USDA breaks these Total Direct Payments into Marketing Loan Gains, Production Flexibility Contracts, Direct Payments, Counter-Cyclical Payments, Loan Deficiency Payments, Compensation Payments to Peanut Quota Holders, National Dairy Market Loss Payment, Conservation Payments, Emergency Assistance Payments, and Miscellaneous Payments. The itemized payments follow:
Marketing Loan Gains are projected to be $2 billion in 2002 compared to preliminary estimates for 2001 of $0.708 billion. Marketing loan provisions are aimed at reducing government costs of stock accumulation. The 1996 FAIR Act mandates that marketing loan provisions be implemented for feed grains, wheat, rice, upland cotton, and all oilseeds. The 2002 Act established marketing loan provisions for peanuts, chickpeas, lentils, dry beans, wool, mohair, and honey.
Production Flexibility Contract (AMTA) Payments were terminated with the enactment of Farm Act of 2002. Before the 2002 farm bill became law U.S. producers received $3.014 billion in the 2002 calendar year.
Direct Payment or Fixed Payments provided under the 2002 Farm Act for eligible producers of wheat, corn, barley, grain sorghum, oats, upland cotton, rice, soybeans, other oilseeds, and peanuts are estimated at $5.036 billion. Producers enroll annually in the program to receive payments based on payment rates specified in the 2002 Farm Act and their historic program payment acres and yields.
Counter-Cyclical Payments are available to eligible commodities under the 2002 Farm Act whenever the effective commodity 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 commodity national loan rate and 2) the direct payment rate for the commodity. The following estimate assumes that 35 percent of the 2002 crop year payment is received as first partial payment is received in calendar year 2002.
NOTE:USDA has now announced projected counter-cyclical program payment rates for 2002-crop wheat, feed grains, upland cotton, rice, oilseeds and peanuts.
The first partial counter-cyclical payment rate for upland cotton is $0.0480 per pound; for rice, $0.57 per cwt; and for peanuts, $36.40 per short ton. Producers with wheat, corn, grain sorghum, barley, oats, soybean and other oilseeds base acreage will not receive a first partial counter-cyclical payment because the projected 2002 effective prices exceed the respective target prices.
After program participants elect their base and yield options, they may also request their first partial counter-cyclical payment, which is equal to 35 percent of the entire projected rate.
For each commodity, the counter-cyclical payment equals the counter-cyclical payment rate times 85 percent of the farm's base acreage times the farm's counter-cyclical payment yield for crops.
After counter-cyclical payment rates are re-estimated in January, a second counter-cyclical payment may be issued to producers. These payments will be up to 70 percent of the projected counter-cyclical payment, less any counter-cyclical payments already received. Final counter-cyclical payments will be determined at the end of the respective marketing year for each crop. For rice and cotton the final counter-cyclical payment will be made in September 2003.
Producers who receive total partial payments exceeding the actual counter-cyclical payment for each respective crop must repay any excess amounts.
Loan Deficiency Payments, marketing loan gain are to minimize the accumulation of stocks by the government, minimize the costs of government storage, and to allow U.S. commodities to be marketed freely and competitively. Starting in 2001, this estimate included payments for grazed acres of wheat, barley, and oats.
Compensation Payments to Peanut Quota Holders follow and assume that 50 percent of the total payment is received in 2002.
National Dairy Market Loss Payment follows:
Conservation Payments include amount paid under the following conservation programs: Conservation Reserve, Agricultural Conservation, Emergency Conservation, and Great Plains Programs. Other conservation programs are considered as miscellaneous.
Emergency Assistance Payments include payments to farmers as a consequence of emergency Supplemental Assistance Legislation enacted in October 1998, October 1999, June 2000, and August 2001. This also includes aid to drought-stricken farmers and ranchers in 2002 including the $752 million in assistance through the Livestock Compensation Program announced September 19, 2002.
Dr. Bobby Coats is an Extension agricultural economist and farm policy specialist with the University of Arkansas. E-mail him at: [email protected]