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Brief Sketch of New Farm Bill

by Bruce Nelson
Wheat Life, July 2002

The good, the bad and the ugly?

We as wheat growers are finally starting to discover what we'll have to deal with in the new farm bill. The deck definitely seems stacked in favor of Midwest and Northern Plains growers. There are five major points in the farm bill that we need to be aware of and how they are going to affect us as Washington wheat growers: fixed payments, variable payments that would include a counter-cyclical element, loan rate, differentials, and the conservation programs.

The direct (fixed) payment ($.52) will occur over the next six years. Direct payments will be calculated on either the farm's 2002 contract payment acres or the 1998-2001 average planted acres, at the option of the producer. For those of us who took an early AMTA payment ($.46) in January, we'll get only a $.06 direct (fixed payment in September.

The counter-cyclical payment (CCP) is variable and can range from nothing to as high as $.65 per bushel( 2004-2007). CCP is figured by the target price of $3.86 (2002-2003) or $3.92 (2004-2007) minus the direct payment of $.52, minus the loan rate $2.80 (2002-2003) or $2.75 (2004-2007) or the higher of 12-month national season average price to equal the maximum CCP of $.54 (2002-2003) or $.65 (2004-2007).

The tricky part is that you can retain your present base acres and current program yield or update base to 1998-2001 actual acres. You have three options after you update your base:

  1. add 70 percent of the difference between program and actual 1998-2001 yields to your program yield;
  2. use 93.5 percent of your actual yield in 1998-2001; or
  3. not updating base and retain your current program yield.
On your direct payment ($.52), you are stuck with the old proven yield and whatever base you take (whether the historical one or the updated base). The full amount on counter-cyclical is not guaranteed and you may actually hurt your bottom line by updating bases because your yield may drop. It has been stated that acreage base and payment acres for calculating payments for direct and counter-cyclical payments are equal to 85 percent of the base acres. Let's hope that USDA has some good software out there so we can compare all of our options.

Now how about the loan rate? This is where we in this state were violated to the nth degree. Because I live in Whitman County and I have been looking at all other counties, I can see that we did not get the $.20 increase that was promised. Instead, Washington state got $.10. That is, if you raise soft white wheat. If I raise durum wheat instead of soft white at $2.90, I can get $4.03 per bushel and $3.31 for dark northern spring. If I lived in Lincoln County, I could get $3.30 per bushel for soft red wheat.

This is the biggest travesty I have ever seen. This will shift production of classes of wheat in huge proportion. there will be durum wheat everywhere. I was talking to a couple of Montana growers the other day and they typically raise DNS and HRW, but they said they would change to almost 100 percent durum next year. The USDA excuse for all of this is that they were making this "more market orientated." But, in reality, USDA is making us raise the wheat that they are pricing the highest. This is an issue we will be working hard to get turned around, but it will not be easy. We're hopeful the turn around will happen soon, but we have to remember that "soon" in government terms could be a year or two.

The differentials haven't been released yet, but if the same individuals who set the loan rates set them it won't be good for us.

As for the conservation part of the bill, I wouldn't hold my breath too long. They did put more money into conservation -- in fact, a lot of money -- but most of that won't kick in until 2004. The programs that are useable for us now are basically the ones that allow us to take land out of production -- and allow other countries to raise wheat and take more of our market.

The other portion of the conservation act is the Conservation Security Program. This actually focuses on production agriculture and will pay a person for what he is doing now in the name of conservation, or what he will start doing in the future (minimum till, no till, rotational, et.). The program will start in 2003. The challenge will be for us to make sure the rules that are drawn up benefit our area in conservation practices. As it stands now, you can be paid up to $45,000 per year depending on what you do and how long a contract you sign up for. Like everything else, it has its problems. There really is not enough money to go around nationwide, which in turn will make the $45,000 limitation moot. In my opinion, if you average 20 percent of the $45,000, you'll be lucky.

This is a sketch of what we are going to get. This is all still being sorted out back East for implementation and the state offices are trying to get our questions answered. Everything I mentioned above has yet to be defined in implementation. It could be better but, of course, it could be a lot worse. There is no doubt that the cash flow situation will not be even close to the old farm bill. Still, we have to be optimistic and hope that we can get things changed in our favor. Until then it is up to all of us to study the farm bill closely and farm it to the maximum that it allows, or else we won't be in business for much longer.

If there is anything that really ruffles my feathers about this whole farm bill business it is this: it does not address the underlying issue for wheat growers or agriculture in general. And what would do that" An all-out program to regain world market share that we have lost over the years because of sanctions. They will not come back unless we have incentives for those countries to come back. Such incentives cannot just be for a small amount of tonnage or a short period of time. They need to cover all exports and for at least a 10-year period.

Maybe we could then regain pride in our agricultural industry and say that we are going to take back our world's share that we had in the previous decades.

Is there anyone out there that cares? I DO.

Bruce Nelson, President's Message
Brief Sketch of New Farm Bill
Wheat Life - July 2002

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