“The regulatory process may well dictate how this program works,” says Blake English, with the Farm Service Agency in Denton County, Texas.
“The bill leaves a lot of leeway for interpretation,” says Denton County Extension Agent Rebecca Parker. “The law does represent new policy, with continuation of the market loan concept but an added target price. It provides farmers with very little wiggle room with prices but adds stability, compared to the 1996 Freedom to Farm Act.”
English and Parker say a significant amount of farmers’ security will come from “decoupled payments.”
Questions remain, however.
Parker says farmers may be considering adjusting yield levels, a possibility under new regulations. “We hope to get something more realistic that the ‘hysterical’ yields we’ve been working with,” she says. “Yield levels set 15 years ago are obsolete.”
English says payments may be delayed until USDA determines how loan rates will change.
The biggest change in farm policy, he says, is “the addition of counter cyclical payments, based on target prices for each commodity. Direct payments have been in place since 1996.”
He says peanut farmers, especially those in traditional production areas who depended on quota support prices, “will feel like they’ve been hit by a two by four. The quota system is gone, converted to a market loan, and that will be a hard transition. I think production in Denton County will be off significantly.”
He says farmers also wonder “who gets payments for the quota, historical producers or landowners? In some cases, producers bought quota, not the landowner. In West Texas, for instance, producers bought a lot of quota over the past five or six years and produced the poundage on leased acreage. The person who bought the quota should be the one entitled to compensation from the quota buyout.”
“A lot of things seem to change daily with regulations,” Parker says. “As USDA identifies inequities, they have an opportunity to correct them. We hope regulations will be complete this fall.”
English says farmers who intend to update acreage bases must do so this year. “Otherwise FSA will use the established base and farmers will be stuck with it for the life of the legislation.”
Even without a base, farmers will be eligible for loan deficiency payments.
Conservation titles in the new law may provide opportunities to help more farmers than the old provisions did, says David Brown, with the Denton County Natural Resources Conservation Service, NRCS.
“Without being in a priority area, farmers found qualifying for Environmental Quality Incentives Program (EQIP) funds extremely difficult,” he says. “Now, we may have a chance to get some money in Denton County.”
“In the past, we have not been successful in getting EQIP funds,” Parker says. “We couldn’t compete with the hot spots (areas with more severe erosion problems).”
“I hope we can compete for funds under the new program,” Brown says, “but for now, we have no clue what qualification requirements will be.”
Parker says in 2002, $400 million will be available for the EQIP program. That jumps to $1 billion in 2003 and will add up to about $6 billion over the life of the program.
Another adjustment that may help Denton County is the change in ratio between funding for crops and livestock. In previous programs, funds were divided equally, half for crops and half for livestock. “Now, it’s 60/40 in favor of livestock,” Parker says.
Payment limits also increase to $50,000 per year per contract, up to $450,000 for the entire contract period, 10 years. “That’s up from a $10,000 per year limit on a five-year contract,” English says.
“This change will help larger operations get help,” Parker says.
Qualifying practices may include planting grass, establishing waterways and building terraces.
English hopes improvements in these programs will provide farmers an “incentive to spend the money necessary to initiate conservation practices. Until we can provide mechanisms that encourage farmers to spend money on conservation, a lot of acreage will continue to erode,” he says.
“We desperately need water conservation practices in this area (within the Dallas/Fort Worth Metroplex). Reaching the spots that need conservation the most will be a test.”
English says FSA will put up 75 percent of the funds for certain projects and the farmer will contribute 25 percent. “But the practice and potential return must fit into a farmer’s economic strategy,” he says.
Overall, the three see the new legislation as a positive departure from the 1996 law. “It’s a good bill for farmers and most farmers recognize it’s good for them” English says.
“This law addresses some of the issues that caused problems in the FAIR Act,” Parker says. “It’s an improvement. But we still have no supply controls; we’ve had none in place since the 1980s.”
She says with a strong dollar competing against devalued foreign currencies, export issues will remain contentious. “We have so many more players in the game other than our own agricultural legislation.”
English says critics of this farm law “don’t bother to consider that many of the markets they compete for are the ones the United States established in the 1970s and 1980s. They also don’t consider that we created the infrastructures in many developing nations that allowed them to trade. Now they want to take advantage of our efforts and criticize us while doing so.”
Trade, as well as payment inequities and quota buyouts represent the kinds of devils that will play important roles in establishing the rules and regulations that will dictate how successful this new farm policy will be.