1996 Farm Bill Titles IAgricultural Market Transition Act Subtitle ATitle, Purpose, and Definitions BProduction Flexibility Contracts CNonrecourse Marketing Assistance Loans and Loan Deficiency Payments DOther Commodities -Dairy, Peanuts, Sugar EAdministration FPermanent Price Support Authority GCommission on 21 st Century Prod. Ag. HMiscellaneous Commodity Provisions IIAgricultural Trade IIIConservation IVNutrition Assistance VAgricultural Promotion VICredit VIIRural Development VIIIResearch, Extension, and Education IXMiscellaneous Major shift from coupled (deficiency payments) to decoupled support (AMTA/PFC payments) Decoupled payments were referred to as AMTA and PFC payments

Federal Agriculture Improvement and Reform Act of 1996 Generally referred to as “Freedom to Farm” As with other farm bills, 1996 farm bill was an amendment to permanent legislation (1949 farm bill) 7 year farm bill beginning in 1996 and ending in 2002 Major change in commodity programs relative to previous 22 years (starting with 1973 farm bill) – Overview

Eliminated Target Prices – Eliminated Commodity Provisions

Initiated decoupled payments – Provided full planting flexibility on previous crop acreage bases – Commodity Provisions

Continued nonrecourse marketing assistance loans and loan deficiency payments – Commodity Provisions Commodity Provisions

Contract Payments by Fiscal Year Contract Payments by Fiscal Year (million $) Total 5,5705,3855,8005,6035,1304,1304,00835,626 Allocation of Payments by Crop Crop Percent Corn46.22 Grain sorghum 5.11 Barley 2.16 Oats 0.15 Wheat26.26 Upland cotton11.63 Rice 8.47 TOTAL

Fixed payments$40,000 Marketing loan gains or Loan Deficiency Payments$75,000 –Can use marketing certificates Continues 3-entity rule Payment Limitations

1996 Farm Bill (Debated in ’95) High prices in ’93, ’94 and part of ‘95 World recession 2 weeks after signed ’96 Bill prices started falling S D TP P LR

Direct Payment AMTA: Ag Market Transition Act AMTA = Payment Rate * Base * Pay Yield * Outlook Reality 1996 P eq q seq S D1D1 Loan rate P eq qsqs S D reduced by world recession Marketing Loan rate Loan rate was to be a safety net

1996 Farm Bill Removed ARP No more ARP, kept the CRP, released land back to production Full capacity, freedom to plant “any” crop P1P1 P2P2 P exp Q exp TD Q S with ARP S with no ARP q2q2 ARP => 10% idling of base acres is required to qualify for TP & loan benefits.

1996 Farm Bill Removed TP Target Price: Congress set TP & provided for a Deficiency Pmt. D P P eq1 qsqs TP S after ARP A Q/yr No production incentive from the target price Production declines, price rises P eq2

Practice Quiz 1.List and describe the purpose of three policy tools used in the 1990 farm bill. 2.Evaluate this statement. “The U.S. went from a nonrecourse loan to a marketing loan program to save money.”