Farm Bill of 2007

Content of the Bill Commodity Programs Conservation Agricultural Trade and Aid Nutrition Programs Farm Credit Rural Development Research Forestry Energy Miscellaneous Provisions

Title 1 Commodity Programs Marketing assistance program is revised –Loan rates guarantee farmers a “safety net” per unit of covered commodities. However, producers have used marketing strategies to receive large loan deficiency payments at harvest even when they sell their crop later in the year at market prices well above the safety net price. This unintended consequence allows some producers to lock in lucrative payments from the government, even when they actually sell their commodity at levels well above the safety net price prescribed in the 2002 farm bill. –The benefits of the marketing assistance loan program are considered trade distorting under World Trade Organization (WTO) guidelines. Recommendations: All loan rates for commodity crops would be set at the less than 85 percent of the 5-year Olympic average (average of last five years price excluding the high year and the low year).

Counter-cyclical payments Counter-cyclical payments were available to covered commodities whenever the effective price was less than the target price (target prices are established by 2002 Farm Act). The effective price was equal to the sum of 1) the higher of the national average farm price for the marketing year, or the national loan rate for the commodity and 2) the direct payment rate for the commodity. The payment amount for a farmer equals the product of the payment rate, the payment acres, and the payment yield. Replace the current price-based counter-cyclical payment program for a commodity with revenue-based counter-cyclical payments for that commodity.

Title 1 Commodity Programs Counter-cyclical payments Commodity Units CurrentAverage of Proposed Proposed Loan Rates maximum over / Wheat $\bu Corn $\bu Sorghum$\bu Barley $\bu Oats $\bu Upland Cotton $\lb ELS Cotton $\lb Rice $\cwt Soybeans $\bu Other Oilseeds $\lb Peanuts $\ton Dry Peas$\cwt Lentils$\cwt Small Chickpeas $\cwt Graded Wool $\lb Nongraded Wool $\lb Mohair $\b Honey $\lb / Proposed loan rates are calculated for each year, , using actual and projected market prices and then averaged over the 5-year period.

Title 1 Commodity Programs Direct payment program Increase overall direct payments and to provide additional income support in the crop years. Continue direct payment acres at 85 percent of base acres, and do not update program payment bases and yields. This proposal would pay farmers an additional $5.5 billion over ten years. Direct payment rates for 2007 under current law compared to USDA’s proposed direct payment rates for crop years: Crop Current Law USDA ProposalUSDA Proposal and Corn ($/bu) Sorghum ($/bu) Barley ($/bu) Oats ($/bu) Wheat ($/bu) Soybeans ($/bu) Rice ($/cwt) Upland Cotton (cents/lb) Peanuts ($/ton) Other Oilseeds ($/cwt) Increase direct payment for beginning farmers

Title 1 Commodity Programs Continue to support the price of milk at $9.90 per hundredweight (cwt), and re-authorize and revise the Milk Income Loss Contract Program (MILC). MILC payments would be based on a reduced and historical payment rate, instead of actual milk sales. Revise the sugar program to operate at no net cost to taxpayers by balancing supply and demand for sugar through domestic marketing allotments and the tariff rate quota (TRQ) on sugar imports. Allow planting flexibility of fruits, vegetables, and wild rice on base acres.

TITLE III TRADE Agricultural Export Assistance Programs: Expand mandatory funding for the Technical Assistance for Specialty Crops (TASC) grant program to $68 million over 10 years and increase the maximum allowable project award to $500,000. Market Access Program (MAP). MAP encourages a public/private partnership to create, maintain, and expand foreign markets for U.S. agricultural, fishery, and forestry products. Expand mandatory funding for the Market Access Program (MAP) by $250 million over 10 years and focus the additional funds on non-program commodities.

TITLE III TRADE Establish a new grant program investing $20 million over 10 years to further focus resources on addressing international sanitary and phytosanitary (SPS) issues for all agricultural commodities. Authorize and provide long-term mandatory funding of $15 million over 10 years to enhance USDA staff support for international standard-setting bodies, such as the Codex Alimentarius, the International Plant Protection Convention, and the World Animal Health Organization.

TITLE III TRADE Provide enhanced monitoring, analytical support, and other technical assistance to support U.S. agriculture in bringing forward or responding to significant trade disputes and challenges. Expand trade capacity, food safety, and agricultural extension programs in fragile regions through $20 million of mandatory funding over 10 years. Reform the Commodity Credit Corporation’s (CCC) export credit guarantee programs to bring them into compliance with the findings of the World Trade Organization dispute resolution panel in the Brazil cotton case. Terminate the Supplier Credit Guarantee Program (SCGP) due to approximately $227 million in defaults and evidence of fraudulent activity.

TITLE III TRADE Revise the Facility Guarantee Program (FGP) to attract additional users who commit to purchasing U.S. agricultural products. These program improvements are estimated to increase usage of the program by $16 million over the next 10 years. Repeal the Global Market Strategy mandate and the Export Enhancement Program, which are redundant or inactive, allowing USDA to focus resources on priority issues. Export Enhancement Program (EEP) of The EEP permits USDA to provide bonuses to make U.S. commodities more competitive, offsetting adverse effects of unfair trade practices or subsidies –Maximum funding for EEP is extended through 2007 at current funding levels of $478 million per year

Food Aid Programs Public Law Reauthorized through 2007, P.L (P.L 480) is one of the oldest U.S. food aid programs. It includes three export titles. Each title has different objectives and provides agricultural assistance to countries at different levels of economic development. Title I of the P.L. 480 program is administered by USDA, and Titles II and III are administered by the U.S. Agency for International Development (USAID). Title I provides for U.S. government financing of sales of U.S. agricultural commodities to developing countries and private entities on concessional credit terms—extended credit periods and low rates of interest charged for the financing. Title II, the Food for Peace Program, which provides grant humanitarian food aid and includes the following changes made by the Farm Security and Rural Investment Act (FSRIA) of 2002: –Minimum annual tonnage is increased to 2.5 million tons from million tons. –In recipient countries, sales in dollars instead of foreign currencies will be allowed in some cases. –Sales of commodities must be at reasonable in-country market prices. –USAID is tasked to streamline program management and application processes. Authorize the use of up to 25 percent of Farm Bill of 2007 authorized P.L. 480 Title II funds for the local or regional purchase and distribution of emergency food to assist people threatened by a food security crisis.

Food Aid Programs P.L. 480 Title III, Food For Development (is dormant) P.L. 480 Title III programs have been centered on countries most in need of food, which under current world conditions, are primarily in Africa; and on programs with direct linkages to increased agricultural production and consumption. Title III programs totaled $29.9 million in FY 1998 and assisted four least developed countries (Eritrea, Ethiopia, Mozambique and Haiti) that have demonstrated a substantive need for food assistance, the capacity to use the assistance effectively, and a commitment to policies that promote food security. In FY 1999, Title III resources were planned for Haiti, Mozambique, Ethiopia, Eritrea and Nicaragua. Funds were not requested for P.L. 480 Title III programs since FY 2000.

Food Aid Programs Food for Progress Program. Using either Commodity Credit Corporation (CCC) funding, or P.L. 480 Title I appropriations, the Food for Progress Program provides commodities to needy countries. Recipient countries are emerging democracies that have made commitments to introduce free enterprise elements in their agricultural economies. Section 416(b). This program is authorized by Section 416 of the Agricultural Act of 1949 and provides for the donation to needy countries of eligible commodities held by the CCC.

Food Aid Programs McGovern-Dole International Food for Education and Child Nutrition Program. Based on the USDA pilot Global Food for Education initiative, which is implemented under Section 416(b), the new McGovern-Dole International Food for Education and Child Nutrition Program is a separate program authorized by the FSRIA that will encourage education and deliver food to improve nutrition for preschoolers, school children, mothers, and infants in impoverished regions. This program may be carried out by private voluntary organizations, cooperatives, intergovernmental organizations, governments of developing countries and their agencies, and other organizations. The John Ogonowski Farmer-to-Farmer Program. This USAID- administered program, operated under Title V of P.L 480, strives to improve global food production and marketing by transferring technical skills of the U.S. agricultural community to farmers in participating countries. This Program was renamed to honor one of the pilots killed on September 11, 2001, who was a participant in this program.

Food Aid Programs Bill Emerson Humanitarian Trust. Reauthorized through 2007, this Trust was established under the Bill Emerson Humanitarian Trust Act of 1998 to meet emergency humanitarian food needs in developing countries. Up to 4-million metric tons can be held in the Trust and can be any combination of wheat, rice, corn, or sorghum.

Farm Policies Farm Service Agency (FSA) farm loan eligibility rules are relaxed to make more borrowers eligible for Federal farm credit assistance. Lending rules for beginning farmers and ranchers are modified to increase eligibility and provide more benefits. FSA lending procedures are changed to streamline delivery of farm loan programs. Farm Credit System (FCS) associations and farm credit banks no longer must get prior permission from another FCS lender when participating in certain loans originated outside the lender's chartered territory. The Bank for Cooperatives is given greater authority to finance the import and export of farm supplies, agriculture-related equipment, agricultural processing equipment, and other capital goods used in storing and handling agricultural commodities or products.