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Farm Bill 2002: The Farm Security and Rural Investment Act of 2002

Farm Business Management Update, June 2002

By Jim Pease

The "Farm Security and Rural Investment Act of 2002" (FSRIA) was signed by President Bush on May 13, 2002. FSRIA provides the framework and funding for farm programs over 2002-2007. It is chock-full of new programs and increased funding for existing programs, providing a 70% increase in baseline funding for Farm Bill programs. FSRIA titles and mandatory increased funding levels are detailed in the table below.

Farm Security and Rural Investment Act Provisions
Title (Section) Subject New Funding
Title I Commodity Programs $40 billion
Title II Conservation Programs $17.1 billion
Title III Trade $1.144 billion
Title IV Nutrition Programs $6.4 billion
Title V Credit  
Title VI Rural Development $1.03 billion
Title VII Research $1.3 billion
Title VIII Forestry $100 million
Title IX Energy $405 million
Title X Miscellaneous  

Virginia producers of corn, wheat, soy, barley, cotton, peanuts, and certain other crops may receive government payments through three different commodity provisions of FSRIA. Market loan rates provide a price floor for all program commodities produced in a particular crop year. Direct or fixed payments are similar to the AMTA or PFC payments of the 1996 FAIR Act and are paid based on historical production rather than current production. Counter-cyclical payments are also paid on historical production but vary depending upon market prices. Soybeans have now been added to the crops receiving both loan support and decoupled direct and counter-cyclical payments. To receive these payments, participants are required to maintain land in agricultural use but are allowed to produce any commodity other than fruits and vegetables. Participants will be allowed to update base acres to reflect more recent planting decisions as well as to partially update program yields. Base acres and program yield update decisions are made farm-by-farm and should be carefully considered by farm program participants. Estimates indicate that government outlays under these programs will increase by more than $6 billion per year compared to the baseline 1996-2002 FAIR Act.

FSRIA eliminates the peanut quota program effective with the current (2002) crop year, making government support for peanuts similar to that of other commodities. Current quota owners will receive a buyout totaling $0.55/lb. Peanut producers will receive direct and counter-cyclical payments as well as loan supports under the same support system as other crops. Producers are given until March 2003 to assign historic peanut production to specific farms, after which program operations will be identical to those of corn or wheat.

A new three and one-half year dairy support program is initiated by FSRIA. Dairy producers will receive monthly payments equal to 45% of the difference between $16.94/cwt and the Class I milk price in Boston on milk produced up to 2.4 million pounds per year. Estimates indicate that 83% of all milk produced in Virginia will be eligible and that payments will average $0.89/cwt over the life of the program. Virginia producers will receive payments retroactive to milk produced since December 1, 2001 under this program.

The conservation provisions of FSRIA provide an 80% increase in funding for conservation programs. The new Conservation Security Program (CSP) has been established which will provide producers with "green payments" as incentives to adopt environmentally beneficial practices. The program covers costs for adoption of new management, vegetative, and land-based structural practices, of maintenance of existing practices, and of existing land-based structural practices not already covered by Federal/State requirements. Program practices will include nutrient management, IPM, water conservation, soil conservation, fish/wildlife habitat management, and others. Incentive payments are calculated as a proportion of a national rental rate for land of similar uses plus a proportion of average 2001 county costs of the practice, and also depend upon the "tier" of participation, which varies by the number and integration of resource concerns addressed and their scope on the producing farm.

The acreage cap for the Conservation Reserve Program (CRP) and its associated CREP program was increased to 39.2 million acres, which could imply an increase of 5.3 million acres under CRP contract. Corresponding funding was increased by $1.52 billion. Funding for the Environmental Quality Incentives Program (EQIP) increased by $9 billion, and annual spending was scaled up from its current $200 million per year level to $1.3 billion by 2007. EQIP has new priorities to assist livestock operations in meeting the requirements of new environmental regulations. Sixty percent of EQIP funding will go to livestock operations. Concentrated Animal Feeding Operations (CAFOs) will now be eligible for funding, and the total payment limit to an individual is increased to $450,000 for the period 2002-2007.

Preliminary analysis indicates that FSRIA will increase US net farm income by an average $4.5 billion per year over 2002-2001 but will have only marginal impacts on acreage and production of most crops. However, loan guarantees that are often higher than the cost of production will provide incentives for many US producers to increase acreage or yields, and it is likely that crop surpluses and resulting low market prices for bulk commodities will continue throughout the period covered by FSRIA. There have been serious public controversies during this Farm Bill debate concerning chronic low price and farm income problems, farm program effectiveness in supporting the agricultural sector, and the distribution of government payments among farm program recipients. These controversies are unlikely to abate as Congress moves on to deal with budget deficits, but congressional leaders do not appear to have any new ideas for getting the government out of agriculture or reducing federal expenditures.

The Thomas government document search engine has the text of the FSRI Act itself:

USDA's Farm Bill Gateway is an excellent source of Farm Bill summaries and FAQs:

The USDA Economic Research Service has side-by-side comparisons of the 1996 and 2002 Farm Bills, plus analysis of selected components of the FSRI Act:

The National Association of Conservation Districts provides a summary of the Conservation Title of FSRIA:

If you're one of the few people who haven't seen this much-talked-about Environmental Working Group site detailing farm payments, it is found at:

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