Title I:
Commodity Programs

Highlights

Title I
Commodity Programs

Income support for wheat, feed grains, upland cotton, rice, and oilseeds is provided through 3 programs: direct payments, counter-cyclical payments, and marketing loans. Support for peanuts is changed from a price support program with marketing quotas to a program with marketing loans, counter-cyclical payments, direct payments, and a quota buyout. To the extent possible, the sugar program is to operate as a "no net cost" program. A new dairy income support program is introduced.

Provision

1996-2001 farm legislation

2002 Farm Bill

Direct payments for wheat, feed grains, upland cotton, rice, and oilseeds

Farmers who participated in the wheat, corn, barley, grain sorghum, oats, upland cotton, and rice programs in any 1 of the years 1991-95 could enter into 7-year production flexibility contracts (PFC) for 1996-2002 during a one-time enrollment period. An eligible farm's "payment quantity" for a given contract commodity was equal to 85 percent of its contract acreage times its program yield for that commodity. A per-unit payment rate (e.g., per bushel) for each contract commodity was determined annually by dividing the total annual contract payment level for each commodity by the total of all contract farms' program payment quantity. The annual payment rate for a contract commodity was then multiplied by each farm's payment quantity for that commodity, and the sum of such payments across contract commodities on the farm was that farm's annual payment, subject to any payment limits.

Direct payments are available for eligible producers of wheat, corn, barley, grain sorghum, oats, upland cotton, and rice. New payments are established for soybeans, other oilseeds, and peanuts. (See peanut provisions for those provisions that apply uniquely to peanuts.)

To receive payments on covered crops (wheat, corn, grain sorghum, barley, oats, rice, upland cotton, soybeans, and other oilseeds), a producer must enter into an annual agreement.

Direct payments for the 2002 crop are to be made as soon as practicable after enactment of the Farm Act. For crop years (CY) 2003-07, payments are to be made no sooner than October 1 of the year the crop is harvested. Advance payments of up to 50 percent can be made beginning December 1 of the calendar year before the year when the covered commodity is harvested.

Total PFC payment levels for each fiscal year (FY) were fixed at: $5.570 billion in 1996, $5.385 billion in 1997, $5.800 billion in 1998, $5.603 billion in 1999, $5.130 billion in 2000, $4.130 billion in 2001, and $4.008 billion in 2002. Spending caps for each crop, except rice, were adjusted for prior-year crop program payments to farmers made in FY 1996 and any 1995 crop repayments owed to the government. The amount allocated for rice was increased by $8.5 million annually for FY 1997-2002. Allocations of the above payment levels were: 26.26% for wheat, 46.22% for corn, 5.11% for sorghum, 2.16% for barley, 0.15% for oats, 11.63% for upland cotton, and 8.47% for rice.

Oilseeds were not eligible for production flexibility contract payments.

Payment rates specified in the 2002 Farm Act:

Since PFC payments for FY 2002 were made prior to enactment of the 2002 Farm Act, 2002 payments will be adjusted.

Provisions

1996-2001 farm legislation

2002 Farm Bill

Counter-cyclical payments for wheat, feed grains, upland cotton, rice, and oilseeds

Supplemental legislation authorized Market Loss Assistance (MLA) payments for wheat, feed grains, rice and upland cotton for crop year (CY) 1998 through CY 2001. Payments were proportional to Production Flexibility Contract (PFC) payments. Payment levels were $2.857 billion in CY 1998, $5.5 billion in CY 1999, $5.465 billion in CY 2000, and $4.6 billion in CY 2001.

Oilseed payments provided in FY 1999 through FY 2001 were based on plantings in 1997, 1998, or 1999. Payment levels were $475 million in 1999, $500 million in 2000, and $424 million in 2001.

Counter-cyclical payments are available to covered commodities whenever the effective price is less than the target price. The effective price is equal to the sum of 1) the higher of the national average farm price for the marketing year, or the national loan rate for the commodity and 2) the direct payment rate for the commodity. The payment amount for a farmer equals the product of the payment rate, the payment acres, and the payment yield.

Target prices for counter-cyclical payments:

The Secretary shall make counter-cyclical payments for the crop as soon as practicable after the end of crop year for the covered commodity. A payment of up to 35% shall be made in October of the year when the crop is harvested. A second payment of up to 70% minus the first payment shall be made after February 1. The final payment shall be made as soon as practicable after the end of the crop year.

Acreage base and payment acres for calculating payments for direct and counter-cyclical payments.

Land eligible for contract acreage was equal to a farm's base acreage for 1996 calculated under the previous farm program, plus any returning Conservation Reserve Program (CRP) base and less any new CRP enrollment. A producer could enroll less than the maximum eligible acreage.

Each producer must select 1 of 2 options for base acres for all covered commodities enrolled for the farm, including oilseeds:

• Update base acres to reflect the 4-year average of planted acreage plus "prevented from planting" for the commodity during CY 1998-2001.
• Use 2002 PFC contract acres as the new base for wheat, feed grains, cotton, and rice and add oilseed bases using 4-year average of planted acreage plus "prevented from planting" for individual oilseeds during CY 1998-2001. In general, oilseed base acres can not exceed the difference between total acreage for covered crops for the crop year and sum of 2002 contract acreage.

Owners of farms will have a one-time opportunity to select a method for determining base acreage. An owner who fails to make an election shall be considered to have selected 2002 PFC contract acres and, for oilseed base, the 4-year average of oilseed plantings.

Base acreage cannot exceed available cropland. The Secretary is directed to provide for an adjustment in base acres when a CRP contract expires or is terminated voluntarily.

Payments were made on 85 percent of the contract acres.

Payment acres are equal to 85 percent of the base acres.

Program yield for calculating payments

Program payment yields were frozen at 1995 levels.

Payment yields for direct payments are unchanged except for soybeans and other oilseeds, which are added to the program. Oilseed payment yields will be determined based on the farm's 1998-2001 average yield multiplied by the national average yield for 1981-85, divided by national average yield for 1998-2001.

Payment yields for counter-cyclical payments may be the same as for direct payments, or may be updated during the signup period at the option of the producer using 1 of the 2 options for all covered crops:
• by adding 70% of the difference between program yields for 2002 crops and the farm's average yields for the 1998-2001 to program yields, or
• by using 93.5% of 1998-2001 average yields.

Planting flexibility and restrictions for program participants

Participants could plant 100% of their total contract acreage to any crop, except with limitations on fruits and vegetables. Land had to be maintained in agricultural use. Unlimited haying and grazing and planting and harvesting of alfalfa and other forage crops were permitted with no reduction in payments. Planting of fruits and vegetables (excluding mung beans, lentils, and dry peas) on contract acres was prohibited unless the producer or the farm had a history of planting fruits and vegetables, but payments were reduced acre-for-acre on such plantings. Double cropping of fruits and vegetables was permitted without loss of payments if there were a history of such double cropping in the region.

Wild rice was added to the list of restricted crops in the 2000 Agricultural Appropriations Act.

The 2002 Act planting flexibility provisions are the same as the 1996 Act, except wild rice will be treated the same as a fruit/vegetable. In general, fruit and vegetable violations on contract acres occur when harvested. Under the 1996 Act, the violation occurred when planted.

Must abide by conservation compliance requirements (see Title II).

Must continue to abide by conservation compliance requirements (see Title II).

Provisions

1996-2001 farm legislation

2002 Farm Bill

Marketing Assistance Loans and Loan Deficiency Payments (LDPs) are available to minimize potential loan forfeitures and subsequent government accumulation of stocks.

Nonrecourse commodity loans with marketing loan provisions were extended. Any production of a contract commodity by a producer who entered into a production flexibility contract was eligible for loans. The formulas for establishing loan rates for wheat, feed grains, and upland cotton were retained, subject to specified maximums. Continued marketing loan provisions allowing repayment of loans at less than full principal plus interest when prices were below loan rates. Authority for the honey, wool, and mohair programs was eliminated in 1996 Act. Marketing loan program was initiated for honey in supplemental legislation for FY 2001.

Nonrecourse commodity loans with marketing loan provisions are extended. Loan rates are fixed in legislation. Marketing loan provisions are extended to peanuts, wool, mohair, honey, small chickpeas, lentils, and dry peas. The requirement that producers enter into an agreement for direct payments to be eligible for loan program benefits is eliminated.

Commodity loans were for up to 9 months, except upland cotton and extra-long staple (ELS) cotton loans, which were for up to 10 months.

The term for upland and ELS cotton loan rates was reduced from a maximum of 10 months to 9 months.

ELS cotton loans were nonrecourse and had to be repaid at the loan rate plus interest.

No change.

Commodity loan rates are per-unit values provided to farmers via commodity-secured loans.

Loan rates for wheat, corn, and soybeans were set at not less than 85% of the previous 5-year Olympic average of farm prices, subject to a maximum of $2.58 per bushel for wheat, $1.89 per bushel for corn, and no lower than $4.92 per bushel nor higher than $5.26 per bushel for soybeans. Loan rates for grain sorghum, barley, and oats were set at a level considered fair and equitable relative to the feed value of corn. Loan rates for sunflower seed, canola, rapeseed, safflower, mustard seed, and flaxseed could not be less than 85 percent of the 5-year Olympic average of farm prices for sunflower seed, subject to a minimum of $0.087 and maximum of $0.093 per pound. The loan rate for upland cotton was set at the lesser of 85% of the 5-year Olympic average of spot market prices, or 90% of the Northern Europe-based average price, subject to a maximum of $0.5192 per pound and a minimum of $0.50 per pound. The loan rate for ELS cotton was set at 85% of the 5-year Olympic average of farm prices, subject to a maximum of $0.7965 per pound. Rice was fixed at $6.50 per hundredweight. The Secretary retained authority to reduce wheat and feed grain loan rates depending on the projected stocks-to-use ratio. Loan rates could be reduced as much as 5% if the ratio was between 15 and 30% for wheat or 12.5 and 25% for corn. If the ratios were higher, loan rates could be reduced up to 10%.

Loan rates are fixed in legislation:

Marketing loan repayment rates allow producers to repay commodity loans at a rate that is less than the original loan rate plus interest when market prices are below commodity loan rates.

Marketing loans were for wheat, feed grains, upland cotton, rice, soybeans, and other oilseeds. Marketing loan repayment rates were based on local, posted county prices (PCPs) for wheat, feed grains, and oilseeds or the prevailing world market price for rice and upland cotton. PCPs were calculated (and posted) by the government each day the Federal Government was open, except for other oilseeds which were calculated weekly. Prevailing world market prices for rice and upland cotton were also calculated on a weekly basis.

Marketing loan provisions are continued for wheat, feed grains, oilseeds, upland cotton, and rice. Marketing loan provisions are extended to peanuts, wool, mohair, honey, small chickpeas, lentils, and dry peas.

Loan deficiency payments (LDPs) provide an alternative way for producers to receive marketing loan benefits.

To reduce administrative costs, loan deficiency payments were available when market prices were lower than commodity loan rates. LDPs were available to producers, and amounted to the difference between the commodity loan rate and the producer's loan repayment rate under marketing loan provisions.

LDPs were available for all loan commodities except ELS cotton.

Loan deficiency payments are continued with minor modifications. LDPs were extended to peanuts, wool, mohair, honey, small chickpeas, lentils, and dry peas.

Unshorn pelts (wool), hay, and silage are eligible for LDPs.

The Agricultural Risk Protection Act of 2000 allowed producers who elected to use acreage planted to wheat, barley, oats, or triticale for the grazing of livestock to be eligible to receive LDPs. Payment quantity was determined by multiplying the acreage grazed times the PFC payment yield for that covered commodity on the farm.

No change.

Upland cotton user marketing certificates (Step 2) can be issued to domestic users and exporters subject to price conditions in the U.S. and Northern Europe.

Maintained provisions for adjustment and import quotas.

Special provisions retained except that the threshold for calculating cotton user market certificates and their value has been suspended through July 31, 2006.

Total expenditures for Step 2 payments were originally limited to $701 million over FY 1996-2002. The 2000 Appropriations Act removed the expenditure cap.

There is no expenditure cap.

Special competitive provisions for extra long stable cotton

A program to increase exports and maintain competitiveness of ELS cotton in world markets was established in the 2000 Agricultural Appropriations Act. Payments were made to domestic users and exporters when world market price was below the U.S. price for 4 consecutive weeks and the lowest priced competing ELS cotton was less than 134% of the ELS loan rate.

Provisions were retained. There is no expenditure cap.

Wool and mohair

Emergency legislation in 2000 and 2001 provided direct payments to wool and mohair producers in 1999 through 2001.

Marketing loan provisions were extended to wool and mohair.

Provisions

1996-2001 farm legislation

2002 Farm Bill

Dairy Two major Federal dairy programs are currently in place: milk price support and Federal milk marketing orders.

Federal milk marketing orders classify and fix minimum prices according to the products in which milk is used.

Federal milk marketing orders were consolidated into 11 orders, down from 33. Multiple basing points for the pricing of milk were authorized. California was permitted to maintain its own fluid milk standards. The Fluid Milk Promotion Program was extended through 2002.

Federal milk marketing orders continue.

Northeast Dairy Compact

The Secretary, upon the finding of a compelling public interest in the area, was authorized to allow the New England region to enter into a dairy compact. Authority for the compact was subsequently extended until September 30, 2001.

The dairy compact is not reauthorized.

Price support is provided through government purchases of butter, nonfat dry milk, and cheese.

The minimum support price for milk containing 3.67% of butterfat declined from $10.35 per hundredweight in 1996 to $9.90 in 1999 ($0.15 per year) and was maintained through government purchases of butter, nonfat dry milk, and cheese. Price support was to be eliminated after December 31, 1999, but was extended until May 31, 2002, in supplemental legislation. The Secretary could distribute price support between nonfat dry milk and butter in a manner that minimizes Commodity Credit Corporation (CCC) expenditures. Authority to adjust support prices for butter and nonfat dry milk was limited to twice per calendar year.

The minimum support price for milk is fixed at $9.90 per cwt for milk containing 3.67% butterfat. Other provisions are extended.

National dairy market loss payments

Market loss assistance payments authorized in supplemental legislation were paid to dairy producers in 1999-2001.

A national dairy market loss payments (DMLP) program is established. Producers enter into contracts ending on September 30, 2005. A monthly direct payment is to be made to qualifying dairy farm operators when the monthly Class I price in Boston (Federal Marketing Order 1) is less than $16.94 per cwt.

The payment rate is 45% of the difference between $16.94/cwt and the Class I price in the Boston milk marketing order for the applicable month.

The payment quantity for a producer equals the quantity of eligible production marketed by the producer during the month.

Producers, on an operation-by-operation basis, may receive payments on no more than 2.4 million pounds of milk marketed per year. Retroactive payments will be made covering market losses due to low prices since December 1, 2001. Producers may not reorganize dairy operations for the sole purpose of receiving additional payment.

Dairy Export Incentive Program (DEIP) subsidizes exports of U.S. dairy products. Under DEIP, the CCC is required to make payments, on a bid basis, to an entity that sells U.S. dairy products for export.

DEIP was extended to 2002. The Secretary must authorize subsidies sufficient to export the maximum volume of dairy products allowable under the Uruguay Round-GATT (UR-GATT), subject to UR-GATT funding limits. DEIP is to be used for market development purposes.

DEIP was extended to 2007.

Provisions

1996-2001 farm legislation

2002 Farm Bill

Peanuts

Price support

The peanut program, a 2-tier price support program based on nonrecourse loans for quota peanuts (those for domestic edible consumption) and "additional" peanuts, was revised to make it a "no net cost" program.

The peanut price support program is converted to a system of direct and counter-cyclical payments, and nonrecourse loans with marketing loan provisions. Marketing quota is eliminated with a quota buyout.

The support rate for peanuts produced by quota owners was frozen at $610 per short ton, reduced from $678 in 1995. Loans for "additional" peanuts remained available, at considerably lower rates than for quota peanuts ($132/ton). The marketing assessment, shared by growers and purchasers, was 1.15% of the loan rate for the 1996 crop and 1.2% for 1997-2002 crops.

As with other crops that are eligible for marketing loans and loan deficiency payments, peanut producers may receive loans by pledging production as collateral. Producers with or without a history of peanut production are eligible. The peanut loan rate is fixed at $355 per ton. Producers can pledge their stored peanuts for up to 9 months and then repay the loan at a rate that is the lesser of 1) $355 per ton plus interest or 2) a lower, USDA-determined repayment rate designed to minimize commodity forfeiture, government-owned stocks, and storage costs and to allow peanuts to be marketed freely and competitively, both domestically and internationally.

Direct payments

No similar provisions.

A new direct payment of $36 per ton is available to peanut producers. These payments are fixed and are made regardless of current prices.

Payments are made on eligible base period (1998-2001) peanut production.

For 2002, the payment is made to historic 1998-2001 producers of peanuts. In 2003-07, payments are made to producers on farms with an eligibility assigned by a historic producer of peanuts.

Counter-cyclical payments

Supplemental legislation provided payments to peanut producers in CY 2000 and 2001.

Peanut producers are eligible for new counter-cyclical payments when market prices are below an established target price of $495 per ton. The payment is based on the difference between the target price and the higher of:
• the 12-month national average market price for the marketing year for peanuts plus the $36-per-ton fixed direct payment, and
• the marketing assistance loan rate of $355 per ton plus the $36-per-ton fixed direct payment.

Payments are made on eligible base-period (1998-2001) peanut production.

For 2002, the payment is made to historic 1998-2001 producers of peanuts. In 2003-07, payments are made to producers on farms with an eligibility assigned by a historic producer of peanuts.

Payment yields and base acres for peanuts

No similar provisions.

Payment quantity for direct payments and counter-cyclical payments is the product of payment yields and payment acres. Payment yields are determined as the average yield on the farm for CY 1998-2001. Historic peanut producers may elect to assign county average yields for 1990-97 for not more than 3 of the 4 years. Payment acres are determined as 85% of average area planted for CY 1998-2001. Adjustments are provided for prevented plantings.

Quota buy-out (compensation for loss of quota asset value)

The minimum national quota and provisions for carryover of under-marketings were eliminated. Quota was redefined to exclude seed use but temporary seed quotas were granted. Government entities and out-of-State nonfarmers could not hold quotas. Sale, lease, and transfer of quota were permitted across county lines within a State up to specified amounts of quota annually.

Marketing quota for peanuts is repealed. Quota owners receive compensation for the lost asset value of their quota in 5 annual installments during FY 2002-06. An annual payment of $0.11 per pound of quota is made to eligible quota holders based on 2001 quota levels. Quota owners may opt to take the outstanding payment due to them in a lump sum.

Provisions

1996-2001 farm legislation

2002 Farm Bill

Sugar

Price support

The raw cane sugar loan rate continued to be fixed at 18 cents per pound; the refined beet sugar loan rate was frozen at the 1995 level of 22.9 cents per pound (instead of varying each year).

The Secretary is directed to operate the sugar program at no net cost to the U.S. Treasury by avoiding sugar loan forfeitures in the nonrecourse loan program. The nonrecourse loan program is reauthorized through FY 2007 at 18 cents per pound for raw cane sugar and 22.9 cents per pound for refined beet sugar. Nonrecourse loans are extended to in-process beets and cane syrups. Loan rates can be reduced, at the Secretary's discretion, if foreign producers reduce export subsidies and support levels below their current World Trade Organization (WTO) commitments.

Marketing assessments paid by sugar processors on all processed sugar increased from 1.1% to 1.375% of the raw sugar loan rate. For beet sugar refiners, the assessments rose from 1.1794% to 1.47425% of the raw sugar loan rate. Agricultural Appropriations Act suspended marketing assessments in FY 2000-01.

Marketing assessments on sugar are terminated.

Cane processors paid a penalty of $0.01 on each pound of sugar forfeited to the government; beet processors paid a penalty of $0.0107 per pound.

Forfeiture penalties are terminated.

The sugar loan program was to be recourse unless the sugar tariff-rate quota (TRQ) was established at or above 1.5 million short tons, raw value. This provision was repealed in the 2001 Agricultural Appropriations Act.

The nonrecourse sugar loan program is reauthorized. The interest rate on CCC sugar loans is reduced 1 percentage point. Eliminates 30-day forfeiture notice.

Payment-in-kind (PIK) offered sugarbeet farmers the option of diverting a portion of their crop from production in exchange for receiving CCC sugar held in inventory.

A sugar PIK was offered in August 2000 and in August 2001 to address large sugar supplies and low prices in the domestic sugar market in 2000 and 2001.

Producers offered bids for the amount of CCC inventory they would accept in exchange for forgoing harvest of a farmer-specified number of planted acres. Bids were subject to a per-acre cap based on a producer's average sugar production over the previous 3 years, and each farmer was limited to $20,000 in PIK sugar payments.

The producer PIK program continues. In addition to existing PIK authorities, the Secretary can now exchange CCC-owned sugar for reductions in acreage prior to planting.

Tariff-rate quota (TRQ) is part of the Harmonized Tariff Schedule of the U.S., as amended in the UR-GATT.

A TRQ limited imports and helped maintain U.S. prices at levels to prevent forfeiture of CCC loans. Under the UR-GATT, the TRQ cannot be less than 1.23 million short tons for raw cane sugar nor less than 24,250 short tons for refined sugar.

TRQs are retained. On June 1, the U.S. Trade Representative (USTR), along with USDA, shall calculate used and unused quota for each quota-holding country and may reallocate unused quota to qualified quota holders.

Marketing allotments

Market allotments (supply control) previously authorized in the 1990 Farm Act were not reauthorized.

Inventory management is introduced, providing authority to the Secretary to impose marketing allotments in order to balance markets, avoid forfeitures, and comply with the U.S. sugar import commitments under WTO and NAFTA. Allotment levels are to be divided between beet processors and cane producers, and with cane producers of Hawaii and Puerto Rico. Allotments are automatically suspended when estimates of imports for domestic food use exceed 1.532 million short tons.

Cost of storing excess production is shifted from the Government to the industry. When allotments are in place, processors who have expanded marketings in excess of the rate of growth in domestic sugar demand will have to postpone sale of some sugar, and either store it at their own expense or sell it for other than domestic food use.

Sugar Storage Facility Loan Program provides financing for processors of domestically produced sugarcane and sugarbeets to construct or upgrade storage and handling facilities for raw sugars and refined sugars.

No similar provisions.

This program extends to sugar processors the type of storage facility loan program available to grain and other crop farmers, and will facilitate orderly marketing of sugar.

Reporting requirements

Expanded reporting requirements will better enable the Secretary to track importation of non-TRQ sugar, molasses, and syrups.

Provisions

1996-2001 farm legislation

2002 Farm Bill

Miscellaneous

Uruguay Round compliance. The Uruguay Round Agreement on Agriculture puts a maximum allowable level on trade-distorting domestic support programs as measured by the aggregate measurement of support (AMS). The ceiling on U.S. AMS support declined from $23.1 billion in 1995 to $19.1 billion in 2000. The $19.1-billion ceiling continues until a new WTO agreement is reached.

If the Secretary determines that the AMS ceiling will be exceeded, the Secretary shall, to the maximum extent practicable, adjust expenditures to avoid exceeding allowable levels. Before making any adjustments, the Secretary is required to submit a report to Congress on the adjustments to be made.

Permanent law refers to those laws that would be in force to authorize various agricultural programs in the absence of all temporary amendments (farm acts).

Maintained permanent law and temporarily suspended provisions of the Agricultural Adjustment Act of 1938 and the Agricultural Act of 1949. Some unused and outdated provisions were repealed.

Maintained permanent law and temporarily suspended provisions of the Agricultural Adjustment Act of 1938 and the Agricultural Act of 1949.

Payment limits

Set limits at $40,000 per person for payments on production flexibility contract payments. Maintained limits at $75,000 on marketing loan gains and loan deficiency payments for 1 or more contract commodities or oilseeds. Supplemental legislation increased limits on marketing loan gains to $150,000 for 1999, 2000, and 2001.

Continues payment limitations at $40,000 per person for direct payments. Sets a limit of $65,000 for counter-cyclical payments. Limits marketing loan benefits at $75,000. Producers with adjusted gross income of over $2.5 million, averaged over 3 years, are not eligible for payments, unless more than 75% of adjusted gross income is from agriculture. Special reference is made to a $75,000 limit for wool and mohair marketing loan benefits. Peanuts are subject to separate payment limits for direct payments, counter-cyclical payments, and marketing loan benefits.

3-entity rule

Under the 3-entity rule, an individual farmer could receive up to twice the payment per year in total contract payments and marketing loan gains on 3 separate farming operations (a full payment on the first operation and up to a half payment for each of 2 additional entities).

The 3-entity rule is maintained.

Commodity certificates

Commodity certificates could be purchased at the posted county price for wheat, feed grains, and oilseeds or at the effective adjusted world price for rice or upland cotton. The certificates were available so that producers could immediately acquire crop collateral pledged to the CCC for a commodity loan. Use of certificates was authorized in 1999.

Authority for use of commodity certificates is retained.

Conservation compliance

To remain eligible for specified program benefits, farmers cropping highly erodible land were required to implement an approved conservation plan (highly erodible land conservation provisions). Producers had to be in compliance with wetland conservation provisions (swampbuster).

Participants must continue to maintain conservation plans, including compliance with conservation and wetland provisions to receive payments (see Title II).

CCC interest rate

The interest rate on Commodity Credit Corporation loans, which reflected the cost to the CCC to borrow from the U.S. Treasury (1-year Treasury bills), was increased by 1 percentage point above the 1-year Treasury bill rate.

No change.

Hard white wheat incentive payments

No similar provisions.

A total of $20 million from the CCC will be used from 2003 to 2005 to provide an incentive to growers to plant hard white wheat (HWW). To qualify, a producer must meet minimum quality criteria and demonstrate the availability of a market for the HWW to be produced. Incentive payments will be limited to 2 million acres or the equivalent volume of production.

Crop insurance is available for a wide variety of crops, but not always in each locality where a crop is grown. The premiums are federally subsidized.

Beginning with CY 1997, dual delivery of crop insurance by the Farm Service Agency and private insurance agents was eliminated in States (or portions of States) that have adequate access to private crop insurance providers.

Supplemental assistance for 1999 and 2000 provided additional insurance subsidies.

No changes to basic program.

Crop insurance provisions are covered in Title X.

Agricultural Risk Protection Act of 2000 (ARPA) provided an additional $8.2 billion for insurance premium subsidies for 2001-05. ARPA raised premium subsidies with the goal of increasing insurance participation and encouraging use of higher coverage levels. ARPA also set revenue insurance subsidies at the same premium subsidy rates as for yield insurance.

ARPA provision (scheduled to go into effect in 2006) that allowed selection of continuous levels, rather than coverage level at fixed intervals, was eliminated.

Adjusted Gross Revenue Pilot Program (AGR)

The Risk Management Agency initiated a pilot AGR insurance program in 1999 to offer coverage for crops for which traditional crop insurance is not available. Insurance coverage under AGR, based on Adjusted Gross Revenue on Internal Revenue Service Schedule F, covered gross revenue from all farm commodities. AGR was initially offered in selected counties in 5 States; its availability was increased in 2001 to 17 States. In 2002, it was available in these 17 States.

Requires that the AGR Pilot Program be continued through at least 2004 in the counties where it was offered in 2002. Requires that at least 8 counties in California and at least 8 counties in Pennsylvania be added to the pilot program in 2003.

Study feasibility of producer indemnification from government-caused disasters

No similar provisions.

The Secretary is required to conduct a study of the feasibility of expanding crop insurance and noninsured crop assistance coverage to include disaster conditions caused primarily by Federal action restricting access to irrigation water.

Reserve Stock Level Adjustment for Flue-Cured Tobacco is a component of the calculation used to determine the basic marketing quota for flue-cured tobacco (along with manufacturers' purchase intentions and the 3-year average of exports). The adjustment is based on a predetermined optimum level of inventories held by the flue-cured producer association ("stabilization").

Under prior legislation, the reserve stock level for flue-cured was the greater of 100 million pounds or 15% of the previous year's effective marketing quota.

The flue-cured tobacco reserve stock level is reduced to the greater of 60 million pounds or 10% of the previous year's effective quota. This provision will result in lower basic flue-cured quotas.

Farm income estimates. USDA develops income estimates to support analyses of the financial performance of farms and the economic well-being of households. These estimates also support development of the National Income Accounts prepared by the Bureau of Economic Analysis.

Not previously included in farm legislation.

Extends coverage of farm income estimates by directing the Secretary to include in all farm income projections: 1) estimates of net farm income for all commercial producers, and 2) separate estimates of net farm income for commercial producers of livestock, loan commodities, and other agricultural commodities.