August 4, 2000

Farm groups suggest
ideas to improve income

The search for a “fix” for the ailing farm economy continues as both the U.S. House and Senate explore options to relieve pressures currently facing farmers and ranchers.

Senate Ag Committee Chairman Dick Lugar (R-IN) and Rep. John Boehner (R-OH) have introduced a major bill relating to farm policy. Meanwhile, House Agriculture Committee Chairman Larry Combest (R-TX) called leaders of major U.S. farm organizations together to hear their perspectives on farm policy.

The new Senate legislation, called the Rural America Prosperity Act, contains many Farm Bureau-backed initiatives in four categories: tax relief, risk management, regulatory relief and trade reforms.

Although bill language is not yet available, major points under tax relief in the bill are:

• Provides 100 percent deductibility of health insurance costs for self-employed individuals.

• Provides $500,000 exclusion from capital gains on the sale of a farm.

• Repeals the estate tax.

• Expands the use of conservation easements by increasing the partial exclusion from estate taxes.

Under risk management:

• Creates Farm and Ranch Risk Management (FARRM) accounts.

• Ensures that farmers are not disqualified from using income averaging due to the Alternative Minimum Tax Calculation.

Under regulatory relief:

• Mandates the General Accounting Office to assess the overall cost of complying with federal regulations and recommend reasonable alternatives that cost less for farmers, ranchers and foresters.

Under trade reforms:

• Grants the president fast-track authority for seven years.

• Establishes congressional ratification of trade agreements.

• Lifts unilateral sanctions on agricultural products.

House Ag Committee
Meanwhile, the chairman of the House Agriculture Committee brought together major farm group leaders in a continuing effort to comprehensively review farm policy.

“I have stated at the beginning of each of these field hearings, and I think it’s important to note that there are significant problems facing the agricultural sector,” Combest said. “I think the previous hearings have served to demonstrate how deep and complex the current challenges are. What’s more, we all fundamentally believe that it is in the best interest of this nation to maintain and foster a diverse and strong agricultural sector for the future. And so, the question we want to answer is, ‘How best do we accomplish that goal?”

AFBF testimony
One of those testifying before the committee was American Farm Bureau President Bob Stallman. He stressed that Congress must avoid abandoning the market-based policies of the 1996 farm bill while working on opportunities to improve farm income.

“Congress gave farmers their word regarding access to additional foreign markets through trade policy reforms, relief from overburdensome regulations, additional and improved risk management tools, and tax reforms for their support of the FAIR Act,” Stallman said. “Now, facing the potential of a third consecutive year of low commodity prices, farmers continue to hold up their end of the bargain. They need some type of income assurances in order to meet established and future obligations. Much work needs to be done on the implementation of a permanent program for a countercyclical payment plan.”

Besides the immediate need for a countercyclical plan to replace yearly ad hoc assistance, Stallman outlined several other action items, including additional low income and weather-related financial assistance this year, continuation of planting flexibility under the 1996 FAIR Act, continued trade expansion and continued evolution of risk management programs.

Stallman said Farm Bureau believes the FAIR Act is continuing to work as designed with respect to producers’ ability to reallocate their resources in a more efficient manner and adjust crop acreage in response to economic and agronomic factors.

“The market is providing pricing opportunities while AMTA payments and loan rates provide a ‘safety net.’ It is imperative that Congress avoids abandoning the market-based policies of the FAIR Act, including increasing loan rates,” Stallman said. “The loan program was intended to be a method to lessen pressure to sell at harvest time and to spread sales throughout the marketing year. It is a marketing tool for producers, not an income support program.”

Other testimony
Other major farm groups suggested Congress increase its annual spending on farm supports.

The groups reminded Congress that more than $22 billion in special aid has been appropriated for growers since 1998 because of low commodity prices. The spending has roughly doubled the outlays promised under the 1996 farm bill, which set supports for farmers at $5.57 billion in its first year, gradually dropping to $4 billion by fiscal 2002.

“To facilitate any kind of financial safety net, we urge that you commit to increasing the farm support baseline...to at least $13 billion,” said Bill Kubecka of the National Grain Sorghum Producers.

The National Corn Council and the National Association of Wheat Producers said the budgetary “baseline” for agriculture must be raised to a level that assures adequate farm supports.

“The single most significant recommendation I can make to this committee is to obtain adequate budget authority,” said Roger McLendon, president of the Cotton Council.