The 2002 Farm Law at a Glance

CRS Report for Congress
The 2002 Farm Law at a Glance
Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
On May 13, 2002, President Bush signed the Farm Security and Rural Investment
Act (FSRIA) of 2002 into law (P.L. 107-171). FSRIA is the latest in a long line of
omnibus, multi-year farm bills. It is intended to guide, for the next 6 years through
2007, the operation of commodity price and income support, conservation, agricultural
trade and foreign food aid, domestic nutrition (primarily food stamps), farm credit, rural
development, agricultural research and extension, and several other farm and rural-
related policies and programs. The 2002 law is the successor to the last omnibus
measure, the Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-127).
This report, to be updated if events warrant, provides selected highlights.¹
Commodity Programs (Title I)
Wheat, Feed Grains, Cotton, Rice, Oilseeds. Fixed, decoupled payments
again are available to eligible producers for wheat, corn, barley, grain sorghum, oats,
upland cotton, and rice – and newly available for soybeans, and other oilseeds. New
counter-cyclical deficiency payments will make up the difference between a crop’s
average market price plus the fixed decoupled payment, and its “target price,” which is
pegged to each unit (e.g., bushel, pound) produced. Both payments are based on 85% of
past production history. Marketing assistance loans and loan deficiency payments
(LDPs) continue, generally at higher rates than before. Beginning in 2003, annual
payment limits are $40,000 for fixed payments; plus $65,000 for counter-cyclical
payments; plus $75,000 for marketing loan gains (gains from USDA-issued commodity
certificates are not counted). “Three-entity” and spousal rules are retained, effectively
doubling these caps. (Other caps may apply to separate programs described below.)
Peanuts. The program is revamped to operate like that for grains and cotton.
Poundage quotas are ended; quota holder compensation is set at $220/ton/year for 5 years.
New direct, decoupled fixed annual payments are $36 per ton, and new counter-cyclical

¹ CRS Report RL31195, The 2002 Farm Bill: Overview and Status, contains program details.
Congressional Research Service ˜ The Library of Congress

payments are based on target prices of $495/ton for 1998-2001 producers. The
nonrecourse marketing loan rate for all peanuts produced is $355/ton.
Sugar. Import quotas and loans continue to support prices at 18¢/lb.(raw cane) and
22.9¢/lb. (refined beet). The no-net cost rule is re-established; marketing assessments and
loan forfeiture penalties are both eliminated. Marketing allotments, to avoid loan
forfeitures, are authorized, as is acreage reduction in exchange for Commodity Credit
Corporation (CCC)-owned sugar.
Dairy. Price support through commodity purchases is continued at the current level
of $9.90/cwt. (100 lbs.) through 2007. A 3½-year National Dairy Program will provide
payments equal to 45% of the difference between $16.94 and the Boston Class I (fluid use)
price, whenever that price is lower than $16.94; each farmer’s payments are limited to 2.4
million lbs. of annual production (approximately a 120-140-cow herd).
Other Commodities. Marketing loans and LDPs are provided for wool, mohair,
honey, dry peas, lentils, and small chickpeas. The law requires $200 million annually to
be spent on Section 32-funded purchases of fruits, vegetables, and other specialty crops.
Selected Loan Rates, Fixed Payment Rates, and Target Prices, P.L. 107-171
Loan RatesFixed PaymentsCounter-CyclicalTarget Prices
Crop
(2002/03, 2004/07) ^*2002-2007(2002/03, 2004/07) ^*
Wheat, $/bu2.80, 2.750.523.86, 3.92
Corn, $/bu1.98, 1.950.282.60, 2.63
Cotton, $/lb0.52, 0.520.06670.724, 0.724
Rice, $/cwt6.50, 6.502.3510.50, 10.50
Soybean, $/bu5.00, 5.000.445.80, 5.80
^*^Ref^l^ect^s^r^a^t^e^s^t^hat^{change i}ⁿ^s^o^m^e^year^s^.
The commodity title contains a “circuit breaker” provision requiring the Secretary
of Agriculture to ensure that trade-distorting domestic farm subsidies do not exceed the
annual limits ($19.1 billion) agreed to under the multilateral 1994 trade agreements.
Conservation (Title II)
The new law increases the acreage cap for the conservation reserve program from
36.4 million, to 39.2 million, acres, of which up to 1 million acres can be used for the
farmable wetland program in all states. It increases the acreage cap for the reauthorized
wetlands reserve program from 1.075 million, to 2.275 million, acres; 250,000 acres can
be enrolled annually. The law gradually increases the environmental quality incentives
program to reach a $1.3 billion annual funding level through by FY2007, with funding
split at 60% for livestock and 40% for crops. Also reauthorized are the wildlife habitat
incentives program, with annual funding gradually increased to $85 million; and the
farmland protection program, with annual funding gradually increased to $125 million.

The law creates a new 2 million acre grasslands reserve program, with CCC funds
of up to $254 million over FY2003-07, and a new conservation security program
providing incentive payments to farmers who adopt and maintain specified conservation
practices on working lands, at an estimated cost of $187 million over FY2003-07. It
provides $275 million over 6 years to rehabilitate small, aging watershed impoundments.
Trade (Title III)
The new farm bill reauthorizes the market access program through FY2007,
gradually increasing annual funding to $200 million by FY2006, and the foreign market
development cooperator program, at $34.5 million annually. The law reauthorizes, at
current levels, the export enhancement program, (and, in the commodity title, Title I) the
dairy export incentive program. It continues, also at current levels, CCC export credit
guarantees (the so-called GSM programs).
The measure reauthorizes P.L. 480 (the Food for Peace program). It eliminates the
annual $1 billion cap on Title II spending (commodity donations for humanitarian and
development activities), and increases the minimum level of Title II commodities to 2.5
million metric tons per year, among other program changes. Food for Progress is
reauthorized with increased funding caps, and minimum annual quantity at 400,000 metric
tons. The law authorizes the President to establish the “McGovern-Dole International
Food for Education and Child Nutrition Program” providing U.S. agricultural
commodities and financial and technical assistance for foreign preschool and school
feeding programs and for pregnant and nursing women and young children, with funding
mandated at $100 million in FY2003 and subject to appropriation in FY2004-2007. Other
reauthorized programs include the Bill Emerson Humanitarian Trust, the emerging
markets, and farmer-to-farmer programs..
Under Title X, retailers, in 2 years, must provide country-of-origin information for
meats, fruits, vegetables, seafood, and peanuts; the program is voluntary until then.
Nutrition Programs (Title IV)
The law reauthorizes the food stamp program through FY2007, also making such
changes as: expanded eligibility for noncitizens; increased benefits for larger households;
extensive state options to conform food stamp rules to other aid programs, simplify
program operations, and enhance client access; “transitional” benefits for those leaving
cash welfare; and new systems for state “quality control” with eased penalties and bonuses
for high performance. It reauthorizes the emergency food assistance program, nutrition
assistance for Puerto Rico and American Samoa, the commodity supplemental food
program, and nutrition assistance on reservations, adding funding for some of them.
Credit (Title V)
The law establishes authorized funding levels for USDA farm credit programs
(authorized by the Consolidated Farm and Rural Development Act) for FY2003-07.
Provisions aim to improve access to such loans, particularly for beginning farmers and
ranchers. For example, the law will provide for 2 additional years of eligibility for loans
once a borrower has reached the current maximum years of eligibility; and new loans for

borrowers with one-time debt forgiveness if delinquency was caused by a natural disaster.
Several changes also are made in the privately owned and operated Farm Credit System.
Rural Development (Title VI)
The farm bill provides $870 million in mandatory authorizations, (total, FY2002-
07), for a number of new rural development programs. Other authorized programs and
initiatives are subject to annual discretionary appropriations. Among the rural
development initiatives are value-added agricultural market development grants, rural
broadcast and broadband services, rural and regional planning, funding for backlogged
water and sewer applications, the Rural Business Investment Program, and Rural
Strategic Investment Program. The 1996 farm bill had created the Fund for Rural
America, which the new law does not continue, and the Rural Community Advancement
Program (RCAP), which it does reauthorize (except, the National Reserve Account and
the Rural Venture Capital Demonstration Program are eliminated).
Research and Related Matters (Title VII)
P.L. 107-171 reauthorizes university research and state cooperative extension
programs at such sums as necessary through FY2007. It reauthorizes the Initiative for
Future Agriculture and Food Systems (a competitive grants program on critical emerging
issues and high-priority research), gradually increasing annual funding authorizations to
$200 million annually by FY2006. The law authorizes such sums as necessary for a
competitive grants program to construct and upgrade security at public university facilities
conducting counter-terrorism research, and for research and extension to improve bio-
terrorism prevention, preparedness, and response. Funding is increased for research
programs at the 1890 colleges, among other research program changes.
Forestry (Title VIII)
A new Forest Land Enhancement Program provides $100 million (total) to assist
private forest landowners to adopt sustainable forest management practices. A new
program to help local governments fight wildfires is among other provisions in the title.
Energy (Title IX)
A new energy title extends, with mandatory funding, the CCC bioenergy program;
establishes new programs for federal purchases of bio-based products and education on
biodiesel fuel benefits; establishes new and expanded loan and grant programs to assist
farmers in purchasing renewable energy systems and improving energy efficiency; and
reauthorizes and funds the Biomass Research and Development Act through FY2007.
Miscellaneous (Title X)
The miscellaneous title of the bill covers a wide range of programs and issues. For
example, it: overhauls virtually all animal health protection laws administered by
USDA’s Animal and Plant Health Inspection Service; creates a national organic
certification cost-share program and new farmers market promotion program; increases
the annual authorization of appropriations for outreach for socially disadvantaged

farmers, from $10 million to $25 million; establishes a new USDA Assistant Secretary
for Civil Rights; makes it illegal under certain instances to transport animals for fighting;
exempts research rats, birds, and mice from the Animal Welfare Act; provides $94 million
in 2000 crop market loss assistance for apple growers; creates a biotechnology education
program; and addresses several “agricultural competition” issues by extending to contract
hog producers the same statutory protections provided through USDA to livestock sellers
and poultry growers and by clarifying that animal producers with contracts can discuss
their terms with advisors and with government agencies.
Six-Year Cost Estimates (2002-20007)
Budget Authority in Million Dollars, March 2002 Baseline
BaselineNew SpendingTotal Projected Spending
Commodity Support61,33737,58798,924
Conserva tion 12,075 9,198 21,273
T r ade 1,572 532 2,104
Nutrition (a)146,8202,793149,613
Rural Development1608701,030
Research 240 520 760
Forestry08585
Energy0405405
Other Provisions (b)0(303)(303)
Total, 6 years 222,20451,687273,891
Source: CRS compilation of Congressional Budget Office data. For more discussion, see What
Is the Cost of the 2002 Farm Bill? in the CRS Agriculture Policy and Farm bill Briefing Book.
(a) Farm bill changes to nutrition spending include changes to food stamps, the emergency food
assistance program, and child nutrition programs, as well as new spending for demonstration
programs. Child nutrition programs are not included in baseline, since their reauthorization is not
addressed by the farm bill.
(b) “Other Provisions” in the farm bill primarily consist of savings associated with the federal
crop insurance program. However, crop insurance is not included in the baseline, since the
reauthorization of the program is not part of the farm bill.
For More Information
^!More extensive materials, including links to other sites and resources,
can be found in the CRS Electronic Briefing Book on Agriculture Policy
and the Farm Bill.
^!USDA has an extensive website on the new farm bill, including its own
side-by-side comparison of previous and new law.
^!The text and summary of the new farm bill are posted on the websites of
the House Agriculture Committee and Senate Agriculture Committee.

Selected Talking Points
Following are some of the arguments offered in debate over the final new measure.
CRS takes no position on these or any other views. The new farm bill:
(PRO)(CON)
Will address continuing economicWill worsen farmers’ economic situation
problems including lowest real net farmby inflating land values (especially for the
cash income since 1930s and 5^th straight42% of farmers who rent land), and
year of low prices; without it, farm incomestimulating overproduction, causing farm
and land values will plunge.prices and incomes to decline further.
Maintains market orientation by givingMaintains outmoded commodity-oriented
farmers flexibility to plant crops based onpolicies, where major subsidies are tied to
market signals, unbound by mostprices of just a few major row crops. This,
government-imposed supply controls orplus target prices and loan rates well above
supply management; market prices andmarket prices will continue to distort
production will be minimally impacted.production and prices.
Is balanced regionally, helping bothProvides the largest benefits to just a
southern and northern tier crops, andhandful of farm belt states; 75% of all
spreading dairy benefits nationwide.payments will go to just 13 states.
Fully complies with the FY2002 budgetWas enacted as a newer baseline shows
resolution permitting the expenditure ofthe U.S. budget deficit worsening. New,
another $73.5 billion in direct spendinglower commodity price forecasts also mean
over 10 years (above April 2001 baseline).this bill will cost much more than $73.5
It provides no more in subsidies than underbillion, which could make it the most
the 1996 farm law as supplemented byexpensive farm bill in history at a time of
subsequent emergency farm aid.other more pressing national priorities.
Complies with trade obligations. A newHas features that will be viewed by other
“circuit breaker” requires cuts in trade-countries as violating U.S. obligations.
distorting subsidies so that their annualThe limit likely will be breached, and the
$19.1 billion limit is not breached. It also“circuit breaker” will be administratively
places the U.S. in a stronger position toand politically infeasible to employ. It
negotiate new agricultural trade reforms:undermines U.S. negotiating credibility,
the U.S. will not unilaterally cut its ownincluding the U.S. stated position that
support until others do so – whether theysubsidies should be reduced worldwide.
are domestic supports, or import barriersMany countries sharply criticize the new
(foreign agricultural tariffs average 62%U.S. law, and are considering increases in
compared to 12% for the U.S.).their own subsidies and import barriers.
Is the largest investment in conservationSpends four times as much money on
in recent farm bill history – a new $17.1commodity price support as on
billion, 80% over baseline.conservation.
Will help stimulate rural economies byWill help few rural areas. Only a small
spreading farm payments through ruralportion of rural counties have agricultural
economies but also by adding $870 millionbases, and in those, farm benefits do not
for innovative rural development. generate good jobs and long-term growth.