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Farm Bill Debate Includes Supply Management

posted on November 9, 2001

Later in the session, corn and soybean prices did bounce higher. More interesting is the oat pit. Typically, it is an oasis of calm on the floor rather than a trading hotbed. For the first time since June of 1988, oats are trading at a premium to corn. Historically, corn prices run considerably higher than oats. In 1996, the spread between corn and oat prices was more than $2.60 a bushel. But this week, the December oat contract was priced four to six cents higher than corn. More than 40 percent of the U.S. oat supply comes via imports. Oat production in Canada and Europe was off this year and American government crop subsidies encourage farmers to grow corn and soybeans. Removing such market distortions caused by government crop subsidies is one of the issues that confronts Congress. So far, the senate effort to re-write farm law has focused on doing more with less. But under consideration this week was a proposal that seeks more.

Farm Bill Debate Includes Supply Management

As mark-up of the Senate version of a new farm bill got under way, Minnesota Democrat Mark Dayton introduced supply management legislation reminiscent of days gone by.

Dayton's Farm Income Recovery Act calls for higher loan rates ... establishment of a farmer-owned reserve ... and bonus payments for set-aside acres. In addition, Dayton's bill would target benefits to family farmers by limiting the amount of a crop for which farmers can receive so-called non-recourse, or forgivable, loans. Producers who exceed the production limits would be eligible only for recourse loans.

To provide farmers with a broader safety net, Dayton's plan directs USDA to set loan rates at not less than 80 percent of the cost of production. Currently, farm loan rates are based on market prices. Dayton says his proposal allows loan rates to adjust annually to changes in input costs and productivity.

The plan, according to Dayton's office, would boost loan rates for wheat from the current $2.58 to $3.88 ... and for corn from $1.89 to $2.40.

The total cost of Dayton's commodity package is estimated at $50 billion over 10 years, an amount sure to meet objection. Commodity programs in the House version of the farm bill are pegged at $48.8 billion, a figure the White House has criticized as too expensive.

Vermont lawmakers continue to try and resuscitate the expired Northeast Dairy Compact. Democrat Patrick Leahy says if he can't revive the compact in Senate deliberations, he would consider a plan similar to one narrowly defeated in the House. It calls for a national dairy compact. Under that proposal, when dairy prices fall below a predetermined level, processors would pay the difference into a national dairy trust fund. That money would go to dairy farmers through regional districts.

The notion has received favorable review from some Midwestern lawmakers. They have fought the compact idea for years, arguing that it leads to overproduction and depressed prices.

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