Family Farm Act of 1987

S.658 H.R. 1425

The Introduction of the Family Farm Act is the culmination of a year of intensive behind-the-scenes work in Washington and in the countryside. The heart of the bill – the price and supply management sections – remains similar to the Farm Policy Reform Act of 1985, which was defeated by the Administration and agribusiness interests. But at the conclusion of the 1985 Farm Bill fight work began immediately on fine-tuning provisions of the Reform Act, adding major new sections and restructuring the national grassroots coalition to take the policy back to Congress as quickly as possible.

In late 1985, the National Fair Credit Committee was formed to develop comprehensive debt restructuring legislation to accompany our price and supply management bill. The organizations comprising the National Coordinating Committee for the Farm Policy Reform Act were joined by new groups from across the country in this effort. The resulting Fair Credit Plan, coupled with the price increases provided through our bill, would keep more than 95% of our farmers on the land and in business, according to university economists.

In January of 1986, the National Coordinating Committee and the Fair Credit Committee merged to form the National Save the Family Farm Coalition (NSFFC). This structure has provided our greatest organized strength yet to carry out grassroots policy development and public education. Some 38 grassroots organizations covering 28 states are now members.

A working group comprised of members of Congress, their staff, and farm organization representatives was structured in April and met throughout the summer months. The NSFFC has been a key player at the negotiating table. The progressive national farm organizations — The American Agriculture Movement, the National Farmers Union and the National Farmers Organization – are now united behind our bill. And our friends in the House and Senate are now together on one bill with a common strategy and the strong leadership of Harkin and Gephardt.

All of these developments, on top of the absolute failure of current legislation, have put us in the strongest position yet with our legislation. It is up to all of us to make sure that we do achieve its passage!

Bill Summary:

The Bill would accomplish the following goals:

1. Allow our Food Producers to Earn a Living Again

The Bill would establish commodity price floors which would allow efficient family farmers to earn a reasonable return on their investment and labor. Int he first year the price support loan rate would e set at 70% of parity or roughly equal to the cost of production. Using current parity levels, the 70% formula would establish the price floors listed below. Note that in each case, the price floors under the Family Farm Act, while considerably higher than current prices, are still significantly lower than the ten-year average market prices of these commodities in the 1970s when adjusted for inflation.

Fig. 1, Net income, FAPRI Staff Report #2-87, February 1987, (http://ageconsearch.umn.edu/bitstream/244143/2/fapri-sr-02-87.pdf ).

nfi-88-95

In each subsequent year of the program the floors would be increased by one percent of parity until they reached 80% of parity.

picture-10
*In 1987 dollars; annual production volumes were weighted for calculating average price of each commodity for ’70-’79 decade. Prices from ’70s do not include any federal subsidy payments also paid on these crops.

The economists of FAPRI – the Food and Agriculture Policy Research Institute of Iowa State University and the University of Missouri – project that the Family Farm Act would, on average from 1988 through 1995, generate over $21 billion more in net farm income annually than the current program.

2. Balance Supply with Demand

Mandatory production controls (subject to producer approval in a nation wide referendum) would limit U.S. production of program commodities to the projected amounts needed to meet actual demand, including domestic consumption, export demand, humanitarian need and strategic reserve requirements. A farmer would only be allowed to market a volume of commodities equal to his authorized acres times his historic per-acre yield. Any excess production would be stored and applied against the following year’s marketing quota.

3. Slash Farm Program Costs

According to the FAPRI projections, federal Commodity Credit Corporation (CCC) outlays from fiscal 1988 through fiscal 1995 would average $14.4 billion a year less under the Family Farm Act than under current legislation. Costly subsidy payments would be eliminated. And with production reduced to better reflect actual demand, producers would sell their production in the market place, not to the government, thereby eliminating costly storage payments.

Additional savings would also come from the livestock transition program contained in the bill. In the fist three years of the Family Farm Act, the government will be allowed to recoup billions of dollars of its investment by selling a significant volume of these commodities to livestock producers. Under this transition program, which is designed to “ease” livestock producers into the higher grain prices, they would be allowed to purchase government-owned grain at below-market prices. In the first year, each producer could purchase up to $50,000 worth of grain at approximately the price at which the government had acquired it. The prices would be increased in subsequent years until, at the end of the transition period, the livestock producers would again be required to purchase their grain on the open market.

4. Target Benefits to Family Farmers

The percentage of acres each farmer would be required to set aside would be determined by the size of his/her operation Smaller and mid-sized producers would set aside the minimum (20-25%) while the largest producers would be required to set aside up to the maximum of 35%. In other words, the larger the producer, the more he/she will be required to set aside.

An additional pro-family farm provision in the bill requires that the crop acreage “base” on a piece of land be reduced by 10% if the land is sold to anyone other than a family farmer. These bases would then be re-allocated by the local committee with priority given to: 1) farmers, who by practicing sound conservation practices such as crop rotation are left with an understated crop base and 2) new farmers.

These provisions are designed both to direct program benefits to this target group – small and medium sized family farmers – and to discourage a new advantage of an improved profit picture in agriculture.

5. Increase Our Export Earnings

For the past half-century, the world market price for storable commodities has effectively been established by U.S. federal price support loan levels. The U.S. remains the dominant force in the world agricultural export market with its share of the world’s corn export market exceeding 60% and its share of the world’s soybean export market exceeding 70%. Historical trends, current economic pressures and their own assurances indicate that, once U.S. crop prices are raised, our major export competitors would eagerly follow our lead and raise their prices as well. To avert any possibility that compteting exporters might attempt to boost their production and increase their market share at our expense, however, the Family Farm Act instructs the President to enter into multilateral negotiations with other food exporting nations to increase world market prices and maintain market shares.

export-valu-88-95

Fig 2 Export earnings, FAPRI Staff Report 2-87, February 1987, (http://ageconsearch.umn.edu/bitstream/244143/2/fapri-sr-02-87.pdf ).

If an agreement has not been reached after nine months, the Secretary of Agriculture is mandated to use bonus commodities (or, of necessary, cash subsidies) to maintain U.S. exports. To implement the bonus program – the “export PIK hammer” – the Secretary would offer sufficient bonus commodities along with purchased U.S. commodities so that the aggregate per-unit price to our competitor’s intended customer would be low enough that we either win the sale or at least make it clear to our competitors that any price-cutting market raid would be unprofitable.

Economists at FAPRI, operating under the assumption that a multilateral agreement on trade will be reached, project that the value of U.S. exports of program commodities would increase by more than $10 billion during the first year of the Family Farm Act (to $20.6 billion) and would continue rising in subsequent years as prices improve (to $36.4 billion in 1995-96, the last year of the FAPRI projection).

In fact, the FAPI projections indicate that the export value under the Family Farm Act would 1) average over $12 billion more annually than under the so-called “export-oriented” 1985 farm bill and 2) average over $17 billion more annually than U.S. exports during the 1986/87 marketing year.

While our export volume of a few (but not all) of these commodities might drop off some initially due to the price increase, the total value generated by the higher per-unit returns more than offsets (by far) any decline in volume as well as value in subsequent years of the program.

6. Improve Farmer Efficiency

Recent farm programs have forced farmers to try to make up in increased volume what they denied in price, and government and agribusiness promotions have convinced farmers that “efficiency” means maximizing output per acre. The Family Farm Act, by specifying up-front the maximum volume each farmer will be authorized to sell at harvest, would immediately redefine efficiency. Rather than the one who maximizes his use of fertilizer and pesticides, the most efficient farmer would be the one who can produce his predetermined crop allotment while finding ways to minimize his input costs!

The bill would allow a local soil conservation committee to approve a farmer’s conservation plan under which he proposes to produce his quote by using more of his acres but reducing his per-acre yield by farming his land less intensively – a practice with both economic and environmental benefits.

7. Protect Farmers and Consumers from Disasters

The USDA would maintain a Farmer Disaster Reserve (FDR) initially composed of government-owned surplus commodities. In the event of a disaster, a producer would receive commodities from the FDR equivalent to 90% of his marketing certificate, minus the amount actually produced. The value of commodities received by a producer may not exceed $360,000 annually.

Once surplus stocks are reduced the government would puchase enough commodities to replenish the FDR to adequate levels. In most cases this would be done by purchasing commodities at half the price-support loan rate (or less) from farmers who have a good year and end up producing more than they expected or are authorized to sell under their marketing certificates.

8. Relieve the Farm Debt Crisis

Debt mediation and restructuring provisions in the Family Farm Act will enable many heavily-indebted producers to remain on their land until, with the improved commodity prices set by the bill, they can farm their way out of trouble.

Meanwhile, the improved profit picture in agriculture will reverse the downward spiral of land values, alleviating lender pressure on numerous producers whose plunging collateral value no longer provides adequate security to cover their indebtedness. Important effects would e: 1) to reduce or eliminate the need for annual $2-3 billion federal bail-outs of the Farm Credit System and 2) to restore the viability of much of the $30-50 billion in farm debt currently considered to be unrecoverable even through foreclosure, thereby forestalling the 1.5-2.5% increase in U.S. interest rates that writing off such debt would potentially cause.

9. Encourage Improved Conservation Practices

When they can afford it, American farmers are the best conservationists in the world. Price, peer pressure and a clear understanding of their own long-term self-interest demand it.

Unfortunately, current U.S. farm policies effectively force farmers to maximize their crop production with intensive use of fertilizer and other chemicals, much of which all too often runs off into nearby streams and rivers and leaches into the underground water supply. Because of deteriorating conditions in agriculture, many farmers are unable to invest in adequate soil erosion control projects.

In return for improved crop prices established by the family farm Act, farmers would agree to reduce their production to levels needed to fill actual projected demand and locally-approved conservation practices would be required on all land removed from production under the program.

Also, the crop volume they would be allowed to market would be based upon their past per-acre yield history. Thus, the bill would eliminate any incentive to increase yields with additional chemical use and, instead, would reward the efficient producer who can fill his production quota with the lowest possible input costs.

10. Stimulate Real Economic Growth in the U.S.

Economists estimate that every dollar of farm income adds from three to seven dollars to the overall economy as it percolates through the system. By the same token, every dollar of farm income lost costs the U.S. economy many times that amount.

New farm income generated by the Family farm Act will: 1) add tens of billions of dollars annually to our national economy; 2) restore prosperity to Mainstreets across America, creating new jobs not only in rural America but also in the farm equipment manufacturing sector; 3) generate billions of dollars in income taxes from farmers and rural merchants who have been losing money for years and 4) help defuse the rural debt bomb (an estimated $30-$50 billion in farm debt currently unrecoverable even through foreclosure) that threatens to force interest rates up 1.5%-2.5% and drag our already sluggish economy into a severe depression.

11. Attack Hunger at Home and Abroad

A portion of the government savings under the Family farm Act will be used to boost food stamps and other domestic hunger programs in order to shield low income Americans from the impact of any rise in retail food prices attributable to the program.

The bill instructs the President to seek agreements with other exporting nations to increase and coordinate food aid and famine relief outlays although not to the extent that these free or discounted commodities would undercut Third World farmers or discourage the development of underdeveloped nations.

And by raising world commodity prices the bill answers the pleas of numerous world hunger experts fo the U.S. and the European Community to stop the dumping of heavily subsidized commodities in the Third World, a practice which is bankrupting many Third World farmers who are unable to compete against these underpriced imports.

12. Protect the Health of U.S. Consumers

The Family Farm Act contains struct prohibitions against 1) importing food produced using any chemicals not allowed for sue by U.S. producers and 2) the importation of any food containing chemical residue levels exceeding the legal tolerances applicable to food produced in the U.S.

The bill also requires that any imported food (or food product containing one or more imported ingredients) be labeled as such to inform U.S. consumers.

Exports

Q. Under this bill won’t we price ourselves out of the world export markets?

A. The so called “market oriented” policy that we have in effect now is a disaster. We’ve lowered our prices to rock bottom level, disrupted farm economies around the world and we are still not seeing a significant increase in our exports. In the FAPRI projections of the ’85 farm ill (see fig. 3), our current market oriented farm policy does not significantly increase exports in terms of the number of bushels we export. The important factor is not the total number of bushels exported, but the total value of the exports (see fig. 2). Through 1996, the ’85 farm bill is only going to yield $137 billion worth of exports while the Harkin-Gephardt bill will bring in $248 billion over this same time period. What matters to farmers and to the economy as a whole is how much money is brought into the economy, not the amount exported.

Q. Won’t other countries undercut our prices?

A. Because the U.S. is such a dominant influence in the world market, raising our domestic prices would tend to raise world prices. Our share of the world export market exceeds 60% for corn, 70% for soybeans and 35% for wheat making us a tremendous influence in the world market.

A fundamentally new trade initiative was incorporated in the Family Farm Act. It directs the President to negotiate with other countries to establish multilateral agreements on orderly marketing procedures, world floor prices and shared production cutbacks. Many of the major traders are willing to do that. If, however, after nine months some of the major countries do not join in a multilateral agreement and attempt to take away our markets by undercutting our prices, the President is directed to implement a targeted export subsidy program. The program, called an export PIK hammer, is a lever to use on countries who refuse to negotiate using our tremendous surplus stocks as a hammer to bring the offending country to the table.

Q. Won’t this cause a trade war?

A. In essence, we have a trade war going on right now. As we have increased federal subsidies to our farmers and forced the price of their products downward, the other major exporters have responded in kind, increasing their subsidies enough to keep their export prices just below ours. Many countries feel that what we’ve got in the U.S. is a $25 billion export subsidy program in the form of target prices.[1] Under this bill, the U.S. would provide leadership to negotiate an orderly world marketing system and turn world trade policy in a positive direction.

export-vol-corn-soyFig. 3, Exports, FAPRI Staff Report #2-87, February 1987 (http://ageconsearch.umn.edu/bitstream/244143/2/fapri-sr-02-87.pdf ).

Q. Won’t these higher commodity prices be an incentive for other countries to increase production?

A. One of the major reasons developing countries like Brazil and Argentina have increased production and exports, is their demand for foreign exchange to service their debt load. As president Alphonsin of Argentina pointed out during the ’85 farm bill debate, as the United States forces down wold prices with its “market clearing” farm policy, Argentina will continue to bring more land into production, lower its p rices and export more to be able to meet its debt obligation. Higher world prices would relieve the pressure to produce more.

Consumers and Taxpayers

Q. How will taxpayer costs be reduced by the Family Farm Act?

A. The most important feature of the Act, compared to the 1985 farm bill, is the total elimination of all deficiency payments. It will eliminate direct subsidies by taxpayers saving $12-$15 billion each year. The Act ensures fair prices in the market place, not through the federal treasury. In addition, the Act calls for effective supply management provisions to eliminate costly surpluses.

Q. How will farm prices be raised without government subsidies?

A. the single most successful farm program of our nation has been the Commodity Credit Corporations (CCC) non-recourse loan program. By establishing a floor at 70% of parity using CCC loans, and then reducing supply with effective production controls, farm prices will be stabilized at cost-of-production levels. Because market prices will rise above the loan rate, farmers will not have to forfeit their grain to the government and costly surpluses will be eliminated.

Q. Won’t the price of food go up under this plan?

A. The direct impact of the act would be to raise food prices by about 5%. while the impact would be felt more strongly in the price of meat and dairy products, prices for bread, flours and other grain products would increase only slightly. For example, a $1.20 box of cornflakes would increase by only two cents while the price of corn more than doubled. Americans spend the lowest percentage of their disposable income on food of any nation in the world – roughly 15%. Many opinion surveys have, in fact, indicated that Americans would willingly pay a little extra for their food if they felt it would help family farmers.

It is important, however, that we maintain an active interest in the plight of those who, even at today’s food prices, are going hungry. The Family farm Act calls on Congress to restore deep cuts made by President Reagan in the food stamp, Women Infants and Children (WIC) and other nutrition programs. By restoring prosperity to Agriculture, we will restore economic vitality to other sectors of the economy, thereby taking concrete steps towards eliminating poverty – the real cause of hunger.

cpi-foodFig. 4, Food prices, FAPRI Staff Report #2-87, February 1987 (http://ageconsearch.umn.edu/bitstream/244143/2/fapri-sr-02-87.pdf ).

Livestock

Q. How would te Family Farm Act affect livestock producers?

A. Since livestock production has historically been at the heart of the family farm system in this country, the farmers who constructed the Family farm Act have always shared a deep concern for the needs of the livestock industry. Dairy farmers are well protected by the dairy program in the bill which FAPRI projects would lead to significant increases in net dairy income.

For real meat producers, the underlying assumption of the Family Farm Act that is born out by the historical charts and the gut instincts of every experienced producer: cheap corn means cheap hogs and cattle. According to historical patterns, if feed grain prices are stabilized at higher levels, we can expect red meat prices to adjust and stabilize on a higher plateau.

Indeed, FAPRI projections show that after the first two years of the program hog and cattle prices would reach increasingly higher levels over the next eight years compared to the current program.

The concern is over the transition period of two to three years during which the liquidation of some corporate feedlots, no longer able to compete without subsidized cheap grain, and the slaughter of dairy cattle would pressure red meat prices. For this reason a livestock transition program in the bill would allow family sized farmers to purchase up to $50,000 worth of CCC feed grains at a subsidized cost for the first three years of the program.

In addition, the National Save the Family Farm Coalition is developing a companion bill to the Family Farm Act which would enact a variable levy on livestock and red meat imports to bolster prices during the transition period.

The important point is that the transition would be toward a greatly restructured livestock industry. The trend toward corporate domination of livestock production would be reversed as corporate feedlots, denied their cheap grain subsidy, would give way to an industry made up of more family feeders. Cattle feeding would return to the Midwest, and the growth of corporate “hog factories” would end.

Economists at Texas A & M have stated that the higher grain prices of the Family Farm Act would be the single greatest factor in reversing the displacement of red meat consumption by poultry. With 60% of poultry production costs in feed expenses, cheap grain gives poultry a cost advantage that will cripple the red meat industry if not reversed.

The Family Farm Act would improve the competitiveness of ruminants like cattle and increase the importance of grass-fed beef. The result would be an increased value of range and pastureland and a reversal of the increasing practice of plowing up highly erodible land.

The Opposition

The strength of a great idea can sometimes be measured best by the opposition it generates from those with power. The Family Farm Act has stirred up a hornet’s nest in Washington among Administration supporters, the corporate agriculture elite and the American Farm Bureau Federation and its allies.[2] According to the American Agriculture Movement, the revolving doors between the USDA and corporate agribusiness have led to the development of the “Coalition for a Better Farm Policy” to help kill the Family Farm Act.

Former Assistant Secretary of Agriculture for Economics, Richard Lesher, left USDA to farm his own consulting company, which has a proposal afloat to defeat a supply management farm bill. The “coalition” would be comprised of various farm and commodity groups as well as agribusiness giants like Cargill, who jointly contribute a quarter of a million dollars to help defeat the bill. Before forming Lesher and associates and serving USDA, Lesher was associated with Secretary of Agriculture Richard Lyng in a similar private consulting firm. Sound familiar?

Farm Bureau economists are also worried about the bill, and are rushing to counter the positive findings of the Texas A & M and FAPRI studies. In a February memo, the Bureau concluded that “More realistic economic assumptions would make the 1984 farm bill look more favorable when compared to the Harkin bill.” Such “tough” analysis by Bureau economists (??) is typical of the weak and unsubstantiated claims of these opponents to a bill that poses a threat not to family farmers, but to the economic self-interest of those that most benefit from federal policy as it now stands.

Farmers and ranchers don’t ave to develop “more realistic economic assumptions” to analyze their disastrous situation today. WE only have to look at our cash flow and empty neighborhoods to realize that the ’85 farm bill is a disaster. And to win the fight for The Family Farm Act we also have to be aware that some of the organizations we belong to and some of the businesses that we buy from are out to do us in. It’s time to put a stop to that way of doing business. It’s time to stop feeding the hand that bites us, and to start working for a federal farm policy geared to family farm agriculture!

Full Compliance

Q. Isn’t it unfair to enact a mandatory program?

A. No. What’s really unfair to farmers is the endless successions of farm programs that have set commodity prices below farmers production costs. Mandatory participation in the programs won’t take place unless there is a majority vote by producers of each commodity in a national referendum. The program is actually more democratic because producers will have a chance to vote on it. (That’s more than you can say about the ’85 farm bill.) Even though the current program is called “voluntary,” every farmer knows he or she has little choice about participating. If we’re going to have a federal farm program, we might as well have one that guarantees a fair price to the producer.

FAPRI Study

The Food and Agricultural Policy Research Institute (FAPRI), a joint project of the University of Missouri and Iowa state University, is the most respected “think tank” in the country for farm program analysis. In 1987 they completed a comprehensive computer analysis of the Family Farm Act wich provides the most reliable projections to date. Here are the facts:

Compared to current legislation, the Family Farm Act would:

• Generate on average from 1988 through 1995 over $21 billion more in net farm income annually. This is an average of $46.7 billion a year as compared to an average net farm income of $24.4 billion annually projected under the current program.

• Cost the government, on average, $14.4 billion less annually for these commodity programs than we spent in fiscal 1986;

• generate, on average, $12 billion more in export earnings annually; and

• increase the U.S. inflation rate, on average for 1988 through 1995, by less than a quarter of a percent; and

• increase food costs to consumers, on average, by only 1.6% more annually than current legislation.

Intensive pressure from corporate donors and opposition politicians has forced FAPI economists to at times present a distorted picture of the results of this study. Don’t let them fool you – look at the data. No farm bill alternative meets the goals of effective farm legislation like the Family Farm Act.

Gov Costs 88 95Fig. 5, Government cost, FAPRI Staff Report #2-87, February 1987 (http://ageconsearch.umn.edu/bitstream/244143/2/fapri-sr-02-87.pdf ).

SOURCE: National Save the Family Farm Coalition

BRAD’S REFERENCES

[1.] It is important that readers are clear on the price and subsidy issue. Subsidies do not cause the cheap prices in any practically significant way. (https://zcomm.org/zblogs/michael-pollan-rebuttal-four-proofs-against-pollans-corn-subsidy-argument-by-brad-wilson/ ) The failure of ‘free’ markets to self-correct well on either the supply or the demand side causes the cheap prices. (http://agpolicy.org/weekcol/248.html ; http://agpolicy.org/weekcol/325.html ) Price Floor programs fix that when they are adequate. Price Floor programs were lowered, more and more, starting in 1953, and they were ended in 1996 for most crops. Subsidies were started in 1961 for feedgrains (including corn) and wheat, in 1964 for cotton, in 1977 for rice, and in 1998 for soybeans. (Agriculture Fact Book 1994, Appendix Table A-3, p. 174, “Direct Government payments, by program, 1950-92.”) Prior to these dates (and after 1942) there were no subsidies. There is, therefore, zero correlation between the lowering of prices, (by lowering price floors, starting in 1953,) and the paying of subsidies (prior to these dates,) as there were no subsidies. Though there are correlations after these dates, (i.e. starting in 1977 for rice,) they are correlations but not causations. Additionally, subsidies have never come close to making up for the full amount by which prices were politically lowered, (by which the market failed, thus resulting in lower prices).

[2.] This section on farm politics may be confusing to some. Some groups claim to represent “agriculture” or “farmers,” and have farmers as members, and have similar names, but do not support fair market prices to keep farmers in business, and to keep ownership of livestock widely dispersed on farms, (instead of owned by a few giant corporations, as in the case of pork and poultry). These groups include the American Farm Bureau Federation and the big “commodity groups,” such as the National Corn Growers Association, (which does not support fair prices for corn). (https://zcomm.org/zblogs/farmer-front-groups-and-the-agribusiness-bribe/ ) The American Corn Growers Association is an exception, and was strongly supportive of the Family Farm Act.

MORE INFO:  HISTORICAL FARM BILL PROPOSALS

See this video on the Family Farm Act of 1987:  https://www.c-span.org/video/?56729-1/family-farm-act .

https://familyfarmjustice.me/2016/12/10/save-the-family-farm/ .

https://familyfarmjustice.me/2016/12/10/the-farm-policy-reform-act-of-1985/ .

Videos

League of Rural Voters, (IATP), “Beyond the Crisis: Solutions for Rural America,” https://www.youtube.com/watch?v=pEnAZ9_KRRs&list=PLA1E706EFA90D1767&index=8 .

League of Rural Voters, “America’s Stake in the 1985 Farm Bill,” https://www.youtube.com/watch?v=zfgZqgfkxXk&list=PLA1E706EFA90D1767&index=18 .

IATP, NSFFC, “Save the Family Farm Act Discussion,” https://www.youtube.com/watch?v=7kezwLZqgek&index=27&list=PLA1E706EFA90D1767 .

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