Agriculture: Payment in Kind (PIK) Program

On January 11, 1983, President Reagan announced that the U.S. Department of Agriculture would implement a payment-in-kind (PIK) program to help reduce Government grain surpluses and to improve farm income. The materials included in this report were compiled by Congressional Research Staff for Member of Congress desirous of more information on the subject.

Congressional Research Service The Library of Congress Washington, D.C. 20540 AGRICULTURE: PAYMENT-IN-KIND IP0240A (PIK) PROGRAM On J a n u a r y 11, 1983, P r e s i d e n t Seagan announced t h a t t h e U.S. Department o f A g r i c u l t u r e would imrlemez'i: a payment-in-kind (PIK) program t o h e l p r e d u c e Government g r ~ l nc u r p l u s e s and t o improve farm income. I n r e s p o n s e t o numerous r e q u e s t s f o r i n f o r m a t i o n on t h i s t o p i c , we have compiled t h e e n c l o s e d m a t e r i a l s on t h i s program and t h e i n i t i a l reaction t o it. A d d i t i o n a l i n f o r m a t i o n on t h e s u b j e c t , p r i m a r i l y i n p e r i o d i c a l s and n e w s p a p e r s , may b e found i n a l o c a l l i b r a r y t h r o u g h t h e u s e o f i n d e x e s such a s t h e R e a d e r s ' Guide t o P e r i o d i c a l L i t e r a t u r e , P u b l i c A f f a i r s I n f o r m a t i o n S e r v i c e B u l l e t i n ( P A I S ) , and t h e New York Times Index. We h o p e ' t h i s i n f o r m a t i o n w i l l be u s e f u l . Members o f Congress d e s i r i n g a d d i t i o n a l on t h i s t o p i c s h o u l d c a l l CRS a t 287-5700. Congressional Reference Division COMPLIMENTS O F Gene Snyder A r t i c l e s a r e r e p r i n t e d with permission of copyright claimants. fl#e1ddle d W 6 diVW USDA News Center United States Uep s m c8 RCZQ &$.-A /~ Washington, D. C. 20250 Agriculture Office of Governmental and Public Affairs BLOCK.ANNOUNCE3 PAYMENT-IN-KIND PROGRAM DETAILS DALLAS, Jan. 11--Secretary of Agriculture John R. Block today announced details of a payment-in-kind sorghum, cotton and rice. -- P I K - program for the 1983 crops of wheat, corn, grain President Ronald Reagan announced the program at the American Farm Bureau Federation meeting today. "PIK is basically simple," Block said. "Farmers who take out of production additional acres over what they agree to take out under the current program will receive as payment a certain amount of the commodity they would have grown on these acres. The commodity is theirs to do with as they wish. Commodities for the PIK program will come from farmerowned reserve, regular loan or CCC-owned stocks. "We have a three-fold objective with PIK," Block said. "Reduce production, reduce surplus stock holdings, and avoid increased budget outlays that would otherdise be necessary under price support programs." Block said worldwide demand is weak, due to severe financial problems of major foreign customers and a strong dollar making our exports more expensive. "It is unlikely our surplus will be substantially reduced any time soon by increased exports," he said. "PIK is aimed at bringing supply more in line with demand. "Farmers can expect to receive the same or greater net returns while the stock adjustments are occurring. Commodity prices may not increase significantly in the near term, though they should firm as storage payments permit greater marketing flexibility and buyers realize that stocks are being reduced. "Once stocks are reduced significantly through the PIX. program, then substantial opportunities for price increases will exist. 0026 - more - Farmers taking part in PIX will 33-83 also avoid some variable costs, and their production risks will also be lowered. in a d a i z l o n , financiaiiy s t r a p p e d famers participating in the P i K program will not have to borrow as much for production expenses." Block said PIK has built-in safeguards to assure that there will be enough production so the U.S. will remain a reliable supplier to domestic and foreign customers. The program is self-terminating; it is planned for 1983 and, if necessary, the 1984 crops. "When excess supplies are reduced to a level we feel is more in line with demand, PIK will go out of existence," Block said. "Also, sound conservation pract$cis will be applied to more acreage and storage space problems will be lessened." Signup for PIK will begin Jan. 24 and run through March 11. "Farmers have four possible options for making their 1983 plans," Block said. "They may participate only in the regular farm programs; participate in the regular program plus the 10 to 30 percent PIX; withdraw the entire base acreage if their whole base bid is accepted; or not participate at all." Farmers wishing to take their entire base acreage out of production may bid to do so by specifying the percent of the farm yield they will accept in return for diverting all of their acreage. They may bid any amount but it must be no more than the offer rate for the 10 to 30 percent P X . The number of whole base bids accepted will depend on the level of signup for the 10 to 30 percent PZR, the supply-demand situation for each commodity, conditions in local areas, and other relevant factors. However, in no case would the amount diverted exceed 50 percent of the total base in the county. The Commodity Credit Corporation reserves the right to reject any or all bids. Block said conservation use acreage eligibility requirements would be the same as previously announced 1983 programs, except haying and grazing will be permitted only on winter wheat planted prior to the announcement of PIK. Under summer fallow rules, PIK acreage will have to be acreage that would have been planted in 1983. When farmers sign up for PIK, they will contract to receive a certain amount of bushels or pounds of the commodity they would have produced on PIK acres, Block - more - - 3 - said. This will be an announced percentage times the farm program yield times the number o r ?IX acres. The percentages are 35 ior wheac, ana 80 =or corn, graln sorghum, cotton and rice. Payment-in-kind will be in terms of :/1 wheat, V 2 yellow corn, # 2 grain sorghum, historical area average quality upland cotton, and for rice, the historical area average of the type, quality and milling outturns. Block said producers will receive their payments-in-kind from CCC stocks. Quantity adjustments will be made to account for variations in the quality of commoditie! Producers entering PIK with outstanding reserve or regular price support loans must make the commodities under loan available to CCC for use in the program in return for liquidation of their loans. They cannot forfeit or redeem their commodities under loan and then draw additional commodities from CCC stocks. Loans which mature before producers receive their payment-in-kind will be extended and storage will be paid by CCC from maturity until receipt of the payment-in-kind. Program participants will receive payments-in-kind during the normal harvest period. Dates will be announced for different areas. To give the producer marketing flexibility, the CCC will pay storage costs from the date of payment-in-kind to redemption or delivery of the commodity not to exceed five months. The annual storage rate will be 26-112 cents per bushel for wheat, corn and sorghum, and 85 cents per hundredweight for rice. The storage rate for cotton will be the approved rate charged by the warehouse where the cotton is stored. Producers redeeming farm-stored grain from the reserve will be compensated for an additional seven months storage from the redemption date, less any unearned storage. To ensure adequate grain where requested, CCC will trade grain receipts with elevators, if necessary. Quality adjustment will be made. Block said there was no specific priority for redemption for the grains. Stocks may come from the farmer-owned reserve, or any year's outstanding loans. However, for upland cotton, participants will be required to liquidate their oldest crop loans first. - more - - 4 - 4 Any grain going into the farmer-owned reserve after Jan. 11 will not be used in the ?iK program, unless the ioan request has already been filed. Eligibility for all 1982 reserve loans will continue until March 31 for small grains and May 31 for feed grains. Block also announced the provisions for the 1983 reserve program. the 1983 reserve will be allowed after a 9-month regular loan period. for all commodities will be at the regular loan rate. Entry into Entry level Storage payments of 26-1/2 cents per bushel will be allowed for wheat, corn, sorghum and barley, with 20 cents for oats. The Federal Crop Insurance Corporation will increase the yield guarantees of insured.producers participating in PIK. Participating at the additional 10 percent but less than 20 percent level increases the yield guarantee by percent; participating between 20 percent but less than 30 percent will result in a guarantee increase of 8 percent; and participating at the maximum of 30 percent will increase the yield guarantee by LO percent. FCIC is offering these higher guarantees without a corresponding rise in premium rates because risk of loss is reduced. Farmers will be able to get full details on the PIK program from their local Agricultural Stabilization and Conservation Service office by the time the PIK signup begins on Jan. 24. Meanwhile, farmers can call a toll-free number, (800) 368-5942, to get answers to their questions. calls weekdays from 8 a.m. until 8 p.m., This number will open for EST, beginning Jan. 12. Interim regulations will be published in the Federal Register with a request for comments. Producers entering into an agreement during the comment period will be given the opportunity to withdraw from the agreement should there be material changes in the final regulations. should be sent to: Comments must be received by Feb. 11 and Howard Williams, director, analysis division, USDA, ASCS, Room 3741-South Building, P.O. Box 2415, Washington, D.C. (202) 447-3391. i/ 20013. Phone: CHICAGO TRIBUNE SECTION PAGE I JAN 1 2 I983 I I 8 Grain offered for ided land By James Worsham Chicago Tribune DALLAS-President Reagan announced Tuesday that his administration would use the huge sur luses of U.S. grain to ease farmers' financial proLems. Reagan, who generally o poses grain embargoes, also announced that e! has signed a bill exempting US. farm products covered by contracts that call for delivery within nine months of an embargo's announcement. The measure, however, will still allow an embarqo similar to the 1980 ban on grain sales to the Soviets that is partially blamed for today's huge surpluses. The embargo provision was part of a bill reauthorizing for four years the Commodity Futures Trading Commission. As expected, Reagan said he would go ahead with a program under which surplus grain would be given to farmers who cut back on production of corn, wheat, rice, cotton and grain sorghum. "IT'S REALLY a crop swap," Reagan said at the 64th annual convention of the American Farm Bureau Federation, meeting in Dallas. "A farmer who takes additional acres out of production would be able to swap what he didn't grow for a certain amount of the commodity already,,in surplus. He can then do with it as he wishes. The White House hopes that by reducing the surpluses, ~e prices that farmers get for their crops will rise from severely low levels, but Reagan made no predictions of big increases, and neither has any other administration official. The payment-in-khid progfam will save the government $3 bllllon to $5 billion a year in storage and farmer loan costs beginning in .fiscal 1984. the administration predicts. But it will have little or no impact on food costs to consumers. "Let's face it. Let's not fool anybody. Until farm prices go up, you will be hurting," Reagan told the federation, one of the nation's largest and most conservative specialInterest organizations. Based in Chicago, it represents 3.2 million farm families, half of them in the Midwest. BOTH REAGAN and the federation, which has endorsed the crop swap scheme, have resisted major government expenditures to ease the economic crisis in agriculture. In the last three years, farm income has . plunged to Depression levels, where ~t is expected to remain in 1983. The White House had sought congressional approval for the program in the lame-duck session last month. but the Senate failed to act after Sen. John Melcher ED., Mont. I blocked consideration. Since then, U.S. Department of Agriculture attorneys have ruled that there is enough authority uncier existin law to begin the program. which fkagan said would, start Jan. 24. The scheme was used in the 1930s and 1960s to reduce huge surpluses. Referring to the widespread publicity given to farm foreclosures. Reagan reminded his audience that he had instructed the Farmers Home Administration to consider problem cases on a "case-bycase basis to help them get back on their feet." REAGAN ALSO announced a move aimed at generating more overseas markets for farm products. He said $250 million more will be used to lower interest rates that foreign customers must pay to borrow money to buy U.S. products. In 1982, Reagan said, a $100 million investment in this "blended credit" program increased foreign farm sales by $500 million. Reagan called attention to his lifting of the Soviet grain embargo imposed by President Carter three years ago and said the world could "count on America" for food aid and farm supplies. The ban on embargoes signed by Reagan had been op sed by the Department of State K t supported by the Agriculture Department. Reagan's crop swap program will allow some farmers to idle a s much as 50 percent of their land. The Agriculture Department predicted commodity prices "may not increye significantly in the near term, although they "should firm" as overall supplies drop. Kenneth R. Farrell But Will it Work? At first g h c e , the apparent Ioqic and ~ i m plicit~of President Reagan's announced plan to make payments-in-kind (PIK) to farmers is appeal&. Any progam that promiw simultaneouslv to im~rove deoressed farm p r i m and income i d reduce'swe~in~ government outlay ($1'2 hillion) for commodity programs stands a good chance of playing well in both Washington and Peoria. Rut will it work? And.is it good farm and food policy? The administration seems determined to make the program attractive to cash-hungry farmers. For not planting up to 30 percent of their 1983 base acreage of wheat and feed grains (25 percent for cotton), farmen would receive quantities of commodities equal to as much as 80 to 90 percent of that acreage's "normal" yields. To participate in PIK, farmers must tint comply with already announced cropland diversion programs (20 percent for wheat ;tnd feed grains, 25 percent for cor,ton). Together, the two proyrams could idle au much as half of the l!Ml hilse acreage, with farmem receiving payment either in cash or in kind on as much i~ HO percent of the acreage. Anti. if n 25-to-Wpercent 1'IK is not srrtficientlv alluring, the itdministration will consuer allowing whole farms to be withdrawn t'rom production on a bid basis. In t h m ~ ,this administrative sleight-ofhand should produce several results the farmer mluces his out-of-wket costs bv not pnducmg on ;LY much ,zs ,50 percent of his cmpland+)r 1r mibly his whole farm-while receiving r;wh and commtdities to dispose of as he w s lit: I!:&{ prduction is reduced and miuket prices incre~tsedt'rom othenvise prev d i m 1eveI.r: and the cllrrtint large suppiies of stwb Igc~vernmenc-c~wnedru;cl/or t m e r owned 1111rlergovcrntnrnt progams), stock management c1fit.q ;mri government budget exp w r e in i!Ni-,ucl ail itre reduced. A cltme lnnk at the implic~t~ons ;mtl rlqk. of the program. howevrr, reveal? something short of a panacea At rnaxmlun, w much as 100 million acres of croplmtl could he idled under PIK and diversion pro;.ralns. Although c e m d y not d farmers will pimicipatc, and some "slippage" will occur h L ~ m ~ofe"phantom" acres, divetsion of le;~stpri~lrrctiveland, and use of fertilproduction deizer illd other li~l(i-suhtit~&, clines o)uld he sutwtantial. Poor weather here and a b r d cwnhind with l a r g e - d e participiition in 1'IK could force prices sharply upward throughout world agricultural markets. Hut the oppwite dso could happen. Since payments in kind would come from marketinsulated stocks owned either hy govemment or by farmers under govemment pmgrams, PIX commodities would increase the supply of "free" ritncks-and a combination of PIK, favorable weather here and elsewhere, and weak demand could push market prices tiown in late 1983 and in KIM. To limit the downside miuket r i k t'or PIK participants, the Senate bgricultiue Committee diving the lame-duck session approved a iltwr for PIK commtxlities at no 1q- than 75 percent of their governmentguaranteed 1983 prim, themselvw scheduled to increiw under other lcrrislation. If retainetl, h t provision rises the anomaiow pwshilitv of govemment having to repurchxse it9 own stocks of commodities!The House voted to exempt PIK from the current ceiling of 350,(X)0 for govemment payments to any individual participant, raking potential equity problems Managing the program and minimizing its potentially uneven impact9 among farmen and regions will require a vmt weh of atlministrative rules and regulations. Even if they can be made operational in time for farmen' decision-making for 19R:b-which is douhtfd -the result will be further government intrusion in the farm economy. And this tiom an administration dedicated to the free market. The rationale for this incor;sistency is thilt PIK is :In emergency (one- or two-ywr) progam tiesigned to cope with n short-term eco- rlomic crisis in aqicuiture. Further, the aaminitration contends, PIK is the only feasihie weapon at hand to attack the twin economic and political problems of a depressed agriculture and burgeoning budget outlays-a contention unfortunately clase to the mark. No one d ~ ~ p u t ethat s amiculture is experiencing one of its m a t difficult years since the 19:Kh. But the .same could be said for other sectnrs of the economy, includmg agricuiture-sup ply industries that could be hurt by PIK. . . Until demand for farm products can be strengthened at home and abroad through economic recovery, some assistance to apricullure may be wananted, especially since government policiei partly caused the current overexpansion in production. But where do we draw the line' And should we risk shutting down the productive capacity of mdlions of acres of cropland when weather-induced shorta g e ~are aU too p i b l e in an ~nherentlyunstahle world agiculture? The l e ~ o n of s the 1960s and 19% should not so quickly be forgotten. PIK and s u n h short-run pahatives to deal with the "farm prohlem" mirror the disarray that plagues U.S. agricuitural policy in general. Despite fundamental changes in ,(.he svucture and economics of &culture in recent decades. farm price and income policy is largely bound by concepts and legislation oi the 1930s More spwificady, PIK reflects the glaring ahsence of an adequate food security policy ta mitigate the eifects of chronically unstable fdsupplies. tUthough current US. commodity stocks are large, global s t o c k a t 17 percent of annual use--are not out of line by historical standards, and probably are minimal. A US food security policy-prererably mordinated international food security poiicies --designed to reduce the instabdity or food supplies wodd view current U.S. abundance as an opportunity to huild vduahle rwerves ;xautqt future production shortt'alh. Inumd. the US. inclination is to short future markets and manage domestic stocks to improve iarm prices and incomes. Until the two objectives are clearly differentiated for policy purposes and until Congress and the adrmnistration give higher priority to long-mn f d security, US. prcgrarn.. will serve neither objective very well. PIK can be made to work, if the price is right. It even can be rationalized as necessary under current circumstances. But as longrange farm and faxi policy it's like using aspirin to treat malaria-the symptoms may he eased for a while, but there's no cure in sight. The writer is director of the Food unri .4!~riculturnl Policy P r o g r a m at Resources for the Future. 0 . fiL\ , JAN 2 0 1983 THE NEW YORK TIMES, Crop Surplus P ! : Impact Disputed new farm commodity aid program produced by the Reagan AdministraWASHINGTON, an. 19 NOW that tion in its first two years. the initial excitement over the ~ e a g a n The Farm Bureau Federation, the Adminis=tionJs new agricultural pay- cou11trY's largest and mast conservahas endorsed m a t program is subsiding, analysts tive farm 0-tion, divided over whether it have the program m principle and urged any real effect thisyear on the badly d a members to PartiupateAmong farmers of winter wheat, who pressed farm economy. ar- planted last fall, enthusiasm for the The "crop -pu News mgement would give sur- new plan was said to be in direct proporM y s i s plus wheat, sun, rice or tion to the condition of that crop and cotton to farmem who re- how the early spring weather would afduced their 1983acreage in fect itthose crops by 10 to 30 percent beyond Earl Rosenbaum, a Pratt, Kan., participating in the20 to25pe-t paid wheat farmer, said last week that reduction program already offered for nearly 80 percent of the farmers in his area were already participating in the thisyear. Its twin objectives are to reduce the 20 Percent acreage reduction Program m e n t 8 s in storing nearly and thus were eligible for the new paytwo years' domestic supply of wheat ment~rogramd more than half a yeat's supply of "But to get in on PIK, we'd have to corn, aml to take more 23 million plow under some real good-looking acres of grain and conon land out of wheat, and it wouldn't pay us to do m u d o n this summer. The latter that." Mr. Rosenbaum said. "However, move would d u e the q l u s soma I just came up through northwest Oklawhat and perhaps by next fall i m p m e homa Thmday, and their wheat is in net farm earnine, now at the lowest very bad shape from dryness. Unless that changes, most of t h e e farmers level since 1933 because of falling fwill gladly be in the PIK program." pricesandriSingproductfoncosts. The analysts also agree that if there Skeptics among farmers and private to be even a slight reduction of the analysts that the new pmgram is surplus next October, virtually all the farmem will have to m',?,- grainintoandthecotton Program and not plant at merit do, s.n of bankrupting the get least 45 percent of their farms. But neito the ther the private analysts nor the Amand soothsayem except to create another bureaucratic &acronym. in this case PIK. for payments in kind. the signup period ends March 11. The experrs athat are after For example a quick study by the keenly n 'i-' in the p h * the only pioneer seed dampanyassumes that about 60 percent of the country's corn farmers will participate in the-paid re Government duction p r o m and that about tfuee quarters of these will also participate to Grain Surplus some degree in the additional reductim Amount of wheat and corn, in under payments in kind. If only 10 percent of the corn land billions of bushels on Oct. 1 goes into the program, a corncrop of 7.5 of each year, that was 2.0 billion bushels could be produced with stor@ in Government near-normal weather and subsoil moisture conditions and with plenty of inorwarehouses or by ganic fertilizer available at low costs. farmers as collateral This would be nearly 400 million bushels for Government more than is now being consumed, and loans. the surplus would actually be increased. Even if the mzuimum 30 percent of the corn land is put under the payment0 in-kind program, the study showed, farmers could still produce a crop of 6.8 billion bushels, which would make only a slight dent in the surplus. In presenting the plan to Congress. Agriculture Secretary John R. Block said it might save 31 billion to $5 billion over the next three years in the costs of storing and handling current surpluses. Yet all except a fraction of the more than 3.5 billion bushels of grain. mostly By SETH S. KING - - s p c i . l t o ~ a l i e r ~ m + ~ - - - FereZttyl LFAfurthgricule&r -. p ~ ~ Y H ~ ~ m ~ & f ~ ~ ~ - e - wheat and corn. and of the 3.8 million bales of upland anton now in storage are still in the on-tarm reserve rather thaa in Commodity Credit Corporation Farmen received loans f o r placing grain and ca*an in this reserve, with the s t ~ &grain as collateral. Their payments in kind will be in the canceling of these loans. The Ciovemment would not have to pay the cumnt storage fee of 26 cents a bushel on the grain it gives back But the analysts say they believe relatively little of the grain and cotton the Government has to pay to store in the credit corporation's warehouses would go out as payments in kind. The new program will certainly not require any additional outlays from the 1983budget, since the loam on reserve grain have already been charged agamst that budget, the Office of Management and Budget says. But if these loans are canceled and the collateral grain goes back to the farmem. the charge8 for theseW c t i o n s will have to be met in the fiscal year 1984. in which Congress has to rieplenish the credit corporation's revolvmg fuud. General 0 & A ' s on t h e O p e r a t i o n of t h e 1983 PIK Program REVISED 1-20-83 1/ - 1 What i s a Payment-In-Kind Program? The P I K program is designed t o encourage farmers t o f u r t h e r reduce 1983 c r o p a c r e a g e s of wheat, c o r n , sorghum, upland c o t t o n and r i c e from t h e p r e v i o u s l y announced programs. I n r e t u r n f o r p a r t i c i p a t i o n i n a P I K program, a producer w i l l r e c e i v e an amount of t h e commodity as payment f o r reducing planted acreage. Why is a PIK Program Needed? The announced 1983 p r o g r a n ( s ) f o r wheat, c o r n , sorghum, r i c e and c o t t o n were designed t o reduce excess s u p p l i e s which have been d e p r e s s i n g farm p r i c e s . D e s p i t e t n e Department's best e f f o r t t o announce e f f e c t i v e programs, s e v e r a l f a c t o r s have come t o g e t h e r t o prevent t h e programs from a c t u a l l y reducing 1983!84 ending s t o c k s and t h e downward p r e s s u r e on p r i c e s and incomes t h a t f a r m e r s a r e now e x p e r i e n c i n g . Some of t h e most important f a c t o r s i n c l u d e : A Large Global S u p p l i e s . There w a s r e c o r d world p r o d u c t i o n of g r a i n s , o i l s e e d s , and c o t t o n i n 1981/82, r e c o r d world c r o p s of g r a i n s and o i l s e e d s a g a i n i n 1982/83. We e s t i m a t e t h a t by t h e end of 1982183 t h e United S t a t e s w i l l hold n e a r l y 150 n i l l i o n t o n s of g r a i n s t o c k s , roughly 60 p e r c e n t of t h e w o r l d ' s c a r r y o v e r and more g r a i n t h a n we export annually. B Global Recession. Demand has been very weak. World use of feed g r a i n s , which had been growing a t an average r a t e of 16 m i l l i o n m e t r i c t o n s (mmt) , each year over t h e p a s t two decades, has not i n c r e a s e d s i n c e 1978179; world wheat consumption, which had been i n c r e a s i n g a t an a v e r a g e 10 m m t per y e a r s i n c e 1960, has been f l a t s i n c e 1979180. 2 S t r o n g U.S. D o l l a r . The v a l u e of t h e U.S. d o l l a r r e l a t i v e t o 10 major c u r r e n c i e s i s a t i t s h i g h e s t l e v e l s i n c e 1969. The i n c r e a s i n g v a l u e of t h e d o l l a r has a c t u a l l y i n c r e a s e d t h e p r i c e of our commodities i n terms of f o r e i g n c u r r e n c i e s d e s p i t e t h e d e c l i n e i n p r i c e s i n U.S. d o l l a r terms. D F i n a n c i a l P l i g h t of Major I m p o r t e r s . F i n a n c i a l problems of a number of middle income c o u n t r i e s , which r e p r e s e n t a s i g n i f i c a n t p o r t i o n of t h e f o r e i g n demand f o r U.S. farm p r o d u c t s , have impacted on our e x p o r t potential. Changes in questions and answers 1-84 a r e i n d i c a t e d by an a s t e r i s k . Questions and answers s t a r t i n g with number 85 a r e new. Released by U. S. Department of Agriculture January 25, 1983. 3 What a r e t h e o b j e c t i v e s of t h e ?IK program? - Reduce szocks v h i l e c u r z i n g p r o d u c ~ i o n , l e s s e n i n g t h e overhang on t h e n a r k e t i n f u t u r e y e a r s and enhancing p r o s p e c t s f o r a mzrket-led r e c o v e r y i n farm p r i c e s . --- Ylaintain s u p p l i e s =n m a r k e t p l a c e , showing t h e U.S. r e l i a b l e s u p p l i e r abroad. i n t e n d s t o be a M n i m i z e CCC l o a n f o r f e i t u r e s by u t i l i z i n g commodities under o u t s t a n d i n g r e g u l a r l o a n s f o r PIK compensation. - To reduce Farmer-Owned Reserve (FOR) . s t o c k s t o more d e s i r a b l e l e v e l s by u t i l i z i n g t h e s e s t o c k s f o r PIK compensation. -- To promote farm income while a t t h e same time reducing c o s t s t o t h e F e d e r a l Government and, t h u s , t o U. S. t a x p a y e r s . --- To 4 l e s s e n s t o r a g e space problems. Whp not a l a r g e r p i 2 d i v e r s i o n program i n s t e a d of t h e PIK? A l a r g e r paid d f v e r s i o n prograni would be more c o s t l y t h a n t h e PIK program, and would n o t accomplish t h e o b j e c t i v e of s h a r p l y r e d u c i n g t h e FOR and government i n v e n t o r i e s . The PIK program i s t h e most c o s t - e f f e c t i v e program f o r r e d u c i n g s t o c k s , and g e t t i n g t h e a g r i c u l t u r e s e c t o r on t h e road t o recovery. 5 Xhen w i i i .farm o p e r a t o r s be a b l e t o s i g n up i n t h e program? Signup w i l l begin J a n u a r y 24 and end March 1 1 , 1983. The end of signup f o r t h e p r e v i o u s l y announced a c r e a g e r e d u c t i o n and land d i v e r s i o n programs w i l l be advanced t o a l s o end on March 11. 6 Why i s t h e ending signup d a t e f o r t h e p r e v i o u s l y announced programs being changed? We need t o have signup i n t h e a c r e a g e r e d u c t i o n and land d i v e r s i o n programs complete b e f o r e t h e county ASC committees begin t o e v a l u a t e t h e b i d s r e c e i v e d under t h e whole base P I R d i v e r s i o n . S e t t i n g an e a r l y . d a t e p e r m i t s producers t o make t h e i r farming p l a n s on a t i m e l y b a s i s . 7 Does t h e PIK program change any a s p e c t s of t h e p r e v i o u s l y announced Droerams ? No. A l l p r o v i s i o n s of t h e a c r e a g e r e d u c t i o n and l a n d d i v e r s i o n programs as p r e v i o u s l y announced w i l l apply f o r farms t h a t p a r t i c i p a t e i n t h e t h e PIK program. Vho i s e l i g i b l e t o p a r t i c i ~ a t ei n t h e PIK ~ r o p r a n ? P r o d u c e r s on any f a m f o r which an 19e3 a c r e a g e base and p i e l d has been e s t a b l i s h e d f o r wheat, c o r n and sorghum, r i c e , and upland c o t t o n under t h e p r e v i o u s l y announced programs. How were t h e 1983 a c r e a g e b a s e s e s t a b l i s h e d ? The Omnibus Budget R e c o n c i l i a t i o n A c t of 1982 r e q u i r e s t h a t t h e b a s e s f o r w h e a t , f e e d g r a i n s , and r i c e f o r 1983 be t h e same as t h o s e e s t a b l i s h e d f o r t h e farm f o r 1982, a d j u s t e d t o r e f l e c t c r o p r o t a t i o n s and o t h e r f a c t o r s tine S e c r e t a r y d e t e r m i n e s s h o u l d be c o n s i d e r e d i n d e t e r m i n i n g a f a i r and e q u i t a b l e base. The upland c o t t o n a c r e a g e b a s e s f o r farms t h a t p a r t i c i p a t e d i3 t h e 1982 c o t t o n program o r r e p o r t e d z e r o p l a n t e d a c r e a g e w i l l be t h e same a s t h e 1982 base. For o t h e r c o t t o n f a r m s , t h e b a s e w i i l be t h e a v e r a g e of t h e c o t t o n a c r e a g e on t h e farm in I981 and 1982. If a farm i s p a r t i c i p a t i n g i n t h e program f o r a commodity, but t h e a c r e a g e b a s e is u n d e r p l a n t e d , what happens t o t h e 1984 a c r e a g e b a s e ? The f a n ' s 1984 a c r e a g e base trill n o t be r s d u c e d due t o under p l a n t i n g i n 1993. What a r e t h e p e r c e n t a g e s of t h e farm y i e l d under t h e 10-30 PIK d i v e r s i o n ? Wheat is 95 p e r c e n t . 80 p e r c e n t . Corn, g r a i n sorghum, upland c o t t o n and r i c e a r e a l l Why is t h e wheat P I K set at 95 o e r c e n t of t h e farm v i e l d w h i l e t h e PIK f o r o t h e r commodities i s s e t a t 80 p e r c e n t ? Wheat i s t h e o n l y f a l l - s e e d e d c r o p e l i g i b l e f o r PIK. These p r o d u c e r s have a l r e a d y i n c u r r e d s u b s t a n t i a l c o s t s t o p l a n t t h e c r o p , which is n o t g e n e r a l l y t r u e f o r s p r i n g - s e e d e d c r o p s . While some wheat i s s p r i n g - s e e d e d , i t would b e i m p r a c t i b l e t o have d i f f e r e n t p e r c e n t a g e s f o r f a l l and s p r i n g - s e e d e d wheat s i n c e b o t h may be p l a n t e d i n t h e same a r e a . Why were b a r l e v and o a t s n o t i n c l u d e d i n t h e PIK program? *- A For b a r l e y , t h e r a t i o of e n d i n g s t o c k s t o u t i l i z a t i o n i s n o t as s e v e r e l y o u t of l i n e w i t h h i s t o r i c a l l e v e l s as i t i s w i t h c o r n and sorghum. W e a l s o b e l i e v e t h e announced a c r e a g e r e d u c t i o n / c a s h l a n d d i v e r s i o n program w i l l h e l p l i m i t t h e s u p p l y of b a r l e y . B a r l e y p r i c e s can a l s o be e x p e c t e d t o b e n e f i t from t h e a n t i c i p a t e d t i g h t e n i n g o f f e e d grain s u ~ p l i e s . B For o a t s , a s f o r b a r l e y , t h e l e v e l of c a r r y o v e r s t o c k s r e l a t i v e t o u t i l i z a t i o n does n o t s i g n i f i c a n t l y exceed h i s t o r i c a l r a t e s . In a d d i t i o n , t h e announced acreage reduction/cash l a n d d i v e r s i o n program i s expected t o keep o a t s t o c k s a t an a c c e ~ t a b l el e v e l . --* 14 *- I h t must be done t o e n r o l l i n t n e F I R program? The farm o p e r a t o r w i l l be r e q u i r e d t o e n r o l l t h e farm i n t h e a c r e a g e r e d u c t i o n program (AR?) a n d f d r wheat, feed g r a i n s , and r i c e Land d i v e r s i o n programs and s i g n a c o n t r a c t w i t h t h e county ASCS o f f i c e a g r e e i n g t o --* r e d u c e t h e acres of t h e a o p s f o r h a r v e s t by t h e p e r c e n t d e s i r e d above t h e p r e v i o u s l y announced program. 15 Whar can t h e farm o p e r a t o r s i g n up f o r under t h e PIK program? For P I K d i v e r s i o n , t h e farm o p e r a t o r may s i g n up t o d i v e r t a p a r t of t h e c r o p a c r e a g e base (any amount t h a t i s no less t h a t 10 p e r c e n t o r more :bar 30 p e r c e n t of t h e crop a c r e a g e base) o r bid t o d i v e r t t h e whole crop acreage base. Does t h e farm o p e r a t o r have t o s i g n up f o r both t h e 10-32 percent F I K d i v e r s i o n and t h e whole base b i d ? No. 17 The farm o p e r a t o r may s i g n up f o r e i t h e r one o r both. Must t h e o p e r a t o r d e c i d e t h e amount of PIK d i v e r s i o n a t sign up? Yes, t h e o p e r a t o r must d e t e m i n e t h e amourit which ell k c m e pirt of t h e PIK c o n t r a c t and rill determine t h e maximum p e r n i t t e d p l a n t e d a c r e a g e . 18 What does t h e bid c o n s i s t of under t h e whole base P I K d i v e r s i o n ? The o p e r a t o r o f f e r s t o reduce t h e p l a n t e d a c r e a g e of t h e c r o p to z e r o and d e v o t e an a c r e a g e e q u a l t o t h e a c r e a g e base f o r t h e crop t o approved conserv a t i o n u s e s . The o p e r a t o r b i d s by s p e c i f y i n g t h e p e r c e n t of t h e farm program y i e l d p e r a c r e t h a t i s a c c e p t a b l e as compensation f o r p a r t i c i p a t i o n . I f a c c e p t e d , t h e bid a p p l i e s an t h e t o t a l PIK a c r e a g e d i v e r t e d . 19 Is t h e r e a l i m i t on what may be b i d ? --. - The o p e r a t o r may bid any amount. However, t h e county ASC c o a t t e e w t l l n o t a c c e p t b i d s t h a t exceed t h e p e r a c r e o f f e r r a t e f o r t h e P I K d i v e r s i o n . Can t h e bid be changed? Any bid r e c e i v e d may be changed o r withdrawn by t h e o p e r a t o r up t o t h e end of signup. 21 How does t h e o p e r a t o r make a b i d ? The o p e r a t o r w i l l bid by completing t h e PIK c o n t r a c t which i n c l u d e s t h e bid Bids w i l l be submitted a s sealed b i d s through March 11, 1983. amount. What i s t h e procedure f o r a c c e p t i n g b i d s ? I n an open p u b l i c meeting on March 1 8 , t h e county ASC committee w i l l open a l l b i d s and a r r a n g e t h e b i d s from t h e lowest p e r c e n t a g e of t h e e f f e c t i v e y i e l d t o t h e h i g h e s t . I f t h e county i s a u t h o r i z e d t o a c c e p t b i d s , t h e bid w i t h t h e l o w e s t p e r c e n t a g e w i l l be a c c e p t e d f i r s t . T i e s w i l l be s e t t l e d by t a k i n g t h e f i r s t bid r e c e i v e d i n t h e county ASCS o f f i c e ( b y d a t e and time). Any r e m a i n i n g t i e s , o r t i e s in c o u n t i e s t h a t conduct s i g n u p by a p p o i n t m e n t , w i l l be broken by l o t t e r y . 23 Is t h e r e a county l i m i t on t h e a c r e a g e t h a t can be a c c e p t e d under t h e b i d ? *- The nimber of whole base b i d s a c c e p t e d w i l l depend on t h e l e v e l of s i g n u p i n t h e 10-30 p e r c e n t PIK, t h e supply-demand s i t u a t i o n f o r each commodity, cond i t i o n s i n t h e l o c a l a r e a , and o t h e r r e l e v a n t f a c t o r s . However, i n no c a s e --+ would t h e amount d i v e r t e d exceed 50 p e r c e n t of t h e t o t a l base i n t h e county. CCC r e s e r v e s t h e r i g h t t o r e j e c t any o r a l l b i d s . When does t h e c o n t r a c t t a k e e f f e c t f o r whole base PIK? C o n t r a c t s s u b m i t t e d by t h e farm o p e r a t o r t o t h e county ASCS o f f i c e by Yarch 11 w i l l t a k e e f f e c t when a c c e p t e d by t h e county ASC c o x n i t t e e on Xarch 18. 25 Who must s i g n t h e c o n t r a c t ? - The farm o p e r a t o r i s r e s p o n s i b l e f o r submi:tin,o t h e c o n t r a c t by no l a t e r t h a n March 11; however all producers' must s i g n by no l a t e r t h a n March 17;. The county committee may f o r 10-30 p e r c e n t PIK p e r m i t a l a t e r s i g n a t u t e i n h a r d s h i p c a s e s . A f t e r all s i g n a t u r e s a r e o b t a i n e d and t h e c o n t r a c t i s s i g n e d by t h e county committee i t becomes f i n a l and b i n d i n g on both Commodity C r e d i t C o r p o r a t i o n (CCC) and t h e producers. -* 26 W i i l t e n a n t s and s h a r e c r o p p e r s be p r o t e c t e d ? A c o n t r a c t w i l l n o t be a c c e p t e d if i t i s known t h a t a l a n d l o r d o r o p e r a t o r has not a f f o r d e d t h e t e n a n t s o r s h a r e c r o p p e r s , if any, t h e o p p o r t u n i t y t o p a r t i c i p a t e . T h i s i n c l u d e s r e d u c i n g t h e number of t e n a n t s o r s h a r e c r o p p e r s i n a n t i c i p a t i o n of o r because of p a r t i c i p a t i o n i n t h e program. ( T h i s i s t h e same p r o t e c t i o n o f f e r e d under t h e a c r e a g e r e d u c t i o n and p a i d l a n d d i v e r s i o n programs. ) 27 ,* What w i l l t h e o p e r a t o r a g r e e t o i n t h e c o n t r a c t ? A For t h e 10-30 p e r c e n t PIK d i v e r s i o n , t h e o p e r a t o r must l i m i t t h e f i n a l a c r e a g e t o an agreed upon amount and d e v o t e t h e r e q u i r e d e l i g i b l e acreage t o conservation uses. B For an a c c e p t e d whole base PIK b i d , t h e o p e r a t o r must a g r e e t o reduce t h e a c r e s of t h e c r o p f o r hzrves: t o z e r o and. t o devote t h e r e q u i r e d e l i g i b l e acreage t o conservation uses. --* 28 .- What kiII 'upper. r z t h e farm does no: c a n ~ l por fzils t o comply f u l l y w i c k :eras and condizions of the c o n t r a c t ? The normal f a i l u r e t o f u l l y comply p r o v i s i o n s w i l l apply. *-- A Producers who attempted in good f a i t h t o comply with t h e c o n t r a c t witirin a l l o w a b l e t o l e r a n c e s will not be a f f e c t e d . B Producers who attempted to comply wirh t h e c o n t r a c t i n p o d f a i r h bur exceed t h e t o l e r a n c e w i l l have program b e n e z i t s reduced p r o p o r t i o n a t e l y . C For v i o l a t i o n of t h e c o n t r a c t p r o v i s i o n s , producers who did not attempt i n good f a i t h t o comply w i l l be d e c l a r e d i n e l i g i b l e f o r P I K program b e n e f i t s f o r t h e crop. Such producers w i l l a l s o be r e q u i r e d to pap l i q u i d a t e d damages. Can an o p e r a t o r o f f e r o r bid only one base or musr a l l bases be c o n s i d e r e d ? Cross compliance w i l l n o t apply and each base tiill s t a n d on i t s own with one e x c e p t i o n . Bases f o r corn and g r z i n sorghum =e combined t o a f f o r d producers a d d i t i o n a l f l e x i b i l i t y and they must be considered i n t o t a l . The same o f f e r and bid r a t e w i l l apply t o both bases. Can an o o e r a t o r o f f e r or bit oniy =he bzse cr! m e f z n c r Ecsr o ~ e r a t e dbe considered? Off s e t t i n g compliance w i l l not appiy. individually. &I fz7-s Each farm w i l l be considered What happens if a farm change r e o u i r i n g a r e c o n s t i t u t i o n occurs a f t e r a FIX c o n t r a c t is f i l e d ? ,* A If t h e r e c o n s t i t u t i o n i s i n i t i a t e d d u r i n g t h e signup p e r i o d , PIK c o n t r a c t s must be c a n c e l l e d f o r crops f o r which the r e c o n s t i t u t i o n i s e f f e c t i v e f o r t h e c u r r e n t pear. The farm o p e r a t o r w i l l be given a n o p p o r t u n i t y b e f o r e c l o s e of signup t o e n r o l l t h e r e s u l t i n g farm i n t h e PIK program f o r t h o s e c o p s . B If t h e r e c o n s t i t u t i o n is i n i t i a t e d a f t e r signup c l o s e s , t h e r e c o n s t i t u t i o n w i l l not be e f f e c t i v e f o r t h e c u r r e n t y e a r f o r any c r o p f o r which a PIK c o n t r a c t is i n e f f e c t . --* What acreage w i l l be e l i g i b l e t o be d e s i g n a t e d as c o n s e m a t i o n use acreage under PIK? The current requirements f o r the acreage reduction wrogram conservation use acreage w i l l apply except f o r summer fallow producers. The PIK Drogram com~ensatest h o proFucer f o r the commodity t h a t would have been produced in 1993; therefore, t o achieve t h e necessary reduction i n production, summer fallow producers must designate f o r the PIX acres land t h a t would n o w a l l y be devoted t o the production of small grain o r row crops i n 1983. This r u l e does not a m l y t o the increased conservation use acreage requirement computed 5y considering the PIK acres a s planed acres. --* - Can rne c3nserva:ion use a c r e a g e be c a z e c o r harves:ed? -.-ne a c r e a g e can be ~ a z e de x c e p t d u r i n g t h e s i x ? r l n c i p a l n o w i n g rnoc~hs. T X s 5-rnonch p e r i o d b e m e e n February? 18 ti-cough Oc=ober 31 will 'x d e t e r z i n e d by t h e l o c a l ASC comniE:ee. ?!ec'nanfcal 'nzr~es:lnq of any crop w i l l .be ~ r o h i b i r e d . There a r e excep:ions to t h e s e r u l e s f o r w i n t e r whear p i a n t s d 31;). -* p r i o r t o :he announcement of the ?11; program ( s e e ques:ion Nha: about t h e - . e a t producers t h a t have a l r e a d y o i a n t e d t h e i r 1983 c r o p ? These p r o d u c e r s who p a r t i c i p a t e i n FIR must a l s o Unit t h e i r a c r e a g e f o r h a r v e s t ; nowever, t o be f a i r and e q u i t a b l e , t h e y w i l l be p e m i t t e d to So t h a t a g r a i n c r o p is g r a z e t h e a c r e a g e o r t o c u t t h e a c r e a g e f o r hay. n o t produced, tne a c r e a g e mst be s u b s t a n t i a l l y d e s t r o y e d by t h e d e a d l i n e established f o r t h e county ( s e e q u e s t i o n 8 5 ) . In a d d i t i o n , 2 approved hp = h e S t a t e XSC cormni:tee wi:h c o n c u r r e n c e of the S t a t e C o n s e r v a t i o n i s t f o r :he S o i l C o n s e r v a t i o n S e r v i c e , t h e s t u b b l e may be e l i g i b l e c o v e r . S p e c i f i c a l l y , how much c o n s e r v a t i o n use a c r e a p e (CUA) i s r e q u i r e d under ., - c x z e r e 9 : situations? . 1 . ~ n er e q u i r e d CYA a c r e a g e f o r a f a n w i t h a 100 a c r e base f o r each cornn o d i t y w i l l be as f o l l o w s : P a r t-i- -c-i ~ a t e si n t h e a d d i t i o n a l PIK d i v e r s i o n a t 30% of base v i t h maximum plancod - T a t 2 Plao Rice -! For PIK p a r t i c i p a t i o n t h e c o t t o n p a i d d i v e r s i o n i s o p t i o n a l up to 5 perc e n t of t h e c o t t o n a c r e a g e base ; however, t h e sum of t h e PIK a c r e s plus t h e paid d i v e r s i o n a c r e s cannot exceed 30 p e r c e n t of the base. Comocity y P a r t i c i p a t e s i n Whole Base Bid phase of ? I K CiJA P e m i c t e d Ac. L X P Pd.Div. PIX - - Total - Cotton p a i d d i v e r s i o n i s o p t i o n a l UD t o 5 p e r c e n t of t h e c o t t o n a c r e a g e base; however, t h e sum of t h e PIK a c r e s p l u s t h e p a i d d i v e r s i o n a c r e s cannot exceed t h e base. --* What about producers tha: d i v e r s i o n oapmencs? 'nave a l r e a d p accepteZ advance d e f i c i e n c y o r i n cases where =he producer d i v e r z s al: of t h e base or s u b s t a n t i a i l p reduces p l a n t e d a c r e a g e , a refund may be r e q u i r e d , This w i l l be a e t e m i n e d when f i n a l payments a r e computed. lu'o i n t e r e s t charges would a p p l y on any refunds f o r PIK p a r t i c i p a r i o n ; however, r e f u n d s not made w i t h i n 30 days from t h e r e q u e s t w i l l be s u b j e c t t o l a t e p a p e n t charges. What i s t h e method of mamensation under t h e PIK program? The producer w i l l have t h e r i g h t t o r e c e i v e bushels o r pounds of a s p e c i f i c comodity-the commodity f o r which acreage was d i v e r t e d , Rowever, CCC r e s e r v e s t h e r i g h t t o s u b s t i t u t e , on a bushel f o r bushel basis, corn f o r g r a i n sorghum. When w i l l t h e PIK c o m o d i t i e s be made a v a i l a b l e ? The PIX a v a i l a b i l i t y d a t e w i l l be determined and announced by :he S e c r e t a r y f o r each production a r e a based on t h e nonnal h a r v e s r f o r t h e crop i n the area. How i s t h e ambunt computed? By mu1:iplying t h e e s t a b l i s h e d percentage ( o f f e r or bid r a t e ) times the farm program y i e l d , times t h e a c r e s d i v e r t e d from production of t h e c r o p under t h e P I X program. Does t h e payment l i m i t a t i o n a p p l p t o t h e P I K arogram? No, t h e payment l i m i t a t i o n p r o v i s i o n s do not apply t o payment-in-kind under W e b e l i e v e t h a t Congress imposed t h e l i m i t a t i o n to prevent t h e program. e x c e s s i v e cash payments out of t h e T r e s u r y to any one farmer. We do not b e l i e v e Congress intended t o l i m i t t h e use of commodities owned by t h e Commodity C r e d i t Corporation i n a program to c o n t r o l production and reduce t h e c o s t of f a n n programs. Row does t h e ?IK program impact a g r i b u s i n e s s e s ? The l i m i t on t h e amount of crop acreage base i n a county t h a t can be withdrawn from production is intended t o minimize adverse e f f e c t s . One of t h e o b j e c t i v e s of the program is t o improve t h e farm economy b e n e f i t i n g all a g r i b u s i n e s s i n t h e long run from an ef f e c t i v e program. Are t h e 10-30 p e r c e n t PIK d i v e r s i o n and t h e whole base bid t h e on1y ways a producer can r e c e i v e P I K compensation? No. Under the previously announced acreage reduction and land diversion programs, there is a $50,000 limitation on total 1983 payments to a producer. Producers whose payments are reduced because of the limitation may request a proportional reduction in their total conservation use acreage requirement. Under the PIK program, these ~roducerswill be able to forego this reduction for special PIK compensation if the farm is participating in the PIK program for the crop. The compensation is 50 percent of the farm's program yield for the a ~ ~ l i c a b lcommodity e times the conservation use ecreage that would have been reduced for that crop. 3ov can t h e FIR be r e c e i v e d ? A P r o d u c e r s w i t h o u t s t a n d i n g CCC l o a n s ( r e g u l a r and FOR) must a l l o w CCZ t o use l o a n c o l l a t e r a l f o r t h e i r PIK payment. *- 3 G e n e r a l l y , p r o d u c e r s w i t h no o u t s t a n d i n g CCC l o a n s o r w i t h l o a n s where t h e o u t s t a n d i n g l o a n amount is l e s s t h a n t h e PIK amount w i l l r e c e i v e I n some t h e PIK by a c q u i r i n g t h e coermodity from an approved warehouse. i n s t a n c e s , however, t h e s e p r o d u c e r s may be r e q u i r e d a t C C C ' s o p t i o n , to o b t a i a a 1983 CCC r e g u l a r l o a n t o use f o r t h e i r PIK payment. T h i s o p t i o n w i l l be used s p a r i n g l y . -* h4 Can a producer d e s i g n a t e a s p e c i f i c c l a s s of a commodity f o r PIK p u r p o s e s ? *- No. The PIK w i l l be i n terms of Number 1 wheat e x c e p t Number 2 f o r s o f t red w i n r e r wheat, Number 2 c o r n , Number 2 sorghum, and f o r c o t t o n and r i c e t h e h i s t o r i c a l a r e a a v e r a g e q u a l i t y . -* When can a producer r e c e i v e t n e PIK? PIK must be r e c e i v e d d u r i n g t h e 5-month p e r i o d b e g i n n i n g on t h e PIK a v a i l a b i l i t y date. If a producer has a CCC p r i c e s u p p o r t l o a n , does t h e producer have t o make :he l o a n c o l l a t e r a l a v a i l a b l e t o CCC? ,* G e n e r a l l y y e s , if t h e l o a n on t h e a p p l i c a b l e commodity is o u t s t a n d i n g on March 11. However, t h i s does n o t a p p l y if t h e o u t s t a n d i n g l o a n w a s o b t a i n e d from a n o t h e r county or a p p l i c a t i o n f o r FOR was a p p l i e d f o r a f t e r J a n u a r y 11. I n a d d i t i o n , at C C C ' s o p t i o n , t h e producer may be r e q u i r e d t o o b t a i n a 1983 l o a n f o r t h e amount needed f o r PIK. -* W i l l a c o t t o n o r r i c e producer who c o o p e r a t i v e be r e q u i r e d t o r e c e i v e is an a c t i v e member of a m a r k e t i n g t h e PIK t h r o u g h t h e c o o p e r a t i v e t h a t has a n o u t s t a n d i n n l o a n f o r t h e comnoditv? Yes, u n l e s s t h e producer has an i n d i v i d u a l l o a n on t h e same commodity t h r o u g h t h e county o f f i c e . Wheat and f e e d g r a i n p r o d u c e r s w i l l n o t r e c e i v e PIK t h r o u g h c o o p e r a t i v e s . What will t h e c o t t o n o r r i c e co-ops do w i t h t h e PIK? The co-op must p e r m i t CCC t o u s e t h e l o a n c o l l a t e r a l f o r PIK p u r p o s e s . CCC w i l l p r o v i d e t h e co-op w i t h t h e q u a n t i t y of t h e PIK t h a t exceeds t h e co-ops outstanding p r i c e support loans. I f a p r o d u c e r ' s r e g u l a r o r r e s e r v e l o a n was o b t a i n e d on g r a i n t h e producer a c q u i r e d and s u b s t i t u t e d f o r e l i g i b l e g r a i n , must t h e l o a n be l i q u i d a t e d even though i t i s s t o r e d i n some o t h e r councy? Yes. If t h e l a a n was obtained in t h e c o u n t q where t h e PIK i s i s s u e d . 59 Car! a ?IS ? a r = i c f ? a n = redeen a CCC l o a n t h r o u e h no- reoayner.: ~rovisiocs? P r c d u c e r s k i t h l o a n s o u t s t a n d i n g as of b r c h 11 ma? not redeem o r f o r f e i t l o a n q u a n t i t i e s c h a r would r e s u l t i n an o u r s t a n d i n g l o a n amount less :ha3 t h e i r ?IK. 51 Since a PIK p a r t i c i p a n t cannot f o r f e i t a l o a n a f t e r March 11, who mps t h e storage until the P I X i s received? CCC wL11 w y s t o r a g e from l o a n m a t u r i t y up t o 5 months f o l l o w i n g beginning of PIK a v a i l a b i l i t y . 52 *- I f Form, CCC-813, Release of Warehouse R e c e i p t s and Redemption Agreement f o r c o t t o n is on f i l e i n t h e county o f f i c e on o r before March 11, must t h e p r o d u c e r maice t h e c o t t o n a v a i l a b l e t o CCC? -* The producer has s o l d h i s e q u i t y i n t h e c o t t o n . The buyer has agreed t o redeem t h e cocton and CCC i s o b l i g a t e d not t o permit redemption by anyone o t n e t t h a n t h e buyer. See q u e s t i o n 108. 0 . 53 What a r e t h e charges on a l o a n l i q u i d a t e d t o make t h e conmoditp a v a i l a b l e t o CCC? *-- CCC r L 1 1 f u l l y compensate t h e producer f o r i n t e r e s t and h a n d l i n g charges a s s e s s e d on t h e q u a n t i t y which t h e producer must make a v a i l a b l e t o CCC. Yowever; CCC n2y reqafre t h e producer t o refund t r a n s p o r t a t i o n paid by CCC i n some cases where t h e producer r e q u e s t e d t h e r e l o c a t i o n of graic. T h i s does not i n c l u d e compression c h a r g e s f o r c o t r o n mless t h e cotton-was r e c o n c e n t r a t e d as d i r e c t e d by CCC. --* 54 How w i l l CCC d e t e r m i n e t h e q u a n t i t y of t h e l o a n commoditp a producer must make a v a i l a b l e t o CCC? Q u a i l t i t i e s must be made a v a i l a b l e on a bushel f o r bushel o r pound f o r pound b a s i s unless t h e l o a n was made on a grade o r q u a l i t y d i f f e r e n t from t h e base g r a d e o r q u a l i t y w e d t o determine t h e PIX. In t h a t case t h e q u a n t i t y i s ad j us t e d t o reflect t h a t d i f f e r e n c e . 55 *- Row w i l l t h e q u a n t i t y be a d j u s t e d ? Assume a producer has a v a i l a b l e a P I K of 1000 b u s h e l s of No. 2 corn. The p r o d u c e r ' s . warehouse-stored l o a n was made on 1982-crop No. 3 corn t h a t had 15.5 p e r c e n t m o i s t u r e ; a test weight of 52 pounds; and broken k e r n e l s and f o r e i g n m a t e r i a l of 4 p e r c e n t . The l o a n r a t e of $2.55 was reduced by 4 The base l o a n r a t e was 1.016 o f c e n t s t o $2.51 because of t h e d i s c o u n t s . t h e d i s c o u n t e d l o a n r a t e (2.55 d i v i d e d by 2.51 = 1.016 rounded t o 3 decimal p l a c e s ) . The 1 0 X bushel PIK of NO. 2 corn w i l l e q u a l 1',016 b u s h e l s of the discounzed corn. (1000 b u s h e l s X 1.016). ( I n t h i s example, 1982 l o a n A - s r-, ,-, ,-- +-..--c--1 -.-w e ~ ec s e l ; h3vev=r, 19C3 I s z r . C l f f e r e z r i a l s 1,511 k u s e < . ; -+ Who i s r e s b o n s i b l e f o r s t o r a g e on t h e PIK commoditv? CCC w i l l Day s t o r a g e f o r UD t o 5 months a f t e r PIK a v a i l a b i l i t y ~ e r i o d begins. The producer w i l l be r e s n o n s i b l e f o r s t o r a g e and warehouse charges f o l l o w i n g t h e a v ~ i l a i 3 i l i t yb e r i o d o r e a r l i e r if t he broducer ta':es t i t l e t o t h e c o m o d i t y b e f o r e t h e end of t h e a v a i l a b i l i t n ~ e r i o d . What s t o r a g e r a t e w i l l CCC pap PIK p a r t i c i p a n t s ? S t o r a g e payments f o r . r e g u l a r l o a n o r FOR s h a l l be i s s u e d a t t h e f o l l o w i n g rates: -Annual R a t e Wheat, Corn Sorghum Rice Cotton $. 265 bu. $.4732 c n S.85 cwt. (The r a t e rates for where t h e D a i l y Rate $.000726 bu. $.001296 cwt. $.002329 cwt. s p e c i f i e d i n t h e s c h e d u l e of t h e a p p l i c a b l e CSA warehouse cotton is stored). . S t o r a g e payments f o r CCC i n v e n t o r y commodities s h a l l be paid t o t h e warehouse by CCC a t t h e warehouse's UGSA, URSA, o r CSA r a t e . 58 *-- 59 What 'nappens t o s t o r a g e e a r n i n g on FOR l o a n s t h a t w i l l be l i q u i d a t e d ? P r o d u c e r s w i l l c o n t i n u e t o earn FOR s t o r a g e u n t i l t h e l o a n is l i q u i d a t e d o r f o r a maximum of 5 months beyond t h e PIK a v a i l a b i l i t y d a t e . In a d d i t i o n , p r o d u c e r s wi'h f a r m - s t o r e d FOR l o a n s w i l l r e c e i v e a d d i t i o n a l compensation of 15.5 c e n t s per b u s h e l ( e q u a l t o 7 months s t o r a g e ) w i t h r e s p e c t t o t h e q u a n t i t y redeemed. However, a l l produc9-rs w i l l be r e q u i r e d t o refund a l l unearned s t o r a g e . This compensation f o r f a r m - s t o r e d FOR w i l l be r e c e i v e d by t h e p r o d u c g r a s p a r t of t h e CCC purchase p r i c e f o r t h e c o m o d i t y t o t a k e i n t o a c c o u n t l o n g term s t o r a g e commitments which t h e producer may 'nave u n d e r t a k e n . W i l l p r o d u c e r s who must l i q u i d a t e farm-stored comoensation? FOR l o a n s r e c e i v e any a d d i t i o n a l Yes, p r o d u c e r s w i l l e a r n an a d d i t i o n a l p a p e n t e q u a l t o 7 months s t o r a g e . 60 Why do farm-stored FOR p a r t i c i p a n t s r e c e i v e a d d i t i o n a l compensation? Some p r o d u c e r s b u i l t farm s t o r a g e s t r u c t u r e s t o s t o r e t h e FOR g r a i n . To r e q u i r e e a r l y l i q u i d a t i o n of t h e FOR l o a n may c a u s e f i n a n c i a l h a r d s h i p u n l e s s some a d d i t i o n a l a s s i s t a n c e is g r a n t e d . 61 Why n o t assist warehouse-stored FOR p a r t i c i p a n t s ? P r o d u c e r s w i t h warehouse-stored l o a n s have n o t i n v e s t e d i n s t o r a g e f a c i l i t i e s . They w i l l c o n t i n u e t o earn s t o r a g e t h r o u g h t h e d a t e of L i q u i d a t i o n , n o t t o exceed 5 months. The producer should r e c e i v e a refund from t h e warehouseman f o r unused s t o r a g e . 62 *-- I f a f t e r u s i n g t h e PIK t h e producer h a s a p a r t i a l b i n of g r a i n o r a p a r t i a l warehouse r e c e i p t r e m a i n i n g , can t h e b a l a n c e be f o r f e i t e d o r d e l i v e r e d ? I f t h e producer must l i q u i d a t e t h e l o w on 75 ~ e r c e n tof t h e q u a n t i t y represented in an i n d i v i d u a l 5in o r warehouse r e c e i p t f o r PIK p u r ~ o s e s ,t h e balance of t h e q u a n t i t y pledged a s c o l l a t e r a l f o r loan which i s remaining i n t h e Sin o r r e c e i p t , n o t t o exceed 5,000 Sushels ( o r t h e e q u i v a l e n t number of ~ o u n d s )of t h e commodity, may be s o l d t o CCC. ---% - 12 - Can producers r e p a p the balance of a warehouse r e c e i p t o r b i n ? The b a l a n c e on a r e g u l a r l o a n can be r e p a i d . However, t h e balance on a FC)R l o a n cannot be r e p a i d w i t h o u t e a r l y redemption c h a r g e s , unless i t is a m a t u r e loan. t o d a c e m a i n i n FOR? W i l l p r o d u c e r s c o n t i n u e t o be Dermitted , -- - L - Yes, s i n c e t h e y were a s s u r e d of t h e o p t i o n as a c o n d i t i o n f o r program p a r t i c i p a r i o n . - Rowever, the f i n a l d a t e f o r r e s e r v e e n t r y w i l l b e - t h e counnodity's a p p l i c a b l e f i n a l l o a n a v a i l a b i l i t y d a t e (?larch 31 f o r whea: and May 3 1 f o t corn and sorghum). 55 K i l l all FOR g r a i n be used f o r FIR? No, only g r a i n i n FOR o r w i t h FOR a p p l i c a t i o n on f i l e on o r b e f o r e J a n u a r y 11 w i l l be e l i g i b l e t o be used f o r PIK. 66 I n cases where c o t t o n producers have mare t h a n one crop p e z r p r o d u c r i o n under l o a n , w i l l t h e y have a c h o i c e of which crop y e a r l o a n t o L i q u i d a t e ? No. M l e s a i n producers w i l l have t h e c h o i c e of which crop y e a r l o a n t o liquidace, c o t t o n producers must l i q u i d a t e the o l d e s t c r o p year l o a n . I f =he o l d e s t crop year p r o d u c t i o n i s under s e v e r a l l o a n s , t h e producer may choose t h e a p p l i c a b l e loan. Once t h e l o a n is s e l e c r e d , t n e b a l e s vili be l i q u i d a t e d i n t h e o r d e r they appear on t h e c o t t o n warehouse r e c e i p t list-i.=lg form (CCC Cotton A-1). 67 For c o t t o n , t h e PYX w i l l be e x p r e s s e d i n pounds which i n most c a s e s w i l l n o t correspond t o whole b a l e s . Bow w i l l this be r e s o l v e d ? A c o t t o n producer w i l l r e c e i v e t h e f u l l b a l e . 68 The c u r r e n t c o t t o n program p r o v i s i o n s p r o v i d e a s e t - o f f f o r c o t t o n r e s e a r c h and promotion. Since p r o d u c t i o n under t'his P I K progtam map be s u b s t a n t i a l l y reduced, what e f f e c t , if any, w i l l t h i s have on t n e r e s e a r c h and orornotion fund? There w i l l be no a d v e r s e impact on t h e r e s e a r c h and promotion fund. Any c o t t o n r e c e i v e d under t h e P I K program w i l l be s u b j e c t t o t h e r e s e a r c h and promotion f e e . The set-off w i l l be made by t h e f i r s t buyer when t h e producer markets t h e PIK c o t t o n . Can a PIK r e c i p i e n t of wheat and f e e d g r a i n , who i s provided t h e commodi:y by CCC ( n o t out of FOR o r l o a n ) be g u a r a n t e e d a v a i l a b i l i t y at-* t h e warehouse of bLs o r her c h o i c e ? No, a l t h m g h t h e producer w i l l , during signup, i n d i c a t e a perferred approved warehouse d s l i v e r y point in t h e producer's county o r in an adjacent county. I f f o r wheat, and feed g r a i n s , CCC i s unable t o p r o v i d e t h e commodirp a c t h e producer ' s p r e f e r r e d warehouse, where w i l l t n e conmoditp 'P-" cielivered? CCC w i l l use t h e Zollowing o r d e r of p r e f e r e n c e i n s e l e c t i n g approved houses : A. B. C. I n p r o d u c e r ' s own county. I n a d j o i n i n g county. I n n e a r e s t house " i n l i n e " t o subterminaf o r t e r m i n a l . What o p t i o n s w i l l a producer have w i t h commodity o b t a i n e d from CCC w i t h t n e PIS? P r o d u c e r s may keep t h e commodity o r d i s p o s e of t h e commodity i n any manner. How will t h e warehouse b o w who has CCC c o m n o d i t i e s coming, and how much? - Each producer w i l l r e c e i v e a " l e t t e r of e n t i t l e m e n t " . The warehouseman w i l l r e c e i v e a c o u r t e s y copy of t h e p r o d u c e r 1s l e t t e r . Warehousemen w i l l a l s o r e c e i v e open l o a d i n g o r d e r s from CCC l i s t i n g t o t a l q u a n t i t i e s t o be made a v a i l a b l e . If a producer e l e c t s t o withdraw t h e PIK from warehouse s t o r a g e , i s t h e p r o d u c e r rss p o n s i b l e f o r l o a d o u t c h a r g e s ? *- Yes, any l o a d o u t a n d / o r t r a n s p o r t a t i o n c h a r g e s a f t e r t h e producer t a k e s t i t l e to t h e PIX w i l l be borne by t h e producer. -* 74 How w i l l a warehouse be reimbursed by CCC f o r s t o r a g e e a r n e d on PIK commodities ? The warehouseman w i l l submit an i n v o i c e t o CCC a l o n g w i t h a copy of p r o d u c e r 1 s l e t t e r of e n t i t l e m e n t t o r e c e i v e t h e a p p l i c a b l e s t o r a g e payment. 75 What w i l l be dcm e t o reduce t h e market impact caused by t h e r e l e a s e of FOR, l o a n . and CCC i n v e n t o r v t o use t h e PIK? Commodities w i l l be r e l e a s e d t o p r o d u c e r s a f t e r t h e PIR a v a i l a b i l i t y d a t e . The s o u t h e r n a r e a s where h a r v e s t o c c u r s f i r s t w i l l r e c e i v e t h e PIK e n t i t l e s e n t f i r s t . A d d i t i o n a l a r e a s w i l l r e c e i v e PIK e n t i t l e m e n t s as h a r v e s t normally progresses. It should be noted t h a t less of a commodity w i l l be r e l e a s e d t h r o u g h PIK t h a n would have been h a r v e s t e d i n t h e absence of PIK. The impact i s f u r t h e r minimized by CCC a g r e e i n g t o pay s t o r a g e c o s t s f o r up t o 5 months if t h e producer h o l d s t h e PIK conmodity o f f t h e market. 76 .wt?v? - We u n d e r s t a n d t h e FCIC i s o f f e r i n g an i n c e n t i v e t o PIK program p a r t i c i p a n t s . FCIC wants t o encourage program p a r t i c i n a n t s t o continue t h e i r insurance coverage and t h i s i s a way t o a t t r a c t new producers t o t h e program. - 9 ;I How does t h e PCIC i n c e n t i v e work? P z r t i c i p a t i n g i n t h e PIT: program a t a l e v e l a t l e a s t 10'b b u t l e s s thar. 207; i n c r e a s e s =he y i e l d guarantee by 6%; p a r t i c i p a t i n g between 202 but l e s s t h a n 30% w i l l r e s u l t i n a guarantee i n c r e a s e of 8%; p a r t i c i p a t i n g at the maximum of 302 w i l l i n c r e a s e t h e f i e l d guarantee by 1 0 : . 78 How does an i n s u r e d farmer become e l i g i b l e f o r t h e y i e l d g u a r a n t e e i n c r e a s e ? No a c r i o n w i l l be r e q u i r e d by t h e program p a r t i c i p a n t . A l l p o l i c i e s w i l l be i s s u e d a t srandard rates and coverages. I n t h e event of l o s s , t h e p r o d u c e r ' s p o l i c y guarantee w i l l be a d j u s t e d according t o his v e r i f i e d ASCS r e c o r d s of p a r t i c i p a t i o n i n P I K . 79 W i l l =here be e x t r a c o s t t o the oroducer f o r t h e i n c r e a s e d ~ u a r a n t e e ? Xo. rhe premium r a t e per a c r e w i l l be t h e same as with t h e s t a n d a r d coverage. 83 How can FCIC o f f e r t h e s e h i g h e r y i e l d g u a r a n t e e s without a corresponding i n c r e a s e in prerriurn r a t e s ? These y i e l d coverage i n c r e a s e s r e c o g n i z e the p r o b a b i l i t y of i n c r e a s e d per a c r e yields on the remaining acreage of program p a r t i c i p a n t s . The h a r v e s t e d a c r e a g e i s expected t o exceed the average production p o t e n t i a l of the e n t i r e f a n . FCIC a n t i c i p a t e s m r e timely operzCiocs a ~ di n c r e a s e d i n p u t s per a c r e on tne reduced acreage planted.. FCIC can o f f e r t h e s e h i g h e r guayant e e s wirhout a corresponding r i s e i n premium r a t e s because t h e r i s k of -Loss i s reduced. 81 W i l l FCIC a c c e p t r e v i s e d acreage r e p o r t s on i n s u r e d w i n t e r wheat destroyed t o comply with FIR? Yes, u n t i l March 11. The P I K p a r t i c i p a n t nnrst i d e n t i f y t h e a c r e a g e t o be d e s t r o y e d on an ASCS map a t t a c h e d t o t h e r e v i s e d acreage r e p o r t . No premium w i l l be charged f o r destroyed acreage which i s t i m e l y r e p o r t e d . Roducers s u b m i t t i n g b i d s f o r whole farm p a r t i c i p a t i o n may submit a z e r o acreage r e p o r t which i s c o n d i t i o n a l upon acceptance of t h e i r bid by ASCS. 82 Whp not accept r e v i s e d acreage r e p o r t s u n t i l ?IK b i d s a r e awarded? Any e x t e n s i o n beyond March 11 would i n c r e a s e FCIC's r i s k of l o s s without o f f s e t t i n g premium income t o m a c c e p t a b l e l e v e l s . One of t h e major causes of w i n t e r wheat l o s s i s w i n t e r k i l l which cannot be a s s e s s e d u n d l t h e crop emerges from t h e dormant s t a g e i n e a r l y s p r i n g . The r i s k of excess m i s t u r e and flood l o s s i n c r e a s e s as time passes. Free i n s u r a n c e coverage on d e s t r o y e d acreage u n t i l March 11 should be an a d d i t i o n a l i n c e n t i v e t o part i c i p a t e i n PIK. 53 How w i l l w i n t e r heat producers be informed of t h e proper procedure f o r r e v i s i x t h e i r acreage r e ~ o r c s ? FCIC will send a l e t t e r of n o t i f i c a t i o n t o each i n s u r e d producer of w i n t e r wheat s t a t i n g e x a c t l y how t o r e v i s e a c r e a g e r e p o r t s and t h e d e a d l i n e f o r d o i n g so. 84 How can t h e producer o b t a i n a d d i t i o n a l i n f o r m a t i o n ? Farmers w i l l be a b l e t o g e t f u l l d e t a i l s on t h e PIK program from t h e i r l o c a l c o u n t y ASCS o f f i c e . *--85 80 What a r e t h e r u l e s f o r haying and g r a z i n g wheat a c r e a g e t h a t was p l a n t e d b e f o r e t h e PIK was announced? A S i n c e t h e PIK program f o r wheat w a s announced a f t e r much wheat a c r e a g e had a l r e a d y been p l a n t e d , wheat a c r e a g e p l a n t e d b e f o r e J a n u a r y 1 2 , 1983, may be d e s i g n a t e d t o meet any c o n s e r v a t i o n use a c r e a g e requirement ( a c r e a g e r e d u c t i o n , paid d i v e r s i o n , o r PTK c o n s e r v a t i o n use a c r e a g e ) f o r any program PROVIDED t h e farm i s p a r t i c i p a t i n g i n t h e PIK program f o r any crop. Such a c r e a g e so d e s i g n a t e d may be grazed w i t h o u t r e g a r d t o t h e 6-month nongrazing p e r i o d and hayed b e f o r e t h e d i s p o s a l d e a d l i n e announced f o r t h e county. This a c r e a g e must not be overgrazed so as t o s u b j e c t t h e land to erosion. B If the wheat a c f e a g e i s averseeded a f t e r J z n u a r y 11 o r r e p l z n t e d t o a n o t h e r s o v e r c r o p , t h e haying and g r a z i n g p r o v i s i o n i n s u b p a r a g r a p h A above does not a p p l y f o l l o w i n g t h e overseeded o r r e p l a n t i n g of t h e wheat a c r e a g e ( s e e q u e s t i o n 33). Can a producer o b t a i n a r e g u l a r l o a n up t o t h e f i n a l l o a n a v a i l a b i l i t y . d a t e and s t i l l redeem t h e q u a n t i t y of t h e c r o p pledged as s e c u r i t y f o r t h e l o a n t o t h e e x t e n t of t h e PIK r e q u i r e m e n t s ? Yes. 87 How long w i l l a PIK p a r t i c i p a n t be allowed t o redeem o r f o r f e i t a CCC l o a n through t h e normal repayment and f o r f e i t u r e p r o v i s i o n s ? Up through March 11, 1983. A f t e r March 11, p a r t i c i p a n t s w i l l n o t be allowed t o redeem o r f o r f e i t l o a n s t o t h e e x t e n t of t h e i r PIK r e q u i r e m e n t s , 88 W i l l a producer who i s r e c e i v i n g his PIK commodity from CCC s t o c k s a l s o r e c e i v e t h e %month s t o r a g e payment from CCC? No. CCC w i l l pay t h e 5-month s t o r a g e t o t h e s t o r i n g warehouse up t o t h e d a t e t h e producer redeems t h e PIK e n t i t l e m e n t not t o exceed t h e 5-month a v e i l a b i L i t v y r i o d . -% *-- 8 V W h e n i7i11 a ?roaucer *who r e d e e z s a r e g u l a r l o t n t o :he r e q u i r e m e n t s r e c e i v e storaRe pspmenzs? k t t h e c i n e of redemption or a t :he p e r i o d , whichever comes f i r s t . 90 e x t e n t of the ?IK end cf t h e % n o n t h a v t l l a b i l i t p How l o n g w i l l CCC i s s u e t h e annual FOR s t o r a g e = w e n t t o producers? CCC w i l l i s s u e FOR s t o r a g e payments t o r e s e r v e producers i n t h e normal manner u n t i l t h e beginning of t h e commodity's a p p l i c a b l e FIR a v a i l a b i l i t p period. 91 W i l l CCC l o a n s maturing on o r b e f o r e March II be a v a i l a b l e f o r redemption f o r ? I K p u r ~ o s e s ? Producers with l o a n s maturing on or b e f o r e ?larch 11 ma7 r e q u e s r an e x t e n s i o n or' t h e m a t u r i t y d a t e , f o r t h e quantity needed to s a s i s f p t h e ?IK. Producers w i l l earn s t o r a g e a t t h e r a t e a p p l i c a b l e t o tne ?IK commodiry f o r t h e p e r i o d beginning March 12 and ending on t h e e a r l i e r of t h e d a t e of redemption or t h e end of t h e + m o n t h PIK a v a i l a b i l i t y p e r i o d . 92 ll and b e f o r e the b e g i n n i n € PIX a v a i l a b i l i t p p e r i o d be e l i g i b l e f o r ? I K ? W i l l CCC l o a n s maturing a f t e r March Yes, l o a n s maturing a f t e r March U w i l l be a u t o m a t i c a l l y extended f o r t h e q u a n t i t y needed t o s a t i s f y r h e P I K t o t h e end of t h e 5-month PIS a v a i l a b i l i t y period. Producers w i l l e a r n s t o r a g e p a p e n t s at the r a t e a p p l i c a b l e t o t h e P I K commodity f o r t h e p e r i o d beginning w i t h t h e d a t e t h e l o a n would have o t h e r w i s e matured and ending on t h e e a r l i e r of t h e d a t e of redemption o r t h e end of t h e S l n o n t h P I K a v a i l a b i l i t y p e r i o d . 93 Can a producer f e e d e r who has a r e o a w e n t s c h e d u l e e s t a b l i s h e d on a l o a n c o n t i n u e t h e s c h e d u l e after ?larch ll? - No. A producer f e e d e r w i l l n o t be p e r m i t t e d t o redeem t h e q u a n t i t y of t h e l o a n needed t o s a t i s f y t h e PIK r e q u i r e m e n t s between March U and t h e P I K a v a i l a b i l i t y d a t e . 91 Can t h e producer use t h e PIK i n s m a l l amounts? Except f o r c o t t o n producers who r e c e i v e t h e i r PIK from CCC i n v e n t o r y must a c c e p t d e l i v e r y of t h e t o t a l PIK q u a n t i t y . However, producers who use t h e P I K t o repay o u t s t a n d i n g l o a n s may l i q u i d a t e p a r t i a l l o a n q u a n t i t i e s . Producers l i q u i d a t i n g warehouse s t o r e d l o a n s must l i q u i d a t e all of a warehouse r e c e i p t . 27 C a n ~ r o d u c e r sconvert t h e i r c u r r e n t reserve loans i n t o Reserve V? Yes, however, producers w i l l n o t be permitted t o convert e x i s t i n g reserve, agreements t o Reserve V a f t e r t h e applicable deadline f o r e n t r y i n t o t h e reserve (March 31 f o r wheat, May 31 f o r corn and sorghum). --* W i l l producers c o n v e r t i n g e x i s t i n g r e s e r v e l o a n s to Reserve V a f t e r J a n u a r y 11, 1983, be r e q u i r e d t o l i q u i d a t e q u a n t i t i e s of t h e commodicv pledged a s c o l l a t e r a l f o r the l o a n s t o t h e e x t e n t of t h e i r FIK reauiremenr s? Yes. W i l l producers c o n v e r t i n g e x i s t i n g r e g u l a r 9 m o n t h l o a n s t o Reserve V a f t e r J a n u a r y 11, 1983, be p e r m i t t e d t o l i q u i d a t e q u a n t i t i e s of t h e commodity pledged as c o l l a t e r a l f o r t h e l o a n s t o t h e e x t e n t of t h e i r PIK r e q u i r e m e n t s ? No. Car: a p r o d u c e r convert a purchase agreement t o a: A Regular l o a n a f t e r March 11 and use t h e l o a n f o r PI'I: p u r p o s e s ? Yes, provided t h e purchase agreement is converted t o a r e g u l a r l o a n w i t h i n t h e l o a n a v a i l a b i l i t y period (?larch 31 f o r wheat and May 31 f o r corn and sorghum). B Reserve l o a n a f t e r ?larch 11 and use t h e l o a n f o r P I K p u r p o s e s ? No. While a producer may convert t h e purchase agreement to a r e s e r v e l o a n b e f o r e t h e r e s e r v e d e a d l i n e e n t r y , t h e new r e s e r v e l o a n may not be used f o r PIK purposes. W i l l t h e 1983 wheat and feed g r a i n c r o p s be e l i g i b l e f o r t h e 1983 r e s e r v e ? Yes, 1983 wheat and feed g r a i n c r o p s w i l l be e l i g i b l e f o r t h e r e s e r v e . However, r a t h e r t h a n immediate e n t r y as i n t h e past, e n t r y i n t o t h e r e s e r v e w i l l be allowed o n l y a f t e r t h e S-month r e g u l a r l o a n period. E n t r y l e v e l f o r a l l commodities w i l l be at t h e r e g u l a r l o a n r a t e . Storage p a p e n t r a t e s w i l l be r e t a i n e d a t t h e 1982 l e v e l . 100 W i l l p r o t e i n be taken i n t o c o n s i d e r a t i o n f o r purposes of q u a l i t y a d j u s t m e n t s f o r wheat? Yes. I f t h e l o a n v a l u e r e c e i v e d by t h e producer was i n c r e a s e d t o r e f l e c t p r o t e i n c o n t e n t , t h e q u a n t i t y t h e producer is r e q u i r e d t o l i q u i d a t e w i t h PIK w i l l be reduced t o r e f l e c t t h e i n c r e a s e d l o a n value. 101 Can producers a s s i g n t h e q u a n t i t i e s of t h e commodity which the? a r e t o r e c e i v e as payment-in-kind . *, 102 Are t h e r e t h e same i i m i t a t i o n s on a s s i g n n e n t s of PZK a s t h e r e a r e .on c a s h papment s? Cash papments cannot be a s s i g n e d t o pap a p r e e x i s t i n g i n d e b t e d n e s s . Assigned c a s h payments must be t o cover advances made t o f i n a n c e t h e c u r r e n t y e a r c r o p , o r r e l a r e d purposes. Rowever, s i n c e P I K i s not a cash payment, t h e s e l i m i t a t i o n s w i l l not apply. X s e p a r a t e assignment fonn w i l l be provided c o v e r i n g PIK, which c o n t a i n s t h e terms and c o n d i t i o n s f o r such assignments. Xo. months s t o r a n e be a s s i m e d . !X For c o t ~ o r .L f a producer has both 1981 and 1982-crop c o t t o n l o a n s tha: exceed t h e P I X q u a n t i t y , can t h e producer redeem e i t h e r l o a n ? Yes. The o n l y r e s t r i c t i o n i s t h a t a q u a n t i t y of t h e commodity e q u a l t o t h e q u a n t i t y of t h e commodity which t h e P I K producer i s e n t i t l e d t o r e c e i v e f o r PIK purposes must r e d 3 under l o a n u n t i l t h e commodity i s t o be made a v a i l a b l e t o CCC. 105 For c o t t o n Ff a producer p a r t i c i p a t i n g i n t h e P I X program has borh 1982 and 1981-crop c o t t o n l o a n s , can t h e producer f o r f e i t 1981-crop l o a n s ? No, n o t f o r t h e q u a n t i t y needed f o r PXK purposes. The m a t u r i t y d a t e f o r t h e o l d e s t c r o p l o a n has been extended t o t h e end of t h e a v a i l a b i l i t y p e r i o d f o r t h e q u a n t i t y needed f o r PIK. 106 W i l l s t o r a g e payments be made on t h e c o t t o n d e s c r i b e d i n t h e above q u e s t i o n ? Yes, CCC w i l l pay a l l s t o r a g e c o s t s b u t w i l l n o t pay compression o r o u t h a n d l i n g charges. 107 Will CCC resample and/or reweigh t h e c o t t o n which producers w i l l r e c e i v e as P I K ? No. As f o r o t h e r commodities, t h e c o t t o n w i l l be c o n s i d e r e d t o b e t h e same grade and weight as when i t was placed under l o a n . Because of t h e l i m i t e d time a v a i l a b l e , i t would be i m p r a c t i c a l t o resample and reweigh. -* *-- 108 Under what c o n d i t i o n s w i l l a CCC-813 be a c c e p t e d f o r c o t t o n ? A CCC-813 may be f i l e d anytime t h r o u g h March 11 f o r any q u a n t i t y of c o t t o n . A f t e r ?larch 11, a CCC-813 may be f i l e d o n l y f o r an amount of c o t t o n i n e x c e s s of t h e amount of c o t t o n t h a t t h e p r o d u c e r w i l l earn i n t h e county under a PIK c o n t r a c t . 109 I f a c o t t o n o r rice producer does n o t have a l o a n , o r h a s a l o a n but t h e q u a n t i t y is smaller t h a n t h e PIK t h e producer w i l l e a r n i n t h e c o u n t y , w i l l t h e producer be a b l e t o d e s i g n a t e a p r e f e r r e d warehouse? No, q u e s t i o n s 69 and 70 a p p l y o n l y t o g r a i n . w i l l r e c e i v e t h e commodity where s t o r e d . Cotton and r i c e producers 110 HOW w i l l CCC d e t e r m i n e t h e l o c a t i o n of t h e c o t t o n o r r i c e t h e ~ r o d u c e r w i l l recef ve? To t h e e x t e n t p r a c t i c a l , CCC w i l l a p p l y t h r e e r u l e s t o d e t e r m i n e t h e c o t t o n o r r i c e t o t r a n s f e r t o an i n d i v i d u a l producer: A The t o t a l q u a n t i t y earned on a farm w i l l be s t o r e d i n one l o c a t i o n . B The q u a n t i t y w i l l be s t o r e d i n t h e l o c a l a r e a , i f p o s s i b l e . C The q u a l i t y w i l l be similar t o t h a t n o r m a l l y produced i n t h e l o c a l area. For example, Ff t h e r e i s i n s u f f i c i e n t c o t t o n now in CCC s t o c k s i n C a l i f o r n i a , C a l i f o r n i a p r o d u c e r s would p r o b a b l y r e c e i v e c o t t o n s t o r e d i n t h e Memphis a r e a r a t h e r t h a n Texas. 111 I f t h e producer i s t o r e c e i v e s t o c k s from CCC f o r PIK, w i l l t h e producer be r e s ~ o n s i b l ef o r anv t r a n s ~ o r t a t i o nc h a r n e s ? CCC w i l l g i v e t i t l e t o t h e commodity t o t h e producer a t t h e d e s i g n a t e d warehouse f r e e of any c h a r g e s . Any l o a n o u t a n d / o r t r a n s p o r t a t i o n c h a r g e s t h e r e a f t e r w i l l be borne by t h e producer. 112 What happens i f t h e producer f a i l s t o use t h e l e t t e r of e n t i t l e m e n t a t t h e end of t h e +month a v a i l a b i l i t y p e r i o d ? P r o d u c e r s w i l l r e c e i v e t i t l e t o t h e commodity at t h e end of t h e last day of t h e a v a i l a b i l i t y p e r i o d as f o l l o w s : A 5 For p r o d u c e r s w i t h o u t s t a n d i n g p r i c e s u p p o r t l o a n s , CCC w i l l select t h e l o a n s t h a t a r e redeemed and made a v a i l a b l e t o CCC f o r use as PIK com~ensation. -r o r o t h e r p r o d u c e r s , a warehouse r e c e i p i w i l l 'ce issued.--x *-- 113 Why a t e oroducers t h a t do n o t have a s u f f i c i e n t o u r s t a n d i n g l o a n q u a n t i r y being r e q u i r e d a t CCC's o p t i o n r o o b z a i a a 19E3 crop pear p r i c e s m p o r t loan? - T h i s o p t i o n would be used very s p a r i n g l y and o n l y LI c a s e s where CCC does n o t have an i n v e n t o r y of t h e commodity a v a i l a b l e . Use of t h e o p t i o n would g e n e r a l l y b e n e f i t both CCC and t h e producer. 114 I f a county i s l i m i t e d t o a c c e p t i n g 500 acres i n whole base b i d s and has a l r e a d y a c c e o t e d 480 acres: A Can a bid of 50 a c r e s be a c c e p t e d ? No. B Can t h e county committee s k i p over b i d s u n t i l t h e y r e a c h a b i d of 20 a c r e s o r l e s s ? No. Bids must be accepted i n o r d e r w i t h no s k i p p i n g . 115 How w i l l county ASC committees e n f o r c e t h e p r o t e c t i o n of t e n a n t s and sharecroppers? To ward off problems, county ASC committees w i l l review t h e 10-30 p e r c e n t or' t h e base c o n t r a c t s as t i m e permits. Due t o t h e time l i m i t a t i o n on approving whole base b i d s , county ASC committees cannot d e l a y approving a c o n t r a c t : however, t h e o p e r a r o r and producers have agreed ia t h e c o n t r a c t not t o v i o l a t e t h e t e n a n t s and s h a r e c r o p p e r s p r o v i s i o n s . 116 What happens if a l a n d l o r d removes a t e n a n t o r farm o p e r a t o r f o r t h e purpose of r e c e i v i n g PIK b e n e f i t s . Compliance w i t h t h e l a n d l o r d - t e n a n t proT h i s w i l l not be p e r m i t t e d . v i s i o n s i s t h e r e s p o n s i b i l i t y of t h e p e r s o n s s i g n i n g t h e c o n t r a c t . If t i m e p e r m i t s t h e c o n t r a c t t o be reviewed, the l a n d l o r d w i l l be r e q u e s t e d t o o b t a i n a n o t h e r t e n a n t o r o p e r a t o r . If i t i s l a t e r found t h a t t h e l a n d l o r d - t e n a n t p r o v i s i o n s have not complied w i t h , t h e t e r n s and c o n d i t i o n s of t h e c o n t r a c t have not been met and l i q u i d a t e d darnages w i l l apply. 117 If t h e t e n a n t o r o p e r a t o r l e a v e s v o l u n t a r i l y , w i l l t h e l a n d l o r d be required to find replacements? No; however, s t a t e m e n t s made t o this e f f e c t w i l l be confirmed. I f time p e r m i t s t h e county ASC committee w i l l confirm b e f o r e t h e c o n t r a c t i s approved. -* e ~ n ec o n t r a c t r e q u i r e s t h e o p e r a t o r t o r e p o r t crop a c r a a g e s and conserv a t i o n use a c r e a g e by 'he f i n a l r e p o r t i n g d a t e f o r t h e county. '&en i s F i n a l r e p o r t i n g d a t e s f o r all c r o p s v a r y by S t a t e and i n some i a s t a n c e s , by county. These dates a r e a v a i l a b l e a t l o c a l county ASCS o f f i c e s . The f i n a l r e p o r t i n g d a t e f o r c o n s e r v a t i o n use a c r e a g e (CUA) i s t h e l a t e s t r e p o r t i n g d a t e f o r any of t h e a p p l i c a b l e program c r o p s having a CUA r e a u i r ~ m e n t . An EXCEPTION t o t h i s is t h a t CUA on which wheat was p l a n t e d b e f o r e J a n u a r y 12, 1983, must be r e p o r t e d by t h e f i n a l d a t e f o r r e p o r t i n g wheat. 119 How i s t h e c o t t o n p a i d d i v e r s i o n computed? A B For PIX, t h e o p e r a t o r may d i v e r t an a c r e a g e up t o 5 p e r c e n t of t h e b a s e ; however : 1 For whole base PIK, =he sum of t h e PIK a c r e s and t h e paid d i v e r s i o n a c r e s cannot exceed t h e base. 2 For t h e 10-30 p e r c e n t PIK, t h e sum of t h e PIK a c r e s and t h e paid d i v e r s i o n a c r e s cannot exceed 30 p e r c e n t of t h e base. For p r o d u c e r s not e n r o l l e d i n PIK, t h e paid d i v e r s i o n i s 0.0667 times t h e p l a n t e d a c r e s not t o exceed t h e s m a l l e r o f : 1 5 percenz of t h e base. 2 The d i f f e r e n c e between t h e p e r m i t t e d a c r e a g e and t h e p l a n t e d acreage. 120 Why w a s t h e r e q u i r e d c o n s e r v a t i o n use f o r PIX i n c r e a s e d t o r e q u i r e t h e o p e r a t o r t o d e s i g n a t e a d d i t i o n a l unpaid a c r e a g e (ARP) f o r c o n s e r v a t i o n u s e ? I n t h e o r i g i n a l computation, t h e sum of t h e c o n s e r v a t i o n use a c r e a g e , t h e p e r m i t t e d a c r e a g e , t h e p a i d l a n d d i v e r s i o n a c r e a g e and t h e PIK a c r e a g e was l e s s t h a n t h e c r o p a c r e a g e base. The a c r e a g e d i f f e r e n c e was f r e e t o be p l a n t e d t o o t h e r c r o p s which tended t o d e f e a t t h e purpose of our o t h e r programs and w a s a o t w i t h i n our i n t e n t . For t h e s e r e a s o n s , t h e ARP c o n s e r v a t i o n use a c r e a g e was r e d e f i n e d by c o n s i d e r i n g t h e PIK a c r e s as p l a n t e d a c r e s of t h e crop. T h i s l e a v e s t h e c o n s e r v a t i o n use r e q u i r e m e n t of t h e r e g u l a r program unchanged by t h e PIK program. 121 How d o e s t h e s p e c i a l PIK compensation work? Assume t h e producer i s owner-operator of one farm with a 2000 a c r e corn base and 100 bushel y i e l d . Assume, f o r example, a f t e r allowing f o r p a r t i c i p a t i o n in t h e 10-30 p e r c e n t of base PIX d i v e r s i o n , equal $100,000 and t h e conservation use acreage under t h e acreage r e d u c t i o n and l a n d d i v e r s i o n programs e q u a l s 400 a c r e s . Tfie producer can choose between having a 50 o e r c e n t (200 a c r e ) r e d u c t i o n i n conservation use acreage ( s i n c e t h e pa;ments w i l l be reduced by 50 ~ e r c e n t )o r forgoing t h e r e d u c t i o n t o r e c e i v e PIK f o r t h e 200 a c r e s a t t h e r a t e of 50 p e r c e n t of t h e corn y i e l d . --* *--;12Does lax ir make any d i f f e r e n c e t h e s o e c i z l FIX orogram wherhet t h e i s i? t h e i0-30 o r t h e w h o l e base F I R p r o e r a n f o r :ne c r o o ? No. P a r t i c f p a z i n g i3 t h e whole base would reduce t h e p r o j e c t e d d e f i c i e n c y p a p e n z s f o r t h e crop t o z e r o , buz t h e producer could s t i l l par,i:ipate i n t h e s p e c i a l program if t h e p r o d u c e r ' s t o t a l payments a r e reduced due t o t h e payment l i m i t a t i o n . 123 I f t h e farm h a s more t h a n one c r o p , can t h e p r o d u c e r choose t o p a r t i c i p a t e i n t h e s p e c i a l PIK on a crop-by-crop b a s i s ? Yes, so long as t h e crop is in t h e P I K program. I f the producer p a r t i c i p a t e s f o r more t h a n one c r o p , t h e a c r e a g e f o r compensation f o r each crop w i l l be i n p r o p o r z i o n t o t h e o r i g i n a l r e q u i r e m e n t s . 1 2 1 Under =he p r e v i o u s l v announced programs, a p r o d u c e r w i t h more t h a n one farm c o c l c zLioca=e :he reduc:loc i n c o n s e r v a t i o n use a c r e a s e amone zzrms, not t c s t e e d the o r i g i n a l requirement. Is t h i s o o i i c y changed? No. 125 Does t h i s mean t h a t p r o d u c e r s who p a r t i c i p a t e i n t h e soecial P I K can r e c e i v e P I K based on 'he f a n s t o which the? a l l o c a t e t h e r c d u c r i o n ? Yes. S i n c e p r o d u c e r s have t h e r i g h t t o a l l o c a t e t h e r e d u c t i o n , t h e ? must r e c e i v e t h e PIK based on t h e y i e l d s of t h e f a m ( s ) t o which t h e r e d u c r i o c i s zllocaced. 126 S i n c e t h e PIX a c r e a g e i s being c o n s i d e r e d a s p l a n t e d a c r e a g e f o r b u r p o s e s of comoutfng t h e c o n s e r v a t i o n use r e q u i r e m e n t under t h e a c r e a g e r e d u c t i o n program (ARP) , is t h a t a c r e a g e s u b j e c t t o r e d u c t i o n due t o t h e a p p l i c a t i o n of aavment l i m i t a t i o n ? Yes. No d i s t i n c t i o n i s made between t h e ARF computed on t h e p l a n t e d a c r e a g e and t h e ARP computed on t h e P I K a c r e a g e f o r t h e purpose of t h e a c r e a g e r e d u c t i o n due t o t h e a p p l i c a t i o n of t h e payment l i m i t a t i o n p r o v i s i o n s . 127 Is t h e PIK e l i g i b l e f o r d e f i c i e n c y pzpments a n d / o r l o a n s ? No. To be e l i g i b l e f o r d e f i c i e n c y papments, t h e c o m o d i r y must have been p l a n t e d i n t h e c u r r e n t y e a r and t o be e l i g l b l e f o r p r i c e s u p p o r t l o a n , P I K acreage t h e commodity must have been produced i n t h e c u r r e n t year. d o e s n o t meet e i t h e r of t h e s e r e q u i r e m e n t s . 128 Row w i l l proven y i e l d s f o r 1984 be determined f o r c r o p s p a r t i c i p a t i n g i n t h e whole base PIK d i v e r s i o n ? The 1983 y i e l d w i l l be assigned by t h e county ASC committee t a k i n g i n t o consideration t h e a c t u a l production from t h r e e s i m i l a r f a m s in t h e a r e a s . --* *-- 1 2 9 When and how w i l l t h e a d d i t i o n a l c o m ~ e n s a t i o nf o r u r o d u c e r s w i t h farm-stored FOR l o a n s be d e t e r m i n e d ? A The amount of t h e a d d i t i o n a l compensation w i l l be determined on t h e P I K a v a i l a b i l i t y d a t e . B Twelve months of advance s t o r a g e was p a i d on t h e l o a n a n n i v e r s a r y d a t e . I f , on t h e PIK a v a i l a b i l i t y d a t e , t h e p r o d u c e r has unearned s t o r a g e of a t l e a s t 7 months, no a d d i t i o n a l disbursement w i l l be made. I f unearned s t o r a g e i s less t h a n 7 months, an a d d i t i o n a l disbursement w i l l be made t o i n c r e a s e t h e unearned s t o r a g e amount up t o 7 months. 130 W i l l p r o d u c e r s p a r t i c i p a t i n g i n PIK w i t h r e g u l a r o r FOR l o a n s be r e q u i r e d t o make a d d i t i o n a l l o a n q u a n t i t i e s a v a i l a b l e t o CCC f o r p r o d u c e r s p a r t i c i p a t i n g i n PIK t h a t do not have l o a n s ? No. --* Chicago Tribune January 30, 1943 s e c t i o n 5 , page 1, 3 heavily on By am ~ebastian Ch~cagoTrlbune NAPLES. Fla.-It , rained heavily during the recent farm machinery m a r k e t i n g conference a t this gulfside resort, scattering more clouds over managers of the troubied industry. Industry executives, who are getting used to foul weather of ail sorts, rescheduled their olf ames around the showers whige tfey adjusted their outlook for the dampening impact of the government's new farm pro am. latest shadow to move over the industry comes in the form of the overnment's new Payment In Kind PIKI pro ram, which will pay farmers w i g grain for idling up to 50 percent of their normal acreage ths year. The unusual "cmp swap" isf aimed at reducing huge government p i n surpluses and prowding a shot m the arm for depressed commodity prices and farmer income. Less land in production, of course, means a reduced need for farm machinery. "The drop in acrea e under the t PIK program may be f ~ f i c u l medicine to swallow," Peter Perkins, a director of the Farm and Industrial Equipment Institute EFIEII , told & t rtp members at the 6 g detmg,, PERKINS. wbo is also vice dent and manager of C h i c a g o - e i FMC Corp.'~fo6d% ~ ~ ~ ~ - g r ~ ~ p , sa5d the d r e a ~ - g h I z i eatlook y for farms equipment saIes~in.4983 was likely to be d'atkqed-fvrtlkrcby the PII( p g r i f i ' 4 . ~ d . Z W c 2;:8 4 The results of an institute sumey in December, before PIK was announced , called for flat dollar sales and some modest unit sales increases compared with 1982, which itself was a de ressed year. Farm machinery saf& have been on the downturn since 1979, and manufacturers had hoped for, sbme modest. p W p toward thehend of fhis year.; 3 An FIE1 follow-up survey this, month found members thought that hope was p ~ t well ? ~ I BEFORE - ~ d : ~ f a r r nequipment ' makey were loqkine for a 4.2 wrcent tncrra5e ~ r s,& of ~ e e 4 6 horsepower gacrqrs 4 8'1 ~ (~I - unqs s " and a 13.3percent pick- irrwmbir!& sales to 17,000 units this year. Not any more. The post-PIKzmihieplfbw calls for a 2 percent drop in largetractor sales and a 1.3 percentxirap in combines. 'a, . . I.. ._While the. F~EImembers aren't ,..-. . Continued',on page.5 -BY ' 4 ' k R a happy about PIK's short-term implications, many admit it may be just what the doctor ordered to set a floor on declining farm income and the side-effect slump in machinery sales. It's also generally acknowledged that other farm suppliers such as seed and fertilizer roducers will be affected more severely t an the equip ment makers. Still, PIK "is going to affect industry sales modestly in 1983," said Boyd C. Bartlett, Deere & Co. senior vice presi-; dent of farm and consumer roduct o p erations in the U.S. and Cana a. who also sits on Deere's board. "I believe it to be a good thing generally for farmers if it addresses the problem of huge stocks of grain, and whatever is good for the farmer in the long run is good for US." One industry anal st attending the meeting inted out tiat "this year was oing to a disaster no mat$?rwhat the farm machinery makers do. The farm equipment makers are burdened with a 12-month inventory and have been hawking deep discounts to try to move those goods. "At least now there's a mechanism ui in lace to try to liquefy the marketp&ce," said. T H E MECHANISM is PIK, which offem (farmers certificates for governmentstored surplus grain in payment for taking up to 30 percent of their land out of production. The new program requires participation in the existing standard reduced-acreage program, which calls for a continued from 1st Husiness Page Farm gear f percent acreagd cutback, half of which is compensated with cash ayments, so a farmer paricipating in PIE could idle as much as 50 percent of normal cropland. Signup for PIK, which is available to farmers who grow wheat, corn, grain sorghum, cotton and rice, started last week and continues until March 11. The Agriculture Department hopes the program will idle 23 million acres and wh~ttle government-owned feedgrain stocks, which stand at some 107.4 million metric tons, or about 49 percent of capacity. The agency also hopes to knock down the cost of farm programs by as much as $5 billion in the next three years by cutting its cosls of storing grain and cotton and by reducing cash payments to farmers. In fiscal 1982 the A riculture Department spent a record IlaPbillion on farm aid, half of which was in the form of crop-secured loans. SOME CRITICS have called Pl'K a Band-Aid approach to the crop surplus problem, citing a more effective export policy as a better long-term solution to oversu ply. Some economists believe PIK could extended in some degree for another year or two in order to reduce stocks more effectively. Whether PIK is successful in reducin the current surplus and firming commo!ity prices and farmer income in the short-run depends on the number of farmers who sign u and the amount of land they agree to iJe. That's one of the unknowns the farm machinery .makers are anxious to pin down. So far, they say they're pickmg up si ns of strong farmer support from taking to t h e i ~dealers, particularly in Iowa and Ill~nois,the largest corn-producing states. Another suestion falls on the timing of 20 . crediting the swapped grain and the farmer's attitude on year-end tax planning. A farmer gets title to the grain at harvest time and can sell it then .or defer the move for months under the. government loan program. The rospect of higher income combined wit! declining interest Peter Perkins t E . rates could yet cause farmers to make some equipment purchases this year, some farm machinery makers hold. If not this year, the stage would be set for increased buying in 1984 and beyond, they believe. F O R THOSE reasons, many FIE1 members believe short-term negatives will be mitigated by long-term positives. > "I don't know whether we'd have unanimous agreement in the company on that question," said Lavon S. Fife, International Harvester's manager of economic analysis and forecastmg. "1 think [PIKI is a step that had to be taken in order to get a turnaround situation ubderway, and so with that in mind, y e , .have to agree it's a good rogram. "Even though it coulf put a slight damper on the industry in 1983, it would be more than compensated in later years in terms of turnaround time." He acknowledges there are some risks associated with PIK that will be unclear until the full level of farmer participation is known. He also holds that other nonPIK factors, such as declining interest rates and fuel costs that further lower farmers' operating expenses, may help offset any adverse impact from PIK th,is I year. Lower interest rates reduce the at&tion of. alternate invertments such as mone market funds and make tax benefits o!accelerated depreciation on capital equipment like a $100,000 combine mope appealing, Fife said. . "Many farmers who are sharp in their analysis may want to buy equipment at a rice that will probably never be availsle again and take the depreciation," he said. "American agricultural policy," declares Representative Barney Frank (D-Mass.), "is out of control." Outraged taxpayers, harried lawmakers, indignant shoppers, embittered farmers-they're all demanding radical changes in the once proud U.S. farm system. Bumper Crop of Subsidies One measure of the nation's farm problems is the amount of money the government is spending to keep food and fiber producers in business. Crop price supports and other federal subsidies will cost taxpayers a record 21.8 billion dollars this year, nearly double the 11.6 billion of 1982 and more than five times as much as in 1981. In addition, farmers could receive up to 12 billion dollars' worth of wheat, corn, cotton and other commodities through the Reagan administration's controversial payment-in-kind program. The PIK plan gives farmers crop surpluses in exchange for taking some of their acreage out of production. The soaring cost of farm subsidies has helped wreck White House plans to reduce the record federal deficit. Even Agriculture Secretary John Block warns: "The government cannot afford to continue to absorb these tremendous expenditures in the face of large deficits." Opposition also is building on Capitol Hill, where pressure to cut defi~itsis unraveling the old rural-urban coalition in which rural lawmakers voted for welfare programs in return for urban members' support of farm subsidies. Asserts Senator Claiborne Pell (D-R.I.): "When we are asking our citizens to tighten their belts, I cannot support the payment of massive subsidies to the agricultural industry nor the cuts in food-stamp benefits for those who need them." American agriculture, long praised as the world's most powerful food-producing machine, rattled and wheezed through the summer of 1983 in need of a total overhaul. Almost everyone-members of Congress, bankers, Main Street merchants, supermarket shoppers and above all farmers themselves-agrees the system is badly out of kilter. For years, even while the Germans overtook the US. in quality of cars and the Japanese captured much of the electronics industry, farming remained the one thing the U.S. could do better than anyone on earth. Yet todayDefying logic that says efficiency means bigger profits, many of the 2.4 million U.S. farmers are teetering on the PIK: A Program Gone Sour brink of bankruptcy because they are too productive. ThouNowhere is the failure of American farm policy more sands of them, once the personification of rugged individevident this summer than in the PIK program, which has ualism, survive only by leaning- on federal handouts indistinguishable in the eyes of some from welfare. m Government subsidies have multiplied five times in three years, reaching the point where in 1983 farm: ers will get nearly as much money from Washington as they get from their crops. At a time when millions around the world go to bed hungry-if they are lucky enough not to be starving-government storage facilities are bulging with so much surplus food that farmers are being paid not to grow more. m Food shipped abroad, while still the cornerstone of U.S. exports, has plummeted under pressures from world recession, a strong dollar and rich global harvests to some 145 milThus, farm subsidies this year could equal 80 percent of farm profits. lion metric tons this year, W-dg:U.Swdh#db~~ the lowest since 1979. U.S.NEWS & WORLD REPORT, Aug. 15,1983 53 idled some 80 million acres of land previously planted in cotton, wheat, corn, rice and sorghum. The Agriculture Department created PIK in early 1983 in a desperate effort to pump money into the badly ailing farm economy. Government economists predicted it could be implemented at little cost to taxpayers. The theory: Instead of being paid money not to grow crops, farmers would be paid in surplus commodities. That would cut the government's cost of storing surplus commodities as well as boost grain and cotton prices above the level where the government would be obligated to buy even more crops. Farmers would benefit, too, from savings on seed, fertilizer, fuel, pesticides and labor that would have been needed to plant the idled acres. PIK, unfortunately, is not working out that way. Costs are soaring far beyond the most pessimistic government assessments. Moreover, the program is funneling most of the money into the coffers of big farmers, some of whom will receive more than a million dollars' worth of commodities. Grain farmers have been helped at the expense of livestock and poultry producers, who had hoped to benefit from low costs for feed grains. Merchants who sell farm implements, seed, fertilizer, pesticides and other goods are struggling to survive an abrupt slowdown in sales of the merchandise that farmers no longer require for their reduced operations. The real cost of the PIK program cannot be determined until Agriculture Department bookkeepers figure out how much the government would have received if it had sold the surplus crops that fai-mers will receive, minus savings on storage. But the value of the commodities given to fanners is expected to run as high as 12 billion dollars, not counting administrative costs. Beyond that, it is growing increasingly clear that PIK will not even make much of a dent in the nation's food surplus unless the drought now plaguing parts of the Midwest persists and spreads. As in past land set-aside programs, farmers simply are taking their worst acreage out of production while applying more fertilizer and pesticides to the remaining land. Record wheat yields of 40.7 bushels an acre, for example, are Slippage in Ex~orts Exports of U.S. Farm Products (in metric tons) Weak demand abroad for U.S. farm products and record crop production combined to depress prices farmers receive. 8hMcndSqlaas30. 54 r n ~ ~ U S W d r e c J r n Mountains of surplus grain are expected to remain after the 1983 harvests, despite sharp cutbacks in acreage. expected to make the 1983 harvest the third-largest ever despite an 18 percent reduction in acreage. An Unforeseen Headache PIK also is turning into a bureaucratic nightmare. Far more farmers than anticipated agreed to idle their land, forcing embarrassed Agriculture Department officials to admit that there is not enough cotton or wheat in storage to meet their obligations. Surplus stocks remain enormous, but most of them are in farmers' hands and not in government warehouses. Solution: Foreclose on farmer-held surpluses and force some farmers to turn over part of their current crop at the government-supported price level. Angry cotton farmers protested the idea of being required to sell the government cotton at 55 cents a pound while the current market price is about 70 cents. Congress bailed them out in late July-at taxpayer expense. In effect, farmers now will be able to get as much as 77 cents a pound by selling last year's surplus to the government. The Washington Post reported on July 28 that in California, nearly 50 farms each will receive a million dollars or more worth of free cotton under the PIK program. Some of the farms are owned by corporate giants such as Bangor Punta, Tenneco, Chevron USA, Shell Oil Company and Superior Oil Company. The newspaper also reported that PIK's beneficiaries include Everett "Bud" Rank, chief administrator of the PIK program and head of the Agriculture Department's Stabilization and Conservation Service. Rank and four partners in a Fresno County, Calif., operation will receive 1.3 million pounds of cotton, worth slightly more than 1 million dollars, in return for idling 2,163 acres. Rank insists his partners signed up for the program without his knowledge and says there is no conflict of interest. The Agriculture Department defends PIK payments to large farmers, explaining that any effort to reduce crop surpluses must include big operators to be successful. Four percent of the nation's farmers account for nearly 50 percent of total cash receipts. "The incongruity of having farmers growing wheat for the PIK program bothers a lot of people," reports Clayton Yeutter, president of the Chicago Mercantile Exchange and a former assistant secretary of agriculture. Farmers themselves have mixed feelings about PIK. Says US.NEWS & WORLD REPORT,A u ~ 15, . 1983 Bitter feelings are expressed by farmers forced to sell equip ment, even entire farms, to pay overdue loans. Farmer will harvest corn from one field, get surplus crops for Idling the adjoining field under the PIK program. Don Horton, Illinois cbordinator for the American Agricultural Movement, an organization spawned by the current trouble: "I don't blame the city people for being mad. But they should be mad at the government, not at the farmer. The farmer doesn't want programs like PIK. We want to get our money from the marketplace, not from the government." In California's Central Valley, PIK came as a bonanza for about 2,000farmers whose land remained flooded well into the summer. "To be paid for not growing cotton on underwater land is really something," marvels one King County grower. "I couldn't have planted this year even if I'd been wearing scuba gear." I Many are hanging on by taking part-time jobs or selling some of their assets. Wayne Turner of Marlow, Okla., was named Outstanding Young Farmer of 1981 by the state Junior Chamber of Commerce. Today he drives a truck to make ends meet. "I have shown $4,000in income the last couple of years on $100,000in gross earnings," he reports. "If it continues like it is, you'll see the family farm go out." While some argue that family farms are an essential part of American life, others contend that if small farmers cannot compete, they should be absorbed by bigger and moreefficient operators. The crunch, however, also is discouraging many young people from going into farming. Last year the number of college undergraduates pursuing agricultural degrees dropped 8.6 percent. Master's-degree candidates declined 12 percent; Ph.D. aspirants, 5 percent. Joseph Kunsman, associate dean of the University of Wyoming's College of Agriculture, observes: "Agriculture today is highly technical and needs to be run by technicians. Among the implications of this situation are more-expensive food and a loss of trade leverage." Hard Times Down on the Farm Despite its unpopularity, the PIK program was born out of desperation. It was implemented to combat the worst economic disaster in agriculture since the Dust Bowl days of the 1930s.Although the Agriculture Department in early August sharply raised the estimate of 1983 farm net income to 27 billion dollars, it still would fall far below the record 33.4 billion of 1973 and when adjusted for inflation would rate as the second lowest since the Depression. The drop in income, c o ~ b i n e dwith high interest rates and increasing operating costs, has buried farmers under a mountain of debt totaling 218 billion dollars, up from 141 billion just five years ago. Most of those who have gone bankrupt have been younger operators mortgaged to the hilt and counting on constantly rising land values to provide loan collateral-values that have declined for the last two years in a row. But some older and more cautious farmers are hurting, too. "I didn't splurge on big, fancy machinery," says Glen Pembleton, 52,a dairy farmer near Racine, Minn. "I never stuck my neck out." Yet Pembleton, who owed nearly $500,000,was forced to sell 400 acres of his land at a public auction August 1. "At least I got to keep the home 80,"he notes. "I could have lost the whole kit and caboodle. If that happened, I don't know what I would have done." William Lamb of Louisville, Ga., is considering giving up farming after 21 years. He already has been forced to sell 271 of his 1,000 acres and worries that he may lose his home. Lamb, who says he has not made a profit since 1979, observes: "When you get to the point where you don't want to get up in the morning, you can't be a farmer." USNEWS & WORLD REPORT, Aug. 16, 1983 Main Street Blues Merchants and small industries serving rural areas are being devastated this year by the combination of recession and the PIK program. "PIK is fine for the farmers, but it puts the implements dealers in worse shape," reports Frederick Cannon, agricultural economist for the Bank of America. For Scotty McCoy, president of McCoy Farm Service in Davisboro, Ga., PIK is a disaster. Not only has the program reduced his sales of seed and fertilizer, but the contract for distributing PIK commodities went to a large farmer cooperative. As a result, his elevator business plummeted 30 percent, a loss in revenue of about $150,000. Says Bernie Schaaf, manager of the Farmers Union Oil Company in Glendive, Mont.: "All of us business people are running a little scared, because we're completely dependent here on agriculture. Our bread-and-butter customers aren't coming through for us, so we don't know what to do next." The Bitter Harvest Hard times are going beyond economic impact and are tearing at the social fabric of rural America. Sociologists Rows of unsold farm machinery are product of the recession, high prices and PIK program that held down production. report that farmers, once believed to be immune from many of the pressures that afflict urban dwellers, are increasingly falling victim to suicide, alcoholism, drug abuse and family problems. ! Craig Mosher, director o i the Tama County, Iowa, Mental Health Center, cites an alarming rise in suicides. "Our rural, central Iowa county has the highest suicide rate in the state-2% times higher than the state and national average," he says. "In fact, the six highest suicide rates among Iowa's 99 counties occur in rural counties." Larry and Phyllis Simpson of Malta, Mont., have been hying to sell their farm to avert bankruptcy. She explains why she sought counseling: "It's your life, and all of a sudden it's all blown up. This is my home. I've been here 20 years, and I just couldn't handle the thought of foreclosure. I can't talk about it, because I just start crying." Says Don LaPlante, a psychologist in Glendive, Mont.: "We've actually had people come in for counseling on whether they should go into the PIK program. Typically, these people have never come here. They've been able to figure the pros and cons themselves. Some of these guys are so depressed that their wives literally have to get them up in the morning and put them on the tractor, because they don't see any use in it.'-'In a public mental-health clinic in Dothan, Ala., Dr. Walter Jacobs is seeing a mounting stream of farmers and their wives. He reports: "We are getting farmers with a great deal of stress-financial worries and just the complexity of modern farming. It exacerbates all existing problems such as alcoholism and family conflicts. Many of the wives are afraid their husbands are suicidal." Rise of the Militants As economic and psychological stress grows, farmers are turning increasingly militant in their political outlook. Groups such as the American Agricultural Movement, the National Farmers Organization and the North American Farm Alliance have sprung up and taken the lead in organizing tractorcades, blocking farm foreclosure sales and holding marches and demonstrations. Some members of the American Agricultural Movement in Colorado have enrolled in seminars on how to make crude pipe bombs. Some members attended a "survival school" in Kansas where students were taught the use of poisons and explosives, knife fighting and hand-to-hand combat. Leaders insist, however, that the group is nonviolent. "I left the American Agricultural Movement because it's gotten too tame," says Keith Shive, head of the Farmers Liberation Army in Kansas. "AAM's a nice social club, but when we drove 665 tractors to Washington, D.C., and when we removed 75 truckloads of grain from an elevator in Missouri right in front of five sheriffs, that made people stand up and take notice." Most farmers, however, still believe mainstream politics is the best way to achieve their goals. In some areas, they are joining consumers, environmentalists, nuclear-freeze advocates and unions to achieve common goals. "There's a place for demonstrations and a place for working within the system," declares Larry Gallagher, executive director of the Illinois Farm Alliance. "Now we're involved in political-action committeedonating funds to certain candidates, lobbying for certain legislation." In Minnesota, a coalition of rural and urban groups called Coact persuaded the State Legislature to pass a moratorium on mortgage foreclosures. North Dakota farmers last spring won a lawsuit that stopped the Farmers Home Adrninistration from foreclosing on delinquent loans without first providing the borrower with a notice, a right to a hearing and other due process of law. Despite their small numbers-less than 3 percent of the population-farmers are convinced they can influence the outcome of next year's election. Republican officials worry that President Reagan and the rest of the COP ticket will take a beating in rural areas unless things improve rapidly. Says Texas Agriculture Commissioner Jim Hightower: "The 1984 election year could be to agriculture what 1896 was to monetary policy. The militant movement period has washed past us. Farmers are now ready to be a political force." The Search for a New Policy Out of the turmoil spreadhi across rural America is a growing consensus that the U.S. needs a new, long-range farm strategy. The current program, now 50 years old, grew out of the Depression in which economic hardship and drought drove thousands of farmers from the soil. That legislation has evolved into two contradictory and competing farm policies. On one hand, the Agriculture Department-through its price supports, research, extension service and credit operation-ncourages farmers to maximize production. At the same time, the government uses production and acreage controls and stockpiling to hold down supplies reaching the market. Saying the nation needs a new farm policy and agreeing on one are two different things. Agriculture Secretary Block recently staged a two-day "agricultural summit" in Washington attended by 75 of the nation's top farm, business, labor and foreign-trade leaders. Net result: Much replowing of old ground on finding new foreign markets, freezing target prices and limiting subsidies to big farmers-but nothing new. Yet the search goes on. Senator Roger Jepsen (R-Iowa)is holding a series of meetings across the country to solicit views on farm programs. The Democratic National Committee is planning a series of farm-policy forums. The Agriculture Council of America, an agribusiness group, is moving ahead with plans for a national forum on farm policy. The main problem is that American agriculture is so huge and diverse. What is good for the grain farmer may be disastrous for livestock and poultry producers. Cotton and tobacco farmers have little in common with food growers. Dairy farmers and sugar growers each have special problems. Farmers themselves cannot decide whether they want U.S.NEWS & WORLD REPORT. Aug. 15, 1983 the government to leave them alone or support them. "They want insurance against low prices while still being able to take advantage of high prices," says Bruce Gardner, a University of Maryland expert on agriculture problems. Many farmers blame their current plight on the Russian grain embargo imposed by President Carter in 1980 in response to the Soviet invasion of Afghanistan. The embargo came at a time when farmers were encouraged to plant "fencerow to fencerow" to meet burgeoning export demand and provide food for a hungry world. Critics were placated somewhat by the recent signing of a new agreement committing the U.S. to sell the Soviets from 7 to 9 billion dollars' worth of grain per year over the next five years, even if it means shortages in this country. Still the World's Best In coming up with solutions to the problem, lawmakers worry that they might unwittingly wreck what, despite all its troubles, remains the world's best agricultural system. The average U.S. farmer produces enough to supply 78 persons, compared wit5 53 in 1972. Am&icans s k n d a smaller portion of their income for food than anyone else in the world-an average $16.10 for every $100 in take-home pay. The U.S. Conference of Mayors recently identified hunger "as the most prevalent and the most insidious" problem facing the' nation's cities. Yet government stockpiles of surplus food include 1.6 billion pounds of dried milk, 982 million pounds of cheese, 567 million pounds of butter, 3.4 billion bushels of corn and 1.3 billion bushels of wheat-to say nothing of peanuts, honey and soy- North Carolina's Prulean Farms beans in a stockpile val- is blg-business agriculture. ued at 24.7 billion dollars. Problem: How to distribute that to the poor without cutting market prices and forcing government purchase of still more surplus production. I ,., ,-* America's Foundation Why are U.S. political leaders so concerned about the plight of such a tiny segment of society? Though their numbers are few, farmers are the backbone of the nation's largest industry. Total assets exceeding 1 trillion dollars make it bigger than the automobile, steel and housing industries combined. The 22 d i o n Americans working in some phase of agriculture, from growing food to selling it at the supermarket, comprise the country's largest labor force. Agricultural exports are the biggest earners of foreign exchange. Warns Representative Jamie Whitten (D-Miss.),chairman of the House Appropriations Committee: "When setting national priorities, we must bear in mind that agriculture is the foundation of our economy. If the foundation goes, everything goes." 0 B y KENNETH R. SHEETS with JOHN C O W N S o f the Economic Unit, MICHAEL BOSC in Chicago, JOANNE DA VIDSON in San Fmncisco, LINDA LANIER in Atlanta. SARAH PETERSON in Houston and CORDON WITKIN in Dmoer U.S.NEWS & WORLD REPORT, Aug. 15,1983 ' When Wall Street Puts On a Straw Hat CRESWELL, N.C. Rows of corn stretch as far as the eye can see-an idyllic example of American agriculture. But this is not your typical farm. Prulean Farms is an 83,000-acre giant owned not by a sunburned tiller of the soil but by the stockholders of Prudential Insurance Company and McLean liucking. At a time when many fanners are desperately scrarnbling to survive, major investors such as the insurance industry see a bright future for American agriculture. Wall Street's Salomon Brothers ranks farmland as the eighth-best investment over a 15-year period, producing a 10 percent return to beat out Treasury bills, housing, stocks and bonds. Banking on that beliefrn Prudential in recent years has bought more than 750,000 acres of farmland in 16 states. rn Agricultural Capita1 and Real Estate Account, a pension fund managed by John Hancock Insurance, has purchased 13 farms totaling 5,708 acres since 1981. Metropolitan Life Insurance has invested in seven joint-venture farming projects, mostly orchards and vineyards in Florida and California. rn Equitable Life Insurance of Iowa developed a 19,400-acre rice farm in Morehouse Parish, La. rn Travelers Corporation bought 12,000acres of farmland in Arkansas, Illinois, Mississippi and Ohio. Insurance executives claim that farmland offers excellent investment opportunities, because agriculture is the one industry in which the U.S. is almost certain to be a world leader for a long time. They foresee global hunger doubling demand for American farm products in the next 10 to 15 years. The fluny of insurance-company investment in farms and ranches is generating alarm among some farmers and sociologists, who see the entire structure of rural life threatened by the disappearance of small family farms and their replacement by absentee landlords. Some residents of this North Carolina coastal region fear that huge operations such as M e a n will ruin the environment as well as depersonalize what has always been a friendly, casual society. Prulean officials insist they are helping develop the region, not harm it. Nonfamily corporations and partnerships own only about 6 percent of the nation's farmland. Yet people are worried to the point where at least 12 statesNebraska, Iowa, Kansas, Minnesota, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, West Virginia and Wisconsin-levy special taxes or fees or impose other restraints on such operations. Farmers Are Taking Their PIK -- Mixed resultsfiom a plan to aid growers who don 't grow cross America last week, the nation's farm land had a bizarre new look. I n A Kansas, large brown patches of stubblestudded earth interrupt shimmering golden carpets of ripening winter wheat. In Nebraska, idle center-pivot sprinklers stand like outsize scarecrows over many once verdant cornfields. In California, more than half of the acreage normally devoted to rice lies uncultivated. The cause of the crop cutback is not drought or disaster but a new federal program that rewards farmers, partly in cash and partly in grain and cotton, for taking large tracts of land out of production. Called payment in kind (PIK), the program aims to invigorate the wilted farm economy by reducing bin-busting surpluses, driving up up more than 10% from 1979. Says Kansas Farm Bureau President John J. Armstrong: "Yields are looking so good out here that we'll harvest nearly as much winter wheat in Kansas as last year on 1.5 million fewer acres." As a result, wheat stockpiles are actually expected to grow this year. For every other commodity, however, PIK appears to be succeeding in drawing down the enormous surpluses. The USDA predicts that the unsold carryover of feed grains, mostly corn, may dwindle from 3.4 billion bu. to 2 billion bu. by the end of the year, a reduction of about 40%. Rice stocks are expected to be cut by almost half, from 68.2 million cwt. (hundredweight) to 36.3 million cwt. "Without PIK, we would able at harvest time for grain from Government-controlled storage. The amount varied from 80% (in the case of corn) to 95% (in the case of wheat) of what they would normally produce on their idled plots. After redeeming the vouchers, the farmers are free to sell the gratis grain or use it as Livestock feed. "PIK sure looked sweet to me," says Kyle Bauer, who idled 700 acres of his 1,700-acre farm in northeastern Kansas. "I can give my ground a rest and still get a return on it." Many farmers, however, are piqued with PIK. They cite poor administration, the possibility of getting paid with inferior grain and a timetable that sometimes forces farmers to sell at deflated prices. "The biggest concern I have is the quality of corn they are shipping in," says Alabama Farmer Bill Sanders. "Some of it is as much as two or three years old. I may have to buy hogs to get rid of it." Texas rice farmers will receive medium-grain California rice for their PIK entitlements because there is not enough of the more marketable long-grain variety to go around. Worse, the shipments will arrive at the beginning of August when the market is flooded with rice. Cash-hungry farmers will have to sell at the lowest price of the season. "These old boys need greenbacks right away," says Rice Farmer Wayne Wilber. "They won't get nearly as much as they would if they got their entitlements later in the season." espite PIK's problems, the GovernD ment insists the program will save taxpayers $9 billion in storage costs and . . Some dwindled stockpiles, some higher prices, but complaints about poor administration. depressed prices, cutting Government costs for farm subsidies and grain storage, and saving farmers production expenses. Alas, at mid-season the results of the ingenious new program are mixed. PIK prompted farmers to remove from production 82.3 million acres of wheat, corn, sorghum, cotton, barley, oats and rice, amounting to 36% of all eligible crop land. The U.S. Department of Agriculture estimates that farmers planted only 60.1 million acres of one major crop, corn, down 27% from last year and the lowest level since 1878. Even with the acreage reductions, however, the nation's winterwheat crop, planted last September and now in the midst of being harvested, is estimated at 1.94 billion bu., the third best crop ever and down only 8% from last year. Farmers in 13 states will bring in larger wheat crops than last year. The reason: record yields, a predicted average of 40.7 bu. of wheat per acre nationwide, have had a market glut like we've never seen," says Agricultural Economist Barry Flinchbaugh of Kansas State University. "It would have been a hell of a mess." Prices have inched up since PIK was announced last winter, but not necessarily as a result of the program. Corn jumped from $2.36 in January to $3.15 this month, primarily because farmers held so much of their 1982 crop off the market that buyers had to bid up the price to get the available supplies. Cotton prices have risen nearly 10c per lb. this year, mostly because of bad weather. Eventually, however, reduced supply should strengthen prices and put more money in farmers' pockets. "The confidence level is better," says Tractor Dealer Bob Kennon of Tifton, Ga. "People are more optimistic about the fall harvest than they've been in two years." When farmers signed up for PIK last spring, they received vouchers redeem- other outlays in fiscal 1984 through 1986. The savings pale, however, next to the estimated $21.2 billion that will be spent this year on farm price supports, five times the outlays of fiscal 1981. Says Agriculture Secretary John Block: "The costs that we are looking at today really are unacceptable." In preparation for redrafting the current farm bill, which expires in 1985, Block last week convened a twoday, closed-door "summit" of farm and agricultural business leaders to thrash out long-range methods for cutting costs and surpluses and aiding farmers. High on the agenda: the nation's sinking share of farm export trade, resulting from a strong dollar, world recession and stiffer competition from overseas. For the short term, the Adrninistration is pushing Congress to freeze "target prices" (the prices that determine the amount of a farmer's cash subsidy) for grain and to lower dairy price supports. Until Congress agrees, Block is delaying the announcement gf the specifics of the 1984 PIK program for wheat. In the meantime, PIK appears to be the only game in town. "This miserable PIK program is designed to keep the poor buggers in farming alive," says Scott Hanson, administrator of the Washington Wheat Commission in Spokane. "Until someone comes up with a better idea, we're stuck with it." -By Susan T i m Reported by Cisela Bolte/ Washington and Lee Criggs/Chicago