Slide1: Agricultural Policy Analysis Center - The University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996
www.agpolicy.org - phone: (865) 974-7407 - fax: (865) 974-7298 Farmland Conservation:
Agricultural Policy Considerations Land Trust Alliance Southeast Program
May 11, 2002 Kelly Tiller
University of Tennessee
Agricultural Policy Analysis Center
What Is A Typical Farm?: What Is A Typical Farm? There is no one-size-fits-all description of a farm today
Even “family farms” vary greatly in terms of what they produce, characteristics, economic situation, and household and business arrangements
Large and very large family farms are most likely to be viable economic businesses
Most small farms subsidize the costs of farming activities with off-farm income sources
Farm Typology Groups: Farm Typology Groups Limited-resource. Gross sales < $100,000, total farm assets < $150,000, total operator household income < $20,000.
Retirement. Small farms, operators report they are retired.
Residential/lifestyle. Small farms, operators report a major occupation other than farming.
Farming-occupation/low-sales. Small farms with sales less than $100,000, operators report farming as major occupation.
Farming-occupation/high-sales. Small farms with sales between $100,000 and $250,000, operators report farming as major occupation. Small Family Farms (sales less than $250,000) Large family farms. Sales between $250,000 and $499,999.
Very large family farms. Sales of $500,000 or more. Other Family Farms Nonfamily farms. Farms organized as nonfamily corporations or cooperatives, farms operated by hired managers. Nonfamily Farms USDA, Economic Research Service, 1998
Farms, Land, and Production: Farms, Land, and Production Limited-resource Retire-ment Residential/lifestyle Low-sales High-sales Large Very large Nonfamily Farming-occupation Small family farms (sales less than $250,000) Other family farms USDA, Economic Research Service, 2000 Agricultural Resource Management Study
Describing Farms: Describing Farms 62% of all farms are in the limited-resource, retirement, and residential/lifestyle categories, but produce only 9% of farm output
Small family farms manage and operate the bulk of farm assets (69%), including the soil, water, energy, and natural habitat resources associated with farmland use
Large family farms and nonfamily farms accounted for 66% of production in 2000
Farm Policy and Family Farms: Farm Policy and Family Farms A “one-size-fits-all” policy for family farms would be unlikely at best
The nonfarm economy is critically important to small family farm households
Government payments and off-farm work help equalize average income for farm and nonfarm households
Government payments have been most relevant to high-sales small farms and large family farms
Major Crop Prices: Major Crop Prices Corn Wheat Soybeans Cotton USDA, National Agricultural Statistics Service, 2002 U.S.
Major Crop Prices, Indexed: Major Crop Prices, Indexed Corn Wheat Soybeans Cotton USDA, National Agricultural Statistics Service, 2002 U.S.
Farm Income & Expenses: Farm Income & Expenses Source: Tennessee Agricultural Statistics Service, 2001
U.S. Corn Exports: Actual & Projected, 1993-2005: U.S. Corn Exports: Actual & Projected, 1993-2005 USDA Feb. 1996 Projections USDA Feb. 2000 Projections Actual
U.S. Share Of World Soybean Exports: 1996-00 Average: 60% 1986-95 Average: 67% 1976-85 Average: 80% 1996 - $7.35 - 66%
1998 - $4.93 - 56%
1999 - $4.63 - 56%
2000 - $4.50 - 51% U.S. Share Of World Soybean Exports Source: U.S. PS&D Database
3-Crop Acreage & Price Index (Cotton, Soybeans, Corn): 3-Crop Acreage & Price Index (Cotton, Soybeans, Corn) Source: Estimated Using National Agricultural Statistics Service Data U.S.
Gov’t Payments by Program: Gov’t Payments by Program Source: Tennessee Agricultural Statistics Service, 2001
2000 Gov’t Payments As A Percentage Of Net Farm Income: 2000 Gov’t Payments As A Percentage Of Net Farm Income USDA, National Agricultural Statistics Service, 2001
Government Payments by Farm Type: Government Payments by Farm Type Limited-resource Retire- ment Residential/ lifestyle Low-sales High-sales Large Very large Nonfamily Farming-occupation Small family farms (sales less than $250,000) Other family farms USDA, Economic Research Service, 1998 Agricultural Resource Management Study
Government Payments: Government Payments High-sales small family farms, large, and very large family farms received nearly 70% of all government payments
They are most likely to specialize in cash grains, covered by commodity programs
Government payments accounted for more than 10% of gross cash income for limited resource and retirement farms
Retirement farms received more than 25% of CRP payments
Though a small proportion of the total, payments have helped keep many limited-resource farms afloat
Indexed 4-Crop Acreage & Price (Soybeans, Cotton, Corn, Wheat): 4-Crop Indexed Acreage Indexed 4-Crop Acreage & Price (Soybeans, Cotton, Corn, Wheat) 4-Crop Indexed Price
2002 Farm Bill: 2002 Farm Bill The Farm Security and Rural Investment Act of 2002
Replaces 1996 Farm Bill and will remain in place for 6 years beginning crop year 2002 (through 2008)
Status: Conference bill passed House and Senate, Administration expected to sign
Increases agriculture spending by 70% over levels approved in 1996 Farm Bill
Essentially extends and expands 1996 commodity programs and provides a mechanism to automatically distribute “emergency payments” made since 1998.
Major Commodity Provisions: Major Commodity Provisions Allows producers flexibility in planting without “giving up” any established base
Continues to pay producers of major commodities direct annual decoupled payments
Allows updating program base acres and yields
Loan rates (minimum price guarantees) are increased for several commodities
Introduces a Counter Cyclical Payment program to replace the “double-AMTA” payment 2002 Farm Bill
Major Commodity Provisions: Major Commodity Provisions Peanut quota buyout
Adds program crops: soybeans, peanuts, wool and mohair, honey, pulse crops
Includes a new dairy program
New options for timing of payments
Payments capped at $360,000, virtually unrestricted with generic certificates 2002 Farm Bill
Fixed Payments & Target Prices: Fixed Payments & Target Prices
Marketing Loan Rates: Marketing Loan Rates 2002 Farm Bill
Commodity Payments Example: Commodity Payments Example Large grain farm in Northwest TN (Weakley County), TNG2400, representative farm
2,400 acre grain farm, owns 600 acres and cash leases 1,800
Assumptions, 1998-2001:
Farms 2,900 acres: 1,080 corn, 500 double-crop wheat, 500 double-crop soybeans, 820 full-season soybeans
Period average yields (in bushels): 125 corn, 55 wheat, 40 soybeans 2002 Farm Bill
TNG2400 Under 1996 FB: TNG2400 Under 1996 FB Under 1996 Farm Bill:
Base acres: 1,200 corn, 600 wheat
Base yields: 80 bu. corn, 32 bu. wheat
AMTA payments: $28,821
(1,200 ac * 0.85) * 80 bu/ac * $0.261/bu = $21,298
(600 ac * 0.85) * 32 bu/ac * $0.461/bu = $7,523
Emergency payments basically doubled AMTA
Marketing loan gains: $71,988
$4,514 corn, $553 wheat, $71,435 soybeans 1996 Farm Bill
TNG2400 – Base Acres: TNG2400 – Base Acres Base acreage options:
Keep current AMTA acres and add soybean base up to total eligible acreage
1,200 corn, 600 wheat, 1,100 soybean
Update all base acres using 1998-2001 average planted acres
1,080 corn, 500 wheat, 1,320 soybean 2002 Farm Bill
TNG2400 – Direct Payment Yield: TNG2400 – Direct Payment Yield Must use “old” AMTA yield for established base crops
Multiply 1998-2001 average proven yield by an adjustment factor (0.78) for new oilseed crops
Use 75% of county average yield as a “plug” for any year with very low or no yield 2002 Farm Bill
TNG2400 – CCP Yield: TNG2400 – CCP Yield IF farm updates all base acreages, can update yields for counter-cyclical payments
Yield update is higher of:
70% of the difference between current (1996) AMTA yields and updated 1998-2001 average yields
93.5% of 1998-2001 average yields
Use 75% of county average yield as a “plug” for any year with low/no yield 2002 Farm Bill
TNG2400 – Base Acres: TNG2400 – Base Acres 2002 Farm Bill
TNG2400 – Base Yields: TNG2400 – Base Yields 2002 Farm Bill
TNG2400 – Revenue: TNG2400 – Revenue 2002 Farm Bill
Conservation Programs: Conservation Programs 2002 Farm Bill provides $17.1 billion for conservation programs
80% increase over the current conservation spending marks
Over half goes to the Environmental Quality Incentives Program (EQIP)
Significant increase for Farmland Protection Program
Continued Conservation Programs: Continued Conservation Programs Environmental Quality Incentives Program, funded at $9b
Promotes ag production and environmental quality as compatible goals
Goal is to optimize environmental benefits
Conservation Reserve Program, increases from 36.4 to 39.2 million acres
Wetlands Reserve Program, increases to 2.3 million acres
Farmland Protection Program: Farmland Protection Program Provides matching funds to help purchase development rights to keep productive farmland in agricultural uses
Adds non-profit organizations as eligible entities
Recognizes need to protect historic and archaeological resources located on farms and ranches
USDA provides up to 50% of fair market easement value
Requires 30 year minimum easement, with priority to perpetual easements
Program administered by USDA’s NRCS
Farmland Protection Program: Farmland Protection Program Program has provided $53.4m to protect 108,000 acres since 1996
Now funded at $985m, a 20-fold increase
FY 2002: $50m
FY 2003: $100m
FY 2004-5: $125m
FY 2006: $100m
FY 2007: $97m
Qualifications for FPP: Qualifications for FPP Prime, unique or other productive soil
Included in a pending offer from a NGO, state, tribe or local farmland protection program
Privately owned
Covered by a conservation plan
Large enough to sustain agricultural production
Accessible to appropriate ag markets
Surrounded by parcels of land that can support long-term ag production
New Conservation Programs: New Conservation Programs Conservation Security Program: $2b
Incentive payments for stewardship practices
Grasslands Reserve Program: $254m
2 million acres of pastureland
10 to 30 year agreements and easements (40%)
Permanent easements (60%)
Small Watershed Rehab. Program: $275m
Agriculture Trends & Observations : Agriculture Trends & Observations Increasing use of production and marketing contracts
Movement toward value-added commodities and niche markets
Changes in the federal tobacco program will have a significant regional impact
Current farm policy has significant potential to affect farmland values
Value of Contract Agriculture: Value of Contract Agriculture All Agriculture: $192 Billion Non-Contract
68 % Marketing
21 % Source: USDA, 1998 Agricultural Resource Management Study Production
14 %
Value of Production Contracts: Value of Production Contracts Production Contract 14 % All Agriculture: $192 Billion Source: USDA, 1998 Agricultural Resource Management Study Livestock $25 Billion Crop $2 Billion
Value of Marketing Contracts: Value of Marketing Contracts Marketing Contract 21 % All Agriculture: $192 Billion Source: USDA, 1997 & 1998 Agricultural Resource Management Study Livestock $20 Billion Crop $21 Billion
Contracting & Farm Structure: Contracting & Farm Structure Source: USDA, 1998 Agricultural Resource Management Study
Trends in Contracting: Trends in Contracting Farms organized as partnerships or corporations twice as likely to contract
Marketing contract use on farms outnumbers production contract use 4 to 1
Average sales on farms with production contracts 10 times greater than cash sales
Expect to further increase the use of production contracts for livestock, hogs
Trends (Continued): Trends (Continued) Rural Communities May Need To Seek New Sources Of Economic Growth
Market Development, Processing, Packaging, Transportation, Information
Opportunities For Farmers To Create Market Power By Producing Higher Value, Attribute-Specific Commodities
Slide44:
The Food Dollar, 1999
Value-Added Agriculture Examples: Commodity Added Value
Apples Apple Jelly
Farming Entertainment Farming
Corn Popcorn
Sweet Potatoes Sweet Potato Muffins Value-Added Agriculture Examples Slaw Salsa Soil Amendment Hot Pepper Sauce Jams & Jellies
Value-Added Projects: Value-Added Projects
Burley Tobacco Basic Quota: Burley Tobacco Basic Quota Source: USDA, Farm Service Agency 1980-1998 Avg. = 599 mil. Post- 1998 Avg. = 339 mil.
TN Harvested Tobacco Acreage: TN Harvested Tobacco Acreage Burley Tobacco All Tobacco Source: Tennessee Agricultural Statistics Service, 2001
Declining Tobacco Income: Declining Tobacco Income Many assume that the tobacco settlement and public health concerns are responsible for declining tobacco income
Larger factors include price above world price, increasing imports, declining exports, movement of cigarette production overseas
Quickly moving toward contract production, overhaul or termination of federal tobacco program
Tobacco quota buyout on the horizon? About $15 billion in 6 states in 5 years?
US Avg. Farm Real Estate Value: US Avg. Farm Real Estate Value USDA, National Agricultural Statistics Service, 2001
Ag Policy and Farmland Values: Ag Policy and Farmland Values Direct government payments have a significant impact on farmland values
Increasing land values increase fixed cost of ag production without corresponding increase in productivity, often without increasing active farmer’s wealth
Farm program payments per acre vary geographically
Farm Commodity Program Payments Vary Regionally: Farm Commodity Program Payments Vary Regionally
Ag Policy and Farmland Values: Ag Policy and Farmland Values The degree to which program payments affect land values depends partly on the form of the payments
Direct payments attached to land have a greater effect than production-based LDPs
Landowner gains, lessee loses
Relatively more “certainty” in 2002 Farm Bill direct payments will have a greater effect on land values
For More Information … www.agpolicy.org: For More Information … www.agpolicy.org
APAC’s Weekly Policy Column: To receive an electronic version of the weekly ag policy column by APAC Director Daryll Ray, send an email to:
jgbrown@utk.edu
requesting to be added to APAC’s Policy Pennings listserv APAC’s Weekly Policy Column