As an overview, we begin with Agricultural
Issues in the 105th Congress (2/20/98). Implementation of the
1996 farm bill, budgeting and funding issues, and trade and
taxation relating to agriculture are examined.
The next report, Agricultural
Research, Education, and Extension Issues in the 105th Congress deals
with the research infrastructure of American agriculture. This is
composed of federal and state agricultural research
and departments, land grant colleges of agriculture, colleges of
forestry and veterinary medicine, and the nationwide Cooperative
Extension System. These activities, as well as the provisional
research programs of the U.S. Department of Agriculture are all
Next are three reports on specific areas of American
agriculture. The first of these, Sugar
Policy Issues (3/2/98) examines raw cane and refined beet
sugar price supports, the loan guarantee program and the federal
government's import tariffs on sugar. A $300 million fund to
reclaim outlying Florida sugar cane fields for the Everglades is
The next agricultural report is Peanuts:
Policy Issues (3/5/98) dealing with the $1.1 billion peanut
industry. The main issue of the report concerns the controversy
pitting peanut growers in favor of continuing price supports
against shellers and product manufacturers who want them reduced.
Pertinent legislation from the current Congress is also
The final report is on Dairy Policy
Issues (3/6/98). Federal milk marketing orders, price
supports and the dairy indemnity program are the main issues in
Congressional interest in agricultural issues continues in the
105th Congress as legislators monitor the impact and implementation
of the 1996 farm law; act on budget and spending, agricultural
research reform, and trade and tax bills; and deal with food,
dairy, and tobacco issues.
A possible settlement between tobacco companies and state attorneys-general
has prompted bills containing provisions to compensate tobacco
farmers and their communities. Attempts to eliminate crop insurance
subsidies for tobacco farmers were defeated by both chambers during
FY1998 appropriations' bill debates, as were House efforts to
curb federal sugar and peanut support.
Dairy price volatility, a court order striking down the current
pricing system, and proposed USDA marketing order reforms are
receiving close congressional scrutiny.
The implications for agriculture of continuing financial difficulties
in Asian markets are the subject of congressional hearings. The
President has promised to pursue "fast-track" legislation
to ease congressional consideration of future trade agreement
implementing bills. Farm interests will be watching closely the
attempt by China, which currently imports some $1.8 billion in
farm products, to gain access to the World Trade Organization.
The Administration proposes $54.3 billion in outlays for all
programs within the U.S. Department of Agriculture for FY1999.
This is slightly less (about $700 million) than FY1998 expected
outlays for these programs. Among other things, the budget proposes
new user fees for food inspection, mandatory funding for crop
insurance commissions, multi-year authorization and carryover
authority for the export enhancement program, and restoration
of food stamp program eligibility for certain legal immigrants.
Conference deliberations are expected on House and Senate bills
approved in the first session to reform the USDA's research and
extension system (S. 1150 and H.R. 2534). The Senate's proposal
for a 5-year research initiative, supported by mandatory funds
and financed by reducing spending for food stamp administrative
costs, is controversial. Other food programs will come under review
if the Congress takes up reauthorization legislation for several
expiring child nutrition programs.
Public concerns about E-coli outbreaks from ground beef and hepatitis
incidents linked to Mexican strawberries have prompted proposals
to give USDA legislative authority for mandatory meat recalls
and a presidential directive to develop new safety standards for
fruits and vegetables. There also are proposals for a single food
agency and for country of origin labeling. Animal agriculture
waste practices also are under review, in part, because of concern
about the role that large concentrations of farm animals may have
played in the recent fish kills associated with Pfiesteria outbreaks
in Northeast waterways.
A House-passed tax bill (H.R. 2513) to encourage the sale of
processing facilities to farmers' cooperatives may be considered
in the Senate. This bill reportedly is in a form more acceptable
to the President than a provision of the Taxpayer Relief Act of
1997 that was "line-item vetoed." On February 12, 1998,
a U.S. District Court ruled that the line item law was unconstitutional.
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The public agricultural research, education, and extension system
is comprised of a nationwide network of federal and state agricultural
research laboratories and departments, land grant Colleges of
Agriculture, colleges of forestry and veterinary medicine, and
the nationwide Cooperative Extension System.
Although the basic authority to conduct agricultural research
and extension programs is permanent, Congress since 1977 has provided
funding authority and policy guidance for USDA's in-house research
programs, and for federal support for cooperative research, higher
education, and extension programs in the states, through a title
contained in omnibus farm legislation. The most recent omnibus
act is the 1996 farm bill (P.L. 104-127).
The research title of the 1996 Act authorizes most of the research
provisions only through FY1997 and then provides generic funding
authority for research and extension for the following 5 years,
through FY2002. It also authorizes mandatory spending on competitive
agricultural research grants under a "Fund for Rural America."
The House Agriculture Committee announced after passage of the
1996 Act that more thorough consideration of research and extension
policy reforms would be high on its agenda in 1997.
In follow-up to that commitment, the House Agriculture Committee
reported out the Agricultural Research, Extension, and Education
Reauthorization Act (H.R. 2534) on October 29, 1997, and the full
House passed it on November 8.
H.R. 2534 would (1) make recipients of federal research and extension
funds more accountable for the relevance and merit of the programs
the funds support, and (2) authorize research initiatives in plant
and animal genetics, value-added agricultural products, precision
agriculture, forestry, and other high priority areas, among other
On October 29, 1997, the Senate passed S. 1150, an amended version
of research reauthorizing legislation that the Senate Agriculture
Committee had reported out on July 30. The key feature of S. 1150
is a 5-year, 10% increase in the annual funding for research and
extension programs. The additional $780 million would come from
redirecting savings from reductions in mandatory Food Stamp program
administrative costs. The new mandatory research money would fund
a competitive grants program called the Initiative for Future
Agriculture and Food Systems. The initiative would support basic
and applied research in plant and animal genetics, food technology
and human nutrition, and a variety other high priority research
The House and Senate research reauthorization measures are expected
to go to conference beginning February 25, after the House passed
a procedural measure (H.Res. 365) on February 24, clearing the
The President's FY1999 budget request for USDA, released on February
2, would allocate $1.84 billion to support the programs of the
research, education, and economics agencies. This represents about
a 3% decrease from the FY1998 appropriations act (P.L. 105-86).
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Authorized by the 1996 omnibus farm act (P.L. 104-127), the modified
sugar program, through FY2003, continues to protect the incomes
of sugarcane growers, sugar beet growers, and those firms that
process each crop into sugar. To accomplish this, the U.S. Department
of Agriculture (USDA) supports U.S. sugar prices by making available
loans to sugar processors and restricting sugar imports.
Two changes could inject some uncertainty at times about the
extent to which the price support level serves to undergird the
domestic market price for sugar. First, the law requires a penalty
to be paid by a processor who "forfeits," or hands over,
any sugar to USDA in lieu of paying off a "non-recourse"
loan. This could occur if unanticipated sugar supplies (e.g.,
higher than initially projected domestic output, and/or more imports
allowed to enter than needed to meet U.S. food demand) result
in market prices falling below the "effective" support
level. A processor would then have to decide whether it makes
more sense financially to sell pledged sugar at a price below
the "effective" support level or hold the sugar in inventory
until prices rise.
Second, the level of imports will dictate the type of price support
that USDA provides processors. Imports above 1.5 million short
tons (ST) require USDA to make available non-recourse loans. Under
non-recourse policy, USDA is expected to continue to limit imports
to the extent necessary to ensure that market prices are supported.
For FY1998, the current 1.79 million ST import quota level (covering
raw and refined sugar) means non-recourse policy is in effect.
However, if annual imports are less than 1.5 million ST, only
recourse loans are available to processors. Recourse loan policy
effectively would transfer all price risk to growers and processors,
because the assurance of a government-protected price would not
exist. During such periods, prices could fall below support levels,
and sugar processors would have no alternative but to sell at
the market price.
Other provisions in current law: freeze support prices for raw
cane and refined beet sugar at 1995 crop levels; increase by 25%
the amount of budget deficit assessments paid by U.S. sugar processors;
repeal the program's no-cost requirement; and repeal domestic
sugar marketing restrictions. Another makes available up to $300
million for use to restore the Everglades environment affected
in part by the Florida sugar industry.
Final congressional action and the President's signature on the
omnibus farm bill did not end the ongoing debate between contending
groups with a direct financial interest in future sugar policy.
In February 1996, a 9-vote margin in the House had barely preserved
the sugar program favored by growers and processors. That outcome
has since encouraged opponents (sugar users and cane refiners)
to continue their effort to reshape the program to more reflect
Program opponents used congressional consideration of the FY1998
agriculture spending bill as a vehicle to try again to revise
the enacted sugar program. On July 24, 1997, during floor debate,
the House rejected on a 175-253 vote an amendment that would have
required USDA to operate only a recourse loan sugar program in
FY1998. The amendment would have effectively eliminated the price
guarantee available to sugar crop farmers and sugar processors.
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President Clinton on April 4, 1996, signed into law the new omnibus
farm bill (P.L. 104-127). Among many provisions, it authorizes
a peanut program for the 1996-2002 crops. The program continues
to support the incomes of producers and aims to ensure that ample
supplies of peanuts are produced for the U.S. market. To accomplish
this, the U.S. Department of Agriculture (USDA) supports the farm
price of peanuts primarily by limiting the amount of peanuts each
eligible farm can sell for domestic food use ("quota"
peanuts) at a specified "high" price level. Farmers
are free to sell peanuts produced in excess of their quota (called
"additionals"), primarily for export and crushing into
peanut oil and meal. Two levels of price support are available:
a high level for "quota" peanuts, and a much lower rate
In 1995, "reform" proposals presented for congressional
consideration sought to address two concerns about the program's
future: mounting government costs, and the consumer cost issue.
Underlying these concerns was widespread recognition of a changing
U.S. peanut market and of USDA's inability to respond to market
developments due to inflexible program provisions.
During farm bill debate, most peanut growers proposed making
the program operate at "no-cost" and adjusting how the
quota loan rate was set relative to 1995's $678/ton level. Growers
argued that the program supports rural economies and that its
basic structure be maintained. Peanut shellers and product manufacturers
recommended significant reductions in the quota price support
level (down to $550/ton and $450/ton, respectively). These two
groups argued this change was critical to the long-term survival
of the peanut industry, and was needed to reverse declining consumer
demand for peanut products. Other manufacturers and their coalition
partners favored outright repeal of the program, arguing the government
should not play a role in managing supplies and dictating prices.
Each group's view that the stakes were higher than usual intensified
debate. Farm programs were under greater scrutiny than before
in a much changed political and ideological climate. In the end,
House floor action in February 1996 retained the Agriculture Committee's
proposed modifications to the existing program by only a 3-vote
margin (212-209). The final law resulted in two major changes.
The support level for "quota" peanuts was reduced 10%
to $610 per ton and frozen at that level for the 1996-2002 crops.
To achieve a no-cost program, 2 quota-related provisions that
contributed to escalating program costs in recent years were eliminated.
In light of the close House vote, program opponents have continued
to press for further change. Most recently, on July 24, 1997,
during floor debate on the FY1998 agriculture appropriations measure,
the House rejected (185 to 242) an amendment that would have lowered
the 1998 crop quota loan rate to $550 per ton. Supporters argued
that the 1996 law changes did not benefit consumers with lower
peanut product prices and still retained strong government involvement
in the peanut marketplace. Opponents countered that further reducing
quota price support would devastate peanut producers and rural
communities, and negate the 7-year policy commitment made to growers.
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USDA administers federal milk marketing orders, which require
processors to pay a minimum price for farm milk depending on how
the milk is used. The pricing of milk under federal milk marketing
orders has long been the subject of policy debate. Producer groups
in the Upper Midwest contend that pricing policy is in need of
major reforms, while many dairy processors contend that orders
are market-distorting and should be gradually eliminated. Milk
producer groups in the Northeast and Southeast generally support
the current order system. The 1996 farm bill requires a reduction
in the number of orders, to at least 10 but no more than 14. It
gives USDA until April 1999 to administratively achieve this goal.
On January 23, 1998, the Secretary of Agriculture released a
proposed rule for marketing order reform that consolidates orders
and makes comprehensive changes to milk pricing policy. The proposed
rule would consolidate the number of federal orders from the current
31 down to 11. It also offers two options for pricing fluid milk.
Option 1A closely resembles the current system with some exceptions,
while option 1B, which USDA prefers, would significantly reduce
minimum mandated prices in many regions. Consequently, USDA would
consider phasing in the lower minimum prices over a 5-year period.
The proposed rule also contains a suggested replacement for the
basic formula price (BFP), a market-determined price that serves
as the base price for most farm milk in the nation.
The comment period on the proposed rule extends until April 30,
1998. When finalized, the rule must be approved by 2/3 of the
dairy farmers within each of the proposed order regions, to become
effective within that region. USDA expects a fall 1998 referendum,
with the new orders becoming effective in January 1999. Rejection
of the rule by a region would end milk orders in that region.
Meanwhile, a November 3, 1997 court decision required USDA to
suspend its current use of Class I differentials. However, enforcement
of the court order has been indefinitely postponed by an appeals
court until it reaches a decision on the appeal.
Because of the recent volatility of farm milk prices, identical
House and Senate resolutions have been introduced encouraging
the Secretary of Agriculture to establish a temporary emergency
price for dairy farmers. After initially rejecting any requests
to administratively do this, the Secretary announced on January
23, 1998, that USDA will consider a temporary price floor. A national
hearing on this subject was conducted by USDA during the week
of February 17, 1998.
The 1996 farm bill gave the New England states authority to enter
into a regional dairy compact, which allows the region to establish
minimum fluid milk prices above the minimum federal level. The
compact was legally challenged by a dairy processor trade group,
but a lower court and an appeals court have upheld its legality.
The House passed a measure (H.R. 1789) on October 21, 1997, which
would reauthorize through FY2002 the Dairy Indemnity Program.
The program makes payments to milk producers who, through no fault
of their own, have been forced to remove their raw milk from the
market because it has been contaminated by nuclear radiation,
toxic substances, or pesticides and other chemical residues. To
date, no action has occurred in the Senate.
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