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“Farm Flex” Bill: Fruit & Veg. Planting Restrictions
Debate over the issue of fruit and vegetable planting restrictions, or “planting flexibility,” involve at least three important angles that could impact the 2007 Farm Bill: Processor concerns about adequate supply, WTO compliance, and the budget. The Bush administration, Midwestern lawmakers, and policy makers representing fruit and vegetable growers, have all contributed to the discussion with specific legislative proposals that will garner more attention as the 2007 Farm Bill is drafted.
I. Planting Restrictions
II. Other Farm Bill Issues
III. Ethanol
I. Planting Restrictions
In a recent Congressional Research Service (CRS) Report, (“Farm Commodity Policy: Programs and Issues for Congress” (3.8.2007)), Jim Monke highlighted the current fruit and vegetable planting restriction and the issue of planting flexibility.
Mr. Monke explained the “planting flexibility” concept by noting that, “Planting flexibility was created in the 1990 farm bill to allow farmers to respond to market signals when choosing crops, but has restrictions to protect fruit and vegetable growers who do not receive direct subsidies. Flexibility refers to the ability to receive government payments for a base crop (such as corn) and simultaneously grow a different program crop on those base acres (such as soybeans, but not fruits and vegetables). Farmers who violate the planting restriction on fruits and vegetables do not receive program payments on acres in violation, and they must pay an additional financial penalty based on the market value of the fruits and vegetables planted (page 5)”
As a general proposition, specialty crop growers support the planting restriction policy.
However, the planting flexibility issue contains at least three important angles that could impact the 2007 Farm Bill: Processor concerns about adequate supply, WTO compliance and the budget.
Processor concerns. The CRS report stated that, “Two policy issues have arisen about planting flexibility. First, some midwestern producers who grew fruits and vegetables have reduced their plantings since soybeans became a program crop in 2002. Processors for canning and freezing have reported short supplies and difficulty contracting new growers. H.R. 1371, ‘Farm Flex,’ would allow fruits and vegetables for canning and freezing to be grown on base acres without additional penalties (besides giving up program payments on those acres for one year) (page 5)”
For more detail on the “Farm Flex” bill, see this March 6 press release issued by Rep. Tammy Baldwin (D-Wis.); “The bipartisan Farming Flexibility Act of 2007 (H.R. 1371 – Farm Flex), introduced today in the House of Representatives by Reps. Tammy Baldwin (D-WI), Mike Pence (R-IN), Timothy Walz (D-MN), and Ray LaHood (R-IL), restores options to Midwest farmers and food processors now penalized by planting restrictions in the 2002 Farm Bill.”
The release explained that, “Currently, farmers who choose to plant fruits and vegetables on their base acreage, are doubly penalized for doing so, in that 1) they will not receive the direct payments on those base acres on which they plant the fruits and vegetables, and 2) they must pay an additional financial penalty based on the market value of the fruits and vegetables they plant.
“As a result, most producers cannot reduce their reliance on the farm commodity programs by rotating vegetable production onto their land and pursuing canning contracts. Consequently, processors have experienced inadequate supplies of fruits and vegetables for canning.”
With respect to what the “Farm Flex” bill would accomplish, the March 6 release stated that, “Farm Flex removes the planting restriction on fruits and vegetables. While producers who choose to plant fruits and vegetables on base acres would not receive direct commodity payments for that acreage, neither would they have to pay an additional penalty. In addition, their historical record of base acreage would not change.”
Rep. Mike Pence (R-IN) was quoted in the release as saying, “The Farm Flex Act will provide Hoosier farmers freedom and flexibility to plant fruits and vegetables that they do not have under current law. Passage of this bill is vital to helping Indiana farmers stay competitive in the global marketplace as well as saving the taxpayers money.”
WTO Compliance. The CRS report went on to say that, “Second, in the U.S.-Brazil cotton dispute, the WTO settlement panel found that the restriction on planting fruits and vegetables made direct and counter-cyclical payments ineligible to be a nondistorting payment (green box) for international trade purposes. In other words, the restriction means direct and counter-cyclical payments are not fully decoupled. If this finding is enforced, it could affect the United States’ ability to meet WTO commitments during years when farm commodity payments are particularly high” (page 5).
The Bush administration’s Farm Bill proposal also addressed planting flexibility and tied in the WTO issue, stating that, “Under World Trade Organization (WTO) rules, direct payments can be classified as non-trade- distorting or ‘green box’ support if, among other conditions, they are not ‘related to, or based on, the type or volume of [current] production’ by the recipient. In the Brazil cotton case, the WTO ruled that direct payments provided under the 2002 farm bill could not be classified as ‘green box’ support, because of the limitations on planting flexibility that currently prohibit the planting of fruits, vegetables, and wild rice on base acres eligible for payments. The WTO reasoned that because direct payments are conditioned on the recipients’ avoiding production of certain crops after the base period, they are related to current production and thus do not meet the criteria for decoupled income support as defined in the WTO Agreement on Agriculture.
“Although the WTO rulings and recommendations in the cotton dispute were limited to particular claims made by Brazil in that case, the reasoning in Cotton would suggest that it is desirable to remove the planting flexibility limitations” (page 32).
With respect to a recommendation on this issue, the Bush administration proposal noted that, “To ensure that direct payments will be considered to be non-trade distorting green box assistance, the Administration proposes that the provision of the 2002 farm bill that limits planting flexibility on base acres to exclude fruits, vegetables, and wild rice, should be eliminated” (page 32).
Meanwhile, Catharine Richert, writing yesterday at the Congressional Quarterly webpage, provided an overview of the planting restriction issue. In part, Ms. Richert reported that, “At least 16 House members, including three Agriculture Committee members, have signed onto a bill (HR 1371) by Tammy Baldwin, D-Wis., that would continue to block subsidies to growers who plant fruits and vegetables but would lift the penalties.
“Baldwin’s bill would split the difference between the Bush administration, which wants to end the planting restrictions outright, and specialty crop growers, who like the law as it is.
“The unsubsidized specialty growers say they will face an unfair competitive disadvantage if commodity farmers can plant fruits and vegetables while still collecting government subsidies for other crops. Canning companies want the planting penalties lifted to bring a cheaper, more plentiful supply of canning fruits and vegetables to the market.”
Ms. Richert went on to note that, “But fruit and vegetable growers, who say they could lose $3 billion a year if the restrictions are altered, are fighting back. California Democrat Dennis Cardoza, the chairman of the Agriculture subcommittee with jurisdiction over fruits and vegetables, is pressing a bill (HR 1600) that would leave the planting restrictions intact and steer about $5 billion of the farm bill budget into promoting specialty crops.
“‘It’s a problem for us,’ Cardoza said of the Baldwin bill.”
Recall that, Michael Doyle, writing on March 21 at the Sacramento Bee webpage, highlighted Rep. Cardoza’s proposal; “California fruit and vegetable farmers put their cards on the table Tuesday with a multibillion-dollar bill that’s part wish list and part bargaining chip.
“The legislation introduced by Rep. Dennis Cardoza, D-Merced, would dramatically boost federal spending on what are known as specialty crops. It’s a big turnaround for hundreds of unsubsidized crops, from asparagus to walnuts.
“‘Nontraditional crops have never had a seat at the table when Congress wrote a farm bill,’ Cardoza said, ‘but that is all about to change.’
“Nonetheless, the specialty crop bill also poses new budgetary and political problems. There will be competition for money, pressure from trading partners and a fight over planting flexibility,” Mr. Doyle said.
Budget. The third angle that the planting flexibility issue could have on the 2007 Farm Bill involves the budget. In the CRS report cited previously, Mr. Monke indicated that, “If the restriction is lifted, fruit and vegetable growers may seek some type compensation in return.” With a sharply lower budget baseline and increased demand for Farm Bill funds in a variety of other areas, additional allocations to compensate specialty crop growers could be difficult to find.
For more on the planting flexibility issue, see this report from the USDA’s Economic Research Service, “Eliminating Fruit and Vegetable Planting Restrictions: How Would Markets Be Affected?” To listen to a FarmPolicy interview with one of the authors of this report (about nine minutes), just click here.
II. Other Farm Bill Issues
In a related example of the competition of garnering scarce Farm Bill funding, which also relates to specialty crop growers, a USDA news release from yesterday stated that, “Agriculture Secretary Mike Johanns today expanded on the Administration’s farm bill nutrition proposals, an area of farm policy which constitutes the largest part of USDA’s budget. The nutrition proposals would spend $467 million more than current programs. An additional $2.75 billion would be spent on the purchase of fruits and vegetables to improve nutrition in USDA food and nutrition programs.”
***
The Wall Street Journal editorial board weighed in this morning with an opinion regarding another aspect of the Administration’s Farm Bill proposal: Payment Limits.
The Journal noted that, “To help plan its reform proposals, the Bush Agriculture Department received IRS tax data for tax year 2004. No names, just income data. In 2004, 276 Washington, D.C. ‘farmers’ filed an IRS ‘Schedule F’ — for taxpayers who actively participate in their farms — and 80 of them reported AGI of more than $200,000. If you’ve been to the District of Columbia lately, you’ve probably noticed it isn’t overrun with corn fields. The D.C. 80 almost certainly do something else as their main occupation, and we’d like to know how many of them also cadge farm payments on the side. Who are these mystery farmers anyway?”
The Journal editorial concluded by saying, “According to the USDA, over the period from ‘2002-05, payments to cotton producers averaged a little over 50% of the value of the cotton sold in those years.’ How’d you like to be in a business where each year the government cut you a check for half of your annual revenue?
“By the way, one gentleman farmer who’s doing the right thing is Iowa Senator Chuck Grassley. According the Des Moines Register, Mr. Grassley reported net income of $25,177 from his 800-acre family farm in 2005 and received about $34,000 in farm subsidies that year. But at least he’s supporting the subsidy means test.
“Farm-state politicians keep telling us that subsidies are needed to help the poor family farmer. But as always in Washington, government power turns out to help the powerful. Where are the Democratic class warriors when we need them?”
The editorial board at the Chicago Tribune noted yesterday that, “Finally, after years of Democratic and Republican administrations pushing bloated subsidies and catering to Big Farming, the White House is taking a few steps in the right direction.
“The president’s plan would make it harder for large, wealthy farms to receive government handouts. It would do this by lowering the highest subsidized annual income level from $2.5 million to $200,000. In the words of Agriculture Secretary Mike Johanns, ‘After $200,000, you should graduate from taxpayer subsidies.’ In addition, the president’s farm plan would limit a large agriculture corporation’s ability to game the system by breaking into several, smaller entities to receive more subsidies. These are good ideas to ensure that federal assistance goes to the farming families that need it most.”
The Tribune editorial concluded by saying, “Home to the most efficient growers in the world, the U.S. should lead the way in creating a market in which farmers from all over the planet can compete and sell their products to as many hungry nations as possible.”
III. Ethanol
Bill Hord, writing in today’s Omaha World-Herald, reported that, “The logistics of collecting and storing a million tons of corn stubble each year for an ethanol refinery are mind-numbing.
“It would take 67,000 semitrailer loads to haul the baled stubble out of the field. That’s 187 truckloads a day, or one every eight minutes. To complicate matters, the need for trucks, machinery and manpower would come during harvest, already the busiest time of the year on the farm.
“And that’s where a massive federal initiative into cellulosic ethanol may find its biggest bottleneck – on the farm.”
The article noted that, “The U.S. Department of Energy wants to replace 30 percent of the nation’s petroleum needs with ethanol by 2030. That goal would require some 40 billion to 45 billion gallons a year from biomass ethanol, a technology not yet in commercial production.
“‘If we can get the farming community’s support,’ said Andy Aden, senior researcher at the National Renewable Energy Laboratory in Golden, Colo., ‘then all the pieces are falling into place and some real progress can be made.’
“But farmer buy-in remains to be seen, said Imperial farmer Rod Johnson.
“‘Our main concern is $4-per-bushel corn (worth $750 to $800 an acre),’ Johnson said. ‘Thirty dollars an acre for biomass is a minor concern for our operation.’”
The article also indicated that, “Not the least of the concerns with corn stover is the problem of storage, Tagore [Sam Tagore, a Department of Energy feedstocks specialist in Washington, D.C] said. The harvest of corn stover would occur during a six-week harvest window in the fall, but the ethanol plant would require regular deliveries throughout the year.
“Even a small ethanol plant using 2,000 tons of stover a day would require 100 acres stacked 25 feet high with stover to run a refinery for a year.
“A three-year study in Chase County indicates that an 80-million-gallon ethanol plant would require corn stover from 500,000 acres of corn within a 50-mile radius of the plant and 500 acres to store it after harvest.
“‘That will give you an idea of the logistical nightmare this thing is,’ said Lex Thompson, one of the Chase County coordinators.”
-Keith Good
