5a. WHAT IS DOMESTIC FARM POLICY

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5a. WHAT IS DOMESTIC FARM POLICY HOW DOES
IT WORK?

• Larry D. Sanders
• Fall 2005

Dept. of Ag Economics Oklahoma State
University
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INTRODUCTION

• Purpose
• to become aware of domestic farm policy tools
• Learning Objectives
• 1. Become aware of historical evolution of US ag
  policy
• 2. Become aware of major objectives of US ag
  policy
• 3. Understand major components/tools for
  domestic farm policy
• 4. Understand recent commodity provisions, how
  they are intended to work, their implementation
• 5. Become aware of alternatives consequences
  in recent farm bills the future of domestic ag
  policy.

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TODAYS FARM POLICY GOALS

• INCREASE PROFITABILITY
• SUPPORT STABILIZE FARM PRICE INCOME
• ADJUST TO MARKET NEEDS
• INCREASE GLOBAL COMPETITIVENESS
• MAINTAIN IMPROVE RESOURCE CONSERVATION
  PRESERVATION
• SUSTAIN FARMS AND THE FARM SECTOR

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HISTORICAL PERSPECTIVE OF FARM POLICY

• SETTLEMENT PERIOD (1776-1929)
• NEW DEAL (1929-1959)
• PRICE SUPPORTS (1959-1970)
• MARKET ORIENTATION (1970s)
• FARM CRISIS/ADJUSTMENT (1980s)
• BUDGET DRIVEN POLICY (1990s)
• INCOME SUPPORT MANAGE INSTABILITY (Current)

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DOMESTIC FARM POLICY
PRICE
FAMILY
INCOME
COMMUNITY
DISASTER
PRODUCTION
ASSISTANCE
CONTROL
STOCKS
MANAGEMENT
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PRICE INCOME POLICY

• GOAL Support Returns to Farmers
• OPTIONS
• Free Market Price Supports
• Target Prices Farm Income Insurance
• Marketing Loan Base Buyout
• Payment Limits PIK
• Decoupling Targeting
• Cooperatives Marketing Orders
• Flexibility Marketing News Service
• Countercyclical payments
• Green payments

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STOCKS MANAGEMENT

• GOAL Provide price stability food security
• OPTIONS
• Free Market
• CCC Stocks
• Farmer-Owned Reserve

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PRODUCTION CONTROL POLICY

• GOAL Adjust production to market ends
  (stability)
• OPTIONS
• Free Market Allotments Quotas
• Land Retirement Diversion
• --Soil Bank
• --PIK
• --CRP
• --Set-aside (ARP)
• Termination/Buyout
• Marketing News Service Marketing Orders

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DISASTER ASSISTANCE POLICY

• GOAL Stabilizing supporting farm income after
  disasters
• OPTIONS
• Free Market
• Disaster Payments
• All-Risk Crop Insurance
• Emergency Loans

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FAMILY COMMUNITY POLICY

• GOAL Maintaining/improving family/ community
  stability growth
• OPTIONS
• Free Market Price Supports
• Target Prices ARP
• Employment/training Programs
• Alternative Economic Support Programs
• Credit
• Technology (public/private)
• Infrastructure Support

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1990 FARM ACT

• Dual Statutory Structure
• Food, Agriculture, Conservation Trade Act of
  1990 (FACTA 90)
• 25 Titles
• Agricultural Reconciliation Act of 1990 (ARA
  90)
• 55 billion spent on commodity programs 1991-1995

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1990 Farm Policy Goals/Mechanisms
Improve
Reduce
Become More
Environment
Budget
Competitive
Deficit
Cut
Market-
Planting
Ag
Oriented
Payment
Flexibility
Resources
Loan
Acres
Conservation
Rates
Program
Export
Support
Programs
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Farm Program Outlays
Planned Outlays
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Federal Agriculture Improvement Reform Act
(FAIR) OF 1996

• 7-YEARS (1996-2002)
• Phasedown govt. support 2/fixed payments
• Eliminates
• Target Prices Deficiency Payments
• Acreage Reduction Program
• Mandatory Crop Insurance
• Establishes Market Transition Payments

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FAIR (cont)

• Increases Planting Flex
• Phasedown milk support price to 9.90 in 1999
  replace w/recourse loan in 2000
• Cap CRP at 36.4 mil. Ac. EQIP, other programs
  approved
• Fund for Rural America
• Food Stamp/Nutrition reauthorized for 2 years.

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1996 Far ActSuccess or Failure

• 7-yrs. To efficiency for Crop producers? 2002
  No
• 4 yrs. For efficiency for Dairy Producers?2002
  No
• Near total flexibility2002 Yes very popular
• More volatility in Feed Price Supply2002 Yes
• Continued support for export markets2002 Yes,
  but questionable support

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2002 Farm Act Forward and Reverse?

• Concerns of profitability, stability, rural
  development and the environment
• Farm/Commodity Groups and Congressional Reps who
  had favored market orientation in 1996 reversed
  course took the lead in promoting an expanded
  role for the Federal government government
  funding
• Defacto admission that the free market was not
  what they really wanted?

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The Future of U.S. Agriculture Factors
Constraints
Rural Development
Commodity
SUPPLY
Monetary
--Production
Energy
Res. Dev.
Technology
--Processing
--Distribution
Environment
Fiscal
--Domestic
INPUTS
--Import
OUTPUTS
--Natural
--Technology
--Stability
--Capital
--Economic Growth
--Human
DEMAND
--Environment
--Social
--Tastes/Pref.
--Income
Land
Trade
Consumer
--Employment
--Population
Transportation
Foreign
--Domestic
Immigration
Education
--Export
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Summary

• Domestic farm policy continues to evolve, based
  on farm problems objectives at each time in
  history
• Recent farm acts focused on
• deficit reduction
• becoming more competitive
• enhancing environment
• 1996 farm bill, driven by budget market focus,
  planned to significantly reduce government
  support over 7 years
• In fact, govt support broke all records
• 2002 farm bill poised to sustain high levels of
  federal spending for agriculture

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Assignments

• 22-29 Sep Read K 7, L5a