The 1996 farm bill was supposed to be the beginning of the end of farm programs. The authors of “Freedom to Farm” rarely mentioned that in public, but it was the underlying intent of the legislation.
Congressional leaders had become alarmed about their inability to predict farm program costs. So they took the average amount spent on program payments under the 1991 farm bill – about $5 billion – and set that aside for direct payments to producers.
The new, decoupled payments were called Agricultural Market Transition Act payments. The transition part referred to a time when Congress hoped farmers would no longer need the payments because market forces would make them unnecessary.
Like much of the wishful thinking that occurs with folks who don’t believe in farm programs, the concept didn’t work. Freedom to Farm unleashed growers to plant pretty much whatever they wanted to plant on all the acres available to them.
The resulting overproduction caused commodity prices to tumble and put a number of farmers in dire financial straits. Within two years of the 1996 farm bill’s passage, some members of Congress pushed through legislation authorizing “double AMTA” payments to help growers survive.
What does that have to do with today? Unfortunately, history tends to repeat itself and many farmers find themselves looking for a light at the end of the tunnel created by the Agricultural Act of 2014.
As the University of Tennessee’s Harwood Schaffer and Darryl Ray noted in a recent Policy Pennings column, http://www.agpolicy.org/weekcol/2017/885.html, “these (AMTA) payments were the newest, latest shiny policy that agricultural economists, farm organizations, and members of Congress would offer farmers in an all-out effort to avoid acknowledging the historic and still-current economic characteristics of farm production.
“It was argued the fixed, decoupled payments would be (WTO) legal because they were based on historic production and not tied to current production levels. The expectation was once these payments were decoupled, farmers would reduce their planted acres and pocket the payments.”
Instead, farmers expanded production, much as they did in 2013 and 2014 when demand for ethanol and drought conditions in the Midwest pushed corn and soybeans to record levels.
The reason Freedom to Farm and subsequent farm programs haven’t worked is their proponents chose to ignore some of the benefits of the older, traditional farm programs in bringing crop supplies more in line with demand.
The “bright, shiny policy,” Dr. Schaffer and Dr. Ray, agricultural economists with the Agricultural Policy Analysis Center, referred to in the 2014 farm bill is crop insurance. The latter was supposed to provide a new, improved safety net. Ask growers who are struggling to stay afloat in 2017 how that’s working for them?