The 2002 Farm Bill: Overview and Status

The 2002 Farm Bill: Overview and Status

Order Code RL31195
Report for Congress
Received through the CRS Web
The 2002 Farm Bill:
Overview and Status
Updated September 3, 2002
name redacted and name redacted, Coordinators
Specialists in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

The 2002 Farm Bill: Overview and Status
Summary
Federal farm support, nutrition, agricultural trade and food aid, conservation,
credit, marketing, rural development, agricultural research, and related policies are
governed by a variety of separate laws. Although these laws may be considered and
amended as free-standing legislation, many of them are evaluated periodically,
revised, and renewed through an omnibus, multi-year farm bill.

On May 2, 2002, the House voted, 280 to 141, to approve the conference report
on a new, 6-year omnibus farm bill (H.R. 2646; H.Rept. 107-424). The Senate
approved the conference report on May 8, and the President signed the bill, the Farm
Security and Rural Investment Act (FSRIA) of 2002, into law (P.L. 107-171) on May
13, 2002. The new law generally supersedes the previous omnibus farm bill, the
Federal Agriculture Improvement and Reform (FAIR) Act of 1996 (P.L. 104-127),
much of it due to expire in 2002.
FSRIA 2002 continues marketing loans and fixed payments, and creates new
counter-cyclical assistance tied to target prices (similar in some ways to a guaranteed
per-bushel pricing system eliminated in 1996) for grains, cotton, and oilseeds. The
new law extends, with modifications, dairy and sugar support (the bill creates new
counter-cyclical payments for dairy), and it overhauls the peanut program by
replacing quotas with a support program like that for other major crops. The final
bill also contains titles to expand conservation programs; reauthorize agricultural
export and food aid programs; and amend and extend research, nutrition (food
stamps), credit, and rural development activities, among others.
Total direct (mandatory budget authority) spending in the bill is $273.9 billion
over 6 years (FY2002-2007), according to Congressional Budget Office (CBO)
estimates (March 2002 baseline). Of this total, $51.7 billion is new spending (above
the March 2002 baseline). Of the new spending, $37.6 billion is for commodity
programs; $9.2 billion is for conservation. About 55% ($149.6 billion) of the bill’s
$273.9 billion in total direct spending is for food stamps and other nutrition-title
programs. The nutrition programs received $2.8 billion in new spending (above
baseline).
The new farm law has attracted widespread criticism from those here and abroad
who argue that it is extremely expensive; will reverse the market-oriented course
Congress had charted for long-term farm policy in 1996; stimulate overproduction,
thus depressing farm prices and distorting trade worldwide; and undermine the U.S.
objective of further reforming global agricultural trade. Proponents counter that the
law is needed to aid farmers hit by several years of low prices; fully complies with
congressional spending limits and current U.S. trade obligations; maintains market
orientation by providing farmers with the flexibility to plant most crops, unbound by
government supply controls; and places the United States in a stronger position to
negotiate future trade reforms by ensuring that U.S. farmers will not be unilaterally
shorn of their support before other countries commit to reducing their own subsidies
and trade barriers.

Contents
Final Legislative Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Budget and Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trade Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Administration Views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Farm Income and Commodity Price Support (Title I) . . . . . . . . . . . . . . . . . . 6
Conservation and Environment (Title II) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Foreign Trade and Food Aid (Title III) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Food Stamps and TEFAP (Title IV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Farm Credit (Title V) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Rural Development (Title VI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Agricultural Research, Extension, and Education (Title VII) . . . . . . . . . . . 24
Other Provisions (Titles VIII, IX, and X) . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Appendix A. Selected Arguments for and Against the New Bill . . . . . . . . . . . . 29
Appendix B. Chronology of Actions in the 107th Congress . . . . . . . . . . . . . . . . 33
Appendix C. Side-by-Side Comparison of Prior and New Law (Selected Provisions)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
List of Tables
Table 1. 2002 Farm Bill, 6-Year Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. 2002 Farm Bill, 10-Year Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 3. Fixed Payments: Comparison of Prior Law, New Law, House, and Senate
Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 4. Counter-Cyclical Target Prices: Comparison of Prior Law, New Law,
House, and Senate Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 5. Loan Rates for Major Crops: Comparison of Prior Law, New Law, House,
and Senate Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 6. Loan/Purchase Rates for Other Commodities: Comparison of Prior Law,
New Law, House and Senate Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The 2002 Farm Bill: Overview and Status
Final Legislative Action
On May 13, 2002, President Bush signed into law a new 6-year omnibus farm
bill, the Farm Security and Rural Investment Act (FSRIA) of 2002 (H.R. 2646; P.L.
107-171). The House had voted, 280 to 141, to approve the conference report
(H.Rept. 107-424) on May 2, 2002, and the Senate approved the conference report
on May 8, 2002, by a vote of 64 to 35. The U.S. Department of Agriculture (USDA)
is now implementing the provisions, most of which take effect this year.1
The Senate had approved its version of an omnibus 5-year (2002-2006) farm bill
(reported as S. 1731 and passed as H.R. 2646) on February 13, 2002, by a vote of 58
to 40. The full House, on October 5, 2001, had approved (by a vote of 291-120) an
omnibus farm bill (H.R. 2646) that would have extended major farm, food, and
related programs for 10 years, through 2011.
Overview
Federal farm support, food assistance, agricultural trade, marketing, and related
policies are governed by a variety of separate laws. Although these laws may be
considered and passed as free-standing legislation, many are evaluated periodically,
revised, and renewed through an omnibus, multi-year farm bill. The Federal
Agriculture Improvement and Reform (FAIR) Act of 1996 (P.L. 104-127) was the
previous omnibus farm bill, and many of its provisions were set to expire in 2002.
The heart of every omnibus farm bill is farm income and commodity price
support policy – the methods and levels of support that the federal government
provides to agricultural producers. However, farm bills also typically include titles
on agricultural trade and foreign food aid, conservation and environment, domestic
food assistance (primarily food stamps), agricultural credit, rural development,
agricultural research and education, and other programs.
Budget and Cost
Like most legislation, the farm bill is considered within federal budget
constraints. The May 2001 congressional budget resolution (H.Con.Res. 83)
reserved, for FY2002-2011, an extra $73.5 billion in direct spending to accommodate
1 USDA maintains an extensive website on the 2002 farm bill, including information on
implementation, at: http://www.usda.gov/farmbill/.

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the cost of legislative changes in farm and related programs. This allowance is “new
money,” i.e., permitted to be added to the projected Congressional Budget Office
(CBO) baseline (April 2001) for such programs for the same 10-year period.
Congress used the April 2001 budget baseline to score the bill, and CBO’s “official”
scoring concluded that FSRIA 2000 would not exceed the May 2001 congressional
budget resolution allowance (the sum of the CBO baseline plus the new money).
As the bill progressed through Congress, subsequent re-estimates of the federal
budget baseline showed fading budget surpluses in general, and higher than
previously-estimated costs for some farm programs in the new bill. For example,
newer projections in early 2002 indicated that some farm prices would be lower than
had been projected earlier, in April 2001, meaning that USDA farm subsidy outlays
would be higher, too. The new estimates created uncertainties regarding available
funding, and whether Congress would continue to support the new spending
approved a year earlier. Ultimately, lawmakers did support this new spending.
Tables 1 and 2, below, show respectively, CBO-estimated costs over 6 years
(the term of the new law), and over 10 years. “Baseline” means a continuation of
current law, unchanged; “new spending” is how much costs might increase under the
new law, which CBO estimates after analyzing the new law’s provisions and impacts.
Both the April 2001 and March 2002 CBO baseline estimates are shown.
Table 1. 2002 Farm Bill, 6-Year Cost Estimates
Budget Authority in Million $
April 2001 Baseline
March 2002 Baseline
Baseline
New
Total
Baseline
New
Total
Spending
Projected
Spending
Projected
Spending
Spending
Commodity
55,534
31,169
86,703
61,337
37,587
98,924
Support
Conservation
11,583
9,198
20,781
12,075
9,198
21,273
Trade
1,566
532
2,098
1,572
532
2,104
Nutrition a
134,556
2,657
137,213
146,820
2,793
149,613
Rural
0
870
870
160
870
1,030
Development
Research
240
520
760
240
520
760
Forestry
0
85
85
0
85
85
Energy
0
366
366
0
405
405
Other
0
(336)
(336)
0
(303)
(303)
Provisions b
Total, 6 years
203,479
45,061
248,540
222,204
51,687
273,891
Source: CRS compilation of Congressional Budget Office data. a and b: see footnotes at end of Table
2.

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Table 2. 2002 Farm Bill, 10-Year Cost Estimates
Budget Authority in Million $
April 2001 Baseline
March 2002 Baseline
Baseline
New
Total
Baseline
New
Total
Spending
Projected
Spending
Projected
Spending
Spending
Commodity
77,045
47,771
124,816
85,365
56,714
142,079
Support
Conservation
21,412
17,079
38,491
22,089
17,079
39,168
Trade
2,610
1,144
3,754
2,640
1,144
3,784
Nutrition a
239,436
6,400
245,836
257,966
6,625
264,591
Rural
0
870
870
160
870
1,030
Development
Research
240
1,323
1,563
240
1,323
1,563
Forestry
0
100
100
0
100
100
Energy
0
405
405
0
405
405
Other
0
(1,594)
(1,594)
0
(1,441)
(1,441)
Provisions a
Total, 10 years
340,743
73,497
414,241
368,460
82,819
451,279
Source: CRS compilation of Congressional Budget Office data. a Farm bill changes to nutrition
spending include changes to food stamps, the emergency food assistance program, and child nutrition
programs, as well as new spending for demonstration programs. Child nutrition programs are not
included in baseline, since their reauthorization is not addressed by the farm bill. b “Other Provisions”
in the farm bill primarily consist of savings associated with the federal crop insurance program.
However, crop insurance is not included in the baseline, since the reauthorization of the program is
not part of the farm bill.
Trade Considerations
The multilateral Uruguay Round Agreement on Agriculture (URAA) posed
another potential constraint on legislators. The URAA limits the United States to
providing no more than $19.1 billion per year worth of domestic farm supports most
likely to distort production and trade (these are so-called “amber box” programs).
The agreement spells out rules for determining whether a policy is market distorting
or whether it is exempt from the annual subsidy calculation. According to USDA’s
Economic Research Service (ERS):
The U.S. has so far met commitments under the URAA, but surges in direct
payments to producers after 1997 in response to low market prices have raised
concerns that domestic subsidy levels might eventually exceed the ceiling on
domestic supports established under the URAA. U.S. support is expected to
remain below its ceiling under current farm programs, but increases in support
under new programs could cause a compliance problem with the URAA
commitments...[and] could hamper efforts in the new multilateral trade talks to
accomplish U.S. goals for liberalizing international trade and getting other

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countries to reduce domestic support to their agriculture sectors and increase
market access.2
FSRIA 2000 continues a system of direct payments not tied to current
production or prices of specific commodities, which, proponents believe, will not
have to be counted as trade distorting and therefore are not subject to URAA farm
subsidy limits. They also believe that the bill’s conservation-related programs are
among those that are exempt from the limits. However, the bill continues crop
marketing loan benefits and the dairy price support program, which already are
classified as trade-distorting (and thus counted toward the URAA annual limit if their
value exceeds the so-called de minimis threshold of 5% of farm production value).
Further, the bill creates a new “counter-cyclical” program that also may have to
be counted toward the URAA annual limit on trade-distorting subsidies. Also,
farmers who receive direct payments are permitted to update the historical production
bases to which such payments are tied. (See “Farm Income and Commodity Price
Support” later in this report for an explanation of these programs.) It remains to be
seen whether these and other types of subsidies in the bill ultimately result in future
URAA compliance problems and/or challenges by foreign trading partners.
The bill does contain a provision requiring the Secretary of Agriculture to
attempt to keep farm program benefits within the annual URAA limit. Critics have
questioned the feasibility of implementing this so-called “circuit breaker.” Besides
the political difficulties of proposing farm program cutbacks, USDA might face
administrative problems.
For example, if USDA found, after calculating upcoming spending, that farm
support might exceed the allowable $19.1 billion, would the Secretary have to
withhold from farmers some or all of the year’s expected subsidy? Which
commodities and/or supports would be affected – some of them, or would she make
an across-the-board reduction? What if USDA wrongly predicted that spending
would not exceed the $19.1 billion, but it ultimately did? Would the Department
take money back from recipients, and if so, how? Defenders of the provision counter
that the “circuit breaker” would not be as complicated as critics contend, suggesting
that relatively modest adjustments in programs and payment levels could be made
easily on an as-needed basis. (See CRS Report RL30612, Farm Support Programs
and World Trade Commitments.)
Meanwhile, the United States is involved in a new round of multilateral trade
negotiations under the aegis of the Word Trade Organization (WTO). Critics
contend that the scope and level of subsidies in the new farm law, and their potential
to perpetuate market distortions, undermine the U.S. argument in the new trade round
that the world’s agricultural subsidies should be further disciplined. Many foreign
officials, and some U.S. analysts, have pointedly noted that the new U.S. farm policy
raises questions about the sincerity of the U.S. negotiating position. The law will
encourage other countries to increase their domestic subsidies and/or import barriers
2 USDA, Economic Research Service. “Aligning U.S. Farm Policy With World Trade
Commitments,” Agricultural Outlook, January-February 2002, p. 12.

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to protect their own farmers, critics add. Many have characterized U.S. farm policy
as highly protectionist and destructive to farmers worldwide, particularly in
developing nations.
Defenders of the bill counter that the United States cannot unilaterally back
away from supporting its farmers before the European Union (EU) and other
competitors agree to do likewise. In the United States, agricultural interests have
long complained that the EU and Japan are permitted, under the URAA, to spend
much more on domestic farm support. Japan’s annual allowable level is
approximately $30-$35 billion versus the U.S. $19.1 billion. The EU’s level is
around $60 billion, more than three times the U.S. level, they argue. Maintaining and
even increasing U.S. subsidies (within allowable limits) provide U.S. negotiators
with more leverage in the negotiations over foreign trade barriers (including high
tariffs) and export subsidies, as well as domestic price supports, defenders argue.
Administration Views
The Bush Administration, at first highly critical of the evolving measure, was,
by late 2001, pledging its support for a “generous farm bill.” On May 2, 2002, the
President said he would sign the final bill, commenting:
I am pleased that the compromise agreement on the farm bill resulted in better
balanced commodity loan rates; spending that is no longer front-loaded; and the
strongest conservation provisions of any farm bill ever passed by Congress. The
final provisions of the farm bill are also consistent with America’s international
trade obligations, which will strengthen our ability to open foreign markets for
American farm products. While this compromise agreement did not satisfy all of
my objectives, I am pleased that this farm bill provides a generous and reliable
safety net for our Nation’s farmers and ranchers and is consistent with the
principles I outlined.
Also by May 2002, the Administration was engaged in a vigorous public
defense of the new bill, particularly in response to widespread foreign criticism.
Such Administration support was a marked departure from its earlier criticisms.
On October 3, 2001, as the House began to debate its bill, the White House Office
of Management and Budget (OMB) issued a Statement of Administration Policy
stating that it did not support H.R. 2646 because it would encourage overproduction
of commodities, fail to help farmers most in need, jeopardize global markets, and
boost federal spending at a time of economic uncertainty.
The OMB Statement of Administration Policy on the Senate bill, issued
December 5, 2001, argued that S. 1731 would: stimulate overproduction (partly
through higher crop loan rates); result in higher consumer milk prices; hurt U.S. farm
trade by among other things risking U.S. ability to meet current trade obligations and
undermining U.S. efforts to phase out worldwide export subsidies in the future;
authorize ineffective conservation programs; poorly direct farm aid by increasing
payments regardless of need; weaken accountability in domestic nutrition programs;
and result in unknown budget costs.

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Previously, on September 19, 2001, the Administration had released a 120-page
report, Food and Agricultural Policy: Taking Stock for the New Century, which
concludes, among other things, that farm policy should be tailored to reflect the wide
differences among U.S. farms and farming practices. Current programs tend to tilt
benefits most heavily toward highly efficient commercial farms (which enables them
to expand operations and lower costs even more), with no direct relationship between
benefits and a farm’s financial need. Landowners, not necessarily farm operators,
benefit the most through higher land values and higher farmland rental rates caused
by current support programs, the report states. Farm policy must promote “more
sustainable prosperity” for farmers, relying on the market and not government for
long-term support, although government could provide aid for “unexpected events”
beyond their control, according to the report.
The report also argues that trade policy not only must focus on more access to
foreign markets, but also be supported by domestic policies that meet U.S. trade
obligations and provide the latitude “to pursue ambitious goals in trade negotiations.”
The report suggests that future policy should shift emphasis from traditional
commodity price supports toward the demand side of agriculture – focusing on
marketing and consumption, particularly overseas. Conservation programs, food
safety and affordability, nutrition, and rural development also are addressed.
Despite its periodic comments on farm policy in general and the farm bill in
particular, the Administration was not viewed by most observers as a major influence
in the legislative debate.
Selected Provisions
Farm Income and Commodity Price Support (Title I)3
Background/Issues. The 1996 farm bill significantly revised federal farm
commodity policy. Title I, the Agricultural Market Transition Act (AMTA), replaced
production-based deficiency payments (the difference between legislated target prices
and lower market prices) for wheat, feed grains, upland cotton, and rice with fixed
“production flexibility contract” (PFC) payments. These payments were made
irrespective of market prices or current planting choices. AMTA authorized $36
billion in PFC payments over the 7-year life of the law to producers with a
participation history in the previous commodity programs. Previous annual supply
controls, including crop-specific acreage bases and cropland set-asides, were ended
by the 1996 law. (See CRS Report RS20271, Grains, Cotton, and Oilseeds: Federal
Commodity Support.)
In addition, AMTA maintained the price guarantees of the marketing assistance
loan program for contract commodities, soybeans and other oilseeds. This counter-
3 Subject headings are not necessarily synonymous with the names of the Titles in the new
law, but such Titles are where most of the provisions discussed generally are located. CRS
contacts for Title I: (name redacted), 7-....; (name redacted), 7-....; (name redacted),
7-.... (sugar and peanuts); Ralph Chite, 7-.... (dairy).

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cyclical program made direct payments to compensate for the difference between low
market prices and specified commodity nonrecourse loan rates. CCC net outlays for
marketing assistance loan gains and loan deficiency payments (LDPs) were $8.1
billion in FY2000, $6 billion in FY2001, and an estimated $7.2 billion in FY2002,
according to USDA.
AMTA continued market price support programs for sugar and peanuts, which
operate through CCC loans and import quotas. The 1996 law also scheduled the
elimination of the longstanding dairy price support program, but Congress
subsequently continued it. Permanent tobacco price support authority was not
modified in 1996.
Persistently low commodity prices stimulated 4 years of large ad hoc emergency
farm aid packages amounting to approximately $23 billion in non-disaster related
farm income assistance, over and above amounts already authorized by AMTA.
About $18 billion went to PFC contract holders. Much of the rest was for special
subsidies for producers of soybeans, peanuts, tobacco, milk, honey, wool, and
mohair. The last congressional “emergency” action, under the FAIR Act, was P.L.
107-25, which provided $5.5 billion to be paid out in FY2001 as allowed for in the
budget resolution (H.Con.Res. 83).
Most farm interests sought a more certain method of funding future counter-
cyclical income support than ad hoc emergency laws. The options below, except as
noted, mainly apply to policies for grains, cotton, and oilseeds.
PFC Payments. Most (although not all) producer groups supported
continuation of annual lump sum assistance like PFC payments. Some wanted PFC
eligibility expanded to include soybeans, and possibly even such commodities as
tobacco, peanuts, milk, wool, mohair, apples, cranberries, which all received direct
payments under the emergency assistance laws. Critics argued that such payments
are quickly capitalized into land prices and rents. The new 2002 farm bill continues
direct payments that are similar in concept to PFC payments, and adds soybeans and
other oilseeds as eligible crops.
Counter-Cyclical Assistance. There was wide support for a new counter-
cyclical assistance program that would be more generous than previously provided
through marketing loans. Early proposals differed in detail but shared a common
objective of providing more support when farm prices and/or incomes decline than
provided under AMTA. The 2002 farm bill contains new counter-cyclical assistance,
tying such support to target prices for individual commodities – not revenue, income,
or receipts, as some had proposed. (See CRS Report RS20913, Farm Counter-
Cyclical Assistance.)
Marketing Loan Assistance. There also was wide support to continue
marketing assistance loans (including loan deficiency payments, LDPs). However,
several groups called for higher loan rates. The new farm bill continues marketing
loan benefits for grains, cotton, oilseeds, wool, mohair, and honey; it also makes
peas, lentils and chickpeas newly eligible. (See CRS Report 98-744, Agricultural
Marketing Assistance Loans and Loan Deficiency Payments.)

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Supply Management. Most major agricultural groups opposed any
restoration of production control or supply management tools. The new law does not
reintroduce these policy tools.
Price-Supported Commodities. AMTA support programs for tobacco,
peanuts, sugar, and milk maintained farm prices above what the market might
otherwise dictate. Nonrecourse price support loans and marketing quotas applied to
virtually all U.S. tobacco and to domestic edible peanuts. Sugar utilized nonrecourse
loans and tariff rate quotas to support prices and limit the entry of less expensive
imports. Milk price support was provided through: direct USDA purchases of dairy
products at specified prices; milk marketing orders (which pool receipts and set
classified prices for most fluid grade milk); and comparatively high duties on
imported milk products.4 Critics, including the WTO, consider these subsidies to be
highly production and trade distorting. Supporters contend that these programs are
effective in maintaining farm incomes and low cost to taxpayers. The new farm bill
continues the tobacco, sugar and dairy programs, and alters the peanut program to
function similarly to the grains and cotton programs. The new law also adds a target
price and counter-cyclical direct payments for dairy producers.
Risk Management. Another proposed alternative would have phased out all
supports tied to the production of specified commodities and replaced them with
assistance designed to encourage producers to expand their use of various risk
management tools. The subsidized federal crop insurance program is an existing risk
management program. However, some argued for a broader approach that might
include a combination of whole farm revenue insurance, income stabilization
accounts, more use of futures markets, contracts with commodity buyers, and other
options. A comprehensive bill introduced by Senator Lugar (S. 1571) embraced such
an approach, but it was not adopted in the final bill.
Provisions As Enacted. Among the grains, upland cotton, and oilseeds
provisions in the new farm bill, P.L. 107-171, are:
! Fixed, decoupled payments (like the current PFC contract payments)
at rates shown in table 3;
! New counter-cyclical deficiency payments that make up the
difference between a crop’s average market price plus the fixed
decoupled payment, and its “target price” (see table 4);
! Continuation of marketing assistance loans (and LDPs) at higher
than current rates for most but not all crops (see table 5);
! Fixed, decoupled payments and counter-cyclical payments are
calculated at 85% of each farm’s base acres and crop yields as set in
1996 Act; producers can update bases. Those who update bases can
also update yields for counter-cyclical payments;
4 Until October 1, 2001, when it expired, the Northeast Interstate Dairy Compact authorized
producers in that region to receive higher prices than the national level. For an explanation,
see CRS Issue Brief IB97011, Dairy Policy Issues.

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! Continued flexibility to plant most crops (except fruits, vegetables,
and wild rice) on base acres; no authority for USDA annual acreage
controls;
! Beginning with 2003 crops, separate annual per person limits of
$40,000 for fixed payments; $65,000 for counter-cyclical payments;
$75,000 for marketing loan gains (however, no limit on gains when
commodity certificates are used to pay off marketing loans). The so-
called “three-entity” rule and husband wife rule are both retained,
effectively doubling these dollar limits. Crop program subsidies are
restricted to those with less than $2.5 million per year in gross
income (3-year average); those earning more than 75% of their
income from agriculture are exempt from this means test. (Peanuts
have a separate set of payment limits.)
A new peanut program is similar to other crop support, with fixed decoupled
payments of $36/ton, a target price of $495/ton, and loan rate of $355/ton; marketing
quotas are ended, with compensation of $220/ton/year for 5 years (a total of
$1,100/ton) paid to quota holders for lost asset values. Also, sugar support at 18¢/lb.
(raw cane) and 22.9¢/lb. (refined beet) continues, with the no-net-cost rule
reestablished, the marketing assessment eliminated, and the loan forfeiture penalty
eliminated. Sales of domestic sugar now are subject to marketing allotments.
Milk continues to be supported through the dairy price support program at the
previous level of $9.90 per hundredweight (cwt.), as proposed by both the House and
the Senate, with the program scheduled to expire December 31, 2007. Farm milk
prices are supported through government purchases of surplus dairy products from
dairy processors. Separately, whenever the minimum monthly fluid milk price in
Boston falls below a target price of $16.94/cwt., all producers nationwide will receive
a payment equal to 45% of the price shortfall. Producers are allowed to receive
payments on up to 2.4 million pounds of their annual milk production. This milk
counter-cyclical payment program expires on September 30, 2005. CBO estimates
the cost of direct payments at $1.3 billion over the 3½ year life of the program.
Marketing loans and LDPs are provided for graded wool, nongraded wool,
mohair, honey, dry peas, lentils, and small chickpeas (see rates in table).
Nonrecourse loans, but not LDPs, are provided for ELS cotton.
House-Senate Differences. The House bill put more of the support benefit
into fixed, decoupled payments while the Senate bill put more benefits into loan
deficiency payments. The fixed, decoupled payments are not tied to current
production or prices and so are not considered to be potentially trade distorting (i.e.,
“amber box”). In contrast, higher loan rates generate increased benefits when market
prices are low and so serve as counter-cyclical assistance – thereby likely to fall into
the “amber box.” The cost of marketing assistance loans and counter-cyclical
payments also are difficult to predict in the future, making government farm spending
projections uncertain.
Another important difference was the Senate plan (S.Amdt. 2826) to limit
support payments more strictly than the House version, to $225,000 per individual
($275,000 for a couple), including marketing loan benefits, fixed payments, counter-

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cyclical payments, plus gains from commodity certificates and forfeitures. The rules
also would have made it more difficult to reorganize operations in order to legally
exceed this limit. (See CRS Report RS21138, Farm Commodity Payment Limits:
Comparison of Proposals.)
Trade Implications. Subsidies linked to market prices are considered trade
distorting. The inclusion of higher loan rates and new counter-cyclical payments in
the law have caused numerous critics to question the stated U.S. international
commitment to limit trade distorting subsidies to agreed upon levels. Whether or not
spending on production and trade distorting policies actually breach the WTO limits,
the sheer size of farm subsidies in the new law causes concern about the ability of
U.S. trade negotiators to persuade other countries to lower their barriers to
agricultural imports or reduce their export subsidies, critics contend. Supporters of
the farm bill counter that the law contains “circuit breaker” provisions if it appears
the WTO limits will be breached. Furthermore, the law makes it clear to other
nations that the United States will not abandon its farmers, but will negotiate from
a position of strength for mutual improvements. (See also pages 3-5.)
Table 3. Fixed Payments: Comparison of Prior Law, New Law,
House, and Senate Bills
Crop, unit
Prior Law
New Law
House Bill
Senate Bill
P.L. 107-171
(2002)
(2002-07)
(2002-11)
(2002-06)
Wheat, $/bu
0.46
0.52
0.53
0.45/0.225/0.113
Corn, $/bu
0.26
0.28
0.30
0.27/0.135/0.068
Grain Sorghum, $/bu
0.31
0.35
0.36
0.31-0.27/0.135/ 0.068
Barley, $/bu
0.19
0.24
0.25
0.20/0.10/0.05
Oats, $/bu
0.020
0.024
0.025
0.05/0.025/0.013
Upland Cotton, $/lb
0.0554
0.0667
0.0667
0.13/0.065/0.0325
Rice, $/cwt
2.05
2.35
2.35
2.45/1.225/0.6125
Soybeans, $/bu
none
0.44
0.42
0.55/0.275/0.138
Minor Oilseeds, $/lb
none
0.008
0.74
0.01/0.005/0.0025
Peanuts, $/ton
none
36.00
36
all years, 36
(¢/lb)
(0.018)
(0.018)
(0.018)
Source: Fixed, decoupled payments in old law (P.L. 104-127), conference report H.Rept. 107-424,
H.R. 2646; and S. 1731. Payment bases differ between bills. The conference report makes payments
on 85% of the payment acres times the payment yield, and generally the yield is that established for
1995. H.R. 2646 uses the same payment base as old law (85% of recent acreage and yield averages
from the 1980s). S. 1731 makes payments on 100% of recent acreage and recent yield levels.

CRS-11
Table 4. Counter-Cyclical Target Prices: Comparison of Prior
Law, New Law, House, and Senate Bills
Crop, unit
Prior Law
New Law
House Bill
Senate Bill
P.L. 107-171
(1995 Levels, Not
(2002-11)
(2002-06)
Applicable 1996-
(2002-03/
2002)
2004-07)
Wheat, $/bu
4.00
3.86/3.92
4.04
3.4460
Corn, $/bu
2.75
2.60/2.63
2.78
2.3472
Grain Sorghum, $/bu
2.61
2.54/2.57
2.64
2.3472
Barley, $/bu
2.36
2.21/2.24
2.39
2.1973
Oats, $/bu
1.45
1.40/1.44
1.47
1.5480
Upland Cotton, $/lb
0.729
0.724/0.724
0.736
0.6739
Rice, $/cwt
10.71
10.50/10.50
10.82
9.2914
Soybeans, $/bu
none
5.80/5.80
5.86
5.7431
Minor Oilseeds, $/lb
none
0.098/0.101
10.36
0.1049
Peanuts, $/ton
none
495/495
480
520
(¢/lb)
(24.75/24.75)
(24)
(26)
Source: Target prices in old law (P.L. 104-127, conference report H.Rept. 107-424, H.R. 2646, and
S. 1731. a Payment bases differ between the bills. The conference report makes payments on 85%
of the payment acres times the payment yield, and generally the yield is that established for 1995.
H.R. 2646 uses the same payment base as old law (85% of recent acreage and yield averages from the
1980s). S. 1731 makes payments on 100% of recent acreage and recent yield levels.
Table 5. Loan Rates for Major Crops: Comparison of Prior Law,
New Law, House, and Senate Bills
Crop, unit
Prior Law
New Law
House Bill
Senate Bill
1996-02 a
P.L. 107-171
2002-03/
2002-11
2002-06
2004-07
Wheat, $/bu
2.58
2.80/2.75
2.58
2.9960
Corn, $/bu
1.89
1.98/1.95
1.89
2.0772
Grain Sorghum, $/bu
1.69
1.98/1.95
1.89
2.0772
Barley, $/bu
1.71
1.88/1.85
1.65
1.9973
Oats, $/bu
1.14
1.35/1.33
1.21
1.4980
Upland Cotton, $/lb
0.5192
0.52/0.52
0.5192
0.5493
Rice, $/cwt
6.50
6.50/6.50
6.50
6.4914
Soybeans, $/bu
5.26
5.00/5.00
4.92
5.1931
Minor Oilseeds, $/lb
0.093
0.096/0.093
0.087
0.0949
Peanuts, $/ton
610 b
355/355
350
400
(¢/lb)
(30.50)
(17.75/17.75)
(17.50)
(20.00)

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Table 6. Loan/Purchase Rates for Other Commodities:
Comparison of Prior Law, New Law, House and Senate Bills
Crop, unit
Prior Law
New Law
House Bill
Senate Bill
P.L. 107-171
2002
2002-03/04-07
2002-11
2002-06
ELS cotton, $/lb
0.7970
0.7977/0.7977
0.7965
0.7965
Wool, graded, $/lb
0.40 a
1.00/1.00
1.00
1.00
Wool, nongraded, $/lb
na
0.40/0.40
0.40
0.40
Mohair $/lb
0.40 a
4.20/4.20
4.20
na b
Honey, $/lb
0.65 c
0.60/0.60
0.60
0.60
Peas, dry, $/cwt
na
6.33/6.22
na
6.78
Lentils, $/cwt
na
11.94/11.72
na
12.79
Chickpeas, large, $/cwt
na
na
na
17.44
Chickpeas, small, $/cwt
na
7.56/7.43
na
8.10
Sugar, raw cane, ¢/lb
18.0
18/18
20.0
20.0
Sugar, beet, ¢/lb
22.9
22.9
22.9
22.9
Milk, $/cwt d
9.90 d
9.90/9.90
9.90 e
9.90
(target 16.94) d
(target 16.94
and rolling
average) f
Tobacco, $/lb
(adjusted
(adjusted yearly)
(adjusted
(adjusted
(permanent law)
yearly)
yearly)
yearly)
Flue-cured
1.656
1.656
1.656
1.656
Burley
1.835
1.835
1.835
1.835
Table 5 and 6 sources: Loan/purchase rates for old law (P.L. 104-127), conference report H.Rept. 107-
424, H.R. 2646, and S. 1731. Table 5: a Loan rates are maximum allowable levels. b Support level for
quota peanuts, the support level for nonquota peanuts is $174/ton ($0.087/lb). Table 6: a Support for wool
and mohair are provided by P.L. 107-25 (sec5) for the 2001 crop only. b The Senate bill excludes mohair
in Section 123, but includes it in Section 171, but the claimed intent is to not provide loans for mohair.
c Honey received emergency support in 2000 under P.L. 106-387(Section 812), but not subsequently. d The
farm price of milk is supported at $9.90 through purchases of storable nonfat dry milk, butter, and cheese.
e The support price is made permanent and a target price is established for 3.5 years. f S.1731 establishes
a target price for milk in 12 northeastern states and a rolling average market price for all other states.
For More Information.
! CRS Report RL31251, Commodity Support Provisions: Comparison
of Current Law with House and Senate Farm Bills.
! CRS Report RS20848, Farm Commodity Programs: A Short
Primer.
! CRS Issue Brief IB97011, Dairy Policy Issues.
! CRS Issue Brief IB95117, Sugar Policy Issues.
! CRS Report RL30924, Peanut Program Policy Issues.
! CRS Report RS20896, Farm Commodity Programs: Wool and
Mohair.
! CRS Report RS20759, Farm Commodity Programs: Honey.

CRS-13
Conservation and Environment (Title II)5
Background/Issues. The conservation title both amends existing programs
and adds new ones to protect or restore agricultural lands and provide resource and
environmental benefits to society. USDA agencies implement current conservation
policies through a combination of cost sharing payments and technical assistance,
backed by education and research for numerous land retirement and working land
programs. Participation in these programs is voluntary.
Historical Policy Changes. Starting with the omnibus farm bill in 1985,
Congress expanded the conservation mission significantly beyond its traditional
focus on controlling soil erosion and providing water to enhance production. The
goals now include wetlands protection, wildlife habitat protection and development,
and air and water quality improvement, among others. New issues have continued
to emerge in recent years. Since the 1996 farm bill was enacted, these issues have
included sequestering carbon and addressing global climate change, producing energy
from biomass, protecting and restoring grasslands, reducing non-point water
pollution caused by very large animal feeding operations, and addressing other
“off-farm” environmental impacts.
Over the years, Congress has added new conservation tools, including controls
over modification of environmentally fragile lands and wetlands by producers who
want to receive federal farm benefits, and easements to protect resource values while
keeping the land under the control of the farmer. The expanded conservation effort
is reflected in funding levels. Conservation activities at USDA received just over $1
billion in FY1985; they now receive more than $3 billion annually. However, most
of this growth has been for land retirement and easements (e.g., the Conservation
Reserve and Wetlands Reserve Programs, CRP and WRP), while the other activities
have grown little or not at all in real terms. In the 1996 farm bill, funding for five
conservation programs was moved from discretionary spending, subject to the annual
appropriations process, to mandatory funding through the CCC. Funding of
mandatory conservation programs totaled just over $2 billion in FY2001, according
to CBO. (See CRS Report RL30331, Conservation Spending in Agriculture: Trends
and Implications, for a review of programs and over the past 20 years.)
Congressional Deliberations. Numerous programs were scheduled to
expire by the end of FY2002. During several days of hearings in 2001, the
agriculture committees explored program and policy options. Farm groups generally
suggested increasing funds for existing programs and reducing conservation
impediments to farm operations. Other interest groups, while supporting some of the
farmer proposals, recommended more substantial changes. One broader approach
encompassing the idea of “green payments” was introduced by Chairman Harkin in
a freestanding bill (S. 932). It was (eventually) incorporated, as the Conservation
Security Program, into the Senate-approved farm bill.
The House moved first on the farm bill. One of its first actions was to adopt a
manager’s amendment removing several controversial conservation provisions from
5 Title II of the new law contains most but not all of the bill’s conservation provisions. CRS
contact: Jeffrey Zinn, 7-.....

CRS-14
the committee-reported bill. For example, the committee version would have
transferred administration of some conservation programs from USDA’s Natural
Resources Conservation Service (NRCS) to USDA’s Farm Service Agency (FSA),
and limited the penalties for farming wetlands (“swampbuster”) only to the year in
which the infraction occurred. On October 4, 2002, near the end of farm bill
consideration by the House, agriculture committee leaders led a successful effort to
defeat (by a vote of 200-226) the so-called Kind-Boehlert amendment (H.Amdt.340),
a bipartisan alternative conservation title endorsed by many environmental
organizations. This amendment, a revised version of the Work Lands Stewardship
Act (H.R. 2375), would have shifted $1.9 billion annually from commodity support
payments to various conservation activities. More generally, the House (and later the
Senate) debated at some length how much money to allocate to conservation and how
to split that funding among conservation programs.
The conservation title was not as controversial when the Senate considered the
farm bill, although water conservation provisions that would have addressed
anticipated water shortages in many parts of the country, and specific allocation
issues that had been raised in the Klamath River Basin, located in southern Oregon
and northern California, did attract considerable attention. These provisions would
have allowed the federal government to lease or purchase water rights as a way to
address scarce supplies. Widely opposed by most western Senators, they were
revised several times, before being approved with many limits, such as being
available only in specified states.
The conference committee was confronted with many differences that had to be
resolved as it created the final version of the conservation title. From the House bill,
it deleted the Farmland Stewardship Program and numerous other items. From the
Senate bill, it deleted a Wetlands Reserve Enhancement Program, a nutrient
management program for Chesapeake Bay drainage, and a Watershed Risk Reduction
Program. Other provisions were modified but remained in the conservation title. For
example, the water conservation provisions that had been passed in the Senate
became both a $200 million transfer from the CCC to the Department of the
Interior’s Bureau of Reclamation to improve water supplies in natural desert terminal
lakes and an earmark of $50 million within the new Surface and Groundwater
Conservation Program to address water allocation problems in the Klamath River
Basin (with a specific prohibition that the funds could not be used to purchase or
lease water rights). Many of the modifications revolved around funding levels for
programs, which differed greatly between the two bills. Still other conservation
provisions ended up in the Commodity, Forestry, and Miscellaneous titles.
Provisions As Enacted. The conservation title of the final bill:
! Increases the CRP acreage cap from 36.4 million to 39.2 million
acres, creates a 1 million-acre national program for isolated
wetlands, and retains language directing the Secretary to give
priority to areas where ongoing projects could be rapidly completed;
! Reauthorizes the WRP, increases the acreage cap to 2.275 million
acres, and allows 250,000 acres to be enrolled annually;
! Increases annual mandatory funding for the Environmental Quality
Incentives Program (EQIP) to reach a level of $1.3 billion in
FY2007 (with 60% of program money to go to livestock producers

CRS-15
and 40% to crop producers), limits any producer or entity to a total
of $450,000 for agreements entered into between FY2002 and
FY2007, and redefines the purpose of EQIP to promote agricultural
production and environmental quality as compatible goals;
! Provides mandatory funding for the Wildlife Habitat Incentives
Program (WHIP) in FY2002 – $15 million, FY2003 – $30 million,
FY2004 – $60 million, FY2005-07 – $85 million;
! Provides for mandatory funding for the Farmland Protection
Program (FPP) in FY2002 – $50 million, FY2003 – $100 million,
FY2004-05 – $125 million, FY2006 – $100 million, and FY2007 –
$97 million; makes certain nonprofits eligible to receive funds; and
authorizes a new farm viability program;
! Reauthorizes the Small Watershed Rehabilitation Program and
authorizes appropriations of $275 million in total through FY2007;
! Gives priority for annual funding of conservation programs to states
that have not received at least $12 million in cumulative
conservation funding in that fiscal year;
! Permanently reauthorizes the Resource Conservation and
Development Program;
! Provides that money for technical assistance will come from the
mandatory funding for each program;
! Permits those with the necessary expertise to become certified
providers of technical assistance to producers participating in the
conservation programs authorized in Title II;
! Provides mandatory funding for a Conservation Security Program,
to be implemented in FY2003, which makes incentive payments to
farmers for adopting and expanding natural resource stewardship
practices;
! Provides up to $254 million in mandatory funds to create a new 2
million-acre Grasslands Reserve Program, with 40% of the funds
going to 10-, 15-, and 20-year contracts similar to those under the
CRP, and 60% going to 30-year and permanent easements;
! Establishes new, generally smaller programs, for: Ground and
Surface Water Conservation (using EQIP funds), Competitive
Innovative Matching Grants (using EQIP funds), Farm Viability
(using FPP funds), Partnerships and Cooperation (using up to 5% of
mandatory funding for conservation programs), Great Lakes Basin
Soil Erosion and Sediment Control, Grassroots Source Water
Protection, Desert Terminal Lakes (transfers $200 million from the
CCC to the Department of the Interior’s Bureau of Reclamation),
and a Conservation Corridor Demonstration on the Delmarva
Peninsula.
For More Information.
! CRS Report RL31486, Conservation Title of the 2002 Farm Bill: A
Comparison of New Law with Bills Passed by the House and Senate,
and Prior Law.
! CRS Issue Brief IB96030, Soil and Water Conservation Issues.
! CRS Report RL31131, Selected Conservation Proposals for the
Next Farm Bill.

CRS-16
Foreign Trade and Food Aid (Title III)6
Background/Issues. Exports are viewed by most U.S. agricultural groups
as critical to farm prosperity. Thus, trade titles in omnibus farm bills are important
vehicles for addressing agricultural trade problems, export assistance, and foreign
food aid programs. Other policy venues also are important. For example,
negotiations are under way in the World Trade Organization (WTO) to strengthen
multilateral agricultural trade rules. Regional and bilateral trade negotiations also
will affect conditions of competition for U.S. farm products.
Recent farm bills, including the 1996 farm law, have extended and amended the
major U.S. foreign food aid and agricultural export programs. These include:
! P.L. 480, the Food for Peace program. Title I of this law provides
for concessional financing of U.S. agricultural exports, Title II
authorizes commodity donations for humanitarian and development
activities, and Title III authorizes bilateral development grants of
food.
! Food for Progress (FFP). This provides either P.L. 480 or CCC
commodities to support countries that have committed to expanding
free enterprise in their agricultural economies.
! Section 416(b). Authorized by permanent law, this program
provides for the donation overseas of surplus CCC commodities;
! Bill Emerson Humanitarian Trust. Once called the Food Security
Commodity Reserve and before that the Food Security Wheat
Reserve, the trust sets aside up to 4 million metric tons of wheat,
corn, sorghum, and rice that can be used to fulfill food aid
commitments when U.S. commodity supplies are short or
unanticipated emergency needs arise.
! Export Enhancement Program (EEP). EEP is a direct subsidy
program authorizing USDA commodity or cash bonuses to exporters
to enable them to negotiate sales of U.S. agricultural products at
more favorable prices to foreign buyers.
! Dairy Export Incentive Program (DEIP). DEIP is another U.S.
direct subsidy program, similar in concept to EEP but focused on
U.S. dairy exports.
! Market Access Program (MAP) and Foreign Market
Development (Cooperator) Program (FMD). Both progams
provide partial federal funding for the cost of agricultural market
development and advertising activities undertaken by the private
sector.
! Export Credit Guarantees (the “GSM” programs). GSM-102
guarantees repayment of private, short-term financing to eligible
countries purchasing U.S. farm products; GSM-103 guarantees
repayment of intermediate-term financing.
In renewing the food aid and export assistance programs, the 107th Congress was
confronted with questions of policy direction and funding. Levels of spending and
6 CRS contact: (name redacted), 7-.....

CRS-17
volumes of product subsidized under EEP and DEIP are subject to limitations under
the Uruguay Round Agreement on Agriculture (URAA). In practice, EEP has been
used very little in recent years; DEIP has been used to the limits of the URAA.
Market promotion programs like MAP, the food aid programs, and export credits
(GSM) are not considered to be trade distorting under the current URAA, and
therefore are not subject to spending disciplines. Foreign trading partners, however,
contend that the United States has utilized food aid and export credits as ways to
dispose of heavily subsidized farm surpluses, thereby distorting trade.
Some have questioned whether export subsidy and promotion support actually
increase overseas sales or simply displace what would have occurred anyway. Even
if sales increase, do they lead to substantially higher farm prices and incomes – or
might direct farm subsidies be more cost-effective? Some critics claim that the trade
programs benefit primarily large food and export companies (who can afford to pay
for promotion activities themselves) or foreign buyers more than U.S. producers.
Defenders cite studies claiming positive outcomes from such spending. Similar
questions arise with regard to foreign food aid.
One issue in the farm bill debate was whether to mandate the Global Food for
Education Initiative, launched as a $300 million pilot program by the Clinton
Administration to help establish school and pre-school food programs in developing
countries.
Provisions as Enacted. Title III of FSRIA (P.L. 107-171), reauthorizes,
generally through 2007, the major foreign food aid and agricultural export programs.
Selected provisions of Title III would:
! Reauthorize MAP, with mandatory funding at $100 million in
FY2002, $110 million in FY2003, $125 million in FY2004, $140
million in FY2005, and $200 million in each of FY2006 and
FY2007;
! Reauthorize FMDP with mandatory funding at $34.5 million
annually through FY2007;
! Reauthorize EEP, DEIP (in Title I) and Export Credit Guarantees
through FY2007, generally at current mandatory funding levels;
! Reauthorize P.L. 480 Food for Peace through FY2007, eliminate the
annual $1 billion cap on Title II appropriated spending, increase the
minimum level of commodities to 2.5 million metric tons per year,
fund transportation, storage and handling at between 5% and 10% of
annual Title II funding, and make other program changes;
! Reauthorize FFP through FY2007, increase funding caps for the
program, and set the minimum annual quantity at 400,000 metric
tons, among other program changes;
! Authorize the President to establish the “McGovern-Dole
International Food for Education and Child Nutrition Program”
providing U.S. agricultural commodities and financial and technical
assistance for foreign preschool and school feeding programs and for
pregnant and nursing women and young children, with funding
mandated at $100 million in FY2003 and subject to appropriation in
FY2004-2007;

CRS-18
! Reauthorize the Bill Emerson Humanitarian Trust, the Emerging
Markets, and Farmer-to-Farmer programs through FY2007;
! Create an exporter assistance program (with $2 million annually in
mandatory CCC funds) to address foreign barriers to U.S. specialty
crop exports.
The final law (under Title X) requires, in 2 years, retailers to provide country-of-
origin information to consumers buying ground and muscle cuts of beef, pork and
lamb; fresh fruits and vegetables; wild and farm-raised seafood, and peanuts. The
program is voluntary until September 30, 2004. Not in the final version is a Senate-
passed provision that would have ended the current statutory restriction against
private financing of agricultural sales to Cuba, and a Senate-passed provision that
would have prohibited USDA quality stamps on imported meats.
For More Information.
! CRS Report RS20997, Farm Bill Trade and Food Aid Provisions.
! CRS Issue Brief IB10077, Agricultural Trade Issues in the 107th
Congress.
! CRS Issue Brief IB98006, Agricultural Export and Food Aid
Programs.
Food Stamps and TEFAP (Title IV)7
Background/Issues. Among the domestic food assistance programs
administered by the USDA, two are noteworthy in the context of the farm bill.
Authorization of appropriations, and other authorities related to the food stamp
program and The Emergency Food Assistance Program (TEFAP), were scheduled to
expire at the end of FY2002.
Food Stamp Issues. Three developments were basic to the farm bill food
stamp debate: the relatively low level of program participation; frustration with
federal food stamp eligibility, benefit, and administrative policies; and concerns of
some over continued ineligibility of many legally resident noncitizens.
Although food stamp enrollment is increasing, it is well below its peak in the
spring of 1994 and only a bit over 10% higher than the all-time low. Over half of the
decline over the 5 years since the last major food stamp amendments came from a
sharp drop in the rate at which those who are eligible actually participate.
State officials, program advocates, and supporters of the 1996 welfare reform
law (with its goal of moving families from welfare to work) maintained that various
aspects of food stamp eligibility, benefit, and administrative rules thwarted
participation and effective administration – denying needed support to working poor
families and others in need, and interfering with efforts to coordinate assistance.
They pointed to overly complex policies that burden administrators and
applicants/recipients, food stamp rules that differ too much from those applied by
states in other welfare programs, and inadequate benefits not worth the “hassle” of
7 CRS contact: (name redacted), 7-.....

CRS-19
applying and maintaining eligibility. Finally, they contended that the program’s
“quality control” system for measuring state performance penalized too many states
too harshly for erroneous benefit/eligibility determinations – thereby pressuring states
to “over-administer” the program and limiting participation.
Food Stamp Reform Agendas. Food stamp advocates, states, and welfare
reform supporters all expressed their dissatisfaction with this state of affairs, but
there was not a single, unified reform agenda, and most alternatives for change
imposed significant new costs. States called for simplified federal food stamp rules,
much greater state control over policies, lifting federal limits on work and training
activities, and revamped and more standardized benefit and eligibility rules to help
administrators and applicants/recipients. They also wanted major revision of the
quality control system and a more open federal waiver policy. Program advocates
emphasized the inadequacy of benefits and the need to grant eligibility to noncitizens.
Although they support reform of the quality control system and selective changes to
make eligibility/benefit determinations easier for applicants/recipients, they resisted
vesting too much decision-making with states and tampering with what they see as
a nationally uniform food stamp “safety net.” Welfare reform supporters also agreed
with quality control reforms, but stress the need to ensure that the food stamp
program fulfills a major role in supporting the working poor as its first priority.
Within major cost constraints, the farm bill’s food stamp provisions responded
to many of these criticisms, by easing/lifting administrative requirements, allowing
states to achieve greater conformity between rules used by food stamps and other
welfare programs, reforming the food stamp quality control system, increasing
benefits, and opening up eligibility for noncitizens.
The Administration. The Administration’s food stamp reform package also
recognized concerns voiced by states, advocates, and welfare reformers. It included:
(1) a modest benefit increase for larger households (similar to the final bill; see
below); (2) standardizing or giving states control over several important federal rules;
(3) liberalizing eligibility rules by excluding the value of one vehicle per adult; (4)
making eligible all low-income non-citizens who have resided in the U.S. legally for
5 years (similar to the final farm bill); (5) restructuring and reducing spending for
employment and training programs for food stamp recipients (similar to the final
bill); (6) ending automatic eligibility for some welfare beneficiaries; and (7)
significantly reforming the food stamp quality control system to penalize fewer states
and give bonuses to states performing well (although in a different way than the final
farm bill). Advocates and state representatives welcomed the Administration’s
proposals, with reservations about the extent of the quality control reforms and
restrictions on food stamp eligibility for welfare recipients.
TEFAP Issues. Federal food donations under TEFAP have increased, and
private-sector donations to emergency feeding organizations are on the rise. But
many contended that federal help was not keeping pace with growing demand.
Perhaps more important, they argued that the costs of storing and distributing food
given out by state/local providers (whether privately or federally donated) were
seriously underfunded.
Provisions as Enacted. The farm bill reauthorizes all expiring food stamp
authorities through FY2007. Drawing on both the House and Senate measures, it:

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! Expands eligibility for noncitizens by making eligible all low-
income legal permanent resident noncitizen children (without regard
to their date of entry) and other individuals (legal permanent
residents, refugees/asylees) who have resided in the United States
for 5 or more years (these changes account for 40% of the cost of the
nutrition title of the farm bill and are expected to affect some
390,000 persons when fully implemented);
! Raises benefits to larger households modestly (by increasing the
amount of income that is disregarded when setting their benefits);
! Allows states to provide “transitional” food stamp benefits for 5
months to families leaving Temporary Assistance for Needy
Families (TANF);
! Sets up a number of state options to reduce recipient reporting
requirements, simplify benefit calculations, and conform income and
asset eligibility rules with those of other public assistance programs;
! Increases funding for nutrition assistance grants (provided in lieu of
food stamps) to Puerto Rico and American Samoa; and,
! Revamps the quality control system to (1) dramatically reduce the
number of states sanctioned (only those with persistently high rates
of erroneous benefit and eligibility determinations would be
penalized) and (2) grant bonus payments to states with exemplary
administrative performance.
The conference agreement also reauthorizes TEFAP through FY2007, increases
funding authority for TEFAP food purchases by $40 million a year, and raises the
appropriations authorization for distribution costs from $50 million to $60 million
a year.
Funding for food stamp and TEFAP expansions are over 90% of the cost of the
nutrition title. Costs also cover extra money for Puerto Rico and American Samoa,
funding for commodity purchases for child nutrition programs, and added funds for
the WIC farmers’ market program (FY2002 only) and the farmers’ market program
for seniors.
House and Senate Bills. The House bill would have reauthorized all
expiring food stamp authorities through FY2011. It also included significant
structural changes intended to increase benefits to families with children and ease
burdens on administrators and applicants/recipients, all of which were largely
included in the final bill. The Senate bill would have reauthorized all expiring food
stamp authorities through FY2006. It also included amendments that – much like the
House bill – raised benefits to larger households, allowed states to conform rules to
TANF and Medicaid and grant transitional food stamps, eased quality control
penalties, and instituted new bonus payments to states for high performance.
However, it went well beyond the House measure, primarily by:
! Expanding eligibility for noncitizens (more extensively than
proposed by the Administration);
! Setting up state options to: establish when eligibility will be
redetermined, reduce recipient reporting requirements, simplify
benefit calculations, and conform asset eligibility rules with TANF
and Medicaid standards;

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! Increasing benefits for recipients with very high shelter costs;
! Liberalizing and simplifying work requirements for able-bodied
adults without dependents;
! Ending limits on spending of work/training funds and changing the
federal share of this spending; and,
! Permitting use of food stamp benefits to buy dietary supplements.
The Senate measure also extended TEFAP authorizations through FY2006 and,
as with the House bill, increased funding for food purchases and distribution costs.
Farm Credit (Title V)8
Background/Issues. Omnibus farm bills commonly contain a credit title that
makes policy changes to USDA agricultural credit programs and addresses issues that
relate to commercial lenders, such as the Farm Credit System (FCS, a confederation
of federally chartered, member-owned banks and associations) and commercial
banks. Credit is an important production input for many farmers. Long-term credit
is used to finance purchases of real estate, and shorter-term loans finance production
input expenses such as livestock, seed, feed, fuel, and fertilizer.
USDA’s Farm Service Agency (FSA) serves as a lender of last resort to eligible
family-sized farmers whose financial condition is too weak to permit them to obtain
commercial credit. FSA provides direct loans to farmers and also guarantees the
timely repayment of principal and interest on certain loans made by commercial
lenders. FSA makes and guarantees real estate and operating loans, and also makes
direct emergency disaster loans. These loan programs have permanent authority
under the Consolidated Farm and Rural Development Act, and unlike the farm
commodity programs, do not require periodic reauthorization. However, Congress
frequently uses the farm bill to make changes to loan program terms, conditions, and
eligibility requirements.
Provisions as Enacted. The final bill generally reauthorizes USDA farm
lending programs and provides greater access to USDA farm credit programs for
beginning farmers and ranchers. It increases the percentage that USDA may lend for
down payment loans and extends the duration of these loans; and, establishes a pilot
program to encourage beginning farmers to be able to purchase farms on a land
contract basis. The measure extends emergency loans for losses due to USDA-
imposed animal or plant quarantines. Regarding shared appreciation agreements
(SAAs), the Secretary may modify a recapture loan on which a payment has become
delinquent; reamortized loans may not exceed 25 years and may not reduce
outstanding principal or unpaid interest. The final bill also enables CoBank (an FCS
arm) to finance facilities for storage and handling in foreign countries that purchase
U.S. farm products, by allowing it to finance equipment and facilities off the farm.
For More Information.
! RS21145 Shared Appreciation Agreements on USDA Farm Loans.
8 CRS contacts: (name redacted), 7-....; Ralph Chite, 7-.....

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! FSA’s website (www.fsa.usda.gov/dafl/) has information on its loan
programs.
Rural Development (Title VI)9
Background/Issues. The 1980 Rural Policy Act (P.L.96-355) designates
USDA as the lead federal agency for coordinating rural development. The stated
mission of the rural development agencies within USDA is to enhance rural
communities by targeting financial and technical resources in areas of greatest need.
Four agencies in USDA are responsible for the mission area: the Rural Housing
Service (RHS), the Rural Business-Cooperative Service (RBS), the Rural Utilities
Service (RUS), and the Office of Community Development (which provides
community development support through field offices). The mission area also
administers the rural portion of the Empowerment Zones and Enterprise
Communities Initiative and the National Rural Development Partnership.
The rural development titles of past farm bills have supported local business
development and expansion and the physical infrastructure of rural areas, e.g.,
subsidies for housing, electricity, telephones, water and waste disposal, and
community facilities. More recently, policymakers have pushed for programs that
support innovative and alternative industry development, and enhanced
telecommunications access, as well as new funding mechanisms. Pressure for such
alternatives has continued as policymakers recognize the implications for rural areas
of the changing structure of agriculture. Local investment strategies, notably value-
added agriculture – e.g., regional food processing plants, ethanol cooperatives,
organic farming, “eco-labeled” production – are also being promoted by many in the
farm sector.
In addition to agriculturally related development opportunities, a broad range
of rural development loans and grants are directed at the provision of physical
infrastructure (e.g., water and waste water facilities), small business and cooperative
development, rural electrical utilities, and housing. The Rural Community
Advancement Fund, authorized by the 1996 farm bill, consolidates 13 business and
infrastructure programs into a more streamlined package to better tailor programs to
the diversity of needs in rural areas. Other programs address emerging needs in
providing telecommunications technology. Many of these non-agriculture programs
address the distinctive economic limitations of rural areas, e.g., poverty, lack of
investment capital, the high cost of providing public services.
Provisions as Enacted. CBO estimates the bill’s new direct budget
authority for rural development at $870 million over 6 years. The final bill retained
many new rural development programs and initiatives in the Senate and House bills
while reducing the programs’ levels of mandatory authorization. The final bill
reduced the House direct authorization amount by $305 million and the Senate direct
authorization amount by $841 million. A portion of this reduction reflects repeal of
the Fund for Rural America.
9 CRS contact: (name redacted), 7-.....

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Neither the Rural Endowment Program nor the Rural Entrepreneurs and
Microenterprise Assistance Program authorized in the Senate version is retained in
the final bill. Although the National Rural Cooperative and Business Equity Fund
was also deleted in the final bill, a Rural Strategic Investment Program is authorized.
Direct Spending Authorizations
Major rural development provisions funded through direct (mandatory)
spending under the bill follow:
! The Rural Strategic Investment Fund establishes a National Board
on Rural America that will provide $100 million in planning grants
to certified Regional Investment Boards;
! The Rural Business Investment Program provides $100 million in
loan guarantees and subsidies to form Rural Business Investment
corporations that will make equity investments to small firms. The
program will be administered through the Small Business
Administration;
! Enhanced Access to Broadband Service to Rural Areas provides
$100 million in grants and loans;
! Rural Local Television Broadcast Signal Loan Guarantees authorizes
$80 million under the Launching Our Communities’ Access to Local
Television Act of 2000;
! Value-added Agriculture Market Development Grants provide $40
million to independent producers and producer-owned enterprises;
5% set-aside for organic production. $15 million of this funding is
earmarked for 10 new Agriculture Innovation Centers for technical
assistance to value-added agricultural businesses;
! The Rural America Infrastructure Development Account authorizes
one-time mandatory funding of pending water and waste water
applications at $360 million;
! Rural Firefighters and Emergency Personnel Grant Program
provides funding to train emergency personnel.
Discretionary Spending Authorizations
The bill also authorizes a number of programs where funding is classified as
discretionary and will have to be provided through the annual USDA appropriations
bill. The final measure:
! Reauthorizes the Rural Community Advancement Program and
eliminates its national reserve account;
! Provides grants to non-profit organizations to construct or refurbish
individually-owned household water well systems for low and
moderate-income households;
! Removes the current authorization level of $590 million on water
and waste disposal grants;
! Provides $100 million in water and waste facility loans and grants
for Native American Tribes;
! Establishes a grant program for Multijurisdictional Regional
Planning Organizations;

CRS-24
! Creates a new Rural Telework Centers program;
! Establishes a Historic Barn Preservation Program;
! Provides a 10% set-aside for child care facilities under the Rural
Community Advancement Program’s (RCAP) Community Facilities
account;
! Authorizes $51 million for new SEARCH grants to provide
technical assistance to very small communities in meeting
environmental goals;
! Establishes the Northern Great Plains Regional Authority and
provides $30 million in authorization; reauthorizes and makes
changes to the Delta Regional Authority.
Other Provisions
The new measure also:
! Provides a generalized definition of rural area for future rural
development programs;
! Repeals the Venture Capital Demonstration Program;
! Repeals the Fund for Rural America;
! Repeals the Alternative Agricultural Research and
Commercialization Corporation;
! Makes Empowerment Zones and Enterprise Communities eligible
for community facility loans and grants without consideration of
RHS statutory requirements;
! Modifies Business and Industry Loans to allow loans to value-added
cooperatives not located in rural areas;
! Provides telephone loans to state and local governments and other
public entities to expand 911 access;
! Authorizes the National Rural Development Partnership;
! Creates an intergovernmental rural policy working group.
For More Information.
! CRS Report RL31172, The Changing Structure of Agriculture and
Rural America: Emerging Opportunities and Challenges.
Agricultural Research, Extension, and Education (Title VII)10
Background/Issues. Title VIII of the 1996 farm bill authorized USDA’s
agricultural research, extension, and education programs and modified public
agricultural research policy. Also, a research-related provision in the rural
development title of the 1996 Act authorized a competitive grants program (the Fund
for Rural America) to support rural development projects and rural-focus research
projects. Although not subsequently fully funded by appropriators, the Fund marked
a significant change in that federal money for the program ($100 million annually for
3 years, of which roughly one-third was for research grants) was to be transferred
directly to USDA from the U.S. Treasury instead of being appropriated.
10 CRS contact: Jean Rawson, 7-.....

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In 1998 Congress passed separate legislation superseding Title VIII of the 1996
farm bill, making several significant reforms and reauthorizing USDA’s research,
extension, and education programs through 2002. The Agricultural Research,
Extension, and Education Reform Act of 1998 (P.L. 105-185) extended the new
provisions contained in the 1996 farm bill (including the Fund for Rural America)
and adopted additional policy changes to: (1) require greater accountability for
program relevance and merit on the part of institutions receiving federal funds; (2)
increase the funding authority for multi-state research projects; (3) phase in a
matching funds requirement for the 1890 (historically black) colleges; and, (4)
authorize several new research programs. Of the latter, the most significant is a 5-
year, $600 million Initiative for Future Agriculture and Food Systems, a competitive
grants program intended to promote cutting-edge research in the areas of genomics,
biotechnology, food safety, new uses for agricultural products, natural resource
management, and farm profitability. Congress authorized funding for the program
– $120 million annually – to come directly from savings in mandatory spending
stemming from reforms made in the food stamp program in 1997.
In part because of difficulties in obtaining consistent financing for the
innovative funding mechanisms authorized in the 1996 farm bill and the 1998
research reform law (the Fund for Rural America and the Initiative for Future
Agriculture and Food Systems), a primary research policy issue in the recent farm bill
debate was funding. In June 2001, a bipartisan group of 49 House members,
including 24 from the House Agriculture Committee, wrote to Agriculture and
Appropriations Committee leaders urging that a portion of the budget increase set
aside for agriculture be used to double the funding for research programs over the
next 5 years, including $500 million in the coming year. In addition, the September
11, 2001 terrorist attacks prompted many lawmakers to call for additional security
for federal and state research facilities, and for increased research on agriculture and
food protection.
Provisions as Enacted. The final bill among other things:
! Permits the annual appropriation through FY2007 of such sums as
are necessary for research at the state agricultural experiment
stations and the Cooperative Extension System (currently limited to
$850 million and $420 million, respectively);
! Permits the annual appropriation through FY2007 of such sums as
are necessary to support the endowment for the 1994 (tribally
controlled) land grant institutions; increases the annual payment to
each 1994 Institution from $50,000 to $100,000; and makes the
1994 schools eligible for competitive grants under the Integrated
Activities program of CSREES;
! Gradually increases the state matching funds requirement for the
1890 (historically black) land grant colleges to 100% over 5 years
(with authority for the Secretary of Agriculture to waive some of the
match requirement under certain conditions); and raises the
minimum amount that can be appropriated for research and
extension at the 1890 schools to a fixed percentage of the amounts
appropriated for 1862 schools (15% for research; 25% for
extension);

CRS-26
! Reauthorizes the Initiative for Future Agriculture and Food Systems,
with funds gradually increasing to $200 million annually by FY2006
and FY2007; and encourages grants under the Initiative to support
minority-serving institutions, rural economic development and
several other priority issue areas;
! Authorizes appropriations for grants to schools in the U.S.
Territories (renamed “insular areas” for the purposes of Title VII) to
support distance education and teaching programs at insular area
land grant schools;
! Creates a special authority for appropriations to support biosecurity
preparedness and response;
! Provides a one-time allocation of $8 million in FY2002 in CCC
funds to support the activities of Girl Scout, Boy Scout, Future
Farmers of America, and 4-H groups in rural areas, with
appropriations authorized in subsequent years;
! Establishes a program to make grants to colleges, agencies or
organizations that can provide training, education, and technical
assistance to beginning farmers and ranchers.
Other Provisions (Titles VIII, IX, and X)
Competition Issues.11 The issue of competition and market structure in
agriculture continued to generate interest, and several attempts were made to address
the issue in the farm bill. The House bill contained two provisions (added as floor
amendments) that would have: created an interagency task force to study the issue;
and authorized appropriations to enhance the ability of USDA’s Grain Inspection,
Packers and Stockyards Administration (GIPSA) to address the issue.
An earlier version of the farm bill proffered by the Senate Agriculture
Committee chairman (S. 1628) contained a competition title that was removed during
committee markup. The competition title contained provisions to: establish within
USDA a special counsel for competition matters; require a report on corporate
structure for companies with sales of $100 million or more; set standards/safeguards
in contracting; and, extend GIPSA oversight to the poultry industry. The Senate-
passed farm bill did contain provisions to: remove mandatory arbitration clauses
from livestock contracts, and allow for dispute settlement through other legal means
in addition to arbitration.
Among the more contentious conference issues was a Senate-passed ban on
packer ownership or control (to such an extent that the producer is no longer
“materially participating” in the production) of livestock for more than 14 days prior
to slaughter. Conferees did not include this ban in the final bill.
The final bill as enacted contains (in Title X) two Senate provisions to: (1)
extend, to swine production contracts, GIPSA authority to protect producers from
unfair and deceptive business practices (such GIPSA authority was already in place
for broiler farmers who grow under contract and livestock producers who sell in cash
markets rather than through contracts); and (2) allow contract producers to discuss
11 CRS contact: (name redacted), 7-.....

CRS-27
the contract with advisors and enforcement agencies even if the contract contains a
confidentiality clause.
Forestry.12 The House and Senate bills both contained forestry titles (Title
VIII in each). The conference agreed to several provisions (discussed below), but
many were deleted. Both bills would have authorized “stewardship end result
contracts,” where the Forest Service could require timber purchasers to reduce
wildfire fuel levels, and grants to biomass-to-energy facility operators “to offset the
costs incurred to purchase” potentially hazardous wildfire fuels; however, differences
between the House and Senate versions could not be resolved, and the provisions
were deleted in the conference. The Senate version also would have created several
new programs: forestry cooperatives grants; help to states with watershed issues on
nonfederal lands; a Chesapeake Bay Watershed Forestry Program; a Suburban and
Community Forestry and Open Space Initiative; an Office of Tribal Relations and
Assistance to Tribal Governments; a research and treatment program for Sudden Oak
Death Syndrome; and an Adaptive Ecosystem Restoration Program for Arizona and
New Mexico. These Senate provisions were deleted in the conference.
A new forest landowner assistance program was enacted. The Forest Land
Enhancement Program assists planning and implementing sustainable forestry
practices on private forestlands (with $100 million in mandatory spending over 5
years), replacing the existing Forestry Incentives and Stewardship Incentives
Programs. It generally follows the House version; the Senate version would have
added a new sustainable forest management program (with $48 million annually in
mandatory appropriations) to the existing programs. However, many of the
program’s provisions in the Senate version were either added to the bill or replaced
comparable provisions from the House version. (See CRS Report RL31065,
Forestry Assistance Programs.)
The forestry title also authorizes a new program to assist local governments in
fighting wildfires; reauthorizes the Forest Service’s Office of International Forestry;
and reauthorizes the Renewable Resources Extension Act and double the authorized
funding for forestry extension.
Energy.13 The Senate approved a new energy title creating a variety of
competitive grant and/or loan programs targeted at conversion of biomass to fuels
and chemicals, development of renewable energy, improvements in agricultural
energy efficiency, and development of hydrogen and fuel cell technologies for farm
applications. In addition, the title would require the federal government to purchase
bio-based products, if available. The House bill included some comparable energy-
related provisions, but in other titles.
The conference committee maintained, in a new Title IX, most of the provisions
of the Senate version, but at reduced funding levels. The conferees also added
funding for the Commodity Credit Corporation Bioenergy Program, which pays
biofuels (mainly ethanol and biodiesel) producers who expand their production
capacity. Under the final bill, mandatory spending on energy programs increases by
12 CRS contact: Ross Gorte, 7-.....
13 CRS contact: Brent Yacobucci, 7-.....

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$366 million between FY2002 and FY2006, and by $450 million through FY2011,
according to CBO.
Miscellaneous.14 The final bill, reflecting both the House and Senate bills,
provides for increased authorized funding for the outreach program for socially
disadvantaged farms, from $10 million to $25 million per year. While House and
Senate bills proposed making it illegal to buy, sell, transfer, or drag non-ambulatory
(“downer”) animals, the enacted measure only provides for the Secretary to prepare
a report and to issue regulations on humane treatment of “downers.” The enacted
bill, like the House and Senate bills, makes it illegal, in certain instances, to transport
animals across state lines (or for export) for participation in animal fighting ventures.
Other sections in the miscellaneous title (Title X) of the enacted bill include:
explicit authority for the Secretary of Agriculture to provide economic and disaster
assistance to livestock and dairy producers, subject to appropriations; and an increase
in Section 32 carryover authority from $300 million to $500 million annually.
Conferees did not include a Senate approved provision in the commodities title
(Title I) of the final bill that would have provided $2.4 billion in new “disaster”
assistance, including $1.8 billion for 2001 crop losses, and $500 million for livestock
producers for calendar year 2001 losses in a county that received an emergency
designation. However, the final bill retains the Senate provision for providing $94
million in 2000 crop market loss assistance for apple producers. Examples of the
many other miscellaneous provisions in the final bill, most located in Title X,
include:
! Overhaul of virtually all animal health protection laws administered
by USDA’s Animal and Plant Health Inspection Service, in order to
consolidate and update them;
! Creation of a national organic certification cost-share program;
! A new farmer’s market promotion program;
! A new Assistant Secretary of Agriculture for Civil Rights;
! Establishment of a Food Safety Commission;
! An amendment to the definition of ‘animal’ under the Animal
Welfare Act to exclude some animals used in laboratory studies;
! A program for public education regarding the use of biotechnology
in agriculture; and,
! Stiffer criminal penalties for violations of the Plant Protection Act
of 2000.
14 CRS contact: Alex Segarra, 7-.....

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Appendix A. Selected Arguments for and Against
the New Bill
These selected pro and con arguments, organized topically, were among those
offered by various lawmakers as they debated final passage of the measure. In
relating these points, CRS does not attempt to support or refute their factual basis
and, of course, takes no position on any legislative option.
Economic Impact on Farmers
Pro: The measure is critically needed now because of continuing severe problems
in the farm sector, including: the lowest real net cash farm income since the Great
Depression; the 5th straight year of low prices for major crops (in some cases record
lows); and high production costs. Without the measure, farm income will decline
well below the levels of the past 6 years, causing plunging land values and
threatening the viability of many rural lenders.
Con: This measure will have the perverse effect of worsening, not improving,
farmers’ financial situation. The higher subsidies inflate land values, adding to
production costs and more specifically making it more expensive to rent land (and
42% of U.S. farmers are renters). Subsidies stimulate overproduction – causing farm
prices to decline. The combination of higher production costs and lower prices
squeezes net farm incomes.
Market Orientation
Pro: The measure maintains the market-oriented features of the 1996 farm law.
Farmers will have the flexibility to plant virtually any agricultural crop (with the
exception of most fruits and vegetables); there are no supply controls such as set-
asides and USDA-managed stocks. Thus, the measure’s support features are not
dependent on government-imposed planting rules, and therefore will have minimal
impacts on market prices and production decisions.
Con: Rather than market-oriented, the measure maintains the commodity-oriented
policies of the past, where most subsidies are pegged to the prices of specified crops,
and skewed toward those who produced them in the past. Moreover, because the
more a producer has grown, the more he or she is entitled to receive – the reason why
2/3 of farm subsidies have gone (and will likely continue to go) to 10% of U.S.
farmers – large farmers will be in an even better financial position to become larger,
swallowing more traditional, small and medium-sized operations.
Regional Balance
Pro: The measure is one of the most balanced in years. For example, negotiators
were able to win the support of most dairy regions in the country. Growers of both
southern and northern tier crops were equally satisfied with the benefits, and various
provisions address the needs of America’s fruit and vegetable growers and of
livestock producers as well.

CRS-30
Con: The biggest benefits will go to just a handful of states, largely in the upper
Midwest, Plains, and South. According to one university analysis, 75% of all
projected annual crop payments under the law will go to 13 states; over 40% will go
to 5 states. Also, commodity program benefits are again focused primarily on the
major row crops (e.g., corn, wheat, soybeans, cotton, etc).
Budget Impacts
Pro: The measure fully complies with the FY2002 Congressional Budget
Resolution. This resolution provided for the expenditure, by the Agriculture
Committees, of an additional $73.5 billion in mandatory farm bill spending (above
the April 2001 baseline, over 10 years), and the Congressional Budget Office (CBO)
officially has reported that the measure’s additional cost will not exceed this.15 Also,
farm policies (which account for little more than one-half of 1% of the total U.S.
budget) will cost no more per year under the 2002 farm bill than spending under the
1996 farm bill (when the cost of the annual emergency assistance packages is
included).
Con: When the FY2002 Budget Resolution allowed $73.5 billion in additional
spending, there was a projected budget surplus. In the wake of 9/11 and an economic
slowdown, the federal budget is now in deficit. Re-estimates of spending since April
2001 show that costs will be higher. When the new spending – whether the $73.5
billion under last year’s outdated estimates, or the $82.8 billion under the March
2002 CBO re-estimate – is added to existing spending, the actual cost of this new bill
will be anywhere from $170 billion to $200 billion over 10 years (not counting the
food stamp title), making it likely the most expensive farm bill in history.
Current Trade Obligations
Pro: The measure fully complies with U.S. trade obligations (which limit trade
distorting U.S. farm subsidies to $19.1 billion per year). The measure was designed
to provide much of the assistance in a non-trade distorting manner (e.g., fixed
payments not based on current production; new conservation spending). To ensure
that U.S. obligations are not breached, a “circuit breaker” provision requires the
Secretary of Agriculture to reduce trade-distorting subsidies if it is determined that
they will breach the $19.1 billion limit.
Con: This measure will cause the United States to violate its current trade
obligations (one analysis estimates a one-in-five chance that the $19.1 billion cap will
be breached, but other analysts contend that the likelihood may be much greater).
The “circuit breaker” provision will be administratively and politically difficult to
employ. Certain provisions considered “green,” that is, not trade-distorting, in fact
will be challenged before the World Trade Organization (WTO) by U.S. trading
partners who believe they are “amber,” that is, trade-distorting.
15 The bill is a 6-year measure (2002-2007), but CBO has scored it over 10 years as well.

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New Trade Negotiations
Pro: Although there are new subsidies, the bill places the United States in a stronger
position, in the ongoing round of world trade negotiations, to negotiate future
constraints on foreign farm supports. More specifically, the United States should not
unilaterally cut its own support to U.S. farmers at a time when: agricultural tariffs
throughout the world average 62%, compared with average U.S. agricultural tariffs
of 12%. Moreover, the European Union (EU) is permitted to provide much higher
subsidies to its farmers (overall EU support is more than three times as high as U.S.
support). Furthermore, the EU accounts for some 90% of all agricultural export
subsidies worldwide.
Con: The United States will have less, not more, trade negotiating clout. Many
foreign leaders have already vehemently denounced the bill as highly trade distorting.
Officials from Brazil, Australia, Canada, Mexico, the European Union, and
developing nations, for example, now question the sincerity and credibility of the
United States when it says it wants further reforms in global agricultural and trade
policies. The bill: jeopardizes progress in current multilateral, bilateral, and regional
discussions; undermines developing nation farmers trying to compete in global
markets or simply to subsist; and, encourages other countries to increase their own
subsidies just to keep pace with the United States.
Conservation
Pro: The measure calls for the largest investment in conservation in the history of
recent farm bills – $17.1 billion in new money, or 80% more in total mandatory
spending than would have been provided without the bill. Moreover, by putting more
money into the protection of “working lands,” the measure will make production
agriculture more environmentally responsible – and result in more off-farm benefits
(e.g., cleaner streams and ground water, etc.)
Con: The increase in conservation will be helpful, but more so for larger producers,
who will be rewarded for environmental practices they should have in place already.
Four times as much money will be spent on commodity price supports than on
conservation under the new law. Had more money gone for conservation, subsidies
could have been more equitably distributed to smaller-sized farms and ranches, to a
more diverse array of crops, and to more regions of the country.
Rural Development
Pro: The new farm bill will help stimulate stagnant rural economies by increasing
land values and shoring up the rural financial system. In addition to spreading farm
payments through rural economies across America, the bill adds $820 million to
innovative rural development projects and activities.
Con: The new farm bill diverts money from the needs of most rural economies to
a few agricultural areas. Only a small percentage of rural (non-metro) counties have
an agricultural base, and in those, few if any of the farm benefits stimulate good jobs
or innovative economic enterprises with long term prospects for growth.

CRS-32
Need for New Legislation
Pro: The measure replaces the 1996 farm bill, which was set to expire in 2002.
Failure to pass a bill now could have resulted in congressional gridlock as the 2002
elections approached – forcing a reversion to permanent farm laws passed in 1938
and 1949. These old laws mandate a strictly prescriptive, non-market-oriented, and
highly costly policy.
Con: Farm state lawmakers deliberately keep these old laws on the books to force
Congress to approve expensive new farm bills. In fact, Congress would never permit
the old 1938 and 1949 laws to take effect, as indicated by the extension of the 1990
farm bill for an additional year when congress could not come to agreement on a new
farm bill by the end of 1995.
Ad Hoc Assistance
Pro: The measure averts the need for yet another year of ad hoc emergency
assistance bills, which Congress passed 4 previous years, providing over $30 billion.
Another emergency bill would have been considered closer to the mid-term elections,
when pressures to provide even greater levels of assistance likely would have
prevailed.
Con: Another year of emergency ad hoc assistance would have been preferable to
locking in 6 years of unpredictable spending, and such ad hoc assistance could have
been implemented by USDA more quickly. Moreover, it was precisely election-year
politics (i.e., the desire to improve the election prospects of farm state lawmakers)
which brought pressure to enact such an overly generous 6-year bill.
Farm Bill Deliberations
Pro: The measure was carefully and transparently crafted, involving 2 years of
deliberations, including over 50 hearings to receive the views of a diverse set of
interests.
Con: Bill drafters focused on proposals by the big commodity interests, ultimately
expanding outmoded and ultimately harmful policy tools rather than introducing
innovative new policies, or better funding research and trade activities.

CRS-33
Appendix B. Chronology of Actions in the 107th
Congress
House Agriculture Committee Hearings
January 31, 2001:
To examine the final report of the Commission on 21st
Century Production Agriculture.
February 14, 2001:
On the current state of the farm economy and the economic
impact of federal policy on agriculture.
February 15, 28, March 7, 8, 14,
15, 21, 22, 29, April 4, 5, 25, 26,
May 2, 3, 2001:
On the future of federal farm commodity programs.
April 3, 2001:
(Subcommittee on Department Operations, Oversight,
Nutrition, and Forestry) on USDA domestic food
distribution programs.
May 22, 2001:
(Subcommittee on Livestock and Horticulture) to review
national dairy policy.
May 23, June 6, 2001: ( S u b c o m m i t t e e o n C o n s e r v a t i o n , C r e d i t , R u r a l
Development, and Research), on conservation programs.
June 12, 28, 2001:
(Subcommittee on Department Operations, Oversight,
Nutrition, and Forestry) to review forestry programs.
June 13, 2001:
(Subcommittee on Specialty Crops
and
Foreign
Agriculture) to review peanuts.
June 19, 2001:
(Subcommittee on Livestock and Horticulture) to review
fruits and vegetables.
June 20, 2001:
(Subcommittee on Conservation, Credit, Rural
Development, and Research) to review agricultural credit.
June 26, 2001:
(Subcommittee on Conservation,
Credit,
Rural
Development, and Research) to review rural development.
June 27, 2001:
(Subcommittee on Conservation,
Credit,
Rural
Development, and Research) to review research.
June 27, 2001:
(Subcommittee on Department Operations, Oversight,
Nutrition, and Forestry) on the food stamp program.
June 28, 2001:
(Subcommittee on Specialty Crops
and
Foreign
Agriculture) to review foreign trade programs.

CRS-34
July 17, 18, 19, 2001:
To review a draft farm bill.
Senate Agriculture Committee Hearings
January 30, 2001:
To review the final report of the Commission on 21st
Century Production Agriculture.
February 28, March 1,
July 31, 2001:
To review the state of current and proposed farm bill
conservation programs.
March 24, 2001:
Field hearings in Iowa to discuss the future farm bill and
related agricultural and rural development issues.
March 27, 2001:
To review the research title of the farm bill.
April 25, 2001:
To review the trade title of the farm bill.
May 16, 2001:
To review the credit title of the farm bill.
June 28, 2001:
To review major farm bill issue areas.
July 12, 17, 2001:
To receive farm bill
testimony
from
agricultural
commodity interests.
July 19, 2001:
To elicit suggestions for the domestic nutrition title of the
farm bill.
July 24, 2001:
To discuss livestock issues for the farm bill.
August 2, 2001:
To discuss rural development issues for the new farm bill.
August 4, 13, 18, 20, 27,
October 27, 2001:
Field hearings in Minnesota, Michigan, Georgia, Iowa, and
Idaho on the farm bill.
House Legislative Actions
May 9, 2001:
House agrees to the conference report (H.Rept. 107-60) for
the FY2002 budget resolution (H.Con.Res. 83), which
guides federal spending and revenue for the next 10 years.
The resolution sets the fiscal parameter for next farm bill
by providing room for an additional $73.5 billion (above
baseline, FY2002-2011) for mandatory farm commodity
support and related spending.
July 26, 2001:
House Agriculture Chairman Combest introduces the
Agricultural Act of 2001 (H.R. 2646), which becomes the
main farm bill reauthorization vehicle.

CRS-35
July 26, 27, 2001:
House Agriculture Committee formally marks up H.R.
2646, agreeing by voice vote to report it.
August 2, 2001:
H.R. 2646, now titled the Farm Security Act of 2001, is
reported (H.Rept. 107-191, Part 1).
August 31, 2001:
House Agriculture Committee issues a supplemental report
on H.R. 2646 (H.Rept. 107-191, Part 2).
September 6, 2001:
House International Relations Committee, where H.R.
2646 was sequentially referred, amends the trade title (Title
III) and agrees by voice vote to report the bill (H.Rept. 107-
191, Part 3).
October 2, 2001:
House Rules Committee reports H. Res. 248, providing for
consideration of H.R. 2646, including new text in the
nature of a substitute to be used for considering floor
amendments (H.Rept. 107-226).
October 3, 4, 5, 2001: Full House debates and amends H.R. 2646.
October 5, 2001:
Full House passes H.R. 2646 by a vote of 291 to 120.
Senate Legislative Actions
May 10, 2001:
Senate agrees to the conference report (H.Rept. 107-60) for
the FY2002 budget resolution (H.Con.Res. 83), effectively
permitting an additional $73.5 billion in new mandatory
spending (above baseline) for farm and related programs
over FY2002-2011.
October 31, November 6,
7, 8, 13, 14, 15, 2001:
Senate Agriculture Committee formally marks up a new
farm bill.
November 15, 2001:
Senate Agriculture Committee agrees by voice vote to
report an original farm bill, the Agriculture, Conservation,
and Rural Enhancement Act of 2001 (S. 1731).
December 7, 2001:
Senate Agriculture Committee reports the original bill (S.
1731; S.Rept. 107-117).
December 10, 11, 12, 13, 14, 17, 18, 19, 2001,
February 6, 7, 8, 11, 12, 13, 2002:
Full Senate debates and amends S. 1731.
December 11, 2001:
Amendment (SA 2471) in the nature of a substitute is
introduced by Senators Daschle and Harkin to be the
vehicle for amendments during floor action on S. 1731.

CRS-36
February 13, 2002:
After adopting by voice vote the substitute amendment (SA
2471), as amended, and then substituting its own bill
language, Senate passes H.R. 2646, by a vote of 58 to 40.
Conference/Final Actions
March 13, April 9, 10,
11, 2002:
Formal House-Senate conference meetings are held to
resolve farm bill differences.
April 10, 18, 23,
24, 2002:
House passes four different motions to instruct its farm bill
conferees to agree to various Senate provisions.
May 1, 2002:
House and Senate conferees agree to file a conference
report on H.R. 2646, now named the Farm Security and
Rural Investment Act of 2002 (H.Rept. 107-424).
May 2, 2002:
House agrees to the conference report by a vote of 280 to
141.
May 8, 2002:
Senate agrees to the conference report by a vote of 64 to
35, clearing the measure for the President.
May 13, 2002:
President signs the farm bill into law (P.L. 107-171).

CRS-37
Appendix C. Side-by-Side Comparison of Prior and New Law (Selected
Provisions)
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
Wheat, Corn, Grain Sorghum, Barley, Oats, Upland Cotton, Rice, Soybeans, Minor Oilseeds (Contract Crops)
Farmers who participated in the wheat, corn, barley, grain sorghum,
Direct payments again are available in 2002-2007 for eligible
oats, upland cotton, and rice programs in any one of the years 1991-
producers of crops of wheat, corn, barley, grain sorghum, oats,
95 could enter into 7-year production flexibility contracts (PFC) for
upland cotton, and rice – and newly available for soybeans,
1996-2002. Each producer received a fixed, decoupled per-unit
other oilseeds, and peanuts. (See peanut provisions; below).
payment rate (e.g., per bushel) for each contract commodity; the rate
Fixed, decoupled payments at rates shown in table 3, page 10.
was determined annually by a statutory formula. Former effective
2002 payment rates shown in table 3.
Target prices and target price deficiency payments linked to farm
Authorizes new counter-cyclical deficiency payments (not
acreage requirements, which had existed from 1974 through 1995,
linked to farm acreage requirements) that make up the
were eliminated by the 1996 farm law.
difference between a crop’s average market price plus the fixed
decoupled payment, and its “target price” (see table, page 11),
tied to each unit (e.g., bushel, pound) produced (2002-2007).
Eligible farm’s “payment quantity,” for direct payment purposes,
Fixed decoupled payments and counter-cyclical payments are
equal to 85% of its contract acreage (generally 1991-95 average
calculated at 85% of each farm’s base acres and crop yields as
acreage) times its program yield (generally frozen at 1986 program
set in 1996 act; producers can update bases. For counter-
levels) for that commodity.
cyclical payments only, those who update bases can also update
yields.
All wheat, corn, barley, grain sorghum, oats, upland cotton, and rice
Marketing assistance loans and loan deficiency payments
produced on PFC farms eligible for marketing assistance loans and
(LDPs) continue through 2007 crop, generally at higher rates
loan deficiency payments (LDPs); non-PFC farm production not
than currently (see table 5, page 11). Participation in the direct
eligible. All soybean or oilseed production eligible regardless of
payment program no longer a requirement for loan eligibility.
PFC participation. See table 5 for former 2002 rates.
Payment Limits
Annual per-person payment limits for above crops: $40,000 for
Beginning with 2003 crops, annual limits of $40,000 for fixed
PFC payments (matching emergency market loss payments paid
payments; plus, $65,000 for counter-cyclical payments; plus,

CRS-38
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
over several recent years effectively doubled this limit); $75,000 on
$75,000 for marketing loan gains (however, no limit on gains
marketing loan gains and loan deficiency payments for one or more
from any commodity certificates issued by USDA). “Three-
contract commodities or oilseeds (the supplemental farm legislation
entity” rule retained. Farm program participation restricted to
also increased limits on marketing loan gains, to $150,000 for 1999,
those with less than $2.5 million per year in adjusted gross
2000, and 2001). Moreover: producers have been able to effectively
income (3-year average), unless more than 75% of it is from
double payment limits due to rules permitting payments to be
agriculture. (Peanuts subject to separate payment limits.)
received for multiple farm operations (“3-entity rule”); plus, use of
USDA commodity certificates (in lieu of cash) virtually uncaps
marketing loan gains.
Flexibility to plant most crops (except most fruits & vegetables) on
Continues flexibility to plant most crops (except fruits,
base acres; no USDA annual acreage control or supply management
vegetables, & wild rice) on base acres; no USDA annual
authority.
acreage control or supply management authority.
Peanuts
National poundage quota set (and allocated among quota holders) to
Poundage quotas are ended; quota holder compensation set at
reflect projected domestic demand for edible peanuts. All peanuts
$220/ton/year for 5 years.
produced above quota limits must be exported or crushed into oil
and meal.
No direct Production Flexibility Contract payments.
Authorizes new direct, decoupled fixed annual payments of $36
per ton, and new counter-cyclical payments based on target
price of $495/ton, for 1998-2001 producers.
Quota peanuts supported through nonrecourse loans at $610/ton;
Nonrecourse marketing loan rate is $355/ton for all peanuts
additionals (nonquota peanuts) supported at 2001 level of $132/ton.
produced.
Sugar
Supported through nonrecourse loans of 18¢/lb.(raw cane) and
Nonrecourse loans remain at 18¢/lb.(raw cane) and 22.9¢/lb.
22.9¢/lb. (refined beet). No provision mandating the program not
(refined beet) continue. No-net-cost rule is re-established.
result in net federal costs. Marketing assessment on books; loan
Marketing assessment and loan forfeiture penalty are both
forfeiture penalty of 1¢/lb. on raw cane sugar (and equivalent
eliminated, effectively raising the effective support level.
amount for beet) effectively reduced support level.
Authority to impose marketing allotments on domestic production
Authorized are: marketing allotments, to avoid loan forfeitures;
was suspended.
and acreage reduction in exchange for CCC-owned sugar.

CRS-39
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
Dairy
Indirect support of the farm price of milk at statutorily-set level of
Price support through commodity purchases is continued at
$9.90 per 100 lbs. (cwt.), through USDA purchases of surplus
current level of $9.90/cwt. through 2007.
cheese, butter, and nonfat dry milk.
No authorization for such payments. However, the new payment
Authorizes a new 3-1/2-year National Dairy Program providing
program modeled after the Northeast dairy compact (authorized by
payment each month equal to 45% of difference between
the 1996 farm bill and expired in 2001) and ad-hoc market loss
$16.94/cwt. and Boston Class I (fluid use) price (when lower
payments to all dairy farmers (authorized by various supplementals
than $16.94); individual dairy farmer payments are made on up
for 1998, 1999 and 2000).
to 2.4 million lbs. of annual production.
Wool, Mohair, Honey
Permanent authority for support ended in 1996, but temporary loan
Authorizes marketing loans and LDPs: graded wool, $1/lb.;
authority was included in several of the subsequent emergency farm
nongraded wool, 40¢/lb.; mohair, $4.20/lb; honey, 60¢/lb.
assistance packages.
Dry Peas, Lentils, Chickpeas
No support provisions.
Authorizes marketing loans and LDPs: dry peas, $6.33/cwt. in
2002-03 & $6.22 in 2004-07; lentils, $11.94/cwt. in 2002-03 &
$11.72 in 2004-07; small chickpeas, $7.56/cwt. in 2002-03 &
$7.43 in 2004-07.
Other Commodities
Section 32 (of Agricultural Adjustment Act of 1935) provides
Increases Section 32 carryover authority, to $500 million;
permanent funding for activities to increase demand and provide
requires that not less than $200 million in Section 32 funds
outlets for U.S. agricultural commodities. This authority is used by
annually purchase fruits, vegetables, other specialty crops, of
USDA to purchase surplus agricultural commodities, both planned
which $50 million is for fresh fruits and vegetables for schools
and “contingency,”(i.e., unanticipated) purchases, among other
through Defense Department Fresh Program.
things. The law has limited, to $300 million per year, the unused
contingency funds that USDA may carry over (to the next fiscal
year).

CRS-40
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
Trade-Related Domestic Subsidy Limits
No provision related to 1994 Uruguay Round Agreement on
If the Secretary determines that commodity program
Agriculture (URAA) domestic subsidy limits.
expenditures subject to URAA domestic subsidy limits will
exceed allowable levels, the Secretary shall, to the maximum
extent feasible, make adjustments in such expenditures to ensure
they remain within limits. Prior to such actions, a report to
Congress is required on such a determination and extent of such
adjustments.
Conservation
The conservation reserve program (CRP) provides annual rental
Increases CRP acreage cap to 39.2 million acres. Retains
payments and cost-share assistance to farmers who contract to plant
priority areas. Extends farmable wetland program to all states
conserving crops like grasses and trees on environmentally sensitive
and increases enrollment cap to 1 million acres (part of overall
land (current law specifies priority areas). Contracts were for 10 to
CRP acreage cap).
15 years. Maximum CRP acreage capped at 36.4 million acres
nationally. Also allows enrollment of farmed wetland acres in the
CRP, under pilot program with enrollment of wetland and associated
buffers limited to a total of 500,000 acres in 6 states.
Wetlands reserve program (WRP) authorizes Secretary to purchase
Reauthorizes WRP; increases acreage cap to 2.275 million
long-term or permanent easements and provide cost sharing to
acres; permits 250,000 acres to be enrolled annually.
producers who agree to restore wetland on agricultural land;
national acreage was capped at 1.075 million acres.
Environmental quality incentives program (EQIP) provides
EQIP is gradually increased up to reach a $1.3 billion annual
technical assistance, cost-share and incentive payments, to crop and
funding level through CCC by FY2007. Priority areas are
livestock producers for environmental improvements. Funded
eliminated. Funds are split at 60% for livestock and 40% for
through CCC at $200 million annually. Priority areas specified. At
crop producers. Funds a new ground and surface water
least 50% of funds for livestock activities.
conservation program, and a new matching grants program for
innovative approaches to conservation.
Wildlife habitat incentives program (WHIP) provides cost-sharing
Reauthorizes WHIP, gradually increasing annual funding to $85
contracts (generally 5-10 years) for development and improvement
million. Reauthorizes FPP, gradually increasing annual funding
of wildlife habitat; total of $50 million authorized under CRP
to $125 million annually.
through FY2000. Farmland protection program (FPP) helps to fund

CRS-41
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
purchases of long-term easements against development of
productive farmland; total of $35 million in CCC funds authorized
through FY2002.
No comparable provisions.
Creates a new 2 million-acre grasslands reserve program, with
CCC funds of up to $254 million over FY2003-2007. Program
is divided (40%/60%) between agreements of 10, 15, or 20
years; and, agreements and easements for 30 years and
permanent easements.
Small watershed rehabilitation program funds modernization and
Provides, over 6 years, total of $275 million for small watershed
reconstruction of aging small impoundments constructed over past
rehabilitation program.
50 years. Appropriation authorized in 2000 at $5 million for 2001,
and up to $35 million for 2005.
No
comparable
provisions.
Creates a new conservation security
program
providing
incentive payments to all farmers who adopt and maintain
specified conservation practices on working lands.
Export Programs
Both the market access program (MAP) and foreign market
Reauthorizes MAP, with funding at $100 million in FY2002,
development cooperator program (FMDP) help exporters (mainly
$110 million in FY2003, $125 million in FY2004, $140 million
nonprofit industry trade associations) finance promotional activities
in FY2005, and $200 million in FY2006 and subsequent years.
overseas. Required (mandatory) funding for MAP of not more than
Reauthorizes FMDP with funding at $34.5 million annually
$90 million yearly in CCC funds through FY2002. FMDP statutory
through FY2007. For funding increases under both programs,
authority (at such sums as necessary) through FY2002; funding has
USDA must give equal consideration to new trade associations
been $28 million per year.
and markets.
Export enhancement program (EEP) authorizes cash payments or
Extends EEP through FY2007 at current levels.
CCC commodities as bonus subsidies to help exporters sell
agricultural products (although not statutorily prescriptive, mainly
wheat and other grains have used EEP) at more competitive prices
in targeted foreign markets. CCC funding at up to $478 million per
year through FY2002, although USDA has used EEP minimally in
recent years.
Dairy export incentive program (DEIP) authorizes cash or CCC
Renews DEIP through FY2007 at current levels.

CRS-42
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
commodities as bonus subsidies to help exporters sell specified
dairy products at more competitive prices in targeted foreign
markets. Authority through FY2002, with CCC funding to provide
commodities to the maximum levels consistent with U.S. trade
obligations.
Authority for export credit guarantees (or GSM) through FY2002,
Reauthorizes CCC export credit guarantee programs through
where CCC guarantees commercial financing of not less than $5.5
FY2007 at current levels.
billion annually of U.S. agricultural exports. Financing can be used
for short-term credit (GSM-102) for up to 3 years; and, for long-
term credit (GSM-103), for 3-10 years.
Emerging markets program requires CCC through FY2002 to offer
Extends emerging markets program through FY2007 at current
no less than $1 billion per year in direct credit, or credit guarantees,
levels.
for exports to emerging markets (formerly emerging democracies).
Food Aid
P.L. 480, the Food for Peace program, seeks to combat hunger and
Reauthorizes Food for Peace through FY2007, eliminate annual
encourage development overseas. Title I makes export credit
$1 billion cap on Title II spending, increases minimum level of
available on concessional terms (e.g., low interest rates for up to 30
commodities to 2.5 MMT per year, funds transportation, storage
years); Title II authorizes donations for emergency food aid and
and handling at between 5% and 10% of annual Title II funding,
non-emergency humanitarian assistance. Authority to enter into
and makes other program changes.
new P.L. 480 agreements (which are funded mainly through annual
appropriations) is through FY2002. Title II annual spending cap of
$1 million, and minimum level of commodities set at 2.025
annually. $10 million but not more than $28 million of Title II
funding per year provided for transportation, storage and handling.
Clinton Administration initiated a pilot global food for education
Authorizes President to establish “McGovern-Dole International
initiative committing USDA to provide up to $300 million (under
Food for Education and Child Nutrition Program,” with CCC
Section 416 authority) for commodities and transportation costs for
funding mandated at $100 million in FY2003; subject to annual
school and pre-school nutrition projects and related activities in
appropriations in FY2004-2007.
developing countries.
Food for progress (FFP) program, authorized through FY2002,
Reauthorizes FFP through FY2007, increases funding caps for
provides commodities to support countries that have committed to
the program, and sets minimum annual tonnages at 400,000 MT,

CRS-43
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
expand free enterprise in their agricultural economies; commodities
among other program changes.
may be provided under Title I of P.L. 480 or Section 416(b)
authorities, or using CCC funds.
Other Trade Provisions
Various trade agreements discipline countries’ use of sanitary and
Requires USDA to establish Technical Assistance for Specialty
phytosanitary (SPS) and other technical barriers to trade, used by
Crops program, using $2 million annually in CCC resources
countries to protect their consumers, agricultural and natural
through FY2007, to provide project support to address SPS and
resources. USDA agencies, the U.S. Trade Representative, and
related barriers to exports of U.S. specialty crops. Also
other federal agencies have established mechanisms for identifying
establishes a Biotechnology and Agricultural Trade Program,
such barriers and attempting to resolve disputes over them.
using technical assistance and project grants, to remove, resolve,
or mitigate significant regulatory nontariff barriers to U.S.
exports involving: agricultural commodities produced through
biotechnology; food safety; disease; or other SPS concerns, with
appropriations authorized at $6 million annually through
FY2007.
Most imports, including many food items, must bear labels
Creates a program for retailers (food service establishments are
informing the final purchaser of their country of origin. However,
exempted) to provide country of origin information to
certain “natural products” including fresh fruits, vegetables, nuts,
consumers of perishable fruits and vegetables, peanuts, fresh
live and dead animals (e.g., meats), and fish, among others,
beef, lamb, and pork, and farm-raised and wild fish/shellfish.
generally not subject to the requirement at the final point of sale.
The program is voluntary for retailers for the first 2 years, and
mandatory thereafter.
Food Stamp Program
The food stamp program provides low-income households with
Reauthorizes food stamp program. Structural changes – with
monthly coupons or electronic benefits cards to supplement their
total costs roughly halfway between the House and Senate
food buying resources. Program was modified and reauthorized
measures – include: expanded eligibility for non-citizens (40%
through FY2002 as a part of the 1996 Personal Responsibility and
of the cost); increased benefits for larger households; extensive
Work Opportunity Reconciliation Act (PRWORA), the welfare
state options to conform food stamp rules to other assistance
reform legislation that also reduced the level of the maximum food
programs, simplify program operations, and enhance client
stamp benefits, limited income deductions, restricted eligibility for
access; “transitional” benefits for those leaving cash welfare; a
many legal immigrants, and imposed time limits for able-bodied
new “quality control” system with eased penalties on states; and
adults without dependents.
a new system of high performance bonuses to states.

CRS-44
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
Other Nutrition Programs
The emergency food assistance program (TEFAP) provides funding
Reauthorizes TEFAP, nutrition assistance for Puerto Rico and
to assist with the costs of storing and distributing surplus
American Samoa, the CSFP, and nutrition assistance on Indian
commodities, among other things. Puerto Rico and American
reservations. Adds funding for TEFAP, Puerto Rico, American
Samoa receive Federal food assistance through separate block grant
Samoa, commodity purchases for child nutrition programs,
programs. The commodity supplemental food program (CSFP)
farmers’ markets for seniors, and women, infants, and children
funds monthly food packages consisting of USDA commodities for
(WIC), and farmers’ markets.
low-income pregnant and postpartum mothers and young children,
and for those over 60. USDA commodities are purchased for
distribution on Indian reservations, various child nutrition, and other
domestic feeding programs.
Credit
The Consolidated Farm and Rural Development Act (P.L. 87-128),
Provides greater access to USDA farm credit programs for
as amended, provides permanent authority for all farm loan
beginning farmers and ranchers. Increases percentage that
programs within USDA’s Farm Service Agency(FSA). FSA
USDA may lend for down payment loans and extends duration
provides direct and guaranteed loans to family farmers unable to
of these loans; establishes pilot program to encourage beginning
qualify for commercial loans. Current law offers certain preferences
farmers to be able to purchase farms on a land contract basis.
to beginning farmers.
The 1996 farm bill tightened eligibility requirements for FSA farm
Farm loan eligibility rules are loosened to make more borrowers
loans. Some of this tightening was reversed or loosened by
eligible for federal credit programs, including allowing: 2
provisions in the Agricultural Risk Protection Act of 2000 (P.L.
additional years of eligibility for loans once a borrower has
106-224), including a waiver through 2002 of a restriction on the
reached maximum number of years of eligibility; new loans for
number of years a borrower can be a customer of FSA.
borrowers with one-time debt forgiveness if delinquency was
caused by a natural disaster; and, emergency loans for plant and
animal quarantines.
The 1996 farm bill authorized funding levels for FSA direct and
Establishes authorized funding levels for USDA farm loan
guaranteed farm loan programs. Actual annual funding levels are
programs for the next five years (FY2003-2007).
determined in the annual agriculture appropriations act, and
supplemental funding is made available periodically .
The Agricultural Credit Act of 1987 (P.L. 100-233) requires certain
Secretary may modify a recapture loan on which a payment has
delinquent FSA farmer borrowers who have had debt written off to
become delinquent; modified loan may not exceed 25 years and

CRS-45
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
share with USDA a portion of any appreciation in real estate that
may not reduce outstanding principal or unpaid interest.
served as collateral for the loan. Recapture loans have been made
available by USDA to allow borrowers to gradually repay USDA for
its share of appreciation.
The Farm Credit System (FCS) is a confederation of lending
Some changes in FCS authorities, such as authorizing CoBank
institutions and associations that makes loans available primarily to
(an FCS institution) to finance facilities for storage and
agriculture. FCS is chartered by the Farm Credit Act of 1971 (P.L.
handling in foreign countries that purchase U.S. farm products.
92-181), as amended , but is cooperatively owned and operated by
its member-borrowers.
Rural Development
The 1996 farm law created the Fund for Rural America, a
Provides $870 million in mandatory authorizations, FY2002-
mandatory program to supplement rural development funding. It
2007, for new programs. The Fund for Rural America is not
was extended to FY2002 in 1998.
extended. Other programs and initiatives are authorized and
subject to annual discretionary appropriations.
The 1996 farm law created the Rural Community Advancement
Most new rural development initiatives are retained, e.g., value-
Program (RCAP) with three accounts (Community Facilities, Rural
added agriculture, broadband services, rural and regional
Utilities, and a Secretary’s discretionary account) to provide funding
planning, although funded at lower levels. RCAP is
flexibility at the State and local levels. Distance Learning and
reauthorized, but the National Reserve Account and the Rural
Telemedicine program were reauthorized.
Capital Demonstration Program are eliminated.
Research
The National Agricultural Research, Extension, and Teaching Policy
Reauthorizes university research and state cooperative extension
Act (NARETPA) of 1977 authorizes $850 million annually for
programs at such sums as may be necessary through FY2007.
agricultural research and $420 million annually for state cooperative
extension programs at land grant universities through FY2002.
The Agricultural Research, Extension, and Education Reform Act
Reauthorizes Initiative for Future Agriculture and Food Systems
of 1998 authorizes the transfer of $120 million annually in FY1999-
at $120 million annually in FY2003, $140 million in FY2004,
2002 from the U.S. Treasury for a competitive grants program on
$160 million in FY2005 and at $200 million in FY2006 and
critical emerging issues and high-priority research.
2007; adds rural economic, business and community
development policy to the list of priority research areas.
NARETPA authorizes the appropriation of such sums as necessary
Increases funding for research programs at the 1890 colleges by

CRS-46
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
for research programs, and establishes a 6% minimum (of
raising the minimum annual appropriation to 25%, and for
appropriation for 1862 schools) for extension programs at 1890
extension programs to 15%, of the amount appropriated for the
colleges; requires 50% state matching funds.
1862 schools; increases the state matching fund requirement to
100% by FY2007.
The Equity in Educational Land Grant Status Act of 1994 authorizes
Allows annual appropriation of such sums as may be necessary
$4.6 million annually in appropriations for an endowment fund, $1.7
for the 1994 endowment fund and capacity-building grants, and
million annually for capacity-building grants, and $50,000 in annual
doubles the annual payments to each college.
payments to each college through FY2002.
NARETPA defines some U.S. Territories as states for the purposes
Redefines U.S. Territories eligible for federal research and
of acts authorizing federal funding to support research, extension,
extension funds as “insular areas,” and creates new authority for
and teaching programs at land grant institutions located there;
grants to agriculture colleges in those areas to strengthen
requires 50% matching funds in FY2002.
teaching programs and for distance education; extends the 50%
matching fund requirement through FY2007.
No authority currently exists specifically for funding for upgrading
Authorizes such sums as may be necessary for a competitive
the biosecurity of federal and land grant laboratories; general
grants program to construct and upgrade security at public
authority exists for high priority research and extension initiatives.
college and university facilities conducting counterterrorism
research; authorizes such sums as necessary for research and
extension activities to improve bioterrorism prevention,
preparedness, and response through FY2007.
Forestry
Forestry Incentives and Stewardship Incentives Programs (SIP) are
Replaces Forestry Incentives and Stewardship Incentive
similar cost-sharing programs for private landowners, with a wider
Programs with a Forest Land Enhancement Program, funded at
range of activities authorized under SIP; SIP was permanently
$100 million (through expiration), with some modifications in
authorized, and both have authorized funding “as needed.” Existing
purposes and practices. Authorizes new program to assist local
wildfire protection programs assist states or volunteer fire
governments in fighting wildfires.
departments, both with authorized funding “as needed.”
Forest Service international forestry programs are permanently
Reauthorizes Forest Service (FS) Office of International
authorized; only authority for Office of International Forestry
Forestry, and Renewable Resources Extension; doubles forestry
expires. Renewable Resources Extension Act authorizes up to $15
extension funding authorization.
million/year for information, education to private landowners.

CRS-47
New Law (P.L. 107-171, Farm Security and Rural
Prior Law or Policy
Investment Act of 2002)
Competition; Anti-Trust Policy
No comparable provisions.
Provides growers with swine production contracts the same
statutory protections as livestock sellers and poultry growers.
Clarifies that livestock and poultry producers can discuss
contracts with state and federal agencies and others having a
fiduciary or familial relationship.
Miscellaneous Provisions
The CCC Bioenergy Program is a 2-year program to provide grants
New energy title: extends the CCC Bioenergy Program and
to bioenergy producers who purchase agricultural commodities to
provides mandatory funding; establishes new programs for
expand production of biodiesel and fuel grade ethanol. The
federal purchases of bio-based products and education on
Consolidated Farm and Rural Development Act allows loans and
biodiesel fuel benefits; establishes new and expanded loan and
loan guarantees for installation of solar energy systems. Biomass
grant programs to assist farmers in purchasing renewable energy
Research and Development Act provides competitive funding for
systems and improving energy efficiency; reauthorizes, funds
R&D on biofuels and other biobased chemicals and products.
Biomass Research and Development Act through FY2007.
USDA provides funding to State Departments of Agriculture for
Authorizes a farmers’ market promotion program. Creates
activities that encourage direct marketing from farmers to
national organic certification cost-share program.
consumers by means of farmers’ markets (Farmer-to-Consumer
Direct Marketing Act of 1976, as amended by P.L. 106–580). The
Federal Organic Foods Production Act of 1990 (P.L. 101-624)
authorized USDA to establish an organic certification program for
producers and handlers of organic agricultural products.
USDA’s Animal and Plant Health Inspection Service (APHIS) has
Consolidates and updates animal health protection laws
been responsible for implementing over 20 separate animal health
administered by APHIS.
protection statutes with authorities for import and export quarantine
inspections, emergency eradication programs, interstate commerce
regulations, and law enforcement.
1990 farm law (P.L.101-624) authorizes $10 million/year to assist
Increases appropriation authorization for the outreach program
socially disadvantaged farmers/ranchers to own and operate farms
for socially disadvantaged farms, from $10 million to $25
and ranches, and participate in agricultural programs that strengthen
million per year. Creates new Assistant Secretary of
the rural economy. USDA’s Assistant Secretary for Administration,
Agriculture for Civil Rights.
Office of Outreach implements the program.

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