NCC Review of Selected Provisions of the Farm Security and Rural Investment Act of 2002

A summary analysis that will be provided to attendees at the NCC's upcoming farm bill educational meetings across the Cotton Belt. The new farm bill provisions are subject to final USDA interpretations and regulations.

Published: February 27, 2002
Updated: May 14, 2002

[Subject to Final USDA Interpretations and Regulations]

Date of Enactment
May 13, 2002

Duration
2002-2007 crop years

Loan Rates, Direct Payments and Target Prices

 

Loan Rates

Direct Payment1/

Target Price2/

 

2002-03

2004-07

2002-07

2002-03

2004-07

Upland Cotton (lb.)

0.520

0.520

0.0667

0.724

0.724

ELS Cotton (lb.)

0.7977

0.7977

N/A

N/A

N/A

Corn (bu.)

1.98

1.95

0.28

2.60

2.63

Sorghum (bu.)

1.98

1.95

0.35

2.54

2.57

Barley (bu.)

1.88

1.85

0.24

2.21

2.24

Oats (bu.)

1.35

1.33

0.024

1.40

1.44

Wheat (bu.)

2.80

2.75

0.52

3.86

3.92

Soybeans (bu.)

5.00

5.00

0.44

5.80

5.80

Min. Oilseeds (lb.)

0.096

0.093

0.008

0.098

0.101

Rice (cwt.)

6.50

6.50

2.35

10.50

10.50

Peanuts (ton)3/

355.00

355.00

36.00

495.00

495.00

1/ Direct payments are decoupled from production and price and 2002 payments will be adjusted for 2002 AMTA payments already received (FAIR Act 2002 AMTA rate – 0.0572 cents/lb);

2/Target price (counter-cyclical) deficiency payments are decoupled from production;

3/Peanut program also authorizes quota buyout of 11 cents/lb. for 5 years.

Marketing Loan

  • Non-recourse loans will be available for all loan commodities produced on farm, whether or not base and yield are established for the specific crop;
  • Loans are for 9 months from first day of month following entry;
  • Upland cotton loans may be repaid at lower of adjusted world price or loan rate plus interest and storage;
  • ELS loans will be repaid at loan rate plus interest and storage;
  • Non-recourse loans are available to producers for co-mingled commodities in unlicensed storage facilities if redeemed immediately.

Loan Deficiency Payments

  • Available to producers who forego loan;
  • Payment is determined by multiplying payment rate by quantity of commodity produced excluding amount of commodity entered in loan;
  • For 2001 crops, commodities produced on non-AMTA farms are eligible for LDPs based on earlier of date beneficial interest lost or date producer requested payment.

Cotton Competitiveness Provisions

  • Three-step competitiveness provision extended and 1.25 cent/lb. threshold for Step 2 payments and Step 3 competitiveness computation eliminated through July 31, 2006.

Base Acres

  • Owners may make one time election to:
    1. Establish base by using acreage on which 2002 AMTA payments were calculated and adding average acreage planted to oilseeds for 1998-2001 (some limits apply); or
    2. Update all base acres using average 1998-2001 planted and prevented planted acreage;
  • If owner does not make choice, then Secretary will use 2002 AMTA payment acres and add oilseeds;
  • Sum of covered commodity base acres, base acres for peanuts and acreage enrolled in CRP, WRP or other conservation programs which restrict or prohibit production, cannot exceed actual cropland on farm with an exception for double-cropping.

Payment Acres

  • Direct and counter-cyclical payments are made on 85% of base acreage.

Payment Yield for Direct Payments

  • Yield used for 2002 AMTA payments or equivalent;
  • For oilseeds payment, yield is calculated as: (average yield planted acre for1998-2001 multiplied by national average yield for 1981-1985 divided by national average yield for 1998-2001) [about 78% of current average yield].

Payment Yield for Counter-Cyclical Payments

  • If base not updated - yield used for 2002 AMTA payments or equivalent;
  • If base updated - choice of following:
    1. 2002 AMTA payment yield or equivalent; or
    2. 2002 AMTA payment yield plus 70% of difference between 2002 payment yield and 1998-2001 average yield/planted acre; or
    3. 93.5% of 1998-2001 average yield/planted acre;

If payment yields are updated using option (2) or (3), years with "zero" planted acreage are excluded and 75% of county average yield is inserted for any year when average yield/planted acreage is less than 75% of county average;

Selection of method for determining payment yields applies to all crops on a farm.

Producer Agreement Requirements for Payments

To be eligible for payments, a producer must:

  • Comply with conservation requirements;
  • Comply with planting flexibility requirements;
  • Maintain land in an agricultural or conserving use;
  • Submit annual acreage reports;

In general:

  • Payments must be shared on a fair and equitable basis;
  • Secretary must safeguard the interests of tenants and sharecroppers.

Counter-Cyclical Payment Rate

  • Payment rate = (target price) – (direct payment) – (greater of:12-month average price received or loan rate);
  • Counter-cyclical payments are decoupled from production.

Payment Schedule

2002:

  • September (approx.) balance of direct payments for 2002 crops;
  • October 35% advance on projected counter-cyclical payments for 2002 crops;
  • December 50% advance on direct payments for 2003 crops;

2003

  • February 35% advance on projected counter-cyclical payments for 2002 crops;
  • September balance of counter-cyclical payment for 2002 crop of cotton (end of marketing year for other crops);
  • October balance of direct payments for 2003 crops and 35% advance on projected counter-cyclical payments for 2003 crops.

Cotton Marketing Year

  • August 1– July 31

Average Price Received by Farmers

  • Weighted average price received by farmers during respective crop’s marketing year as collected by USDA-NASS. Final price for each month available at end of subsequent month (e.g.: July price available August 31st);
  • Price is FOB warehouse excluding any loan benefits.

Cropping Flexibility

  • Maintain current rules prohibiting planting of fruits and vegetables on contract acres.

Payment Limitations

  • $40,000/person for direct payments;
  • $65,000/person for counter-cyclical payments;
  • $75,000/person for marketing loan gain/loan deficiency payments;
  • Separate limits for peanuts;
  • 3-entity, wife eligibility and actively engaged rules unchanged;
  • Marketing certificates available for loan redemptions;
  • Entities (excluding general partnerships and joint ventures) with three-year average adjusted gross income in excess of $2.5 million, if less than 75% is derived from farming, ranching or forestry activities, are ineligible for all programs;
  • Creates commission to review effect of limitations with requirement to report one year after enactment.

Conservation Programs

CRP

  • Increases enrollment cap from 36.4 million to 39.2 million acres;
  • Land enrolled may be re-enrolled;
  • Contract offers evaluated based on soil erosion, water quality and habitat.

EQIP

  • Annual funding increased from $200 million to $1.3 billion by 2007;
  • Funding to be allocated 60/40 between livestock and crops;
  • Contract limit of $450,000; contracts may be 1-10 years (payments subject to direct attribution).

WRP

  • Increases enrollment cap from 1.075 million acres to 2.275 million acres;
  • Payments available for easements and cost-share for restoration.

WHIP

  • Provides $700 million (10-fold increase) for technical assistance and cost-share payments to establish and improve habitat on private lands.

Grasslands Reserve Program

  • New program to enroll up to 2 million acres of virgin and improved pastureland to enhance habitat and prevent subdivision for development.

Conservation Security Program

  • New program funded at $2 billion;
  • Open to all producers to encourage practices to generate conservation benefits relative to soil, water, air and habitat;
  • Provides base payment based on national average rental rate for specific land use, cost-share up to 75% and bonus payment for practices which optimize environmental benefits beyond minimum requirements;
  • Uses tiered approach (payments subject to direct attribution):
    • Tier I: producers maintain conservation practices that achieve environmental benefits on all or portion of operation, limited to $20,000 annually, base payment 5% of national average rental rate, 75% cost-share and bonus;
    • Tier II: producers adopt or maintain conservation practices that achieve environmental benefit on entire operation, limited to $35,000 per annum, base payment 10% of average national rental rate, 75% cost-share and bonus;
    • Tier III: producers adopt and maintain conservation practices that achieve environmental benefits by addressing all identified resources of the operation at the Resource Management System, limited to $45,000 per annum, base payment 15% of national average rental rate, 75% cost-share, and bonus.

Research

  • Re-authorizes and establishes new research and extension programs;
  • Increases funding for Initiative for Future Agriculture and Food Systems from $120 million to $200 million per year by 2006.

Export Promotion

  • Market Access Program (MAP) funding increased from current level of $90 million annually to $200 million annually by 2006;
  • Foreign Market Development (FMD) funding increased from $27.5 million to $35 million/year;
  • Enhances Food for Progress program; and
  • Continues pilot program for Global Food for Education Initiative.