Order Code RL30956
CRS Report for Congress
Received through the CRS Web
What Is A Farm Bill?
May 5, 2001
Jean Yavis Jones
Specialist in Food and Agriculture Policy
Resources, Science, and Industry Division
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
What Is A Farm Bill?
A farm bill is a collection of new laws and amendments to longstanding laws that
sets the overall direction of federal food and farm policy for a specified number of
years. Farm bills typically contain not only commodity price and income support
provisions, but also provisions on agricultural trade, rural development, domestic food
assistance, foreign food aid, conservation, crop insurance, farm credit, forestry, and
agricultural research. The many issues covered by farm bills make it possible to form
a broad coalition of support among common, and sometimes conflicting interests for
policies and programs that individually might not be enacted.
The omnibus nature of farm bills attracts many diverse interests to debates:
farmers and their organizations; farm input suppliers; commodity handlers, processors,
and retailers; banks, insurers, and lending institutions; exporters and importers;
scientists, researchers and educators; domestic and foreign consumers; low-income
groups; environmentalists; and rural communities. The heart of most farm bills,
however, is farm income and commodity price support policy.
Farm income support programs make payments to farmers to supplement their
income without directly supporting commodity market prices. This type of support
includes: (1) production flexibility contract (PFC) payments to wheat, feedgrain,
cotton, and rice farmers; (2) loan deficiency payments for contract crops and oilseeds
when market prices are lower than loan rates; (3) disaster relief payments; and (4) in
recent years, ad hoc emergency “market loss payments.” Commodity price support
programs directly impact the price of commodities by setting minimum prices,
restricting production or sales, and/or regulating imports. These include the milk,
peanut, sugar, and tobacco programs. Some farmers also receive federal payments
for taking environmentally sensitive land out of production, for example, under the
conservation reserve program.
Many provisions in the current farm bill, the Federal Agriculture Improvement
and Reform (FAIR) Act of 1996, are set to expire in 2002. Without a new farm bill
by the end of 2002, many permanent commodity statutes incompatible with current
national economic objectives, global trading rules, and Federal budget or regulatory
policies would come back into effect. Other farm bill statutes without permanent
authority would expire after those dates, and their continuation would be uncertain.
The 107th Congress began a review of the 1996 farm law early in 2001. This early
review reflects a desire to deal with persisting farm price and income problems by
making changes to underlying farm policy, rather than relying on short term, ad hoc
emergency farm aid measures, which has been the practice for the past several years.
(For more detailed information on the upcoming farm bill and issues, see CRS Report
RL30947, Agriculture: Previewing the 2002 Farm Bill and the CRS Electronic
Briefing Book Agriculture Policy and the Farm Bill from the CRS Web site at
Farm Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What do you need to know about farm bills? . . . . . . . . . . . . . . . . . . . . . . .
Why have an omnibus farm bill? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why is the 107th Congress likely to approve a new Farm Bill? . . . . . . . . . .
What interest groups have a stake in the farm bill? . . . . . . . . . . . . . . . . . . .
Commodity Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
What commodities currently have support programs? . . . . . . . . . . . . . . . . . 4
How do the commodity and farm income support programs work? . . . . . . 4
How are commodity programs financed and how much do they cost? . . . . . 5
What about commodities that do not receive income or price support (e.g.,
meats, poultry, fruits, vegetables, horticulture, nuts, etc.)? . . . . . . . . . 6
Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
What are the links between farm programs and conservation programs? . . . 6
Agricultural Trade and Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
How important is agricultural trade to farmers and the U.S. economy? . . . . 7
What is the role of the government in promoting agricultural exports? . . . . 7
What programs and how much foreign food assistance does the United States
provide? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
How do U.S. World Trade Organization (WTO) commitments affect domestic
farm policy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
How do U.S. WTO commitments affect export programs and food aid? . . . 9
Domestic Food Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
How do domestic food programs affect the farm bill? . . . . . . . . . . . . . . . . . 9
Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
What is the relationship between rural development and agriculture policy?
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Farm Bill Issues, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interim Farm Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Countercyclical Farm Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production Flexibility Contract (or AMTA) Payments . . . . . . . . . . . . . . .
Marketing Loan Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price Supported Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-supported Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Green Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acreage Diversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment Limits and Income Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Commodity Program Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Farm Support and Agricultural Trade Agreements . . . . . . . . . . . . . . . . . .
Export Promotion and Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic Food Assistance and Welfare Reform . . . . . . . . . . . . . . . . . . . .
List of Figures
Figure 1. USDA Gross Outlays, FY1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Figure 2. Direct Government Payments to Farmers, 1980-2001 Forecast . 19
Figure 3. U.S. Agricultural Trade, FY1981-2001 Forecast . . . . . . . . . . . . . 24
List of Tables
Table 1. Titles and Subtitles of the 1996 Farm Bill (the Federal Agriculture
Improvement and Reform Act of 1996, P.L. 104-127) . . . . . . . . . . . . . . . 18
Table 2. CCC Net Expenditures by Commodity/Program, FY1996-2002 . . . . 20
Table 3. Direct Government Payments to Farmers, by State . . . . . . . . . . . . . . . 21
Table 4. USDA Funding for Conservation Activities, FY1990-2000 . . . . . . . . 23
Table 5. Agricultural Export and Food Aid Programs
Program Levels for Fiscal Years 1995 to 2000 . . . . . . . . . . . . . . . . . . . . . 25
Table 6. Federal Food and Nutrition Programs, FY1996 and FY2000 est. Funding
and Participation Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Table 7. Commodity Donations to Domestic Feeding Programs.
Dollar Value (in millions): Mandatory and Bonus Commodities
(excludes administrative funding and cash-in-lieu of commodities) . . . . . . 27
What Is A Farm Bill?
A farm bill is an omnibus legislative statute consisting of a collection of laws that
sets the overall direction of U.S. agriculture policy for a specified number of years.
It is directed toward providing a plentiful, safe and affordable supply of food and fiber
through programs and policies designed to:
! maintain a stable domestic farm economy and promote U.S. agriculture
products here and abroad;
! provide nutritious, safe, affordable food for consumers;
! Support the food needs of low-income Americans and those in underdeveloped
! conduct research and provide extension and inspection services related to plant
and animal production, protection, and disease prevention; and
! protect farmland and conserve natural resources and the environment.
What do you need to know about farm bills?
! Farm bills are about much more than farming and farmers. The 1990 farm bill
(P.L.101-624) had 25 titles and was about 750 pages long. The 1996 farm bill
(P.L.104-127) was less than half that size and contained 12 titles and some 300
pages. Nevertheless, both laws contained provisions covering commodity
programs, forestry, conservation, trade, research, domestic and foreign food
assistance, farm credit, crop insurance, rural development, and a miscellaneous
section. [See table 1 in Appendix.]
! Farm bill programs are complex, tightly intertwined, and interactive. Changes
to a program may have unintended or unavoidable consequences beyond those
affecting the program itself. For example, a change in dairy support or grain
policy has implications not only for dairy and grain farmers, cattlemen and feed
producers, but also for food manufacturers, retailers, consumers, and federal
domestic and international food assistance. Similarly, changes to farm
payments and credit have consequences for the economies of farm dependent
! The farm bill is not the only legislation that affects food and agriculture
The budget resolutions approved by the House and Senate that set
baseline and future spending levels for agriculture will influence farm
policy and funding decisions;
Trade legislation and tax relief proposals have implications for
agriculture and farmers;
Agricultural appropriations legislation again may reach into farm
policy-making, particularly if another multi-billion dollar farm aid
package is contained in this annual funding measure.
Legislation on trade agreements, including “fast track” authority
establishing expedited rules for considering legislation implementing
trade agreements, has implications for U.S. agriculture.
Proposals affecting the food stamp and commodity donation programs
normally are debated as part of farm bills, although they also have
been part of past welfare reform legislation.
Why have an omnibus farm bill?
! Omnibus farm bills provide an opportunity for the Congress and Executive
Branch to periodically review and redirect many federal policies and programs
affecting farmers, consumers, rural areas, and the food and fiber sectors.
[See Table 1, Titles and Subtitles of the 1996 Farm Bill at the end of this
! As the number of farmers and farm workers engaged in production agriculture
has declined, farm policymakers increasingly have sought support for farm
programs from a wider array of interested parties. This has added provisions
to farm bills that appeal to, among others, environmentalists, food and
consumer groups, researchers and educational institutions, manufacturers and
processors, trade organizations, financial institutions, and non-farm dependent
rural and urban constituencies.
! Urban and suburban constituencies have become increasingly sophisticated and
politically active in pursuing environmental, food safety and health concerns
linked to agricultural production and processing practices. This has put
pressure on farm legislators to expand federal farm policy beyond the farmgate.
Why is the 107th Congress likely to approve a new Farm Bill?
! A number of commodity support program provisions enacted in the 1996 farm
bill are scheduled to expire in 2002, and many of the authorities under these
provisions will either revert to earlier, permanent law, or terminate.
! Many permanent law provisions are incompatible with global trading rules,
federal budget or regulatory policy, and the current structure of agriculture and
the national economy. Some of these provisions are outdated and would be
nearly impossible to implement or finance.
! Unlike the high price and market expansion period when the last farm bill was
considered, the U.S. farm sector has suffered from generally weak markets for
the past several years. Farm prices are expected to remain low as supply
continues to outpace demand, and without further action by Congress farm
income is expected to fall well below the high levels created by emergency
farm aid laws passed in 1999 and 2000. Rather than continuing to rely on
short-term relief measures, many would prefer to make countercyclical income
support a permanent feature of farm policy.
What interest groups have a stake in the farm bill?
! Farmers and farm and commodity organizations. This would include the
two largest farmer organizations, the American Farm Bureau and the National
Farmers Union, as well as individual commodity producer groups (e.g., the
National Association of Wheat Growers, National Corn Growers Association,
National Cattlemen’s Association, National Milk Producers Federation, the
Rice Federation, etc.).
! Industry. This would include input suppliers (farm machinery, fertilizers,
pesticides, etc.); manufacturers and processors (millers, crushers, and packers);
the financial sector (banks, lending institutions, insurers, etc.); and the
marketing sector (warehouse operators, freight carriers, exporters and
importers), and the retail food industry.
! Foreign Markets. This would include foreign buyers, consumers, companies,
competitors, trade groups, and foreign food aid recipients.
! Domestic consumers. This would apply to consumers of agricultural goods
and their by-products, consumer, public health and nutrition organizations,
and domestic food program recipients (e.g., those receiving food stamps,
school meals, WIC food packages and other commodity assistance) and their
! Environmentalists. This would include organizations representing
environmental and conservation concerns with an agricultural perspective
(such as the Soil and Water Conservation Society and American Farmland
Trust), as well as broader environmental interest groups (such as the Sierra
Club and Environmental Working Group).
! Scientists, Researchers, and Educators. This includes many universities and
land grant colleges, private and public researchers, scientists, and others
working on new and improved products and their application, and public
What commodities currently have support programs?
! Many commodities produced in America receive some form of federal support,
but this support varies substantially by type and amount. Some commodities
(e.g., food and feed grains, cotton, oilseeds, rice, peanuts, sugar and dairy
products) receive direct payments or price support that is mandated by law.
Other commodities (e.g., beef, poultry, fruits and vegetables) typically receive
no direct payments or price support but may get assistance if there are disasters
or special circumstances warranting government support (e.g. disaster relief,
“market loss payments,” or surplus removal to shore up prices).
! In 2000, the value of farm products totaled an estimated $196 billion; just over
49% from crops and 51% from livestock. About 30% of crop sales were from
fruits, vegetables and tree nuts. The remaining 70% of crops – food grains
and feed crops, oilseeds, tobacco, cotton and field crops, receive federal
income and price support. About 20% of livestock production (primarily milk)
receives federal support.
! The crops that have mandatory support are: feed grains (corn, sorghum,
barley, oats), food grains (wheat, rice), oilseeds (soybeans, sunflower seed,
safflower seed, rapeseed, canola, flaxseed, mustard seed), peanuts, sugar,
cotton, and tobacco. The livestock commodities that have mandatory support
are: dairy products, honey, wool, and mohair.
! The Secretary of Agriculture has discretionary authority to support the prices
of all other commodities. This authority has been used cautiously and
How do the commodity and farm income support programs work?
! Production flexibility contract payments (or AMTA payments1): Contract
payments support farm income but do not support commodity market prices.
Producers of wheat, feed grains, cotton and rice receive fixed annual payments,
declining in amount each year after 1996 through 2002. Eligible farmers are
free to produce any mix of crops (except fruits and vegetables). Each farm's
level of contract payments is based on historical cropping and yields prior to
1996.There is a limitation of $40,000 per person per year on contract
! Marketing assistance loans and loan deficiency payments (LDPs):
Marketing assistance loans and loan deficiency payments support the income
of farmers producing a commodity but do not directly support the market
price. For wheat, feed grains, cotton, rice, and oilseeds, farmers are allowed
Sometimes called AMTA payments because of the title of the farm bill they fall under - Title
I, the Agricultural Market Transition Act (AMTA). This title covers farm commodity
to repay nonrecourse commodity loans at market prices when prices are below
loan rates, or they may receive loan deficiency payments (LDPs) in lieu of
obtaining and repaying loans when prices are below the loan rate. Marketing
loan provisions help the federal government avoid acquiring, storing, and
disposing of commodities due to loan forfeitures. There is a limitation of
$75,000 per person per year on marketing loan gains for a farm. (This
limitation permits each person to receive payments for up to two additional
farms at up to half the limit ($37,500) for each, and was doubled for 1999 and
2000 when low prices drove payments for some farmers above the limit.)
! Nonrecourse price support loans: The law requires that price support loans
be made available at specific rates for sugar, peanuts, and tobacco. The
harvested and stored commodities serve as collateral for the loans. If a farmer
does not repay the commodity loans by the maturity date, the government
takes title to the commodity as full payment of the loan and interest charges.
In effect, the nonrecourse loan rate becomes the price guarantee for farmers
and serves to support market prices because buyers must pay more than the
loan rate to obtain the commodity.
! Government purchases and disposal of surplus commodities: Some
commodity prices are supported by means of government purchases that
reduce supply by storing stocks or channeling them into noncommercial
outlets. The government disposes of its acquisitions through domestic and
foreign food assistance programs, or through market sales when prices
strengthen. Federal commodity purchases typically are done at the discretion
of the Secretary of Agriculture when a determination of need is made.
! Emergency farm payments: Congress sometimes mandates emergency or ad
hoc direct income support payments for specific commodities when market
prices drop so low that established support programs are deemed inadequate.
How are commodity programs financed and how much do they cost?
! The Commodity Credit Corporation (CCC) is a wholly-owned government
corporation chartered in 1933 to stabilize, support and protect farm income
and prices. It is the financing institution for USDA’s price and income support
programs and export subsidies, and more recently for certain conservation
programs (including the Conservation Reserve Program).
! Commodity program operations are financed through the CCC, which borrows
money from the Treasury. CCC repays the Treasury from program revenues
and congressional appropriations. [See Table 3 in the Appendix]
! Commodity programs are entitlements. Expenditures are based upon program
rules and commodity market conditions. Eligible farmers are guaranteed
legislatively-specified support based on these rules and conditions. [See Figure
2 in the Appendix]
! CCC annual net expenditures averaged about $3 billion during most of the
1970's, with modest variation. During the 1980s, spending variation was
large. Net expenditures reached a high of $25.8 billion in FY1986 and then
declined. From FY1990 through FY1998, CCC net expenditures averaged
about $6.1 billion annually.
! In 1997-1998, market prices for major commodities dropped and have
remained low, encouraging Congress to adopt several emergency income
support and disaster loss measures that boosted CCC spending to record
levels. CCC net expenditures totaled $32.3 billion for FY2000 and averaged
$24 billion over the three years from FY1998 through FY2000. [See Tables
2 and 3 in the Appendix]
What about commodities that do not receive income or price support
(e.g., meats, poultry, fruits, vegetables, horticulture, nuts, etc.)?
! Although producers of beef, pork, poultry, fruits, vegetables, nuts and nursery
crops, etc., typically do not receive direct payments, the federal government
supports activities that promote their production and marketing. Such support
(also provided to most program commodities) includes: food inspection service
to help ensure the safety of products, extension service field tests and other
activities to help farmers improve quality and increase quantity; check-off and
other market promotion programs; and disaster assistance to help growers
affected by severe weather or natural disasters.
! Moreover, the government engages in programs that support agricultural
producers through the use of public land for grazing, water programs in dry
regions, natural resource and conservation, rural development (e.g., utilities,
housing, grants, etc.), and agricultural research and education.
What are the links between farm programs and conservation programs?
! Laws creating conservation programs were first enacted in the late 1930's in
response to drought and the dust bowl conditions. Programs enacted after
World War II focused on enhancing farm production by providing water to
agriculture through small watershed and flood reduction projects. Pressure for
a greater federal role in conservation heightened in the 1970's as evidence of
unacceptably high erosion was occurring in the wake of dramatically expanded
production for international markets.
! More recent farm bills have expanded conservation initiatives beyond erosion
to include other environmental concerns, notably water pollution and quality,
and wetlands and wildlife habitat loss, among other things.
! The 1996 farm law emphasized the importance of conservation policy by
funding more than half of all conservation activities directly through the
Commodity Credit Corporation, rather than by annual discretionary
appropriations. Other program changes expanded environmental conditions for
enrolling land in the CRP and conservation programs and activities (e.g., costsharing, wildlife, air quality, farmland protection, animal waste management).
! Farmers are required to adhere to conservation program requirements if they
want to receive payments under most farm programs (known as conservation
compliance). Moreover, farmers removing environmentally sensitive crop land
from production under the conservation reserve program or wetlands reserve
program, receive federal payments.
! Conservation spending under various federal agricultural statutes has become
an increasingly important source of income to farmers, as well as a significant
resource for conserving land and protecting the environment. Annual funding
for it has grown from $1.6 billion to $3.6 billion over the past 15 years. [See
Table 4 in the Appendix]
Agricultural Trade and Food Aid
How important is agricultural trade to farmers and the U.S. economy?
! In FY 2000 farm exports amounted to $50.9 billion, imports were $38.9
billion, and the trade balance was a positive $12 billion. A positive agricultural
trade balance helps reduce the overall U.S. trade deficit [See figure 3 in the
! Exports of higher valued commodities and processed products exceed those
of bulk commodities. In FY 2000, 63 % of all agricultural exports were
higher value items.
! Agricultural exports are important both to farmers and to the U.S. economy.
Exports account for about 25% of gross farm receipts. Production from over
a third of harvested acreage is exported. This includes an estimated 32% of
wheat, 42% of rice, 33% of soybeans, 16% of corn, and 26% of cotton.
According to the USDA, each $1.00 of agricultural exports stimulates another
$1.30 in supporting activities. Agricultural exports generate an estimated
808,000 full-time civilian jobs, including 488,000 in the non-farm sector.
What is the role of the government in promoting agricultural exports?
! USDA operates four kinds of agricultural export and food aid programs that
are authorized in the farm bill: export subsidies, market development
programs, export credit guarantees, and foreign food aid.[See Table 5 in the
Appendix] These include:
Export subsidies. The Export Enhancement Program (EEP) largely has
been used to subsidize wheat exports, while the Dairy Export Incentive
Program (DEIP) subsidizes dairy products. EEP has been little used since
1995, while DEIP spending has been at the maximum allowed under U.S.
international commitments in the World Trade Organization (WTO) to curb
the use of export subsidies.
Foreign market development. Through matching funds, USDA uses the
Market Access Program (MAP) to help private firms and organizations and
the Foreign Market Development or “Cooperator” Program (FMDP) to
help commodity and producer organizations penetrate new markets;
Export credit guarantees. The CCC provides credit guarantees to private
lenders who finance purchases by foreign customers. Short- and
intermediate-term guarantees help reduce lender risks and thereby facilitate
the use of credit.
Foreign food aid programs. Various statutory authorities make
commodities available to mainly low-income countries in need of
food. These include the P.L. 480 programs (titles II and III), and
Section 416(b) of the Agricultural Act of 1949.
What programs and how much foreign food assistance does the United
! U.S. foreign food assistance is provided through the P.L. 480 programs (titles
I, II and III), Section 416(b) of the Agricultural Act of 1949, and the Food for
Progress program. Federal funding for these programs was just over $1.84
billion in FY2000. [See Table 5. Agricultural Export and Food Aid Programs
in the back of this report.]
! Title I of P.L. 480 provides long term, low interest loans to developing
countries to purchase U.S. agricultural commodities. Administered by the
USDA, its purpose is to promote export market development.
! Title II of P.L. 480 provides for commodity donations for humanitarian
purposes or for development programs. It is administered by the U.S. Agency
for International Development (AID) and implemented mainly by private
voluntary organizations, cooperatives, and international organizations like the
World Food Program (WFP) of the United Nations.
! Title III provides for the use of donated commodities (or the use of local
currencies from the sale of donated commodities) in development projects; it
is also administered by AID.
! Section 416(b) of the Agricultural Marketing Act of 1949 provides for
commodity donations from surpluses held by the CCC. It is administered by
! Food for Progress (FFP). Provides food aid to encourage the development
of private enterprise in recipient countries. FFP is administered by USDA.
! U.S. flag vessels, under cargo preference laws, must be used to ship at least
75 % of food aid commodities, thus strengthening the U.S. maritime industry.
How do U.S. World Trade Organization (WTO) commitments affect
domestic farm policy?
! Farm policy proposals considered for the next farm bill will be evaluated, in
part, on their conformance to WTO rules, and possibly, on their accordance
with the U.S. negotiating position in the second round of the WTO Uruguay
Round trade negotiations
! The U.S. is committed to spend no more than $19.1 billion per year (the socalled aggregate measure of support, or AMS) on domestic farm support that
is “trade-distorting,” which is defined in detailed rules and procedures.
! Market-distorting policies (so-called “amber box”) are those that are judged
as most likely to distort production and trade and include, among other things,
price support programs (e.g. dairy, peanuts, and sugar) and marketing loan
program benefits and deficiency payments.
! “Blue-box” programs do not count in determining the AMS. These include
production limiting programs providing a direct payment based on fixed areas
or yields, or made on 85% or less of base level production. The 1996 farm law
ended these kinds of farm support (e.g. target price deficiency payments and
acreage set asides).
! “Green Box” policies are not counted toward the spending cap and cover
policies judged to be the least market distorting: AMTA payments, disaster
payments, CRP payments, farm credit , agricultural research, and food safety
and inspection, for example.
How do U.S. WTO commitments affect export programs and food aid?
! The U.S. has made commitments to cut the quantities of subsidized exports
and budgetary outlays for export subsidies.
! Export subsidies, like EEP and DEIP, are subject to reduction commitments.
! Spending on food aid and market development are not subject to WTO
Domestic Food Programs
How do domestic food programs affect the farm bill?
! The federal government is expected to spend some $34.5 billion on domestic
food programs in FY2001. The largest of these, the food stamp program, is
funded at $18.2 billion. Together with the Puerto Rico Block grant ($1.3
billion) and several commodity donation programs, the food stamp program
has been part of farm bills for many years.2 [See Tables 6 and 7.]
! Food stamps increase food purchasing and consumption, thus increasing retail
food sales and demand for farm products, and reducing the incidence of poor
nutrition among low income populations. The program also helps poor families
maximize their limited resources by freeing up a portion of their income for
other necessities, such as housing.
! Commodity donation programs offer a non-commercial outlet to dispose of
foods purchased by the USDA for farm income support and surplus removal
! The inclusion of food programs broadens the base of congressional support for
omnibus farm legislation to include urban and non-farm rural constituencies.
Food stamp programs operate in every county and city in the in the United
States and served an average of 17.2 million low income persons in FY2000.
There are 2.1 million farms (and some 4.7 million farm residents) in the U.S.
and farming constitutes 10% or more of the economy of only 50 congressional
districts, according to the USDA.
! Farm support programs can raise food prices and have a substantial impact on
low-income consumers who spend a much higher proportion of their income
on food than other consumers. Federal domestic food programs are affected
when higher food prices reduce food stamp purchasing power, raise the cost
of WIC food packages, and increase the cost of federally subsidized meals and
milk served through child nutrition programs.
What is the relationship between rural development and agriculture
! Farm policy has long been associated with rural development policy, although
less so in recent years as fewer rural areas depend on agricultural production.
In farm-dependent areas, farm support policies directly impact the well-being
of farmers and their communities, which benefit from higher land values and
financial stability brought by farm support programs. Changes that affect farm
payments, credit, and land values have implications beyond the farm gate to
local farm supply companies, banks, retail outlets, schools, and so on.
Other domestic food programs, such as child nutrition programs, and the special
supplemental nutrition program for women, infants and children (WIC), normally are not part
of farm bills, although commodity donations for them, or special programs, like the farmers
market nutrition program under WIC, have been legislated from time to time as part of farm
! The declining role of production agriculture in rural economies has led some
to question how much farm payments benefit rural communities, and whether
this type of large-scale farm assistance may divert attention from other
activities that might better meet rural America’s needs (in other words,
alternative industry development, financing systems, and infrastructure
! The USDA is one of several federal agencies engaged in rural development
activities, and operates rural development programs (notably through the Rural
Utility Service, Rural Housing Service, and the Rural Business Cooperative
Service). It is designated as the lead federal agency for coordinating and
providing assistance to rural areas. Other federal agencies involved include the
Departments of Commerce, Housing and Urban Development, Transportation,
and the Environmental Protection Agency.
Selected Farm Bill Issues, 2001
Although the current farm bill provisions do not expire until the end of 2002,
there is pressure to make changes to commodity program policy before that time to
address the general weakness in agricultural markets and its implications for U.S. farm
income. Current (May 2001) USDA projections show that farm prices are generally
up from 2000. However, the USDA also projects that under current policy, and
assuming no supplemental income payments or unexpected major global shortfall in
production, net cash farm income in 2001 will be the lowest since 1994, and about $4
billion below the average of the 1990's.
Thus, current circumstances are quite different from 1994 and 1995 when the
current farm bill was written. At that time prices for most commodities were reaching
record highs, largely because of tight supplies and growing export demand. To many
the time seemed propitious for a new approach to federal farm policy. Party control
of the Congress had changed; the Congress was given responsibility for writing a farm
bill (with guidance but no proposal from the Administration); there was pressure to
reduce the federal budget deficit and control agriculture spending; and trade
agreements were promoting more open markets and less market-distorting farm
Title I of the 1996 law, the Agricultural Market Transition Act, offered an
approach that seemed to address the changing times and conditions. In lieu of target
price support and acreage set asides, it offered eligible farmers annual lump sum
payments, declining in amount each year and based on previous production history.
Farmers were given virtually full planting flexibility, a key difference from earlier price
support programs that required planting specific crops to qualify for payments that
were tied to market prices and often required taking acreage out of production. For
the first two years after the farm bill, qualifying farmers received AMTA payments
while also getting premium prices for their commodities, and there were few
complaints. However, by 1998, prices for many major commodities had begun to fall,
and in combination with natural disasters, farm income was declining. This happened
for a number of reasons. Unusually good worldwide growing conditions had increased
world supplies; demand slowed in the face of financial crises in two key markets for
U.S. agricultural goods - Asia and Latin America; and the high value of the U.S.
dollar relative to other currencies made U.S. products less competitive.
In 1999 and 2000, the Congress approved 5 emergency farm aid laws that added
$29.6 billion to federal FY1999-2001 funding for agriculture. Although early signs of
moderate recovery are indicated, USDA economists predict that the next few years
are unlikely to see a strong rebound in farm prices and market income for major crops
unless global crop output drops significantly. Farm cash receipts are expected to rise
by roughly $4 billion between 2000 and 2001, but net cash income for farmers is
projected to fall by some $5.7 billion, unless the Congress steps in to provide further
The following identifies some of the issues that are being discussed as the
Congress prepares for the next farm bill. For more detailed information, see CRS
Electronic Briefing Book, Agriculture Policy and the Farm Bill, and CRS Report
RL30847, Agriculture: Previewing the 2002 Farm Bill.
Interim Farm Assistance
For the past several years, the Congress has approved multi-billion dollar ad hoc
farm spending bills to help offset low commodity prices and declining farm income.
Over $14.2 billion in additional agriculture spending was approved for FY2000 alone,
bringing total direct farm payments (including CRP) for that fiscal year to a record
$25.9 billion. Only about half that amount is projected to be available for FY2001,
unless Congress acts to increase spending. Most farm groups have recommended that
Congress continue ad hoc payments until more permanent countercyclical assistance
can be legislated, and advocate FY2001 payments close to the total FY2000 level of
support ($9-12 billion). Although short-term “ countercyclical” payments have been
popular among farm groups, the uncertainty over whether they would be available in
coming years is a concern. Most farm policymakers agree that ad hoc payments at
such high levels are unlikely to be achievable every year.
Countercyclical Farm Assistance
Most of the major commodity groups and farm organizations agree on the need
to adjust farm policy to incorporate additional, automatic income or commodity
support when farm prices fall. Not everyone agrees on how much support should be
provided, who should receive it, and how it should be distributed. The federal cost of
such assistance and WTO disciplines limiting certain kinds of support (e.g., price or
income support) are important factors in this discussion. Most proposals advocate
countercyclical payments when prices or farm receipts are below a specified threshold.
Proposals vary as to whether payments should be tied to revenue or crop price; should
be crop specific, or based on the “whole farm” production; and whether the measures
should be calculated against national or state bases. Most proposals also advocate
countercyclical income assistance to supplement AMTA payments (see below). The
National Farmers Union would allow farmers to discontinue AMTA payments and
instead receive countercyclical income assistance through a new marketing loan
assistance program (see below) that ties payments to set loan rates and costs of
Production Flexibility Contract (or AMTA) Payments
Most, although not all, farmer organizations and program commodity groups
advocate the continuation of “contract” or AMTA payments. Many also recommend
that the total amount provided for these payments be increased (for example, to the
1999 level of $5.56 billion) and be guaranteed (i.e., not decline annually as past
AMTA payments did). There also are proposals to add soybeans and minor oilseeds
to the commodities eligible for AMTA payments, with the caveat that overall AMTA
funding be increased commensurately to avoid reductions in payments to other crop
producers. Thus far, only the National Farmers Union advocates ending AMTA
payments, and replacing them with loan deficiency payments and supply management
program (see below).
Marketing Loan Assistance
Nearly all of the commodity groups recommend that loan rates be raised. This
would result in higher marketing loan gains for farmers and larger federal
expenditures. Several groups suggest an inequity in the previous law because soybean
rates were set so much higher than other program commodities, albeit because
soybeans were not eligible for AMTA payments. Some propose the elimination of the
cap on rates and removal of Secretarial discretion to set loan rates. Some also call for
setting the loan rates at a specified percentage of a multi-year average; others establish
specific rates, and call for a floor in marketing loan rates for all commodities (not just
cotton, soybeans, and rice). There also have been discussions about adding other
commodities to those eligible for marketing loan assistance (e.g., fruits and
vegetables, dairy, etc.). Most of the marketing loan proposals would provide separate
countercyclical income assistance, although some advocate replacing the marketing
loan assistance program with a new counter-cyclical support program.
Price Supported Commodities
Programs using price support and/or production controls (e.g. milk, sugar,
peanuts, and tobacco) continue to be criticized by some who object to paying higher
prices than might otherwise be the case, and by those worried about the extent to
which these programs distort markets and risk U.S. non-conformance with trade
commitments. An issue for the Congress is whether to maintain the price support
programs more or less as they are, or develop alternative support systems that are less
market distorting. None of the commodity groups have suggested alternatives and
most appear to support maintaining or expanding the existing support systems.
Traditionally, commodity groups (such as those representing livestock products,
fruits, and vegetables) that do not receive price or income support have resisted, or
at least not pushed for programs establishing this type of support for their producers.
This is largely because many of these producers were reluctant to tie themselves to
the federal conditions (e.g., acreage set asides, planting restrictions, etc) that in the
past accompanied such federal support programs. However, as these producers deal
with persistent low prices and increasing environmental regulations, the benefits of
decoupled AMTA payments and counter-cyclical income relief may have growing
appeal to some, although not to all. For example, the National Cattleman’s Beef
Association is on record as opposing any form of income or price support for beef.
Other groups, such as pork producers, who received “market loss payments” under
one of the emergency farm aid packages passed in the last Congress, have not taken
formal positions on federal support. 3
As the farm economy copes with oversupply and persistent low prices, interest
is growing in resource and conservation options that might enhance farm income,
reduce production, protect farm land, and help farmers with the costs of meeting
environmental protection requirements. Among the proposals often discussed are the
expansion of acreage under the Conservation Reserve Program (CRP), and broader,
so-called “Green payments” that would reimburse farmers for practices that enhance
land, water and air quality, and protect wildlife.
The 1996 farm law eliminated annual cropland acreage set-asides. These had
been used to reduce production and lessen or prevent price-depressing surpluses. Setasides also often were used in the 1980's and early 1990's to control or reduce federal
commodity program spending (by reducing the amount of acreage farmers could
receive farm payments for). Proponents of this form of supply control contend that
it prevents overproduction. Those opposed note that in a global market, acreage
diversion is ineffective because it encourages offsetting increases in foreign
production, and risks loss of markets. Nearly all farm groups oppose acreage setasides. An exception is the National Farmers Union, which advocates voluntary
acreage set-asides for crops and higher loan rates offered to farmers that participate.
The NFU also supports an increase in acreage allowed to be enrolled in the CRP.
Proponents of a government owned and/or farmer-owned commodity reserve
contend that this would keep low price commodities out of the market until prices
improve. This, it is asserted, would give farmers an incentive to store their crops until
prices are higher. Opposition to reserves comes from those who believe that the
availability of large amounts of a commodity in a reserve will have the opposite effect;
that prices will stay low as long as there is a reserve supply overhanging the market.
Except for the NFU, most farm and commodity groups oppose such reserves. The
NFU recommends the creation of a government-owned commodity reserve and a
farmer-owned-reserve that pays farmers for stocks held.
Pressure from trade agreements and negotiations to further reduce or eliminate price
supports and production controls (e.g. for dairy, peanuts, etc.) also may generate interest
among these groups in AMTA-like payments or countercyclical income support.
Payment Limits and Income Testing
Because the largest proportion of federal farm payments goes to big farms, there
are frequent calls for some form of income testing or limits on the amount of federal
aid a farmer can receive. The 1996 farm law did not employ an income test, but it did
set annual limits on AMTA payments to individual farmers ($40,000) and on
marketing loan assistance ($75,000).4 Those in favor of payment limits contend that
rich and successful farms do not need federal support, or at least do not need as much
assistance as smaller farms. Opponents suggest that payment limits (and income tests)
are punitive to those farmers who work hard and are efficient producers. Nearly all
of the farmer and commodity groups oppose payment limitations and income targeting
Other Commodity Program Issues
Underlying the 1996 farm bill was the idea of ending many federal commodity
programs so that market forces (rather than federal policies) would direct farmers in
their planting and other decisions. Thus, that law provided gradually declining AMTA
payments (ending after 2002); a termination date for the dairy price support program;
and the immediate end of the honey program (the wool and mohair program had been
terminated in 1995). Resistance to the idea of terminating all farm assistance after the
1996 farm bill provisions expired, however, left in place most of the commodity
program provisions in permanent law. Moreover, subsequent laws passed in response
to price and income losses supplemented AMTA payments; twice extended the dairy
price support program; and restored federal support for honey, wool, and mohair.
Among the questions likely to be raised about overall farm policy are:
! If commodity programs were eliminated or substantially pared back, what
would happen to: commodity prices and food production; export volume and
value; and the financial condition of farmers and lenders and rural, farmdependent communities?
! To what extent do commodity programs benefit rural America? Do farm
programs help the rural economy, or do they hide the need for different forms
of assistance that would benefit more rural communities and offer more
sustainable, long-term economic growth for rural America?
! To what extent might decreased commodity program participation lessen
farmer efforts to conserve and protect soil, water, and wildlife?
! How can the dilemma be resolved between a) the use of cropland diversion,
such as the Conservation Reserve Program, to reduce production and boost
market prices, and b) the adverse impact such diversion has on domestic
business and jobs as well as U.S. global competitiveness?
The so-called “three-entity rule” allows farmers to receive payments of up to one-half of the
amount allowed for the first farm for each. The Congress doubled the payment limit in 2000
when it became clear that low prices could push payments higher than the maximum allowable
payment for many farmers.
! Should the federal government control production, and if so, how can this be
done without influencing farmers planting decisions, and sending signals to
! To what extent might federally subsidized crop or revenue insurance be used
as a counter-cyclical income vehicle for farmers, and should these vehicles be
expanded to cover more commodities?
! Do farm policies encourage structural changes in agricultural production and
marketing that lead to greater consolidation and concentration? If so, is this
desirable, and should it be examined when developing policy alternatives?
Farm Support and Agricultural Trade Agreements
Rules agreed to by the United States as a member of the World Trade
Organization place restrictions on the types and amounts of government support for
agriculture. The rules are complex, but in essence, they discourage market-distorting
practices (such as price supports and export subsidies) and permit non-distorting
practices (such as decoupled farm income support like AMTA, and environmental
support). These rules and U.S. proposals in the on-going WTO agriculture
negotiations are expected to influence policy makers as they seek ways to help
support the stagnant U.S. farm economy and rewrite farm bill provisions without
endangering trade commitments.
Export Promotion and Food Aid
U.S. export promotion programs seek to improve overseas markets for U.S.
goods. They have been criticized in the U.S. by those who refer to them as “corporate
welfare,” and by overseas competitors who claim they are market-distorting and at
odds with the U.S. position that the EU and other member countries should
dramatically reduce their export subsidies. U.S. proponents of these programs
contend that they are used minimally (especially compared to other countries) and are
among the few vehicles the U.S. has to counteract foreign subsidies. Questions raised
about U.S. programs include:
! Should export promotion subsidy programs be more generously funded and
aggressively applied as a strategy to encourage competitors to negotiate
worldwide reductions in trade distorting export subsidy programs?
! Conversely, should funding for export subsidies subject to reduction
commitments be shifted to food aid (e.g. a world school lunch program) and
market development, neither of which are subject to limits?
! Should export promotion be shifted away from subsidizing bulk commodities
in slow growth markets toward higher valued products in faster growing
! Does cargo preference for U.S.-registered shipping vessels impede or reduce
the value of P. L. 480 food donations or concessional sales to poor countries?
Domestic Food Assistance and Welfare Reform
Food stamp and commodity donation program provisions traditionally are part
of farm bills, and were included in the 1996 farm law. However, major food stamp
program changes and funding authorization through FY2002 also were part of welfare
reform legislation enacted in 1996.5 The House and Senate Agriculture Committees
generally prefer to legislate on the food stamp and related programs as part of farm
bills. The crush of legislative work surrounding commodity programs, however, may
delay consideration of food stamp program provisions in this year’s farm legislation
until next year, when the Congress also will be taking up reauthorization of the
welfare reform law (P.L.104-193). Among the substantive issues expected to be part
of the next food stamp debate are proposals to restore eligibility for some legal aliens
made ineligible under the food stamp amendments in the 1996 welfare reform law.
There also may be some discussion about whether the food stamp provisions of the
1996 welfare reform law should be part of the welfare reform reauthorization or the
farm bill reauthorization.
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L.104193). A proposal to fold funding for the food stamp program into a block grant that states
could use as part of their welfare systems was strongly resisted by the House and Senate
Agriculture Committees in the 104th Congress, and the food stamp program was not block
granted or “cashed-out,” although revisions were made to the program, among other things,
to give states flexibility to conform this program with other welfare programs.
Table 1. Titles and Subtitles of the 1996 Farm Bill (the Federal
Agriculture Improvement and Reform Act of 1996, P.L. 104-127)
Agricultural Market Transition
A. Short Title, Purpose, and
B. Production Flexibility
C. Nonrecourse Marketing
Assistance Loans and Loan
D. Other Commodities
F. Permanent Price Support
G. Commission on 21st Century
H. Miscellaneous Commodity
II. Agricultural Trade
A. Amendments to Agricultural
Trade Development and
Assistance Act of 1954 and
B. Amendments to Agricultural
Trade Act of 1978
C. Miscellaneous Agricultural
B. Highly Erodible Land
C. Wetland Conservation
D. Environmental Conservation
Acreage Reserve Program
E. Conservation Funding and
F. National Natural Resources
H. Miscellaneous conservation
IV. Nutrition Assistance
V. Agricultural Promotion
A. Commodity Promotion and
B. Issuance of Orders for
Promotion, Research, and
C. Canola and Rapeseed
A. Farm Ownership Loans
B. Operating Loans
C. Emergency Loans
D. Administrative Provisions
E. General Provisions
VII. Rural Credit
A. Amendments to the Food,
and trade Act of 1990
B. Amendments to the
Consolidated Farm and
Rural Development Act
C. Amendments to the Rural
Electrification Act of 1936
D. Miscellaneous Rural
Research, Extension, and
A. Modification and Extension
of Activities Under 1977
B. Modification and Extension
of Activities Under 1990
C. Repeal of Certain Activities
D. Miscellaneous Research
E. Research Authority After
Fiscal Year 1997
A. Commercial Transportation
of Equine for Slaughter
B. General Provisions
Figure 1. USDA Gross Outlays, FY1999
Figure 2. Direct Government Payments to Farmers, 1980-2001
Table 2. CCC Net Expenditures by Commodity/Program,
Corn and Oat Products
Wheat and Products
AMTA Crops Support
Wool & Mohair
All Commodities Support
Conservation Reserve Program
Other Conservation Programs
All Conservation Programs
Data are from the USDA, Farm Service Agency, January 16, 2001.
FY00 FY01Est FY02Est
Table 3. Direct Government Payments to Farmers, by State
Calendar years 1998-1999 (dollars in millions)
($ in millions)
($ in millions)
# of Farms a/
($ in millions)
($ in millions)
# of farms a/
a/ A farm is defined as a unit from which $1,000 or more worth of commodities were produced and sold.
Top 10 states in number of farms and top ten states receiving direct farm payments are italicized
SOURCES: 1997 Census of Agriculture and Table, Value of total direct government payments, by State,
1990-99, ERS, USDA.(2000 state data not available as of 3/19/01) Data on number of farms are from
Table 4. USDA Funding for Conservation Activities, FY1990-2000
(actual dollars in millions)
a/ Activities of the 4 USDA agencies engaged in supporting conservation: the Natural Resources
Conservation Service (NRCS), Farm Service Agency (FSA), Forest Service, and Extension Service.
b/ Funds passed through the NRCS to the FSA to producers to help them install conservation practices.
c/ 90% of these payments go to farmers through the Conservation Reserve Program.
SOURCE: USDA, Office of Budget and Program Analysis.
Figure 3. U.S. Agricultural Trade, FY1981-2001 Forecast
Source: USDA, Economic Research Service
Table 5. Agricultural Export and Food Aid Programs
Program Levels for Fiscal Years 1995 to 2000
(in millions of dollars)
Dairy Export Incentive
Market Access Program
CCC Export Credit
P.L. 480 Food Aid
Food for Progress
Includes funding of $28 million annually for the Foreign Market Development
Note: Program level is the value of goods and services provided, not the amount
appropriated through appropriations legislation.
Source: USDA, Annual Budget Summaries and Outlook for U.S. Agricultural Exports,
Table 6. Federal Food and Nutrition Programs, FY1996 and FY2000
est. Funding and Participation Estimates
(amounts in millions unless otherwise noted)
FY 2000 est.
Child Nutrition a
Elderly Nutrition c
a/ Includes school lunch, school breakfast, child and adult care food, summer food, special milk,
commodity procurement, state administrative expenses, and funding for discretionary programs (e.g.
team nutrition). Amounts include the value of “bonus” and “entitlement” commodities. Participation
estimates count average daily school lunch participants. child care food participants, and average
monthly summer food program participants. School breakfast participants (7.6 million) are not
counted because they are assumed to also be school lunch participants.
b/ Includes the cash grants and commodities for the emergency food assistance program (EFAP) and
for the food distribution program on Indian reservations (FDPIR). Also includes bonus commodities
for charitable institutions, summer camps and disaster feeding.
c/ Figures include $470 million provided for Older Americans Act nutrition programs under the
appropriation for the Department of Health and Human Services.
d/ Average daily meals, FY1999.
e/ Figures are not added because individuals may receive benefits from more than one program
NOTE: Food Stamp Program and Commodity Donation programs (e.g., FDPIR, EFAP, CSFP)
normally are authorized under farm bills. Child nutrition programs (School lunch, breakfast, etc.)
and WIC , authorized under the National School Lunch Act and the Child Nutrition Act of 1966,
normally are NOT part of farm bills.
NA = Not available; NR= Not relevant.
SOURCE: USDA Budget Explanatory Notes for FY2001 and FY1998; program information report
(Key data), USDA, FNS, December 2000, except as otherwise noted.
Table 7. Commodity Donations to Domestic Feeding Programs.
Dollar Value (in millions): Mandatory and Bonus Commodities
(excludes administrative funding and cash-in-lieu of commodities)
Child Nutrition: Total1
Section 32 (AMS) purchases
Bonus Commodities (Sec. 32 & Sec.416)
Commodity Supplemental Food Program
Food Distribution on Indian Reservations
Food Donations (selected groups: Pacific
Islands, disaster assistance, nuclear affected
Emergency Food Assistance Program (TEFAP)
Bonus to other outlets (Charitable Institutions,
Summer camps, Disaster feeding)
Total Commodity Donation Value
1/ FNS commodities are purchased with funds appropriated for child nutrition
programs and Section 32 commodities are purchased for child nutrition programs
using agricultural surplus removal funds. In both cases, the commodities are
bought to meet the legislatively mandated level of commodity support required
under the National School Lunch Act and the Child Nutrition Act of 1966. Bonus
commodities are bought specifically for surplus removal reasons (Section 32 of the
Act of August 24, 1935), or are acquired as part of commodity price support
programs and disposed of under Section 416, Agricultural Adjustment Act of
1949. They are available to all domestic feeding programs.
Source: USDA Budget explanatory notes, FY 2001 Budget.