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1996 Farm Bill

1996 Farm Bill. Decoupled payments were referred to as AMTA and PFC payments. Titles I Agricultural Market Transition Act Subtitle A Title, Purpose, and Definitions B Production Flexibility Contracts C Nonrecourse Marketing Assistance Loans

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1996 Farm Bill

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  1. 1996 Farm Bill Decoupled payments were referred to as AMTA and PFC payments Titles I Agricultural Market Transition Act Subtitle A Title, Purpose, and Definitions B Production Flexibility Contracts C Nonrecourse Marketing Assistance Loans and Loan Deficiency Payments D Other Commodities - Dairy, Peanuts, Sugar E Administration F Permanent Price Support Authority G Commission on 21st Century Prod. Ag. H Miscellaneous Commodity Provisions II Agricultural Trade III Conservation IV Nutrition Assistance V Agricultural Promotion VI Credit VII Rural Development VIII Research, Extension, and Education IX Miscellaneous Major shift from coupled (deficiency payments) to decoupled support (AMTA/PFC payments)

  2. Federal Agriculture Improvement and Reform Act of 1996 Generally referred to as “Freedom to Farm” As with other farm bills, 1996 farm bill was an amendment to permanent legislation (1949 farm bill) 7 year farm bill beginning in 1996 and ending in 2002 Major change in commodity programs relative to previous 22 years (starting with 1973 farm bill) Overview

  3. Eliminated Target Prices Eliminated Eliminated Commodity Provisions

  4. Initiated decoupled payments Provided full planting flexibility on previous crop acreage bases Commodity Provisions

  5. Continued nonrecourse marketing assistance loans and loan deficiency payments Commodity Provisions

  6. Contract Payments by Fiscal Year(million $) Allocation of Payments by Crop Crop Percent Corn 46.22 Grain sorghum 5.11 Barley 2.16 Oats 0.15 Wheat 26.26 Upland cotton 11.63 Rice 8.47 TOTAL 100.00

  7. Fixed payments $40,000 Marketing loan gainsor Loan Deficiency Payments $75,000 Can use marketing certificates Continues 3-entity rule Payment Limitations

  8. 1996 Farm Bill (Debated in ’95) High prices in ’93, ’94 and part of ‘95 World recession 2 weeks after signed ’96 Bill prices started falling S P TP LR D

  9. Direct Payment Direct Payment AMTA: Ag Market Transition Act AMTA = Payment Rate * Base * Pay Yield * .85 1995 OutlookReality 1996 S S Peq Marketing Loan rate Loan rate D1 Peq D reduced by world recession qseq qs Loan rate was to be a safety net

  10. 1996 Farm Bill Removed ARP No more ARP, kept the CRP, released land back to production Full capacity, freedom to plant “any” crop ARP => 10% idling of base acres is required to qualify for TP & loan benefits. P1 S with ARP P2 S with no ARP Pexp TD Q exp Q q2

  11. 1996 Farm Bill Removed TP Target Price: Congress set TP & provided for a Deficiency Pmt. P S after ARP TP Peq2 A Peq1 D Q/yr qs No production incentive from the target price Production declines, price rises

  12. Practice Quiz • List and describe the purpose of three policy tools used in the 1990 farm bill. • Evaluate this statement. “The U.S. went from a nonrecourse loan to a marketing loan program to save money.”

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