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
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USDA News Center
United States
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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
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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.
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- 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
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s p c i . l t o ~ a l i e r ~ m + ~
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FereZttyl
LFAfurthgricule&r
-.
p ~ ~ Y H ~ ~ m ~ & f ~ ~ ~
-
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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