The recommendations, contained in a report by the Commission on the Application of Payment Limits for Agriculture, could help derail efforts by Iowa Sen. Charles Grassley to attach a payment-limit tightening amendment to the 2004 agricultural appropriations bill that is expected to be taken up by the Senate in the next few days.
“NCGA took the opportunity to make public comments regarding payment limitations and overall, is pleased with the commission’s recommendations,” said NCGA President Fred Yoder. “While we have concerns about specific suggestions for future changes, the commission should be commended for their thorough review of all of the comments and making prudent decisions on what is clearly a complex issue.”
Congress created the commission as part of a compromise on payment limits in the 2002 farm bill. The commission submitted its report to President Bush and the House and Senate agriculture committees Sept. 3.
In addition to recommending that any "substantive" changes be deferred until the next farm bill, the commission recommended there be a phase-in period for any substantial changes, NCGA officials noted.
Acknowledging the "long-term investment decisions" made by producers, lenders, and agribusiness firms, the commission noted concerns about upsetting the stability provided the new farm bill and cautioned against "unnecessary disruptions in production, marketing, and business organization, including landowner-tenant lease arrangements."
The commission met nine times since January and reviewed comments on the effects of further payment limitations. Additionally, a public workshop was held in June where experts presented analyses of the effects of further payment limitations.
According to the commission's report, farm program payments in recent years accounted for about 20 percent of gross cash income and about 100 percent of net cash crop income for the crops now eligible for direct and counter-cyclical payments and marketing assistance loans. Under the 2002 farm bill though, the President's budget is projecting a decline in average payments to producers from $18.5 billion annually for the 1999-2001 crops to an annual average of $11.6 billion for the 2003-07 crop years.
The report also points out that in 2001 “the largest 6 percent of farms received 30 percent of total production flexibility contracts, market loss and disaster assistance payments, and marketing loan benefits, yet these farms accounted for 48 percent of the total value of agriculture production on farms receiving government payments.”
In evaluating the impact of the 2002 farm bill provisions, the commission projected that the $40,000 limit on direct payments would reduce payments to producers by about 1.6 percent or $85 million per year and the $65,000 limit on counter-cyclical payments would reduce payments by $125 million per year.