cause of chronic price and income problems in crop agriculture—crop insurance becomes the preferred solution.