2002 U.S. Farm Bill Revisited: Impacts, Implications of the WTO Ruling and the U.S. Budget : 2002 U.S. Farm Bill Revisited: Impacts, Implications of the WTO Ruling and the U.S. Budget 12th Annual Farming for Profit!
Moose Jaw, SK, Canada
June 27, 2005
Flynn Adcock and Parr Rosson
Center for North American Studies
Dept. of Agricultural Economics
Texas A&M University
Overview : Overview Program Spending & Summary of FSRIA Provisions
Implications of Budget Reconciliation
Implications for WTO Obligations
Case: U.S. Farm Bill, Canadian Cattle Feeding, and BSE
U.S. Farm Program Spending : U.S. Farm Program Spending
U.S. Federal Budget Outlays by Function, FY 2005 : U.S. Federal Budget Outlays by Function, FY 2005 Physical Resources includes: transportation, community and regional development, etc.
Source: Budget of the U.S. Government; www.whitehouse.gov/omb/budget/fy2003/pdf/hist.pdf
Slide5 : CCC Net Outlays, FY 1980 – 2006E
Slide6 : CCC Net Outlays, (2000 $) FY 1980 – 2006E
Slide7 : CCC Net Outlays, By Commodity FY86 – 06E
FSRIA Provisions : FSRIA Provisions
Summary of Provisions : Summary of Provisions FSRIA Signed May 13, 2002
Effective for Crop Years 2002-07
New Spending from $45.1-$51.7 Billion (2002-2007)
Major Increases in Environmental, Conservation, & Energy
Institutionalizes Previous Ad-hoc Funding for Commodity Programs
FSRIA Titles : FSRIA Titles Title I: Commodity Programs*
Title II: Conservation*
Title III: Trade*
Title IV: Nutrition
Title V: Credit
Title VI: Rural Development
Title VII: Research & Related Matters
Title VIII: Forestry
Title IX: Energy
Title X: Miscellaneous*
Farm Bill Spending, 2002-07 : Farm Bill Spending, 2002-07 Total Cost: $273.9 Billion
Commodity Programs: $98.9 Billion
Conservation: $21.3 Billion
Food & Nutrition: $149.6 Billion
Total Over Baseline: $51.7 Billion
Average Annual Cost: $8.6 Billion (over baseline)
Farm Bill Program Spending by Title, Budget Authority, FY 2002-2007 : Farm Bill Program Spending by Title, Budget Authority, FY 2002-2007 Excludes funding for discretionary programs which is provided through annual appropriations.
FSRIA Provisions : FSRIA Provisions Commodity Programs-Sources of Payments to Producers
Direct Payments (AMTA/PFC) - Continuation
Marketing Loan Gain (MLG) or Loan Deficiency Payments (LDP) - Continuation
Initiated New Counter-cyclical Payments (CCP) - reinstates Target Prices*
FSIRA Provisions (cont.) : FSIRA Provisions (cont.) Soybeans & Peanuts Covered Under All Payment Provisions
Dry Peas, Lentils, and Chickpeas now Covered under Marketing Loan Program
Required Country of Origin Labeling at Retail for Meats, Seafood, Produce, Peanuts (MCOOL Provisions Postponed for all but Seafood)
CCP (counter-cyclical payments) for Dairy farmers
U.S. Loan Rates : U.S. Loan Rates Wheat loan rates will be announced by class: hard red spring, hard red winter, soft red winter, soft white wheat, and durum.
FSIRA Provisions (cont.) : FSIRA Provisions (cont.) Wool, Mohair, & Honey Get Marketing Loan Payments
Conservation Reserve Program (CRP) Acreage to Expand from 36.4 ma to 39.2 ma
Environmental Quality Incentive Program (EQIP): 6 fold increase, $400 million in 2002 increasing to $1.3 billion in 2007
Farm Bill Payments : Farm Bill Payments Direct Payments = Payment rate x (Base acres x .85) x Farm Program Yield
Counter-cyclical Payments (CCP)
Secretarial Action Required to Implement
Target price
-Effective price (Higher of Market price or loan rate plus Direct payment rate)
Counter-cyclical payment rate ($/unit)
CCP = CCP rate x (Base acres x .85) x Updated Farm Program Yield
Potential Impacts of Farm Bill : Potential Impacts of Farm Bill U.S. Dry Pea and Lentil Planted Area Expected to Rise
Marketing Loan Program
Favorable Lentil Prices/Falling Alternative Crop Prices
Relatively Low Input Costs
Long-term Benefits from including in Crop Rotation
Most Growth in ND, WA, MT
Potential Impacts of Farm Bill : Potential Impacts of Farm Bill Wheat Production up from Recent Low in 02/03 MY
Barley Production down from Highs of Early 1990’s – Less than ½ of CN
Canola Crop Grew from near Zero in 90 but has fallen since 2001 – Very Small compared to Canada
Potential Impacts of U.S. Budget Reconciliation : Potential Impacts of U.S. Budget Reconciliation Research by TAMU AFPC in early 2005
Impacts are dependent on which parts of the program are adjusted
Reducing Direct Payments (de-coupled) would have the greatest impact on income because fixed
Counter-Cyclical and Loan Deficiency/ Marketing Loan Gain Payments are not fixed but based on market conditions
Simulation results show that loan rate reductions would be least harmful to producers
Cuts to CRP were not analyzed
Implications of WTO Obligations and the Cotton Case : Implications of WTO Obligations and the Cotton Case
WTO Issues/Impacts : WTO Issues/Impacts Direct payments – Green Box (don’t count)
MLGs/LDPs – commodity specific Amber Box
CCPs – noncommodity specific Amber Box
Amber Box limit is $19.1 billion annually
Noncommodity specific support is not included when calculating the AMS as long as it is <5% of the value of agricultural production
These amber box payments are referred to as “de minimis” (trifling amount)
If >5% then full amount counts
WTO and the New Farm Bill : WTO and the New Farm Bill Aggregate Measure of Support (AMS) refers to the $19.1 billion annual spending cap on
Amber box payments. Source: FAPRI Billion Dollars
WTO Issues/Impact (Continued) : WTO Issues/Impact (Continued)
Farm Bill Adjustment Authority Related to Doha Round (WTO) Compliance
Potential for Year 1 cut in support ceiling of 20%, from $49.1B to $39.3B
Will have to Adjust Export Credit Guarantees to Comply w/6 Month Maximum
Changes to Some Programs to Make More “Green”
Implications of WTO Cotton Case : Implications of WTO Cotton Case Findings against U.S. cotton-related programs
Step 2 of Cotton Program Likely Gone
Restrictions on what crops can be planted on program acreage (fruits/vegis) may be lifted
Findings against Export Credit Guarantee Program as well – Some Changes as Early as Next Month
These Findings will be considered during Budget Reconciliation and for 2007 Farm Bill
Case Example: Beef and Cattle : Case Example: Beef and Cattle
Slide27 : U.S. Farm Bill, Canadian Cattle Feeding, and BSE Investment in Prairie Province Beef Industry
Availability of Cheap U.S. Corn and Export of this Corn to the Canadian Cattle Feeding Industry
Concern over the Potential Impacts of MCOOL
Dynamics Changed with Discovery of BSE
Ban on Canadian Cattle Exports to U.S. and Low Canadian Prices Led to More Investment in Prairie Beef Industry
Canadian Industry May be Stronger when Normal Trade Resumes – But With Uneven Benefits
Slide28 : U.S. Feed Grain Exports to Canada
Slide29 : Alberta Direct Fed Steer Price, Jan 01 – Jun 05
Slide30 : Alb/Sask Cattle on Feed, Jan 01 – Jun 05
Summary and Conclusions : Summary and Conclusions
U.S. Farm Spending, while High, is Low Compared to Rest of U.S. Budget
Farm Spending Less than Mid-80s in Real Terms
Most of Farm Bill Spending in Food/Nutrition Programs – 36% in Commodity Support
Direct Payments are Green Box; MLG/LDP and CCP are Amber Box
Inclusion of LDP for Lentils/Peas Spurred the Greatest Shift in Production
Budget Reconciliation Impacts are Unclear
Summary and Conclusions (Continued) : Summary and Conclusions (Continued)
Doha Round, Cotton Case, and Budgetary Concerns to Impact Next Farm Bill
Inclusion of Fruits and Vegetables in the Program and/or as Crop Alternative for Program Acres???
MCOOL Less of a Threat than BSE
Canadian Cattle Industry Likely Stronger Post-BSE but Cow/Calf Producers will Need Greater Recovery Time
U.S. Farm Bill Impacts on Canada Appear to be Less than Other Factors such as BSE or Canadian Policy Changes