|Congressional Research Service Reports
Redistributed as a Service of the NLE*
RS20452: Agriculture and the 106th Congress:
A Summary of Major Issues
Jean Yavis Jones
Specialist, Food and Agriculture Policy
Resources, Science, and Industry Division
Updated December 15, 2000
Most congressional interest in agriculture in the 106th Congress
was focused on persistent low prices for major commodities and proposals to
redress declining farm income. Six emergency farm aid bills were approved,
increasing agricultural spending by nearly $27 billion for fiscal years
1999-2001. These bills provided disaster relief along with short term "market
loss payments"to farmers to shore up farm income. Some longer term changes also
were enacted as part of emergency farm legislation. Among these were the
extension of the dairy price support program beyond 2000, increases in the
farmer payment limit so farmers could receive the supplemental payments, and the
exemption of agriculture products from unilateral U.S. trade sanctions. The
Congress also approved a new law (P.L.
106-224) increasing coverage and premium subsidies for crop insurance, which
added another $8.2 billion to agriculture spending over the next 5 years. Animal
Plant Health Inspection reforms were part of the crop insurance measure. Other
legislation (H.R. 4444)
strongly supported by the farm sector that approved permanent normal trade
relations with China also was adopted (P.L.
For the last 3 years, abundant world supplies and declining export demand
have kept prices for most U.S. farm commodities and farm income quite low.
Despite economic recovery in world markets and some growth in export demand, the
USDA projects that current supplies, especially of major field crops, are likely
to maintain downward pressure on farm prices. In response, the 106th
Congress approved several multi-billion dollar emergency farm aid laws. It also
expanded crop insurance coverage and premium subsidies. Longer term efforts were
less successful. These included proposals for farm policy changes that would
provide automatic counter-cyclical farm income relief and restrict mergers in
the agriculture sector (which some see as a contributor to low farm prices). Tax
relief, in the form of Farm and Ranch Risk Management (FARRM), also was proposed
but not enacted. These proposals are expected to resurface in the
The "Farm Safety Net". The 1996 farm law established a
system of guaranteed annual lump-sum payments to wheat, feedgrain, cotton, and
rice farmers. (1) These
"contract" or "AMTA" payments replaced the longstanding system of price supports
for individual commodities that paid farmers the difference between target
prices and market prices when the latter were lower than target prices set by
law for each commodity. In return for giving up price supports linked to market
prices, eligible farmers were given nearly total planting flexibility, and
acreage reduction programs were eliminated. The idea was that farmers would be
able to plant in response to market signals, rather than federal program
benefits. Opposition to this approach came from some who worried about what
would happen without an automatic "safety net" for farmers if prices fell, which
began to happen late in 1997. Advocates of the new approach contended that
contract payments made to farmers when prices were good would provide a cushion
for lean years, and that there still would be marketing loan assistance for
field crops, albeit at capped loan rates. (2) After record
highs in 1996 and 1997, U.S. farm income and prices for many major commodities
began a sustained period of decline. Unusually good worldwide growing conditions
had expanded supplies and an Asian financial crisis that spread to much of the
rest of the world reduced demand.
As farm income fell, the Congress stepped in. For FY1999, it approved
emergency farm aid packages that added $6.6 billion to farm spending, most of
which went for so-called "market loss payments," and raised the 1999 crop year
limit on the maximum amount of marketing loan assistance a farmer could receive
(from $75,000 to $150,000 per farmer per farm, or $300,000 per farmer for up to
3 farms). For FY2000, another $15 billion was added to farm program spending for
emergency assistance. As before, most of this aid went to farmers receiving AMTA
payments (i.e.,grain, cotton, and rice farmers), regardless of their income
situation. Some also went to oilseed, tobacco, peanut and dairy farmers, and for
disaster relief. The distribution of most of this aid to AMTA recipients,
without regard to their income situation, was viewed as the quickest way to get
payments out to farmers. Some, including the Administration and some
congressional Democrats objected to this approach, favoring instead more
targeted assistance to those farmers in economic distress, and the use of the
marketing loan program to provide this aid. Complaints also were heard that
"non-program" producers (i.e. fruit, vegetable, and livestock producers) who had
suffered losses from natural disasters (droughts and floods), as well as falling
prices received too little of the emergency assistance funding. For FY2001, the
Congress again approved an emergency farm aid package adding some $3.8 billion
in assistance to farmers, and raised the limits on how much farmers could
receive in federal farm payments.
There was less agreement on more permanent policy changes addressing farm
income problems. These included proposals to: (1) extend marketing loan
repayment terms (S.
30 and H.R.
1299); (2) reestablish the farmer-owned reserve (H.R. 2704 and
S. 839); and
(3) provide supplemental income payments (SIP) for producers of crops eligible
for market loan assistance (H.R. 2792).
The SIP proposal and others like it would have provided supplemental payments
for wheat, feed grains, cotton, rice, and oilseeds whenever the current year's
national gross revenue for a crop falls below a specified percentage (95% in H.R. 2792; 92%
in the Administration proposal) of the previous 5-year average.
Except for raising the maximum payments a farmer can receive, efforts to
change the marketing loan program did not meet with much success. In part, this
was because of the price tag associated with some of these proposals when they
were first offered. (3) There also
were concerns that this would undermine the "free market" direction of farm
policy, and the efforts by U.S. trade negotiators to get other countries to
reduce their high levels of domestic farm support. Nonetheless, marketing loan
assistance is viewed by many as a more appropriate system for delivering farm
payments to farmers suffering from low prices than AMTA payments, which make no
price or income distinctions. (See CRS Issue Brief IB10043, Farm Economic
Relief: Issues and Options for Congress, and CRS Report 98-744, Agricultural Marketing Assistance
Loans and Loan Deficiency Payments.)
Agriculture Spending. Two appropriations measures passed in 1999 (P.L.
106-78 and P.L.
106-113) added a total of $9.3 billion to regularly programmed farm spending
for FY2000. A third FY2000 farm aid package, approved in June 2000, was added to
the conference agreement on crop insurance (H.R. 2559, P.L.
106-224). It provided another $5.5 billion in farm aid for FY2000 (plus
$1.64 billion for FY2001), as well as some $8.2 billion in new spending over the
next 5 years for the crop insurance program. Further agriculture funding ($210.4
million) was added to the conference agreement on the FY2001 military
construction appropriation bill (H.R. 4425, P.L.
106-246). FY2001 agriculture appropriations contained another $3.8 billion
in supplemental spending for farm programs (P.L 106-387), over half of which
went for crop and quality losses and disaster assistance. For calendar year
2000, the USDA projects that direct government payments to farmers will reach a
total of $23.3 billion; $13 billion of which will come from emergency farm aid.
In addition to further supplemental aid for farm programs, the FY2001
agriculture appropriations law contained a provision exempting agriculture
products from unilateral trade sanctions on certain countries (including Cuba).
Agreement on the FY2001 funding bill was delayed by strong disagreement over the
Cuba sanctions exemption. over half of which will go for crop and quality losses
and disaster assistance. (See CRS Report RL30501, Appropriations for FY2001: U.S.
Department of Agriculture and Related Agencies, and CRS Report RS20416,
Emergency Farm Assistance in FY2000 Appropriations Acts.)
Crop Insurance. The federal crop insurance program insures
participating farmers against losses from natural disasters. It provides: (1)
"catastrophic" coverage to producers growing an insurable crop, with premiums
fully paid by the federal government and a minimal administrative fee paid by
farmers; (2) "Buy-up" protection to obtain additional coverage, at a less
subsidized rate, and (3) Revenue insurance products protecting limited numbers
of farmers against losses from low prices, low yields, or both. Many farmers
have expressed dissatisfaction with the coverage and costs of crop insurance
(particularly for additional "buy-up" protection) and either do not participate
or waive additional coverage. The 1996 farm law required farmers to sign a
waiver of eligibility for any federal disaster or other payments for crop losses
if they chose not to participate in the crop insurance program. It was hoped
this would encourage greater participation and lessen the need for almost annual
ad hoc emergency disaster payments to farmers. Neither proved to be true:
participation did not expand significantly and the Congress nullified the waiver
of benefits in every disaster bill enacted since 1996. The main issue has been
how to design a program that is affordable to those at high risk, attractive to
those at low risk, and acceptable in terms of federal costs and private
insurers' willingness to underwrite. Crop insurance reform legislation passed in
the 106th Congress and was signed into law on June 20, 2000 (P.L.
106-224). Among other things this law increases federal subsidies for farmer
premiums, expands coverage for multiple year natural disasters and authorizes
pilot programs for livestock farmers. The additional cost of the crop insurance
program under these reforms is just over $8 billion over 5 years, and room was
made in the FY2000 and 2001 budget resolutions for this additional spending.
(See CRS Issue Brief IB10033, Federal Crop Insurance: Issues in the
Agricultural Trade. With some 25% of U.S. farm income derived from
agricultural trade, many in Congress believe that long-term remedies for low
farm prices and income depend upon enhancing U.S. trade policies. Thus, farm
groups and legislators generally supported: (1) formally bringing China, which
imported just over $1 billion in U.S. farm products in FY1999, into the world
trading community; (2) exempting agricultural exports explicitly from unilateral
U.S. economic sanctions on foreign countries;(3) expanding export and food aid
programs; and (4) pressing for tough negotiations to lower foreign-imposed
barriers to U.S. farm products. A resolution of disapproval (H.J.Res.
103) of the President's decision to extend for one year U.S. trade relations
with China was rejected in the House on July 18, 2000. Subsequently, the House
and Senate approved and the President signed legislation establishing permanent
normal trade relations with China (P.L.
106-286). The African Growth and Opportunity Act approved by the Congress
106-200) also addressed agricultural issues. Among other things, it included
a provision allowing rotation in the types of products targeted for trade
retaliation (so-called "carousel retaliation"), which was intended to put more
pressure on the EU to resolve the meat hormone dispute. Other provisions in P.L.
106-200 created a chief agriculture negotiator in the office of the U.S.
Trade Representative, addressed unfair trading practices of state trading
enterprises, and set explicit U.S. objectives for agriculture in the next round
of WTO negotiations.
U.S. policies restricting the sale of agriculture and medical goods to
certain countries were an issue in the 106th Congress, as well. Most
agriculture interests and many humanitarian relief groups strongly supported
efforts to eliminate such restrictions. There was, however, strong opposition
from many in the Cuban-American community and by some in the Congress. The
Administration also raised concerns about restricting presidential flexibility
in the conduct of foreign policy. Provisions were added to annual agricultural
appropriations measures for the past 2 years to exempt agriculture and food
products from sanctions only to be later deleted. This year, sanction exemption
language was approved by the Senate, but dropped from the House-reported FY2001
agriculture appropriation measure, after the Senate rejected a compromise House
proposal that would have added modified language to the conference agreement on
the FY2001 military construction spending bill (H.R. 4425)
passed in June. House leaders promised to pursue this modified sanction language
during conference deliberations on the FY2001 agriculture appropriations bill.
Compromise language on a proposal that would allow trade, but not financing for
sales to Cuba was adopted in the finally enacted fiscal measure (P.L.
106-387). (See CRS Issue Brief IB10040, Agricultural Trade Issues in the
106th Congress, CRS Issue Brief IB10061, Exempting Food and Agriculture
Products from U.S. Economic Sanctions: Current Issues and Proposals,
CRS Report RS20744, Agricultural Support in the European Union and the
United States, CRS Report RL30612 (pdf), Farm Support Programs and
World Trade Commitments.
Livestock and Dairy. For several years, prices in the livestock sector
had been declining, with the heaviest declines in the hog sector, where average
price per hundredweight fell from almost $53 in 1997 to $30.50 in the Spring of
1999 (after having sunk to a record low of $14.70 in December 1998). Declining
overseas markets, oversupply and slaughter capacity limitations were reasons
given for the declines, along with the changing structure of the industry. Some
price recovery has accompanied the revival of the Asian economy and rising
demand; however, some believe concentration in the industry and the growing use
of price contracting arrangements between producers and processors exacerbates
low livestock prices. Mandatory price reporting by large meat packing firms was
incorporated by conferees into the FY2000 agriculture appropriation law (P.L.
106-78). There also were proposals calling for country-of-origin labeling
for imported meats (H.R. 169, H.R. 693, S. 675), and for
extending eligibility for marketing loans to swine producers (H.R. 217). Crop
insurance reform legislation signed by the President on June 20,2000 (P.L.
106-224) included a provision for pilot projects for livestock insurance.
Hearings in the Senate on dairy pricing policy were held on February 8 and 9,
2000. The lack of consensus on this issue was apparent at these hearings, and
there was no agreement on anything other than a straight extension of the
current dairy price support program by the end of the 106th Congress.
(See CRS Issue Brief IB10063, Animal Agriculture: Current
Issues, and CRS Issue Brief IB97011, Dairy Policy Issues.)
Industry Concentration. The changing structure of the agriculture
sector, particularly with respect to mergers between major grain companies and
concentration in the livestock sector, is seen by some as a cause of persistent
low farm prices. A proposal (S. 1739) to
restrict mergers and increase federal regulation of the non-farm sectors of the
agriculture industry was offered in the first session as an amendment to FY2000
agriculture appropriations. It was not adopted in the finally-enacted law.
Several bills (H.R. 3159, S. 2411) call
for more rigorous application of anti-trust laws and increased reporting
requirements for processors and manufacturers in the agriculture sector. Bills
also have been introduced to establish a position with responsibility for
agricultural antitrust matters in the Department of Justice (S. 1984, S. 2252) and to
make it illegal for meat packers to own, feed or control animals intended for
3342). At issue are: (1) the adequacy and employment of existing federal
antitrust statutes to protect farmers against anti-competitive practices; (2)
the extent to which mergers influence farm prices and their impact on farmers
and consumers, and (3) the appropriate role of the federal government in
regulating industry. (See CRS Report RS20562, Merger and Antitrust Issues in
Animal & Plant Health Inspection. The Animal & Plant Health
Inspection Service (APHIS) is the USDA agency responsible for protecting the
domestic food and fiber industry from foreign pests and diseases. It carries out
its responsibilities under 10 major statutes. For several years policymakers
have been concerned about conflicts among these laws and provisions in them that
do not reflect current knowledge and practices in plant and animal protection.
The major issues concern federal versus state authority in this area, and the
degree to which APHIS should expand its plant protection authority to include
the protection of natural ecosystems. Four bills (H.R. 1504, S. 321, S. 910, S. 983) proposing
to modernize the APHIS statutes were introduced in the 106th
Congress. Provisions similar to those in H.R. 1504 were
added to the crop insurance reform legislation signed into law on June 20, 2000
106-224) (For more information, see CRS Report RS20401, Agricultural Quarantine: Congress
Debates Reform of Plant Protection Authorities.)
Biotechnology. Genetic engineering of plants and their use in food
products is an increasing area of legislative interest. Genetically modified
organisms (GMOs) are being used by growers to lessen plant susceptibility to
pests and reduce the need for chemicals to prevent plant diseases and insect
infestations. Concerns have arisen that the unregulated use of this technology
will spill over to unharvested lands, interfere with the natural evolution of
valuable species and possibly lessen their effectiveness, and pose a risk to
human health. StarLink corn, a genetically modified corn approved only for
animal feed by the EPA because it contains a protein that has potential hazards
for the human digestive system, was detected in Taco shells in September 2000.
Farmers are concerned that seed companies will increase their control over plant
production and lessen farmers' ability to reuse seeds and maintain control over
input and production costs. They also are concerned that restrictions by foreign
countries on GMOs will reduce their markets. Supporters of GMO technology
contend that it can help underdeveloped nations become agricultural producers
and help feed millions of hungry people. Moreover, they argue that the
environment and human health is made safer by less dependence on chemicals in
agricultural production, and that stated human health concerns about GMOs often
are influenced by the desire to protect native-produced agricultural products
from U.S. competition. Restrictions on imports and labeling of GMO products are
expected to be major issues in the next round of WTO trade negotiations and a
potential subject of domestic regulation. Legislation (S. 3184) was
introduced at the end of the session to require labeling of GMO foods. (See CRS
Report 98-861 ENR, U.S.-European Agricultural Trade: Food
Safety and Biotechnology Issues, and CRS Report RS20732 (pdf),
StarLink Corn Controversy: Background..)
CRS Reference Products on Agriculture
CRS Report RL30712 (pdf), Agriculture in the United States: Selected
CRS Report 97-905, Agriculture: A
Glossary of Terms, Laws, and Programs, 3rd Edition. (also can
be accessed on line through the House Agriculture Committee Website.)
CRS Report RL30313, Agriculture: A List of
1. (back)The 1996
farm law is formally entitled the Federal Agriculture Improvement and Reform
(FAIR) Act. Title I, The Agriculture Market Transition Act (AMTA), also known as
"Freedom to Farm," substituted lump sum payments for target price support for
wheat, feedgrains, cotton, and rice.
2. (back) Marketing
loan assistance provides payments to field crop farmers when prices fall below
loan rates established on the basis of three preceding year olympic average
prices for commodities. High prices and expanding export markets when the farm
bill was considered probably helped to mute some of the concerns about
eliminating target price supports.
proposed in 1998, raising the loan rate cap probably would have resulted in
substantially higher deficiency payments for many farmers because of the high
average prices for many commodities in the preceding 3 years. At this point,
however, the last 3 years of very low prices for many commodities, probably
would result in loan rates that are lower than the caps for many commodities.
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