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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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Presentation Transcript
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

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)

slide2
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

slide3
Eliminated Target Prices

Eliminated

Eliminated

Commodity Provisions

slide4
Initiated decoupled payments

Provided full planting flexibility on previous crop acreage bases

Commodity Provisions

slide5
Continued nonrecourse marketing assistance loans and loan deficiency payments

Commodity Provisions

contract payments by fiscal year million
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

slide7
Fixed payments $40,000

Marketing loan gainsor Loan Deficiency Payments $75,000

Can use marketing certificates

Continues 3-entity rule

Payment Limitations

1996 farm bill debated in 95
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

direct payment
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

1996 farm bill removed arp
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

1996 farm bill removed tp
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

practice quiz
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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