Agriculture: Good Times and Bad Times
The Agriculture and Consumer Protection Act of 1973 , an omnibus farmbill, dealt with soil conservation, lowered the limit on farm program payments, provided direct disaster payments, and shifted to a market-oriented farm policy. The Food and Agriculture Act of 1977 continued the marketoriented loan and target price policies of the 1973 legislation and further limited farm program payments. It created an extended storage program for grains, known as the farmerreserve program, in an attempt to deal with surpluses. The Agricultural Credit Act of 1978 increased the amount of credit available to farmers. For much of the 1970’s, the worldwide demand for agricultural products was growing, creating higher land prices and incomes and reducing surpluses. However, as farmers borrowed money at low interest rates to expand their businesses by purchasing equipment and land, many became overextended. As market prices for agricultural crops fell, land prices dropped and credit became tighter. Farms began going into foreclosure, and manufacturers and sellers of farm equipment, seed, and fertilizer, along with rural banks, also experienced economic difficulties. The embargo in 1980 on U.S. food exports to the Soviet Union, through which President Jimmy Carter canceled sales of 17 million metric tons of corn, soybeans, and wheat, also reduced demand for agricultural products. The Soviet grain embargo ended in 1981.
Farms and Farmland, 1850-2006
Sources: Data from Historical Statistics of the United States: Colonial Times to 1970 (Washington, D.C.: U.S. Department of Commerce, Bureau of the Census, 1975); Statistical Abstract of the United States, 1981 (Washington, D.C.: U.S. Department of Commerce, Bureau of the Census, 1981); Statistical Abstract of the United States, 2008 (Washington, D.C.: Department of Commerce, Economics and Statistics Administration, Bureau of the Census, Data User Services Division, 2008)
In 1983, the Payment-in-Kind program was implemented in an attempt to reduce government surplus holdings of grains, rice, and cotton by removing 25 percent of farming land from production. A crop insurance program was also implemented to provide relief to farmers from natural disasters. However, the government had amassed large stockpiles of farm products and could not sell them. Gradually, market prices began to strengthen, but the cost of farming support programs exceeded $4 billion annually. In 1985, President Ronald Reagan and the Congress enacted the Food Security Act, also known as the 1985 Farm Bill. This legislation lowered commodity prices and subsidies and established a dairyherd buyout program. Loan deficiency payments, compensation for crops when market prices fell below a government-set minimum, were implemented to protect farmers when market prices were low. The result did reduce crop surpluses and made U.S. agricultural products more attractive to other countries.
Legislation in 1990 encouraged farmers to raise crops for which they had not received subsidy payments and reduced the amount of payments for which they could qualify. In 1996, Congress worked to stop farming reliance on government assistance altogether. The Federal Agriculture Improvement and ReformAct (FAIR Act), also called the Freedomto- FarmAct or 1996 FarmBill, dismantled price and income supports, allowed farmers to plant crops for global markets without restriction, and phased out dairy price supports.
Congress eased the transition for farmers with the Agricultural Market Transition Act (AMTA) of 1996. The AMTA provided deficiency payments over a seven-year period for corn, wheat, grain sorghum, barley, oats, cotton, and rice crops, and government stockpiles for these crops were eliminated. By 1999, an estimated 30 million acres that would have been idle were in production, with crops that allowed farmers to respond to changing market and climate conditions. Overseas exports slumped, however, and livestock and crop prices plunged in 1998. The government responded with a number of emergency appropriation bills, again boosting farm subsidies to keep the agricultural business stable.
Besides crop deficiency payments, the loan program for farmers started during the 1930’s also acts as a subsidy for farmers. Under this loan program, farmers originally would repay loans plus interest after their crops were sold in the marketplace. These loans had no penalty for nonpayment, except that the low-value crop was defaulted to the government. When the FAIR Act was implemented, the requirement to default low-value crops was removed, and the loan became a direct subsidy for the farmer. Loan deficiency payments (LDP) were also implemented and allowed farmers to bypass the loan process and receive a subsidy payment instead. This created a system in which farmers could take loan subsidies when market prices were low and sell their crops when market prices improved.
In 1985, the Conservation Reserve Program (CRP) was implemented and set aside millions of acres of farmland in highly erodable or environmentally sensitive areas. Farmers were paid per acre for a ten- to fifteen-year period to not grow crops but instead plant native grasses on the land or create riparian areas. The FAIR Act lessened the total number of acres that could be enrolled under the conservation program from 45 million acres to 39.2 million acres.