An Overview of Crop Provisions in the New Farm Bill

Mike Rankin
Crops and Soils Agent
University of Wisconsin - Extension

        The 2002 Farm Bill encompasses a large range of policy on many different fronts, but those of most interest to crop producers are the three major income support provisions for commodities.  These programs include: direct payments, counter-cyclical payments, and marketing loans.  Program eligibility is similar to the previous Farm Bill such that participants will need to follow certain soil conservation and wetland protection practices.  Direct payments and counter-cyclical payments will be made on 85% of the total qualified base acreage for each crop.  Here's a closer look at each provision: 

Direct Payments

        These will be similar to those established in the 1996 Farm Bill.  They are calculated from historical base acreages and yields with no tie to actual current production.  Perhaps the biggest change in this provision will be the fact that soybeans are now eligible for direct payments with the 2002 crop.  Because of this, soybean producers will be given the chance to update their farm acreage bases.  For 2002, any advanced payment already received under the old Farm Bill will be deducted from payments made under the new law.  Beginning this year, producers can request up to 50 percent of the following year's direct payment after December 1^st of the year prior to harvest.  The remaining 50 percent of the direct payment will be sent-out after October 1^st in the harvest year. 

Counter-cyclical payments

        What goes around, comes around and this one is back with a new name.  Most crop producers remember the old target price concept and this provision effectively replaces the "extra" AMTA (direct) payment made to crop producers during the past several years.  When the 12-month average market price for a commodity is below the target price, payments will be made to crop producers of that commodity.  These payments will be determined as follows: 

Target price – Direct payment rate – [Higher of loan rate or market price] 

        Base acreages used in the counter-cyclical provision will be the same as those used to determine direct payments.  However, base yields can be adjusted at the producer's discretion.  Payments will be made in three installments if market prices are projected to be below the target price.  It should be noted that in 2004 the target prices for crops will increase somewhat while loan rates will correspondingly decrease. 

Marketing loans

        The loan program is similar to that in the 1996 Farm Bill with one major exception.  The loan rate for corn has been increased and the rate for soybeans has been decreased.  Producers who chose not to take the marketing loan will remain eligible for loan deficiency payments.  The following table summarizes some of the key prices used in determining LDP's, direct payments, and counter-cyclical payments. 

  Base Acres and Yields

        Program participants will have the option of updating bases and adding oilseed (soybean) acres.  If elected, the new bases will be determined from cropping years 1998 through 2001.  All crop bases acres must be updated (e.g. you can't just update one crop and not another).  The alternative is to keep your current base and add the average oilseed crop acres planted from 1998 to 2001.  In this case, the total crop acre base cannot exceed the total crop acreage on the farm (except where double-cropping is involved).  If this occurs, the producer will have the option of deciding how he/she wants to allocate the base acres (e.g. keep the full soybean base and subtract from corn base). 

        The options to update base crop yields are more limited.  Obviously, oilseed yields will need to be established.  Once again, this will be done using data from 1998-2001.  There will be an option to use 75% of the county yield average for any year where data is missing or below the calculated figure.  The final 4-year yield average will be calculated down by about 25% to make the ratio equal to the 1981 through 1985 yields used for other crops. 

        Beyond oilseeds, producers can also update base yields for other crops, HOWEVER, this can only be done if base acreages are updated and it only will be used for determining counter-cyclical payments (direct payment calculations will always use original base yield figures). 

Internet information

        Obviously, this new farm bill will involve some pencil pushing (primarily in the area of changing base acres and yields and deciding how to allocate acres).  Here are a couple of Internet sites that are currently available and may help in the decision-making process: 

University of Illinois: www.farmdoc.uiuc.edu/policy/index.html 

Iowa State University: www.extension.iastate.edu/feci/FSRIA/homepage.html