The Farm Security and Rural Investment Act of 2002 - PowerPoint PPT Presentation

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The Farm Security and Rural Investment Act of 2002

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The Farm Security and Rural Investment Act of 2002 General Overview Crop Program Changes Dairy Provisions Key Features Higher loan rates for most crops. – PowerPoint PPT presentation

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Title: The Farm Security and Rural Investment Act of 2002


1
The Farm Security and Rural Investment Act of 2002
  • General Overview
  • Crop Program Changes
  • Dairy Provisions

2
Key Features
  • Higher loan rates for most crops.
  • Direct payments for wheat, feed grains,
  • cotton, and rice (previously called
  • production flexibility contract payments).
  • Expanded eligibility for direct payments
  • to producers of oilseeds and peanuts.

3
Key Features (Continued)
  • Additional payments (called counter-cyclical
    payments) to farmers when commodity prices fall
    below their target prices.
  • An option for producers to update the bases and
    yields used to calculate counter-cyclical
    payments.
  • New programs for dairy, pulse crops (dry peas,
    lentils, and chickpeas), peanuts, honey, wool,
    and mohair.

4
Key Features (Continued)
  • Reauthorizing the Conservation Reserve Program
    and expanding the acreage cap from 36.4 million
    acres to 39.2 million acres.
  • Reauthorizing the Environmental Quality
    Incentives Program and increasing the funding
    from about 200 million per year to 400 million
    this year, ranging to 1.3 billion in fiscal year
    2007
  • Authorizing other new Environmental programs

5
Loan Rates
FAIR Act 2002 Farm Bill 2002 Farm Bill
Maximums 2002-03 2004-07
Corn 1.89 1.98 1.95
Wheat 2.58 2.80 2.75
Soybeans 5.26 5.00 5.00
Sorghum Rel. to corn 1.98 1.95
Cotton 51.92 cents 52.00 cents 52.00 cents
Rice 6.50 6.50 6.50
6
Fixed Payments
FAIR Act 2002 Farm Bill
2002 2002-07
Corn 0.26 0.28
Wheat 0.46 0.52
Soybeans --- 0.44
Sorghum 0.31 0.35
Cotton 0.0572 0.0667
Rice 2.05 2.35
  • Not tied to current production
  • Paid on 85 of base acres, but base acres can be
    updated
  • Paid on program yields used for FAIR Act
    paymentsno updates
  • Soybean payment yield 78 of 1998-2001 yield

7
Target Prices
2002-03 2004-07
Corn 2.60 2.63
Wheat 3.86 3.92
Soybeans 5.80 5.80
Sorghum 2.54 2.57
Cotton 0.724 0.724
Rice 10.50 10.50
  • Used to determine counter-cyclical payments
    (CCPs)
  • CCP rate Target Price Fixed Payment (higher
    of loan rate or season avg. farm price)
  • Paid on 85 of base acres
  • If producers do a full base update, then CCPs
    paid on updated program yield

8
Expected CCP for Corn - 2002
Target Price 2.60 Less Fixed
Payment 0.26 Less Loan Rate 1.98 Equals
CCP per Bushel 0.36 PLUS LDP IF MARKET PRICE
IS LESS THAN LOAN RATE. GUARANTEES 2.60/BU. ON
85 OF BASE ACRES _at_ PROGRAM YIELD
9
EQIP Features
  • Funding increased from 1.3 billion over 6 years
    to 1.3 billion annually by 2007.
  • Allocation to livestock increased from 50 percent
    to 60 percent.
  • Cost sharing at 75 percent 90 percent for
    low-resource and beginning farmers.

10
EQIP Features (Continued)
  • Removes animal unit cap for eligibility
  • CAFOs must have Comprehensive Nutrient Management
    Plan to be eligible for payments.
  • Payment cap 450,000 total for FY 02-07. Up
    from 10,000 annual and 50,000 total for FY
    96-01.

11
Dairy Title Features
  • 9.90 support price extended through December 31,
    2007.
  • Dairy CCP program authorized from December 2001
    through September 2005.
  • Continues Dairy Export Incentive and Dairy
    Indemnity Programs.

12
Dairy Title Features (Continued)
  • Continues processor fluid milk promotion program
    and requires importers to pay an assessment
    equivalent to 0.15 per hundredweight NDPR
    checkoff.
  • Mandates three economic studies.
  • Authorizes (without appropriations) Johnes
    research program.

13
National Dairy Market Loss Payments
  • Uses 16.94 target price relative to Boston Class
    I price to set monthly deficiency payments (45
    percent of difference).
  • 2.4 million pound annual payment cap.
  • No cap on total expenditures.
  • Retroactive to December 2001.

14
Recent Boston Class I Prices
15
Estimated Monthly Payment Rates
  • Rates from December 2001
  • July 2002 based on actual Boston Class I
    prices.
  • Rates from August December 2002 based on
    Higher of Class III or Class IV futures prices
    on June 20, 2002 plus 3.25 Boston Class I
    differential

16
Projected Total Payments for 2002
  • Based on monthly payment rates from previous
    slide and
  • Milk per cow _at_ 55 lbs/day
  • Larger farms may qualify for larger payments if
    payment
  • cap is liberally interpreted


January-December 2002 payments plus December
2001 retroactive payment received in 2002
17
Subjective Assessment
  • Further separates production decisions from
    marketplace conditions.
  • A very inefficient means of promoting rural
    development
  • Conformance with GATT?
  • Costly, but less so when compared with
    supplemental payments outside of FAIR.
  • Much more a political product than in the past.
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