The 2002 Farm Bill: Overview and Status

The 2002 Farm Bill: Overview and Status

Order Code IB10085
CRS Issue Brief for Congress
Received through the CRS Web
The 2002 Farm Bill: Overview and Status
Updated September 27, 2001
Coordinated by Geoffrey S. Becker
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Overview
Congressional Action
Budgetary and Trade Considerations
Budget
Trade
Administration Views
Selected Issues
Farm Income and Commodity Price Support
PFC Payments
Counter-cyclical Assistance
Marketing Loan Assistance
Supply Management
Price-Supported Commodities
“Green” Payments
House Committee Bill
Conservation and Environment
House Committee Bill
Foreign Trade and Food Aid
Provisions of the 1996 Law
Selected Issues
House Committee Bill
Farm Credit and Finance
House Committee Bill
Rural Development
House Committee Bill
Agricultural Research, Extension, and Education
1996 Farm Bill
1998 Research Legislation
Selected Issues
House Committee Bill
Food Stamps and TEFAP
Food Stamp Issues
Food Stamp Reform Agendas
TEFAP
House Committee Bill
Other Provisions
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The 2002 Farm Bill: Overview and Status
SUMMARY
Federal farm support, food assistance,
oilseeds; continue planting flexibility with no
agricultural trade, marketing, and rural devel-
supply controls; extend with some modifica-
opment policies are governed by a variety of
tions dairy, sugar, wool and mohair, and honey
separate laws. Although these laws may be
supports; create a new peanut support pro-
considered and reauthorized as free-standing
gram similar to that for major row crops, and
legislation, many of them are evaluated period-
terminate quotas; expand conservation pro-
ically, revised, and renewed through an omni-
gram funding; reauthorize agricultural export
bus, multi-year farm bill. The Federal Agricul-
and food aid programs; and include provisions
ture Improvement and Reform (FAIR) Act of
for research, nutrition (food stamps), credit,
1996 (P.L. 104-127) was the most recent
and rural development.
omnibus farm bill, and many of its provisions
expire in 2002.
The Senate Agriculture Committee also
has been holding farm bill hearings but has not
Every omnibus farm bill spells out farm
set a date to begin marking up legislation.
income and commodity price support policy –
Many observers believe a final bill will not
namely the methods and levels of support that
clear Congress until 2002.
the federal government provides to agricultural
producers. However, farm bills also typically
The congressional budget resolution
include sections on agricultural trade and
(H.Con.Res. 83), completed in May 2001,
foreign food aid, conservation and environ-
reserves for FY2002-FY2011 an extra $73.5
ment, domestic food assistance (primarily food
billion in direct spending for farm and related
stamps), agricultural credit, rural development,
programs. This total is over and above the
agricultural research and education, and
approximately $95 billion projected for agri-
marketing-related programs. “Miscellaneous”
culture and related programs under a
provisions dealing with subjects such as global
current-law baseline for the same 10-year
warming, food safety, and animal health and
period. The House committee bill would
welfare are often added.
utilize most of this amount. Federal budget re-
estimates in August indicated that future
The House Agriculture Committee held
surpluses, on which the farm bill was relying
extensive hearings this year, and marked up an
for its increased funding, have shrunk consid-
omnibus bill (H.R. 2646) on July 26-27, 2001.
erably from levels estimated in May. That,
The panel chairman has been seeking full
combined with new spending needs to re-
House action by this fall. The recent terrorist
sponse to the terrorist attacks, have raised
attacks have added some uncertainty to this
questions about available resources.
schedule but not necessarily derailed the bill.
[The resolution also permits Congress to
The committee bill would set a
increase agriculture spending by $5.5 billion in
commodity-based support policy through 2011
FY2001. A bill providing these ad hoc funds
(for 10 years) that would: provide fixed pay-
for 2001, H.R. 2213, passed the House and
ments, new counter-cyclical assistance tied to
Senate prior to the August recess and was
target prices (a guaranteed per-bushel pricing
expected signed by the President on August
system which had been eliminated in 1996),
13, 2001 (P.L. 107-25).]
and marketing loans for grains, cotton, and
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MOST RECENT DEVELOPMENTS
House floor on action a new 10-year omnibus farm bill (H.R. 2646; H.Rept. 107-191)
could occur shortly. The bill was cleared by the House Agriculture Committee on July 27.
Committee action had followed extensive hearings to solicit proposals from agricultural
interest groups.
The Senate Agriculture Committee, too, has been holding hearings and receiving
proposals for new farm policies, but a markup has not yet been scheduled. Many observers
speculate that a final bill will not clear Congress until sometime in 2002 (when most current
farm bill provisions expire).
The Bush Administration has not developed its own recommendations for a new farm
bill nor commented (as of September 27) on the specifics in the House Agriculture
Committee legislation. However, it did, on September 19, release a broad, 120-page report
laying out “principles” for future farm policy.
Earlier, Congress passed another bill (H.R. 2213) to provide $5.5 billion in ad hoc
assistance for 2001 crops. The measure passed the House on June 26 and the Senate on
August 3, and was signed into law (P.L. 107-25) by the President on August 13.
BACKGROUND AND ANALYSIS
Overview
Federal farm support, food assistance, agricultural trade, marketing, and rural
development policies are governed by a variety of separate laws. Although these laws may
be considered and reauthorized as free-standing legislation, many of them are evaluated
periodically, revised, and renewed through an omnibus, multi-year farm bill. The Federal
Agriculture Improvement and Reform (FAIR) Act of 1996 (P.L. 104-127) was the most
recent omnibus farm bill, and many of its provisions expire in 2002.
The heart of every omnibus farm bill is farm income and commodity price support policy
– namely the methods and levels of support that the federal government provides to
agricultural producers. However, farm bills also typically include titles on agricultural trade
and foreign food aid, conservation and environment, domestic food assistance (primarily food
stamps), agricultural credit, rural development, agricultural research and education, and
marketing-related programs. “Miscellaneous” provisions such as global warming, food safety,
and animal health and welfare often are added to farm bills.
Congressional Action
The House Agriculture Committee, after extensive hearings, marked up and approved
a new farm bill (H.R. 2646) on July 26 and 27, 2001. The omnibus measure, reported August
2 (H.Rept. 107-191), would extend major farm, food, and related programs for 10 years,
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through 2011. More specifically, the bill would set a commodity-based support policy
providing fixed payments, new counter-cyclical assistance tied to target prices (the per-bushel
guaranteed price system eliminated in 1996), and marketing loans for grains, cotton, and
oilseeds; extend with modifications dairy, sugar, wool and mohair, and peanut supports;
expand conservation program funding; reauthorize agricultural export programs; and include
provisions for research, nutrition (food stamps), and rural development.
The committee chairman was seeking House floor action on the measure in the fall. The
bill’s status was less certain in the aftermath of the September 11 terrorist attacks, although
it still could reach the full House shortly.
The Senate Agriculture Committee also has held numerous hearings but has not yet set
a date to begin marking up a bill. Some observers predict that omnibus farm legislation might
not clear Congress and be ready for the President’s signature until 2002.
Budgetary and Trade Constraints
Budget. The farm bill must be considered within the constraints of the federal budget.
The congressional budget resolution (H.Con.Res. 83), completed in May 2001, reserves, for
FY2002-2011, an extra $73.5 billion in direct spending for farm and related programs. This
total is over and above the approximately $95 billion projected for such programs under a
current-law baseline for the same 10-year period. The House Agriculture Committee-
approved farm bill apparently utilizes most of these available funds. [See the Congressional
Budget Office (CBO) website for its official farm bill cost estimates. Also see on Agriculture
and the Budget in the CRS Electronic Briefing Book on Agriculture Policy and Farm Bill.)
The budget resolution does make release of the extra funds contingent upon not utilizing
federal surpluses not attributed to Social Security or Medicare. CBO and Administration
budget revisions in August projected budget surpluses that are much smaller than those
estimated in May, when the resolution was passed. After CBO and the Administration budget
re-estimates this summer projected much smaller surpluses, questions arose as to whether the
resources remain available to fund the additional spending written into the new farm bill.
Agricultural interests assert that the language of the budget resolution is tied to the spring
budget estimates (not the more recent ones) and, therefore, the money can be committed to
the farm bill. The September terrorist attacks further cloud the budgetary picture.
Trade. The multilateral Uruguay Round Agreement on Agriculture (URAA) poses
another constraint by limiting U.S. spending to no more than $19.1 billion per year on
domestic farm supports most likely to distort production and trade. The agreement spells out
rules for determining whether a policy is market distorting or whether it is exempt from the
annual spending calculation. Thus, farm programs that can be justified as URAA compliant
are likely to garner more congressional support than others. (See Farm Support Programs
and World Trade Commitments, CRS Report RL30612; and Farm Program Spending:
What’s Permitted Under the Uruguay Round Agreements, CRS Report RS20840.)
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Administration Views
The Bush Administration has not developed its own recommendations for a new farm
bill nor commented yet on the specifics in the House Agriculture Committee legislation.
However, it did release, on September 19, 2001, a 120-page report that attempts to take a
comprehensive look at modern U.S. agriculture and to offer a set of “principles to guide
policy development.” The report, Food and Agricultural Policy: Taking Stock for the New
Century, concludes, among other things, that:
! Farm policy should be tailored to reflect the wide differences among U.S.
farms and farm practices. Current programs are tilted most heavily toward
highly efficient commercial farms that enable them to expand operations and
lower costs even more, with no direct relationship between benefits and a
farm’s financial status. Landowners, not necessarily farm operators, benefit
the most through higher land values and farmland rental rates.
! Farm policy must promote “more sustainable prosperity” for farmers, relying
on the market and not government for long-term support, although it could
provide aid for “unexpected events” beyond control of farmers and ranchers.
! Trade policy not only must focus on more access to foreign markets, but also
be supported by domestic policies that meet U.S. international obligations
and provide the latitude “to pursue ambitious goals in trade negotiations.”
Domestic farm policy must not reduce competitiveness while seeking to
expand farm export opportunities.
The report suggests that future policy should shift emphasis from traditional commodity
price supports toward the demand side of agriculture – focusing on marketing and
consumption, particularly overseas. Conservation programs, food safety and affordability,
nutrition, and rural development also are addressed in the report, which can be viewed at the
USDA web site: [http://www.usda.gov/news/pubs/farmpolicy01/fpindex.htm]. In releasing
the report, Agriculture Secretary Veneman commented that “fundamental, far-reaching
changes in policy, programs, procedures, and institutions may be required.” She also
emphasized that current farm policy does not expire until later in 2002 – implying that
Congress should take more time to debate and pass a new bill. Following the release of the
Administration’s report, Senate Democrats, and, separately, the chairman and ranking
minority member of the Senate Agriculture Committee, issued, in late September, their own
lists of broad farm policy objectives.
Selected Issues
Farm Income and Commodity Price Support1
The 1996 farm bill significantly revised federal farm policy. Title I, the Agricultural
Market Transition Act (AMTA), replaced production-based deficiency payments (the
difference between legislated target prices and lower market prices) for wheat, feed grains,
1 Prepared by Geoffrey Becker and Jasper Womach, Specialists, Resources, Science, and Industry
Division.
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upland cotton, and rice with fixed “production flexibility contract” (PFC) payments. These
payments are made irrespective of market prices or current planting choices. AMTA
authorized $36 billion in PFC payments over the 7-year life of the law to producers with a
participation history in the previous commodity programs. PFC contract payments are
projected at $4.1 billion for FY2001. Previous annual supply controls, including crop-specific
acreage bases and cropland set-asides, were ended by the 1996 law.
In addition, AMTA maintained the price guarantees of the marketing assistance loan
program for contract commodities, soybeans and other oilseeds, and extra long staple (ELS)
cotton. This counter-cyclical program makes up the difference between low market prices
and specified commodity nonrecourse loan rates with direct payments. CCC net outlays for
loan-related activities (including marketing loan gains, loan deficiency payments (LDPs), and
commodity forfeitures) are projected at $6.6 billion in FY2001, according to USDA.
AMTA continued the market price support programs for sugar and peanuts, which
operate through CCC loans and import quotas. The 1996 law also scheduled the elimination
of the longstanding dairy price support program, but Congress has since continued it.
Persistently low commodity prices stimulated three years of large ad hoc emergency
farm aid packages that have provided a total of approximately $17 billion in non-disaster
related farm income assistance, over and above amounts already authorized by AMTA.
Nearly $14 billion went to PFC contract holders. Much of the rest was for special subsidies
for producers of soybeans, peanuts, tobacco, milk, honey, wool, and mohair. Congress has
again provided additional “emergency” income support payments in FY2001 as provided for
in the budget resolution (H. Con. Res. 83), which provides increased agriculture spending of
$5.5 billion in FY2001. A bill (H.R.2213) providing this level of ad hoc funds for 2001
passed the House on June 26 and the Senate on August 3, and the President is signed it into
law (P.L. 107-25) on August 13, 2001. The Senate Agriculture Committee on July 25 had
approved a version (S. 1246) providing $7.494 billion. (See Supplementary Farm Support
Payments for 2001 in the CRS Electronic Briefing Book on Agriculture Policy and Farm Bill.)
Many policy makers and farm groups are now urging policy changes to provide a more
certain method of funding future counter-cyclical income support than ad hoc laws. Except
as noted, the options below mainly apply to policies for grains, cotton, and oilseeds.
PFC Payments. Most (although not all) producer groups have called for continuation
of annual lump sum assistance like PFC payments. Some have recommended that the future
annual fixed payments be larger than the 2002 level of $4 billion in the current law. Some
want PFC eligibility expanded to include soybeans. One question is whether other commodity
producers should share in any expanded AMTA funding – such as the tobacco, peanut, milk,
wool, mohair, apple, and cranberry producers who recently received direct payments under
the emergency assistance laws. Another is whether the basis for awarding PFC payments
ought to be revised (e.g., by using more recent planting histories, allowing entry of farmers
who did not produce contract crops when AMTA was adopted in 1996, etc.). Or, should an
entirely different basic approach to subsidizing farmers, if any, be considered?
Counter-cyclical Assistance. There is growing interest in a new counter-cyclical
assistance program that is more generous than now provided through marketing loans.
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Various proposals differ in detail but share a common objective of providing more support
when farm prices and/or incomes decline than provided under current law.
For example, the Commission on 21st Century Production Agriculture recommended
“Supplemental Income Support” (SIS) payments when national aggregate PFC-crop gross
income falls below some proportion of an earlier base period. Others have called for more
targeted counter-cyclical aid. The American Farm Bureau Federation (AFBF) has
recommended that such payments be made when any state’s (as opposed to national) gross
cash receipts for a particular PFC commodity fall below a recent average level.
Marketing Loan Assistance. There appears to be wide support to continue
marketing assistance loans (including loan deficiency payments or LDPs). However, several
groups have called for higher loan rates. Others have proposed “re-balancing” current loan
rates by raising them to a level equivalent to soybeans (which are not currently a PFC
commodity). Another question is whether marketing loans should be extended to currently
ineligible commodities (e.g., fruits, vegetables, milk, tobacco) or to commodities that became
temporary beneficiaries under the recent ad hoc funding packages (wool, mohair, honey).
Supply Management. Most major agricultural groups oppose any restoration of
supply management tools. However, the National Farmers Union and the National Farmers
Organization are proposing voluntary set-asides for crops – with loan rates increasing as more
acres are removed from production – and also commodity reserve programs that (when prices
are low) pay producers to store crops on the farm until prices rise.
Price-Supported Commodities. Support programs for tobacco, peanuts, sugar,
and milk maintain farm prices above what the market might otherwise dictate. Nonrecourse
loans and marketing quotas apply to virtually all U.S. tobacco and to all peanuts grown for
domestic edible use. Sugar utilizes nonrecourse loans and tariff rate quotas to support prices
and limit less expensive imports. Milk price support is provided through direct USDA
purchases of dairy products at specified prices, milk marketing orders (which pool receipts
and set classified prices for most fluid grade milk), and, in New England, the Northeast
Interstate Dairy Compact (which allows producers there to receive higher prices than the
national level). At issue for Congress is whether to maintain, modify, or eliminate these
programs, which WTO considers highly market distorting. Supporters contend that these
programs are effective in maintaining farm incomes and low cost to taxpayers. Some
consideration is being given to direct payments as either an alternative or supplement to price
support.
“Green” Payments. Some contend that farmers’ incomes can be enhanced through
so-called green payments, which provide financial incentives based not on the commodities
they produce, but rather in exchange for practices that protect land, water, air quality, and/or
wildlife; or possibly offer scenic, recreational, or open space amenities. (See “Conservation
and Environment,” below.)
House Committee Bill. The committee bill proposes the following provisions for
grains, cotton, and oilseeds:
•
Fixed, decoupled payments (like the current PFC payments) at rates shown in the table,
with a per-person payment limit of $50,000 per year.
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•
New counter-cyclical deficiency payments that make up the difference between a crop’s
average market price plus the fixed decoupled payment, and its “target price.” Target
prices are shown in the accompanying table. The per-person payment for this subsidy
would be limited to $75,000 yearly.
•
Continuation of marketing assistance loans (and LDPs) at current rates, except that the
soybean rate would be lowered to $4.92/bu. (see table). A payment limit of $150,000
per year would be applied to marketing loan benefits.
•
A producer’s decoupled payments and counter-cyclical payments would be set at 85%
of their current or updated AMTA base acres and AMTA crop yields.
•
Continued flexibility to plant most crops (except fruits and vegetables) on base acres,
and no USDA acreage control authority.
A new peanut program
Loans, Fixed Decoupled Payments & Target
would be similar to other crop
Prices
support, with fixed decoupled
(Dollars per Unit)
payments of $36/ton, a target
price of $480/ton, and loan rate
Crop
Loan
Fixed
Target
of $350/ton; marketing quotas
Rates
Payments
Prices
would be ended, with
Wheat (bu.)
2.58
0.53
4.04
compensation of $200/ton paid
to quota holders for lost asset
Corn (bu.)
1.89
0.30
2.78
values. Also, sugar support at
18¢/lb raw and 22.9¢ refined
Sorghum (bu.)
1.89
0.36
2.64
would continue with the no-
Barley (bu.)
1.65*
0.25
2.39
net-cost rule re-established, a
payment-in-kind program and
Oats (bu.)
1.21*
0.025
1.47
m a r k e t i n g a l l o t m e n t s
Upland cotton (lb.)
0.5192
0.0667
0.736
authorized, and no marketing
assessment. Dairy would
Rice (cwt.)
6.50
2.35
10.82
continue at its current support
level of $9.90/cwt.; Marketing
Soybeans (bu.)
4.92
0.42
5.86
loans and LDPs would be
Minor oilseeds (lb.)
0.087
.0074
0.1036
provided at rates of $1/lb. for
graded wool, 40¢/lb. For
Source: House Committee on Agriculture. *Set by formula
based on value relative to corn.
nongraded wool, $4.20/lb. for
mohair, and 60¢/lb. for honey.
The total 10-year additional cost (above baseline) of the bill’s commodity provisions
were estimated by CBO to be $49.8 billion. (See: CRS Report RS20271, Grains, Cotton,
and Oilseeds: Federal Commodity Support; CRS Report RS20848, Farm Commodity
Programs: A Short Primer; CRS Report RS20913, Farm Counter-Cyclical Assistance; and
Farm Income and Commodity Price Support Programs, Sugar Program, Peanut Program, and
What Is "Counter-Cyclical Assistance"? in the CRS Electronic Briefing Book on Agriculture
Policy and Farm Bill.)
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Conservation and Environment2
A farm bill conservation title might both amend existing programs and add new ones to
protect or restore resources on agricultural lands and provide resource and environmental
benefits to society. USDA agencies implement conservation policies through a combination
of land use contracts, cost sharing payments, and technical assistance, backed by education
and research. Participation in these programs is voluntary.
Starting with the omnibus farm bill in 1985, Congress expanded the conservation mission
greatly beyond its traditional focus on controlling soil erosion and providing water to enhance
production. The goals now include wetlands protection, wildlife habitat protection and
development, and air and water quality improvement, among others. Since the 1996 farm bill
was enacted, new issues have emerged, including the role agriculture might play in
sequestering carbon, protection and restoration of grasslands, reduction of non-point water
pollution caused by vary large animal feeding operations, and other “off-farm” impacts. For
example, to what degree is nutrient run-off in the corn belt contributing to the growth of a
seasonal “dead zone” in the Gulf of Mexico?
Congress has added new conservation tools, including controls over environmentally
fragile lands and wetlands for producers who want to receive federal farm benefits, and
easements to protect resource values while keeping the land under the control of the farmer.
The expanded conservation effort is reflected in funding levels. Conservation activities
received just over $1 billion in FY1985 and now receive more than $3 billion annually.
However, most of this growth has been for land retirement and easements (e.g., the
Conservation Reserve and Wetlands Reserve Programs, CRP and WRP), while the other
activities have grown little or not at all in real terms. (See CRS Report RL30331,
Conservation Spending in Agriculture; Trends and Implications for a tabulation of programs
and review of spending over the past 20 years.)
Numerous programs are scheduled to expire by the end of FY2002. During several days
of hearings by the agriculture committees, farm groups generally have suggested only
enlarging the size of existing programs to increase the flow of conservation funds to
producers. Other interest groups, while supporting some of the farmer proposals, have
recommended alternatives. One broader approach encompassing the idea of “green
payments” is the Conservation Security Act (S. 932, Harkin; H.R. 1949, Thune). An
alternative to the House committee-reported bill (see below), endorsed by many
environmental organizations, is the Work Lands Stewardship Act (H.R. 2375, Kind). The
Kind bill reportedly is being revised and may be offered as a floor amendment to H.R. 2646.
House Committee Bill. Title II of H.R. 2646 proposes new spending of $16.1 billion
for conservation (a 75% increase over baseline). Changes from current programs include:
reauthorization through 2011 of the CRP with a new 39.5 million acre enrollment cap, and
of the WRP with an added 150,000 acres enrolled per year; extension of the Environmental
Quality Incentives Program (EQIP) through 2011 at $1.2 billion annually (with $675 million
in EQIP to address groundwater conservation issues plus explicit authority to use EQIP for
2 Prepared by Jeffrey Zinn, Specialist, Resources, Science, and Industry Division.
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annual and perennial crops (e.g., tree fruits or nuts)). The bill also: moves some conservation
programs from the Natural Resources Conservation Service to the Farm Service Agency;
reauthorizes the Wildlife Habitat and Incentives Program and Farmland Protection Program
at, respectively, $25 million and $50 million annually; authorizes a new 2 million acre
Grasslands Reserve Program under 10, 15, and 20-year contracts; provides up to $100 million
annually (to $850 million over 10 years) for conservation technical assistance to producers
using government or private contractors; and $150 million for small watershed dam
restoration, among other provisions. Committee staff reportedly is preparing numerous
changes to the conservation title that may be offered as a manager’s amendment on the House
floor. (See CRS Issue Brief IB96030, Soil and Water Conservation Issues; CRS Report
RL31131, Selected Conservation Proposals for the Next Farm Bill; and Conservation and
Environment in the CRS Electronic Briefing Book on Agriculture Policy and Farm Bill.)
Foreign Trade and Food Aid
Exports are viewed by most U.S. agricultural groups as critical to their prosperity. Thus,
trade titles in omnibus farm bills are important vehicles for addressing agricultural trade
problems, export assistance, and foreign food aid programs. Other policy venues also are
important. For example, negotiations are under way in the World Trade Organization (WTO)
to strengthen multilateral agricultural trade rules. Regional and bilateral trade negotiations
also will affect conditions of competition for U.S. farm products.
Provisions of the 1996 Law. Title II of the 1996 farm bill extended and amended
the major U.S. foreign food aid and agricultural export programs. It reauthorized through
FY2002 Titles I, II, and III of P.L. 480 (the Food for Peace program), which respectively
provide concessional financing of U.S. agricultural exports, commodity donations for
humanitarian and development activities, and bilateral development grants of food. The farm
bill extended to FY2002, at previously authorized funding levels, export credit guarantees for
agricultural sales (the so-called GSM programs). It also extended, at reduced spending levels,
the Export Enhancement Program (EEP, an export subsidy program) and the Market Access
Program (MAP, which assists in the export promotion of U.S. farm products), as well as the
Foreign Market Development Cooperator Program (FMDP).
Selected Issues. In renewing the food aid and export assistance programs, the 107th
Congress again is confronted with questions of policy direction and funding. Levels of
spending and volumes of product subsidized under EEP and the Dairy Export Incentive
Program (DEIP) are subject to limitations under the URAA. In practice, EEP has been used
very little in recent years; DEIP has been used to the limits of the URAA. Market promotion
programs like MAP, the food aid programs, and export credits (GSM) are not considered to
be trade distorting under the current URAA, and therefore are not subject to spending
disciplines. Foreign trading partners counter that the United States has utilized food aid and
export credits as ways to dispose of heavily subsidized farm surpluses, thereby distorting
trade. So, during the reauthorization deliberations, spending and program design might hinge
not only on domestic questions such as budget impact but also trade considerations.
Some have questioned whether export subsidy and promotion support actually increases
overseas sales or simply displaces those that would have occurred anyway. Even if sales
increase, do they lead to substantially higher farm prices and incomes – or might direct farm
subsidies be more cost-effective? Some critics claim that these programs benefit primarily
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large food and export companies (who can afford to pay for promotion activities themselves)
or foreign buyers more than U.S. producers. Defenders cite studies claiming positive
outcomes from such spending. Similar questions arise with regard to foreign food aid.
One issue is the performance of the $300 million pilot Global Food for Education
Initiative, launched by the outgoing Clinton Administration to help establish school and pre-
school food programs in developing countries. Members’ perception of its value to farmers
and recipients could help determine whether or not to authorize a more permanent program.
The farm bill also could be a vehicle for further congressional guidance on objectives and
strategy in multilateral and/or bilateral trade negotiations. U.S. agricultural groups generally
expect trade negotiations to open new markets. However, some segments of agriculture –
e.g., dairy, peanut, sugar, and certain fruit and vegetable producers – could fear the prospect
of increased imports under an agreement that reduces trade barriers.
House Committee Bill. Title III of H.R. 2646 would reauthorize MAP, FMDP, P.L.
480 Food for Peace, Food for Progress (FFP), export credit guarantees, EEP, and DEIP
through 2011, with spending increases in some. For example, the MAP authorization would
be more than doubled, to $200 million per year (from a current $90 million), and FMDP
would be authorized at $35 million annually; FFP transportation and administrative funding
also would be increased. In other trade-related action, the committee, during mark-up,
adopted an amendment to make leaf tobacco eligible for MAP funds, but rejected another that
would have imposed more stringent country-of-origin labeling requirements on red meat,
fruits, vegetables, and farm-raised fish. Another committee provision authorizes $3 million
annually in CCC funds to establish a program aimed at removing sanitary, phytosanitary, and
related barriers to trade in specialty crops. Total additional 10-year cost (above baseline of
the trade provisions was estimated by the CBO to be $3.8 billion.
The House International Relations Committee, to which H.R. 2646 also was referred,
changed a number of the trade provisions during a mark-up session on September 6, 2001.
The panel would: explicitly authorize (although not require) USDA to operate a global school
food program, which is not in the Agriculture Committee version; set annual funding for MAP
at $180 million; set FMDP funding at $40 million annually; and did not accept the Agriculture
Committee’s plan to make tobacco eligible for MAP funds, among other differences. The
International Relations Committee approved a 6-year rather than 10-year reauthorization for
trade programs. Presumably, differences in the two panels’ versions will be resolved prior to
floor action.
(See CRS Issue Brief IB10077, Agricultural Trade Issues in the 107th Congress; and
Agricultural Trade and Foreign Food Aid in the CRS Electronic Briefing Book on Agriculture
Policy and Farm Bill.)
Farm Credit and Finance3
Omnibus farm bills commonly contain a credit title that makes policy changes to USDA
agricultural credit programs and addresses issues that relate to commercial lenders such as
3 Prepared by Ralph Chite, Specialist, Resources, Science and Industry Division.
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the Farm Credit System (FCS, a confederation of federally chartered, member owned banks
and associations) and commercial banks. Credit is an important production input for many
farmers. Long-term credit is used to finance purchases of real estate, and shorter-term loans
finance production expenses such as livestock, seed, feed and fertilizer.
USDA’s Farm Service Agency (FSA) serves as a lender of last resort to eligible family-
sized farmers whose financial condition is too weak to permit them to obtain commercial
credit. FSA provides direct loans to farmers and also guarantees the timely repayment of
principal and interest on certain loans made by commercial lenders. FSA makes and
guarantees real estate and operating loans, and also makes direct emergency disaster loans.
These loan programs have permanent authority under the Consolidated Farm and Rural
Development Act, and unlike the farm commodity programs, do not require periodic
reauthorization. However, Congress frequently uses the farm bill to make changes to loan
program terms, conditions, and eligibility requirements.
The condition of the farm economy will be important to consideration of farm bill credit
issues. For example, if low commodity prices and/or high energy and other input costs
undermine the creditworthiness of farm borrowers, Congress might consider a further
postponement of borrower graduation requirements, as well as other forms of forbearance
for FSA loan customers. (Among other provisions, the credit title of the omnibus 1996 farm
bill limited the number of years a borrower could remain a customer of FSA before being
required to “graduate” to a commercial lender.)
House Committee Bill. Title V, the credit title of H.R. 2646, requires some program
operational and administrative changes, and alters or expands certain eligibility and benefit
provisions for FSA farm loans. Among the major provisions are a removal (through the end
of 2006) of the requirement that an FSA borrower has to “graduate” to a commercial lender;
extend authority through 2011 requiring USDA to earmark a certain portion of FSA loans
for beginning farmers; and, to offer an interest-rate buydown program on certain loans.
Additionally, Title V would respond to several recent occurrences by allowing a farmer to be
eligible for an FSA emergency disaster loan to mitigate the effects of increased energy costs
and USDA imposed animal quarantines, and allow loans for horse breeders who suffered
losses as a result of mare reproductive loss syndrome.
Rural Development4
The 1972 Rural Policy Act (P.L. 92-419) designates USDA as the lead federal agency
for coordinating rural development. The stated mission of the rural development agencies
within USDA is to enhance rural communities by targeting financial and technical resources
in areas of greatest need. Four agencies in USDA are responsible for the mission area: the
Rural Housing Service (RHS), the Rural Business-Cooperative Service (RBS), the Rural
Utilities Service (RUS), and the Office of Community Development, which provides
community development support through Rural Development’s field offices. The mission
area also administers the rural portion of the Empowerment Zones and Enterprise
Communities Initiative and the National Rural Development Partnership.
4 Prepared by Tadlock Cowan, Visiting Scholar in Economic Growth and Entrepreneurship,
Resources, Science, and Industry Division.
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The rural development title of past farm bills has supported local business development
and expansion and the physical infrastructure of rural areas, e.g., subsidies for housing,
electricity, telephones, water and waste disposal, and community facilities. More recently,
policymakers have pushed for programs that support innovative and alternative industry
development, enhanced telecommunications access, as well as new funding mechanisms.
Pressure for such alternatives is expected to continue as policymakers recognize the changing
structure of agriculture and the diversity of rural communities. Some rural areas have grown
and prospered during the last decade, particularly those within commuting distances of metro
areas. Other rural areas are falling further behind as their primary industries (including
agriculture) either decline or adapt to a global marketplace and economy that often means
fewer employment opportunities and lost population, especially in farm-dependent areas.
Local investment strategies, notably value-added agriculture – e.g., regional food
processing plants, cooperatives, organic farming – are being promoted by many in the farm
sector. While holding promise for agriculture and surrounding communities, there are limits
on how many yogurt plants, small dairy processors, or food processors can be supported by
these local economies, especially with increasingly global competition in these sectors.
Thus, the kinds of rural entrepreneurship seen in the past (e.g., in the above types of
value-added enterprises) may give way to future forms of rural entrepreneurship that build
around new, or previously ignored resources. Among the possibilities are investment in
environmental entrepreneurship or environmental capital, public-private development of
carbon emission markets and sustainable land management innovations tied to national (clean
water) and international agreements (carbon emissions), and environmentally sensitive land
use for non-agricultural purposes (e.g., recreation). New forms of agricultural production and
marketing, particularly agriculture within metro regions, also suggest future possibilities for
enhancing rural opportunities. (See Rural Development in the CRS Electronic Briefing Book
on Agriculture Policy and Farm Bill.)
House Committee Bill. Title VI of H.R.2646 provides $2.6 billion in estimated
budget authority for rural development in FY2002-2011, of which about $1 billion is funding
for new programs. Section 601 of the Title proposes new mandatory spending of $20 million
per fiscal year for grants and loans to provide or improve broadband services to rural areas
of less than 25,000 population. Section 602 amends the 2000 Agricultural Risk Protection
Act (P.L. 106-224) to permit $50 million to be used for value-added agricultural development
grants for each fiscal year 2002-2011. Not less than $5 million of this funding for FY2002
and not less than $10 million for FY2003-2004 is provided for grants to establish Agriculture
Innovation Centers for technical assistance to value-added agricultural businesses. For each
fiscal year 2002-2011, $30 million is provided from the funds of the Commodity Credit
Corporation for Community Water Assistance Grants, which extends spending for this
program to 2011 and makes the funding mandatory. A new Pilot Program for Strategic
Regional Development Plans and Implementation provides mandatory spending on planning
grants of $2 million and implementation grants of $13 million for each fiscal year 2002-2011
to ten rural communities in states with a large proportion of rural residents. Loan limits are
increased from $25 million to $100 million for certain other rural development loan programs;
and loans and guarantees for renewable energy systems are also revised. Section 615 of Title
VI establishes a new National Rural Development Partnership composed of the Coordinating
Committee and the state rural development councils. Finally, the Title VI provides $2 billion
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in program level funding for loan guarantees to implement the Launching Our Communities
Access to Local Television Act of 2000.
Agricultural Research, Extension, and Education5
1996 Farm Bill. Title VIII of the 1996 farm bill authorized USDA’s agricultural
research, extension, and education programs and modified public agricultural research policy.
Also, a research-related provision in the rural development title of the 1996 Act authorized
a competitive grants program (the Fund for Rural America) to support rural development
projects and rural-focus research projects. Although not subsequently fully funded by
appropriators, the Fund marked a significant change in that federal money for the program
($100 million annually for 3 years, of which roughly one-third was for research grants) was
to be transferred directly to USDA from the U.S. Treasury instead of being appropriated.
1998 Research Legislation. In 1998 Congress passed separate legislation
superseding Title VIII of the 1996 farm bill, making several significant reforms and
reauthorizing USDA’s research, extension, and education programs through 2002. The
Agricultural Research, Extension, and Education Reform Act of 1998 (P.L. 105-185)
extended the new provisions contained in the 1996 farm bill (including the Fund for Rural
America) and adopted additional policy changes to: (1) require greater accountability for
program relevance and merit on the part of institutions receiving federal funds; (2) increase
the funding authority for multi-state research projects; (3) phase in a matching funds
requirement for the 1890 (historically black) colleges; and, (4) authorize several new research
programs. Of the latter, the most significant is a 5-year, $600 million Initiative for Future
Agriculture and Food Systems, a competitive grants program intended to promote cutting-
edge research in the areas of genomics, biotechnology, food safety, new uses for agricultural
products, natural resource management, and farm profitability. Congress authorized funding
for the program – $120 million annually – to come directly from savings in mandatory
spending stemming from reforms made in the food stamp program in 1997.
Selected Issues. In part because of difficulties in obtaining consistent financing for
the innovative funding mechanisms authorized in the 1996 farm bill and the 1998 research
reform law (the Fund for Rural America and the Initiative for Future Agriculture and Food
Systems), a primary research policy issue in the current farm bill debate is funding. In June,
a bipartisan group of 49 House members, including 24 from the House Agriculture
Committee, wrote to Agriculture and Appropriations Committee leaders urging that a portion
of the budget increase set aside for agriculture be used to double funding for research
programs over the next 5 years, including $500 million in the coming year. (See CRS Report
97-325, Agricultural Research, Education, Extension and Economics Programs: A Primer.)
House Committee Bill. Title VII (Research and Related Matters) of H.R. 2646
reauthorizes research programs through 2011; this includes the Initiative for Future
Agriculture and Food Systems at $120 million annually through FY2011. In addition, it seeks
to increase funding for the 1890 colleges by gradually increasing the matching funds
requirement from its current level of 50%, to 60% in 2003 and to 100% in 2007 (rising in
10% increments from 2003). The bill also initiates a 50% matching funds requirement for the
5 Prepared by Jean M. Rawson, Specialist, Resources, Science, and Industry Division.
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land grant colleges in the U.S. territories (Puerto Rico, Virgin Islands, Guam, American
Samoa, No. Mariana Islands, and Micronesia), and establishes a competitive grants program
to strengthen the teaching programs at those colleges (plus institutions in the Republic of the
Marshall Islands and the Republic of Palau). Title VII contains a new subtitle that amends
the Research Facilities Act (7 U.S.C. 390 et seq.) to permit the assessment of civil penalties
to cover damage from violence against agricultural research facilities.
Food Stamps and TEFAP6
Appropriations authorizations and other authorities related to the Food Stamp program
and The Emergency Food Assistance Program (TEFAP) expire at the end of FY2002.
Food Stamp Issues. Although food stamp enrollment appears to have leveled off
(and may be increasing), it has fallen dramatically (by nearly 40%) over the last 7 years. But
less than half this decline can be linked closely to loss of eligibility because of an improved
economy and increased earnings or the significant new restrictions put in place by the 1996
welfare reform law. Over half came from a sharp drop in the rate at which those who are
eligible actually participate. And participation rates appear to be notably low among working
poor families with children and the elderly.
At the same time, states, program advocates, and supporters of the 1996 welfare reform
law (with its goal of moving families from welfare to work) maintain, to different degrees,
that aspects of food stamp eligibility, benefit, and administrative rules serve to thwart
participation and effective administration and deny needed support to working poor families
and the elderly. They point to what they see as overly complex policies and food stamp rules
that differ from those applied by states in administering Temporary Assistance for Needy
Families (TANF) block grants and Medicaid. They also see a food stamp “quality control”
system that penalizes states too harshly for erroneous benefit/eligibility determinations
(pressuring them to “over-administer” the program) and inadequate benefits (especially for
families with children and the elderly) that are not worth the “hassle” of applying and
maintaining eligibility for.
Separately, some worry about the continued ineligibility of many legally resident
noncitizens. While 1998 amendments restored eligibility to some made ineligible for food
stamps by the 1996 welfare reform law, and several states are funding food stamps for others,
over 400,000 legally resident noncitizens remain ineligible – and participation by eligible
citizen children with legally resident noncitizen parents has declined greatly since 1996.
Food Stamp Reform Agendas. Program advocates, states, and welfare reform
advocates all are dissatisfied, but there is not a unified reform agenda, and most alternatives
would impose significant new costs. States call for simplified federal food stamp rules, much
greater state control over program policies, and more standardized benefit/eligibility rules that
will make it easier on both administrators and applicants/recipients. They also want major
revision of the quality control system. Program advocates emphasize the inadequacy of
benefits and the need to restore eligibility to noncitizens. Although they support reform of
the quality control system and selective changes to make eligibility/benefit determinations
6 Prepared by Joe Richardson, Specialist, Domestic Social Policy Division.
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simpler for applicants, they resist vesting much more decision-making with states and
tampering with what they see as a food stamp “safety net.” Welfare reform supporters also
agree with quality control reforms, but stress the need to ensure that the Food Stamp program
fulfills a major role in supporting the working poor as a first priority.
A description of state-supported initiatives can be found in the American Public Human
Services Association’s “Crossroads” report on welfare reform reauthorization. Program
advocates’ proposals are incorporated in the Nutrition Assistance for Working Families and
Seniors Act (S. 583/H.R. 2142) and Title VI of the Leave No Child Behind Act (S. 940/H.R.
1990). These include provisions similar to, but more extensive than, the four structural
changes in H.R. 2646. They also encompass restoration of food stamp eligibility to all legally
resident noncitizens, a benefit increase for child support recipients, larger benefits for those
with very high shelter costs, changing food stamp rules for redetermining eligibility to
conform to those used in Medicaid, an increase in minimum monthly benefits for small
households (primarily elderly), and a series of outreach efforts.
TEFAP. Federal food donations under TEFAP have recently increased, and private-
sector donations to emergency feeding organizations are on the rise. But many contend that
federal help has not kept pace with growing demand and is well below what would be
required in a serious economic downturn. Perhaps more important, they argue that costs for
storing and distributing food given out by state/local providers (whether privately or federally
donated) are seriously underfunded.
House Committee Bill. Title IV of H.R. 2646, the House Agriculture Committee’s
farm bill, reauthorizes all expiring food stamp authorities and the appropriations authorization
through FY2011. It also includes 4 significant structural changes intended to increase benefits
to families with children and ease burdens on administrators and applicants/recipients – at a
cost of $3.25 billion through FY2011. Benefits to households of four or more persons are
raised modestly. Administrative burdens are lightened by allowing states to conform the way
they count income for food stamp purposes to the method they use in either their TANF or
Medicaid program and by allowing them to provide “transitional food stamp benefits” for 6
months to families leaving TANF for work. Finally, the quality control system is substantially
revamped by raising the threshold above which states are penalized for erroneous
benefit/eligibility determinations, imposing sanctions only after a state has exceeded the
threshold for a third consecutive year, and instituting new “bonus” payments to states that
lead in providing quick service to recipients and have low rates of improper denials.
For TEFAP, the House Committee’s farm bill reauthorizes funding for food purchases
and distribution costs through FY2011 and increases annual funding by $40 million a year,
$10 million of which is earmarked for distribution costs. (See CRS Report 98-59, Food
Stamps: Background and Funding, CRS Report RL30164, The Emergency Food Assistance
Program and Emergency Feeding Needs, and Food Stamps and TEFAP in the CRS
Electronic Briefing Book on Agriculture Policy and Farm Bill.)
Other Provisions
Forestry. The House Agriculture Committee farm bill (H.R. 2646) contains a forestry
title (Title VIII), and a forest management section under miscellaneous provisions (Title IX).
Under the forestry title, the existing, overlapping Forestry Incentives and Stewardship
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Incentive Programs would be replaced with a coordinated Forest Land Enhancement Program
to provide cost-sharing to private landowners for planning and implementing sustainable
forestry practices, with $15 million annually in mandatory appropriations. The Renewable
Resources Extension Act and Forest Service’s Office of International Forestry would be
reauthorized through 2011. The existing wildfire protection assistance programs would be
expanded with additional authority to cooperate with state foresters and private landowners
on activities to protect intermingled government-private lands from wildfire. Another section
would authorize “stewardship end result contracts,” under which the Forest Service (and the
Interior Department) could require timber purchasers to reduce wildfire fuel levels, essentially
trading goods (timber) for services (fuel reduction). Finally, under a section in Title IX, the
Secretaries of Agriculture and of the Interior could make grants to biomass-to-energy facility
operators “to offset the costs incurred to purchase” potentially hazardous wildfire fuels. (See
CRS Report RL31065, Forestry Assistance Programs.)
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