United States

Department of

Service Food ecurity Act

Agriculture

Information 1 8 Bulletin of 1985

Number 498

Lewrene K. Glaser

" c-J
PROVISIONS OF THE FOOD SECURITY ACT OF 1985. By Lewrene K. Glaser. National

Economics Division, Economic Research Service, U.S. Department of Agriculture.

Agriculture Information Bulletin No. 498.

ABSTRACT

The Food Security Act of 1985 (P.L. 99-198) establishes a comprehensive framework

within which the Secretary of Agriculture will administer agriculture and food

programs from 1986 through 1990. This report describes the act's provisions for

dairy, wool and mohair, wheat, feed grains, cotton, rice, peanuts, soybeans, and

sugar (including income and price supports, disaster payments, and acreage

reductions); other general commodity provisions; trade; conservation; research,

extension, and teaching; food stamps; and marketings. These provisions are compared

with earlier legislation.

Keywords: Program commodities, loan levels, target prices, cropland reduction,

grain reserves, conservation, credit, food aid, agricultural trade, food stamps,

agricultural research.

1301 New York Avenue, NW

Washington, DC 20005-4788 April 1986

i
ACKNOWLEDGMENTS

Preparation of this report required the generous effort of many people within the

Economic Research Service. Lewrene Glaser wrote the summaries of titles I through

X; Larry Traub wrote the summaries of titles XIV, XVI, and XVII; Mark Smith wrote

the summary of title XI; Mike Dicks wrote the summary of title XII; George Amols

wrote the summary of title XIII; and Joyce Allen wrote the summary of title XV. Tom

Fulton, Lewrene Glaser, and Mitch Toerpe compiled the appendixes and index. Tom

Fulton and Lewrene Glaser had principal responsibility for general management of the

project under the overall direction of Milton Ericksen, Chief of the Food and

Agricultural Policy Branch. Lindsay Mann had principal responsibility within the

Information Division, Economics Management Staff. The authors gratefully

acknowledge the assistance of the ERS secretarial staff, especially Chonte Wright,

Sharon S. Briscoe, Nicole Midgette, Rosa Pitts, and Marilyn Riley. The authors also

thank the many reviewers in the Agricultural Conservation and Stabilization Service,

the Office of the General Counsel, the Office of Budget and Program Analysis, the

Farmers Home Administration, the Food and Nutrition Service, the Foreign

Agricultural Service, and the Economic Research Service.

Additional copies of this report ...

can be purchased from the Superintendent of Documents, U.S. Government Printing

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Please add 25 percent extra for postage for shipments to foreign addresses.

Microfiche copies ($5.95 each) can be purchased from the order desk, National

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Provisions of the Food Security Act of 1985 (AIB-498). Enclose check or

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The Economic Research Service has no copies for free mailing.

ii
CONTENTS

Page

SUMMARY ..................................................................... vii

INTRODUCTION ................................................................ 1

TITLE I: DAIRY .............................................................. 1

Price Support ....................................... 2

Milk Production Termination Program -....................................... 3

Casein ........................................ 3

National Dairy Research Endowment Institute ................................ 4

Milk Marketing Orders ..................................................... 4

National Commission on Dairy Policy ....................................... 5

Dairy Products for Veterans Administration Hospitals and the Military ..... 5

Dairy Indemnity Program ................................................... 5

Dairy Export Incentive Program ............................................ 5

TITLE II: WOOL AND MOHAIR .................................................. 6

TITLES III AND IV: WHEAT AND FEED GRAINS ................................... 6

Target Prices and Price-Support Loans ..................................... 6

Loan Repayment ........................................ 7

National Program Acreage ................................................... 8

Farm Program Acreage ................................................................ 8

Deficiency Payments ......................................... 8

Disaster Payments ....................................... 9

Acreage Reduction ........................................ 9

Cross Compliance ........................................ 14

Wheat Marketing Quotas .................................. 14

Other Provisions .......................................................... 14

1986 Programs ............................................................. 15

TITLE V: COTTON ........................................ 15

Target Prices and Price-Support Loans ..................................... 15

Loan Repayment ............................................................. 16

Marketing Certificates .................................................... 17

National Program Acreage .............................................. 17

Farm Program Acreage ...................................................... 17

Deficiency Payments ........................................ 18

Disaster Payments ......................................... 18

Acreage Reduction ......................................................... 18

Cross and Offsetting Compliance ........................................ 20

Extra Long Staple Cotton ........................................ 20

Other Provisions .......................................................... 20

1986 Programs ........................................ 21

TITLE VI: RICE ............................................................. 21

Target Prices and Price-Support Loans ..................................... 21

Loan Repayment ........................................ 22

Marketing Loan for the 1985 Crop ........................................ 22

Marketing Certificates ........................................ 23

National Program Acreage .................................................. 23

Farm Program Acreage ........................................ 23

Deficiency Payments ........................................ 24

Disaster Payments ......................................................... 24

iii
Acreage Reduction ......................................................... 24

Cross and Offsetting Compliance .......................................... 26

1986 Programs ............................................................. 26

TITLE VII: PEANUTS ......................................................... 26

National and Farm Poundage Quotas ......................................... 26

Farm Yield .......................................................... 27

Quota Peanuts ............................................................ 27

Additional Peanuts ........................................................ 27

Peanut Referendum ......................................................... 27

Sale, Lease, or Transfer of Farm Poundage Quota ........................... 28

Marketing Penalties ....................................................... 28

CCC Resale Price .......................................................... 28

Price Support ............................................................. 28

Disaster Payments ......................................................... 29

1986 Programs ............... .............................................. 29

TITLE VIII: SOYBEANS ...................................................... 29

Price-Support Loans ....................................................... 29

Loan Repayment ............................................................ 29

Disaster Payments ......................................................... 30

TITLE IX: SUGAR ............................................................ 30

Price-Support Loans ....................................................... 30

Disaster Payments ........................................................ 30

Prevention of Loan Forfeitures ............................................ 30

Protection of Producers ................................................... 30

TITLE X: GENERAL COMMODITY PROVISIONS ...................................... 31

Acreage Base and Program Yield System ..................................... 31

Honey .................................................................... 32

Payment Limits and Payment Review ......................................... 33

Advance Deficiency and Diversion Payments ................................. 33

Advance Recourse Commodity Loans .......................................... 33

Interest Payment Certificates ............................................. 33

Payment in Commodities .................................................... 33

Wheat and Feed Grain Export Certificate Programs .......................... 34

CCC Sales Price Restrictions ....................... 3................... 35

Disaster Payments for the 1985-90 Crops of Peanuts, Soybeans, Sugar Beets,

and Sugarcane ............................................................ 35

Cost Reduction Options ................................................... 35

Multiyear Set-Asides ...................................................... 36

Supplemental Set-Aside and Acreage Reduction Authority .................... 36

Grain Reserves ............................................................ 36

Normally Planted Acreage .................................................. 37

Special Grazing and Hay Program ........................................... 37

Advance Program Announcement .............................................. 37

Normal Supply ............................................................. 38

Marketing Year for Corn ................................................... 38

Federal Crop Insurance .................................................... 38

Cost of Production Review Board ........................................... 38

Liquid Fuels .............................................................. 38

TITLE XI: TRADE ........................................ 38

U.S. Food Assistance ........................................ 38

Maintenance and Development of Export Markets ............................. 41

iv
Cargo Preference ........................................ 44

Agricultural Imports ...................................................... 44

Trade Practices ....................................... 45

TITLE XII: CONSERVATION ........................................ 46

Highly Erodible Land Conservation ......................................... 46

Wetlands Conservation ...................................................... 47

Conservation Reserve ...................................................... 47

Other Provisions .......................................................... 49

1986 Reserve Program ...................................................... 50

TITLE XIII: CREDIT ........................................................ 50

Eligibility for Real Estate and Operating Loans ............................ 50

Water and Waste Disposal Facilities ....................................... 51

Oil, Gas, and Mineral Rights as Collateral ................................ 53

Nonsupervised Accounts .................................................... 53

Eligibility for Emergency Loans ........................................ 53

Prompt Approval of Loans and Loan Guarantees ............................... 54

Appeals ................................................................... 54

Disposition and Leasing of Farmland ....................................... 54

Release of Normal Income Security ......................................... 55

Financial Statements and Plans ............................................ 55

Authorized Loan Amounts ................................................... 55

Debt Restructuring and Conservation Easements ............................. 55

Interest Rate Reduction Program ............................................ 56

Homestead Protection ....................................................... 56

Rural Utilities ......................................... 56

Rural Development and Finance Corporations ................................ 56

Protection for Purchasers of Farm Products ................................ 57

Other Provisions .......................................................... 57

TITLE XIV: AGRICULTURAL RESEARCH, EXTENSION, AND TEACHING .................. 58

Responsibilities of the Secretary ......................................... 58

Councils and Boards ....................................................... 58

Grant Authority and Funding ........................................ 58

Grants for Research and Extension at 1890 Land-Grant Colleges ............. 59

Federal and State Partnerships ......................................... 59

Grants for International Trade Development Centers ........................ 59

Agricultural Information and Personnel Exchange with Ireland .............. 59

Extended Contractual Powers ............................................... 60

Technology Development Research Program .................................... 60

Supplemental and Alternative Crops ........................................ 60

Aquaculture ................................................................ 60

Funding for Agricultural Research Programs, Extension Education, and

Federal Agricultural Research Facilities ................................. 60

Soybean Research Advisory Institute ....................................... 61

Smith-Lever Act ........................................................... 61

Market Expansion Research ................................................. 61

Pesticide Resistance Study ................................................ 61

Critical Agricultural Materials ........................................ 61

Expansion of Education Study .............................................. 62

Grants for Financially Stressed and Dislocated Farmers .................... 62

Annual Report on Family Farms ............................................. 62

Human Nutrition Research .................................................. 63

Agricultural Productivity Research ........................................ 63

v
TITLE XV: FOOD STAMP AND RELATED PROGRAMS .................................. 64

Food Stamp Eligibility and Benefits ....................................... 64

Food Stamp Funding Levels ................................................. 66

Employment and Training Programs .......................................... 67

Workfare .................................................................. 68

Program Administration .................................................... 69

Puerto Rico Block Grant ........................................ 70

Commodity Programs ........................................ 70

Commodity Supplemental Food Program ....................................... 70

Commodity Distribution ..................................................... 71

Nutrition and Miscellaneous Provisions .................................... 71

TITLE XVI: MARKETING ....................................................... 72

Beef Promotion and Research Act of 1985 .................................... 72

Pork Promotion, Research, and Consumer Information Act of 1985 ............ 75

Watermelon Research and Promotion Act ..................................... 76

Marketing Orders ........................................ 77

Grain Standards ........................................................... 77

TITLE XVII: RELATED AND MISCELLANEOUS MATTERS ............................. 78

Processing, Inspecting, and Labeling ...................................... 78

Agricultural Stabilization and Conservation Committees .................... 79

National Agricultural Policy Commission Act of 1985 ........................ 79

National Aquaculture Improvement Act of 1985 .............................. 80

Special Study and Pilot Project on Futures Trading ........................ 81

Animal Welfare ........................................ 81

CCC Storage Contracts ........................................ 82

Emergency Feed Program ............................................... 82

Controlled Substances Production Control .................................. 82

Unleaded Fuel in Agricultural Machinery ................................... 83

Potato Advisory Commission ........................................ 83

Viruses, Serums, Toxins, and Analogous Products ........................... 83

Federal Insecticide, Fungicide, and Rodenticide Act Funding ............... 83

Users Fees for Reports, Publications, and Software ........................ 83

Confidentiality of Information ............................................. 83

Land Conveyance to Irwin County, Georgia .................................... 84

National Tree Seed Laboratory ............................................. 84

Control of Grasshoppers and Mormon Crickets ............................... 84

Study of a Strategic Ethanol Reserve ...................................... 84

TITLE XVIII: GENERAL EFFECTIVE DATE ........................................ 84

APPENDIXES ................................................................ 85

Commodity Program Levels, Crop Years 1982-86 .............................. 85

Major Agricultural Legislation, 1933-86 ................................... 87

Glossary of Agricultural Policy Terms ..................................... 91

Selected References ........................................ 98

Summary of the Food Security Improvements Act of 1986 ..................... 100

INDEX ......................................... 103

vi
SUMMARY

The Food Security Act of 1985 (P.L. 99-198) establishes a comprehensive framework

within which the Secretary of Agriculture will administer agriculture and food

programs from 1986 through 1990. Following is a brief outline of the act, first by

topic, then by title.

Conmmodity Provisione

Loan programs--Minimum support levels specified for 1986; market-based formulas

for 1987-90 with limited annual declines. Further cuts authorized for wheat and

feed grains when needed to compete in world markets. Marketing loans and

certificates required for cotton and rice.

Target prices--Minimum target prices frozen at 1985 levels in 1986-87 for wheat and

feed grains, 1986 only for cotton and rice. Target minimums decline in following

years.

Acreage reduction--Secretary may use acreage reduction, set-aside, or paid land

diversion programs to reduce acreage planted to wheat, feed grains, cotton, and

rice. Acreage reduction tied to level of carryover stocks.

Grain reserves--Continues farmer-owned reserve.

Export Provisions

Food aid--Continues and expands P.L. 480 and section 416 international food aid

programs. Creates Food for Progress program.

Cargo preference--Exempts specific commercial exports from U.S. flag vessel

requirements. Increases share of food aid shipments which must be carried on U.S.

flag vessels.

Conservation Provisions

Creates "sodbuster," "swampbuster," and conservation reserve programs to help remove

highly erodible land and wetland from crop production.

Other Provisions

Continues, revises, or expands credit, research, extension, and food stamp

programs. Authorizes three new market promotion programs.

Programs by Title

Title I--Continues milk support price for 1986 at $11.60 per hundredweight (cwt)

with further declines in 1987-90. Requires milk production termination program for

April 1, 1986-September 30, 1987. Amends Federal milk marketing orders.

Title II--Continues wool and mohair programs through 1990.

Titles III and IV--Continues price and income supports for wheat and feed grains.

Authorizes Secretary to implement marketing loans, loan deficiency payments, target

option program, and inventory reduction payments. Allows discretionary marketing

quotas for wheat.

vii
Title V--Continues cotton programs through crop year 1990. Requires marketing loans

and certificates to make U.S. cotton more competitive in world markets. Allows

optional loan deficiency and inventory reduction payments.

Title VI--Continues rice income and price-support programs. Requires marketing

loans and certificates to make U.S. rice more competitive in world markets. Allows

optional loan deficiency and inventory reduction payments.

Title VII--Continues two-tier peanut price-support program. Authorizes disaster

payments for 1985-90 crops.

Title VIII--Continues soybean price-support program for 1986-90 crops. Authorizes

marketing loans and disaster payments.

Title IX---Continues sugarcane and sugar beet price-support programs. Authorizes

disaster payments for 1985-90 crops.

Title X--Establishes system for calculating crop and farm acreage bases and program

yields. Amends honey program. Limits payments received under wheat, feed grain,

Upland and extra long staple (ELS) cotton, and rice programs to $50,000 per person

per year; disaster payments to $100,000 per person per year. Revises farmer-owned

reserve program.

Title XI--Amends Public Law (P.L.) 480 to allow use of foreign currencies obtained

through program to encourage development of private enterprise and enhance food

security in developing countries through local food production. Creates Food for

Progress program to help countries that have made commitments to introduce or expand

free enterprise elements in their food sectors. Expands type and volume of

commodities donated under section 416. Creates Special Assistant to the President

for Agricultural Trade and Food Aid. Establishes further programs to promote

commercial agricultural exports. Changes cargo preference laws to exempt specific

commercial program shipments and to increase the mandated percentage of food aid

shipments which must be carried on U.S. flag vessels.

Title XII--Prohibits USDA program benefits to farmers who convert highly erodible

land ("sodbusters") or wetlands ("swampbusters") to cropland. Authorizes a

conservation reserve of 40 to 45 million acres by 1990.

Title XIII--Shifts funding for USDA credit programs from direct to guaranteed

loans. Protects buyers of farm products from double payment. Assists farmers who

are in financial difficulty or have lost farms in foreclosures.

Title XIV--Authorizes or continues research, extension, and teaching programs.

Title XV--Continues and amends Food Stamp Program through September 30, 1990.

Extends Temporary Emergency Food Assistance Program through September 30, 1987.

Increases funding for Puerto Rico's Nutrition Assistance Program. Expands nutrition

monitoring of needy.

Title XVI--Establishes mandatory promotion programs for beef and pork and an

optional program for watermelons. Increases penalties for violations of marketing

orders. Mandates development of new grain classification standards.

Title XVII---Establishes processing, inspection, and labeling requirements for

poultry and meat imports. Establishes criteria for Agricultural Stabilization

and Conservation committees. Establishes a National Commission on Agricultural

viii
Policy to study structure, procedures, and methods of formulating and administering

U.S. agricultural policies. Authorizes programs in aquaculture research,

assistance, and training. Requires study and pilot project on farmers' use of

agricultural commodity futures and options markets. Requires establishment of

animal welfare standards. Requires program to control grasshoppers and Mormon

crickets.

ix
Provisions of the

Food Security Act of 1985

Lewrene K. Glaser

INTRODUCTION

The Food Security Act of 1985 (P.L. 99-198) provides a 5-year framework for the

Secretary of Agriculture to administer various agriculture and food programs.

Several of the commodity programs were started decades ago under the Agricultural

Adjustment Acts of 1933 and 1938 and the Agricultural Act of 1949 (commonly referred

to as permanent legislation).

More recent legislation created USDA's food stamp, credit, and research programs.

All of the programs have been modified over time to meet changing economic needs and

various domestic and international conditions. The 1985 Act is the latest piece of

legislation in this series; it replaces the Agriculture and Food Act of 1981, which

expired with the 1985 crops.

The Food Security Act of 1985 was passed by Congress December 18 and signed by the

President December 23, 1985. Public Law 99-253, making technical corrections in the

1985 Act, passed Congress on February 19 and was signed by the President on February

28, 1986. These corrections made cross compliance for wheat and feed grains

discretionary instead of mandatory, changed the formula for caldulating crop acreage

bases, and changed the election procedure for local Agricultural Stabilization and

Conservation (ASC) committees. The Food Security Improvements Act of 1986 was

passed by Congress on March 12 and was signed by the President on March 20.

This report summarizes the act's 18 titles and compares it with previous legislation

where applicable. The Secretary referred to throughout the text is the Secretary of

Agriculture, unless otherwise noted. This report concludes with a table of the

commodity program levels 1982-86, a short list of agricultural legislation from 1933

to 1986, a glossary of agricultural terms, a list of additional readings, a summary

of the Food Security Improvements Act of 1986, and an index.

How the Balanced Budget and Emergency Deficit Control Act of 1985 (P.L. 99-177),

commonly referred to as Gramm-Rudman-Hollings, will affect the agricultural programs

authorized in this act is not yet known. Gramm-Rudman-Hollings mandates across-theboard spending cuts in nonexempt Federal programs, including agriculture if the

President and the Congress fail to agree on specified budget spending levels until a

balanced Federal budget is achieved by 1990. USDA's Food Stamp Program is exempt

from the cuts.

TITLE I: DAIRY

The 1985 Act continues the reduction in milk price supports and mandates a milk

production termination program. The Secretary must establish a National Commission

on Dairy Policy and has the authority to establish a National Dairy Research

Endowment Institute. Changes are made in the provisions governing milk marketing

1
orders. Commodity Credit Corporation (CCC) stocks will be made available for the

manufacture of casein and for use in a dairy export incentive program.

Price Support

Title I specifies the support price for milk for January 1, 1986, to December 31,

1990. For calendar year 1986, the support level remains at $11.60 per hundredweight

(cwt) for milk containing 3.67-percent milk fat. The support price drops to $11.35

per cwt for January 1-September 30, 1987, and $11.10 per cwt for October 1, 1987-

December 31, 1990. However, the Secretary must adjust the support rate in calendar

years 1988, 1989, and 1990, based on the estimated amount of net CCC price support

purchases for each year. The price of milk is supported through the purchase of

butter, cheese, nonfat dry milk, and other dairy products. If annual purchases are

estimated to be 2.5 billion pounds or less (milk equivalent), the rate increases by

50 cents per cwt on January 1. If net CCC purchases are estimated to exceed 5

billion pounds, the rate decreases 50 cents per cwt. The support price, however,

cannot be lowered after 1987 unless the milk production termination program

decreases milk production by at least 12 billion pounds during the 18 months of the

program or unless the Secretary certifies to Congress that reasonable contract

offers were made under the program but not accepted by a sufficient number of

producers to achieve the targeted reduction.

The 1981 Act specified minimum support levels for milk, a change from previous

legislation where rates were based on a percent of parity. The initial support

price was $13.10 per cwt for December 1981-September 1982 with further increases

scheduled for fiscal years 1983-85. TheOmnibus Budget Reconciliation Act of 1982

eliminated the scheduled increases and continued the support level at $13.10 per cwt

through fiscal year 1984. Also, if CCC purchases remained high, the Secretary could

reduce the effective returns to producers during fiscal year 1983-85. The 1982 Act

authorized a 50-cent-per-cwt deduction on October 1, 1982, if net CCC purchases were

projected to be more than 5 billion pounds (milk equivalent) for the next 12

months. A further 50-cent deduction was allowed on April 1, 1983, if projected net

annual purchases exceeded 7.5 billion

pounds. The deductions were made

beginning April 16, 1983, and September Figure 1

1, 1983, and ending November 30, 1983. Milk Supply, Use, and Stocks, 1985

Billion pounds The Dairy and Tobacco Adjustment Act of

1983 significantly changed the existing 170

dairy program by lowering price supports,

instituting a 15-month voluntary milk 160 Total supply

diversion program, and requiring a dairy

products promotion order. The pricesupport level dropped to $12.60 per cwt 150s

on December 1, 1983. The Secretary was

authorized to further reduce the support 140

price by 50 cents per cwt on April 1,

1985, if net CCC purchases were estimated Commercial

to exceed 6 billion pounds (milk 130 ommrstocks

equivalent), and another 50 cents on July

1, 1985, if net purchases were estimated 120

to exceed 5 billion pounds. Botharmuse

reductions were taken. Figure 1 shows 110

that milk supply and stocks have 1973 75 77 79 81 83 85

increased dramatically in the last few increased 1985 dramatically forecast. in the Stocks last few as of December 31.

years.

2
Milk Production Termination Program

During the period April 1, 1986, through September 30, 1987, the Secretary must

operate a milk production termination or "whole-herd buy-out" program. Under the

whole-herd buy-out, producers will receive payments from USDA, based on bids

submitted to the Secretary, for the purpose of stopping milk production. All dairy

cattle which the producers own must be sold for slaughter or export. For 3, 4, or 5

years (as determined by the Secretary) after such sale, producers may not acquire

interest in dairy cattle or milk production, nor acquire or make available to others

facilities not used because of this program. Program participants must provide

evidence of their milk marketing history and the past and present size and

composition of their herds. A producer who began marketing milk in the 15-month

period ending March 31, 1986, is ineligible to participate, except if the entire

herd and facilities were transferred to the producer as the result of a gift or

inheritance from a family member. Participants violating their contracts are

subject to marketing and civil penalties.

To help offset the cost of the milk production termination program, the price of

milk received by producers will be reduced by 40 cents per cwt during April 1-

December 31, 1986, and 25 cents during January 1-September 30, 1987. This deduction

will be collected by handlers and remitted to the CCC and is applicable to all milk

marketed for commercial use in the contiguous 48 States. The Secretary must issue

regulations specifying marketing procedures to ensure that the greatest number of

cattle are slaughtered during April-August 1986 and March-August 1987 and that such

sales follow historical seasonal marketing patterns. The total number of dairy

cattle marketed for slaughter under this program is limited to 7 percent of the

national dairy herd in addition to the normal culling rate per calendar year.

A milk diversion or a milk production termination program may be established by the

Secretary in 1988, 1989, or 1990 as necessary to avoid burdensome excess stocks of

milk or milk products. To minimize the effect of the 18-month program on beef,

pork, and lamb producers, the Secretary must purchase 400 million pounds of red meat

in addition to those normally purchased and distributed. Two hundred million pounds

will be available for distribution through domestic programs and 200 million pounds

for export programs and military commissaries located outside the United States.

The Dairy and Tobacco Adjustment Act of 1983 authorized a 15-month milk diversion

program for January 1984-Harch 1985. Participation in the program was voluntary.

Producers signed contracts to reduce their marketings by 5-30 percent from the base

period and, in return, received payments of $10 per cwt. After November 8, 1983,

participating producers could only sell their dairy cattle for slaughter or to

another producer in the program. Idle facilities and equipment were not to be used

by other producers. To partially offset the cost of the program, the Secretary

deducted 50 cents per cwt from the price received by producers for milk marketed

commercially in the contiguous 48 States during December 1983 through Harch 1985.

Casein

The CCC must maintain surplus stocks of nonfat dry milk of not less than 1 million

pounds annually to sell to individuals or entities for the manufacture of casein.

Bids may be accepted at lower than resale price in order to promote a domestic

casein industry. The Secretary must determine whether imports of casein interfere

with USDA's milk price-support program and report to Congress by February 21, 1986.

3
National Dairy Research Endowment Institute

The Secretary may establish within USDA a National Dairy Research Endowment Institute

to aid the dairy industry in implementing a dairy products research order. The

institute would establish permanent funding of scientific research to expand U.S.

markets for milk and dairy products. The research goals would be to increase the

knowledge of human nutritional needs and the relationship of milk and dairy products

to those needs; to improve dairy processing technologies, particularly those

appropriate to small- and medium-sized family farms; to develop new dairy products;

and to appraise the effects of this information on the marketing of dairy products.

The institute would be headed by a board of trustees, composed of members of the

National Dairy Promotion and Research Board. If the institute is established, a

Dairy Research Trust Fund of $100 million would be established in the U.S. Treasury.

The money would be invested by the Treasury Secretary in various interest-bearing

obligations, accounts, or certificates. The interest, dividends, and other payments

that accrue would be available to the institute for authorized activities.

Milk Marketing Orders

The 1985 Act specifies minimum class I differentials for the 44 milk marketing

orders administered by the Agricultural Marketing Service (AMS). (See table 1.)

These differentials are the dollar amounts added to the price of manufacturing grade

milk in the Minnesota-Wisconsin marketing area to determine the minimum class I

(bottling) milk price that handlers must pay under each of the marketing orders.

Table 1--Ninlium class I milk differentials I/

Marketing order Minimum differential Marketing order Minimum differential

area (per cwt of milk having area (per cwt of milk having

3o5 percent milk fat) 3.5 percent milk fat)

Dollars Dollars

New England 3.24 Greater Kansas Cityi 1.92

New York-New Jersey 3.14 Tennessee Valley 2.77

Middle Atlantic 3.03 Nashville, Tennessee 2.52

Georgia 3.08 Paducah, Kentucky 2.39

Alabama-West Florida 3.08 Memphis, Tennessee 2.77

Upper Florida 3.58 Central Arkansas 2.77

Terampa Ba 3.88 Fort Smith Arkansas 2.77

Southeastern Florida 4.18 Southwest Plains 2.77

Michigan Upper Peninsula 1.35 Texas Panhandle 2.49

Southern Michigan 1.75 Lubbock-Plainview, Texas 2.49

Eastern Ohio-Western Pennsylvania 1.95 Texas 3.28

Ohio Valley 2.04 Greater Louisiana 3.28

Indiana 2.00 New Orleans-MississIppi 3.85

Chicago Regional 1.40 Eastern Colorado 2.73

Central Illinois 1.61 Western Colorado 2.00

Southern Illinois 1.92 Southwestern Idaho-Eastern Oregon 1.50

Louisvi lle-Lexington-Evansville I 2. 11 Great Basin 1.90

Upper Nidwest 1.20 Lake Mead 1.60

Western South Dakota 1.50 Central Arizona 2.52

Black Hills, South Dakota 2.05 Rlo Grande Valley 2.35

Iowa 1.55 Puget Sound-Inland 1.85

Nebraska-Western Iowa 1.75 Oregon-Washington 1.95

1/ A minimum class I milk differential is the dollar amount added to the price of manufacturing grade

miTk In the Minnesota-Wisconsin marketing area to determine the class I (bottling) milk price in each of

the marketing areas.

4
The minimum differentials will be in effect for the 2 years beginning May 1, 1986,

and will continue in effect unless an order is amended by AMS. The MinnesotaWisconsin price is an estimate of the average price paid for manufacturing grade

milk used to make butter, nonfat dry milk, and cheese at plants in most of Minnesota

and Wisconsin. Under Federal milk marketing orders, milk is priced according to how

it is used at processing plants. Milk sold for drinking is in the highest price

class, while milk used in manufactured products is in lower price classes.

The 1985 Act also authorizes milk marketing orders to include payments to handlers

and marketing cooperatives for services of marketwide benefit. These services

include, but are not limited to, providing facilities to furnish additional milk

supplies needed by handlers and to dispose of excess milk supplies, and transporting

milk to fulfill requirements for milk of a higher use classification or to provide a

market outlet for. milk of any use classification. AMS would also have to amend the

marketing orders to incorporate such provisions.

National Commission on Dairy Policy

Title I establishes a National Commission on Dairy Policy to study the future

operations of the Federal milk price support program. The commission will have 18

members, appointed by the Secretary, who are engaged in the commercial production of

milk in the United States. At least 12 must be appointed from nominations made by

Congress. The membership of the commission should reflect, as much as possible, the

geographical distribution of milk production volume throughout the United States

with each member representing a milk-producing region.

The commission will examine the current Federal price-support program for milk,

alternatives to the program, the future functioning of the program, technologies

that will become a part of the milk production industry before the end of this

century, the effect that developing technologies will have on surplus milk

production, and the future structure of the milk production industry.

The commission must submit its findings and recommendations to the Secretary and

Congress not later than March 31, 1987. The commission will dissolve 30 days after

the report is submitted.

Dairy Products for Veterans Administration

Hospitals and the Military

The 1985 Act continues the transfer of dairy products (butter, cheese, and other

items) acquired by the CCC to Veterans Administration hospitals and the military

through December 31, 1990. The dairy products available under this program are

limited to those acquired by the CCC under price-support operations and not disposed

of through foreign donations.

Dairy Indemnity Program

The dairy indemnity program will be continued through September 30, 1990. Under

this program, the Secretary is authorized to compensate dairy farmers for lost

production, if they are directed to remove their milk from commercial markets due to

nuclear radiation or fallout, inadvertent chemical residues, or toxic substances.

Dairy Export Incentive Program

From February 21, 1986, to September 30, 1989, the CCC must operate an export

incentive program for dairy products. The CCC will pay, on a bid basis, individuals

5
or businesses that export U.S. dairy products. Bids will be accepted or rejected

under criteria the Secretary deems appropriate. The Secretary must issue

regulations that ensure that payments made under this program are for sales in

addition to, not in place of, those that would normally be made and that such

payments will not displace commercial export sales. The payments can be made in

cash, in kind, or through the issuance of certificates redeemable for commodities.

The payment rates must reflect the type of dairy product to be exported and the

domestic and world prices of dairy products, among other things.

TITLE II: WOOL AND MOHAIR

The 1985 Act extends the National Wool Act of 1954 through December 31, 1990. The

Secretary must support the price of wool and mohair through loans, purchases,

payments, or other operations. The support rate for shorn wool, rounded to the

nearest full cent, remains at 77.5 percent of:

average parity index for 3 previous calendar years

$0.62 X average parity index for 1958, 1959, and 1960

A parity index is the index of prices paid by farmers for commodities and services,

including interest, taxes, and farm wages. The support prices for pulled wool and

mohair must maintain normal marketing relationships between pulled and shorn wool

and maintain approximately the same percentage of parity for mohair as for shorn

wool.

TITLES III and IV: WHEAT AND FEED GRAINS

The 1985 Act continues price and income supports for wheat and feed grain producers

through the 1990 crop year. Nonrecourse loans provide price support; target prices

and deficiency payments provide income support. The 1985 Act authorizes the

Secretary to implement several optional programs, including "marketing loans," loan

deficiency payments, the "target option program," and inventory reduction payments.

Wheat marketing quotas are also discretionary.

Target Prices and Price-Support Loans

Minimum target prices for wheat, unless a marketing quota is in effect, decrease

from $4.38 per bushel for the 1986-87 crops to $4 per bushel for the 1990 crop

(table 2). The 1981 Act specified minimum wheat target prices that increased from

$4.05 per bushel for the 1982 crop to $4.65 per bushel for the 1985 crop. The

Table 2--1inimum wheat and corn target prices and loan rates, crop years 1986-90

Item 1986 1967 1988 1989 1990

Dollars

Wheat:

Target price 4.38 4.38 4.29 4.16 4.00

Basic loan rate 3.00 1/ / / 1/

Corn:

Target price 3.03 3.03 2.97 2.88 2.75

Basic loan rate 2.40 1/ I/ I/ I/

I/ The rate is to be 75-85 percent of average market price (see text).

6
Agricultural Programs Adjustment Act of 1984 lowered the levels for the 1984-85

crops to $4.38 per bushel (app. 1).

Minimum target prices for corn decrease from $3.03 per bushel for the 1986-87 crops

to $2.75 per bushel for the 1990 crop (table 2). The minimum levels for corn target

prices for crop years 1982-85 set by the 1981 Act increased from $2.70 per bushel to

$3.18 per bushel. The 1984 Act, however, held the 1985 rate at the 1984 level of

$3.03 per bushel (app. 1). Payment rates for grain sorghum, oats, and barley, if

designated by the Secretary, must be fair and reasonable in relation to the payment

rate established for corn.

The 1985 Act continues loans and purchases for the 1986-90 crops of wheat and feed

grains. Loan rates must encourage wheat and feed grain exports, not create

excessive stocks, and reflect production costs, supply and demand conditions, and

world prices of wheat and feed grains. The 1986 basic loan rate (prior to any

discretionary reductions) is $3 per bushel for wheat and $2.40 per bushel for corn.

For 1987-90, the basic rates will be 75-85 percent of the simple average of the

season prices received by producers during the 5 preceding marketing years, dropping

the years with the high and low prices. This rate may not be lowered by more than 5

percent from the basic rate in the previous year.

Loan levels may be further reduced from the basic rate by up to 20 percent if the

average market price was 110 percent or less of the announced loan rate during the

previous year or if the reduction is necessary to maintain domestic and export

markets. For the 1986 crops of wheat and feed grains, the Secretary must reduce the

basic rates of $3 and $2.40 by at least 10 percent. Any reduction made under this

authority may not be used in determining the basic loan rate in subsequent years.

For example, the basic loan rate for the 1987 crop of wheat will be calculated using

the formula, but it may be set at no lower than $2.85 per bushel, a 5-percent

reduction from the 1986 basic rate of $3. The $2.85 level can then be dropped by up

to 20 percent to determine the final loan rate for 1987. Similar provisions for

wheat and feed grains were contained in the 1981 Act, except that the trigger level

was 105 percent of the announced loan rate and the reduction was limited to 10

percent annually, with a floor of $3 per bushel for wheat and $2 per bushel for corn.

Loans will once again be available for the 1986-90 crops of grain sorghum, barley,

oats, and rye at levels that the Secretary determines are fair and reasonable in

relation to the level for corn and that reflect such factors as relative feed values.

The 1981 Act established the minimum basic loan rates for wheat and corn at $3.55

and $2.55 per bushel, respectively, for the 1982-85 crops. The Omnibus Budget

Reconciliation Act of 1982 raised the minimums, for the 1983 crop only, to $3.65 for

wheat and $2.65 for corn. The Secretary used discretionary authority in 1984 and

1985 to reduce the loan rates for wheat by 25 cents (7 percent) to $3.30 per

bushel. See appendix 1 for the target and loan levels, crop years 1982-86.

Loan Repayment

The Secretary has the option to offer wheat and feed grain producers a marketing

loan. If market prices are below the loan rate, producers may repay their loan at

the world market price, as determined by the Secretary, or 70 percent of the basic

loan rate, whichever is higher. Loans may not be repaid at a level higher than the

announced loan rate. If a marketing loan program is used, the Secretary must issue

a formula defining the world market price and a mechanism for periodic announcement

of such price.

7
Under a similar provision, the Secretary may offer loan deficiency payments to

producers who, although eligible to obtain loans, agree not to. The loan deficiency

payments for the 1986-90 crops of wheat, corn, grain sorghum, barley, oats, and rye

would be determined by multiplying the loan payment rate by the amount of commodity

eligible for loan. The payment rate per bushel is the announced loan level minus

the repayment level used in the marketing loan. The amount of commodity eligible for

this payment is determined by multiplying the individual farm program acreage for

the crop by the farm program payment yield.

National Program Acreage

The 1985 Act continues to set the national program acreage (NPA) for wheat and feed

grains at the number of harvested acres (based on the weighted national average of

farm program payment yields) the Secretary determines is required to meet estimated

domestic and export needs (less imports). The acreage may be adjusted for any

desired increase or decrease in carryover stocks. The Secretary must announce the

NPA for wheat for a particular crop year by June 1 (August 15 under the 1981 Act) of

the preceding calendar year. The NPA for feed grains must be announced by September

30 (November 15 in the 1981 Act) of the preceding calendar year. The 1985 Act

specifies a program allocation factor of 80-100 percent, arrived at by dividing the

NPA for the crop by the estimated number of total acres that will be harvested. The

program allocation factor is a ratio used in determining farm program acreage. As

with the 1981 Act, the announcement of the NPA and the calculation of the program

allocation factor are not required whenever an acreage reduction program (ARP) is in

effect.

Farm Program Acreage

Individual farm program acreage continues to be determined by multiplying the

allocation factor by the number of acres planted for harvest on the individual

farm. If an ARP is in effect, then the individual farm program acreage is the

acreage planted on the farm for harvest within the permitted acreage (the crop base

less the percentage reduction specified by the ARP) with the following exception.

If producers plant between 50 and 92 percent of the crop's permitted acreage when an

ARP is in effect and devote the rest to conserving uses or nonprogram crops (any

agricultural commodity other than wheat, feed grains, Upland cotton, extra long

staple cotton, rice, or soybeans), then the individual farm program acreage equals

92 percent of the permitted acreage for the purposes of calculating deficiency

payments. Any acreage considered planted under this provision may not also be used

as conserving acreage under any acreage reduction, set-aside, or land diversion

program.

Title X establishes the formulas by which crop acreage bases and farm program

payment yields are calculated under a new acreage base and program yield system for

wheat, feed grains, Upland cotton, and rice.

Deficiency Payments

Like the 1981 Act, the 1985 Act authorizes deficiency payments if the national

weighted average market price received by farmers during the first 5 months of the

marketing year is lower than the established target price for that crop year. The

payment rate for wheat and corn is the difference between the target price and

either the national weighted average market price or the basic loan level, whichever

is higher. The payment rates for grain sorghum, oats, and barley, if designated by

the Secretary, must be fair and reasonable in relation to corn. Payments for the

1986-90 crops will again be determined by multiplying the payment rate times the

8
individual farm program acreage times the farm program payment yield established for

the farm. Deficiency payments will not be made for any quantity on which a disaster

payment was made.

If the Secretary exercises discretionary authority to reduce the basic loan rate by

up to 20 percent, USDA must make additional payments to producers to provide the

same total return as if there had been no reduction. The payment rate is the basic

loan level minus the national weighted season average farm price for the marketing

year or the announced loan level, whichever is higher. These payments would not be

subject to the $50,000 payment limitation. Title X specifies that payments received

under the wheat, feed grain, Upland cotton, extra long staple (ELS) cotton, and rice

programs are limited to $50,000 per person per year with certain exceptions.

Up to 5 percent of the deficiency payments (including payments made because the

basic loan was reduced) may be made as payments-in-kind (PIK).

The Secretary may offer wheat producers a target option program (TOP), where

producers choose from a schedule of target prices and corresponding acreage

reduction levels. The Secretary also may vary the rate of wheat deficiency payments

based on the quantity produced, with such payments being targeted to commercial

family farmers with annual gross sales over $20,000.

Disaster Payments

As under the 1981 Act, the 1985 Act does not automatically entitle producers to

disaster payments if they can obtain crop insurance under the Federal Crop Insurance

Act. However, even if crop insurance is available, the Secretary may make disaster

payments to producers when all of the following conditions have been met: (1)

producers have suffered substantial farm production losses as the result of drought,

flood, other natural disasters, or other conditions beyond the producers' control

that either reduced yields or prevented planting of wheat, feed grains, or other

nonconserving crop; (2) such losses have created an economic emergency for

producers; (3) Federal crop insurance indemnity payments and other forms of

assistance made available by the Federal Government are insufficient to alleviate

the economic emergency; and (4) additional assistance must be made available to such

producers to alleviate the economic emergency.

If these conditions are met, prevented planting payments will be made on the smaller

of either the acreage intended to be planted to wheat or feed grains or the acreage

planted for harvest in the preceding year of wheat or feed grains (including any

acreage which the producer was prevented from planting to wheat, feed grains, or

other nonconserving crops). The payment calculation is 75 percent of the farm

program payment yield times one-third of the target price for wheat or feed grains.

Payments may be made in cash or in-kind. Reduced-yield payments will be made if the

total quantity of wheat or feed grains harvested on any farm is less than the

potential production obtained by multiplying 60 percent of the farm program yield by

the acreage planted for harvest. The payment calculation is 50 percent of the

target price for the deficit in production below the 60-percent level.

Acreage Reduction

The 1985 Act continues the authority of the Secretary to require reductions in the

acreage planted to wheat and feed grains. Acreage limitation, set-aside, or paid

land diversion programs may be implemented if total supplies will be excessive. An

acreage limitation program is commonly called an acreage reduction program or ARP.

Figures 2 and 3 indicate the areas where wheat and corn are produced in the 48

9
Figure 2

Harvested Acres of Wheat for Grain, by County, 1982

A-j

0

Less than 5,000

5.000-49.999

50.000 or more

U.S. Total: 51,212,930 acres
Figure 3

Harvested Acres of Corn for Grain or Seed, by County, 1982

50,000 or more

U.S. Total: 69,707.035 acres
contiguous States. When determining an ARP or set-aside, the number of acres placed

in the conservation reserve must be considered. If an acreage reduction or

set-aside program is in effect, producers must participate in the program as a

condition of eligibility for wheat and feed grain loans, purchases, and payments.

USDA must announce an acreage reduction or set-aside program by June 1 for wheat or

September 30 for feed grains prior to the calendar year in which the crop is

harvested. Adjustments in the program can be made until July 31 for wheat or

November 15 for feed grains if there has been a significant change in total supply

since the program was first announced. Under the 1981 Act, the announcement dates

were August 15 for wheat and November 15 for feed grains.

When an ARP has been announced, USDA determines the acreage that may be planted to

the crop (permitted acreage) by uniformly reducing the crop acreage base of each

farm. The percentage reductions for the 1986-90 crops of wheat and feed grains

range from 0 to 30 percent for wheat and from 0 to 20 percent for feed grains,

depending upon the amount of carryover stocks (tables 3 and 4). Under an ARP, a

percentage of each farm's acreage must be devoted to conservation uses. The amount

is determined by multiplying the number of acres required to be withdrawn by the

ratio of the number of acres actually planted to the number of acres authorized to

be planted under the reduction. Malting barley may be exempt from any acreage

reduction requirements.

The Secretary may also operate a set-aside program rather than an acreage reduction

program. If announced, producers must set aside and devote to conserving uses

acreage equal to a specified percentage of the current year's acreage planted for

harvest to that crop. The Secretary may adjust individual set-asides to correct for

crop rotation practices and abnormal factors affecting production. If a set-aside

program is established, the Secretary may also limit the acreage planted to wheat or

feed grains or both.

All or part of reduced or set-aside acreage may be devoted to certain designated

crops for harvest (sweet sorghum, haying and grazing, guar, sesame, safflower,

sunflower, castor beans, mustard seed, crambe, plantago ovato, flaxseed, triticale,

rye, or other commodities), if the Secretary determines that such production is

needed to provide adequate supplies, will probably not increase the cost of

price-support programs, and will not adversely affect farm income.

Table 3-Wheat acreage reduction program Table 4-Feed graln acreage reduction program

Allowable reduction Allowable reduction

Crop With carryover With carryover Crop With carryover With carryover

year stocks of I billion stocks greater than year stocks of 2 billion stocks greater than

bushels or less I billion bushels bushels or less 2 billion bushels

Percent Percent

1986 0 - 15 1/ 15 - 22 1/2 1986 0 - 12 1/2 1/ 12 1/2 - 17 1/2

1987 0 - 20 20 - 27 1/2 1987-90 0 - 12 1/2 12 1/2 - 20

1988-90 0 - 20 20 - 30

I/ A 2 1/2-percent paid land diversion is also I/ A 2 1/2-percent paid land diversion is also

required with in-kind payments, if carryover required, with in-kind payments, if carryover stocks exceed I billion bushels. Producers who stocks exceed 2 billion bushels.

planted their wheat before the announcement of

the 1986 program are eligible for land diversion

payments ($2 per bushel) on an additional 10

percent of their crop base.

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At the request of State Agricultural Stabilization and Conservation (ASC)

committees, the Secretary must allow haying and grazing on reduced acreage under

1986 programs and grazing only under 1987-90 programs. Haying and grazing are not

permitted on any diverted wheat and feed grain acreage during a consecutive 5-month

period established by the State ASC committee.

The Secretary may also offer producers a paid land diversion (PLD) program if such

payments will assist in obtaining the necessary adjustments in total acreage. A

diversion program can be offered whether or not an acreage reduction or set-aside

program is in effect. The diverted cropland (in addition to any reduced or

set-aside acreage) must be devoted to approved conservation practices. Payment

amounts may be determined by bids submitted by producers or other such means as the

Secretary deems appropriate. The total acreage to be diverted in any county must be

limited so as not to adversely affect the local economy. For the 1986 crops of

wheat and feed grains, a 2 1/2-percent PLD is required if carryover stocks exceed 1

billion bushels of wheat and 2 billion bushels of corn; payments will be made

in-kind. Producers who planted wheat prior to the announcement of the 1986 programs

are also eligible for diversion payments of $2 per bushel for an additional 10

percent of their wheat base.

The Secretary may make inventory reduction payments to producers who agree to forgo

obtaining loans and receiving deficiency payments and who limit the amount of wheat

and feed grains planted for harvest to the crop acreage base less half of any

acreage to be diverted by an ARP and PLD. Payments would be made in-kind, subject to

availability. The payment rate and quantity would be the same as those determined

for loan deficiency payments.

Any set-aside, reduced, or diverted acreage may be used for wildlife food plots or

habitats, based on standards determined by the Secretary in consultation with

wildlife agencies. The Secretary may authorize USDA to pay for part of the cost of

establishing the plots. USDA may also pay for part of approved soil and water

conservation practices on set-aside, reduced, or diverted acreage.

The main differences between these provisions and those in the 1981 Act are the

acreage reduction percentages and how the crop acreage bases are calculated. Under

the 1981 Act, the amount of acreage to be taken out of production was left to the

discretion of the Secretary. Congress later changed that. The Omnibus Budget

Reconciliation Act of 1982 required a 15-percent ARP and a 5-percent PLD for the

1983 wheat crop and a 10-percent ARP and 5-percent PLD for the 1983 feed grains

crop. The diversion payment rates were also set in the legislation at $3 per bushel

for wheat and $1.50 per bushel for corn, but the Secretary could reduce the levels

by 10 percent if the program's objectives could be met with a lower rate. The PLD

rates for grain sorghum, oats, and barley were set at rates fair and reasonable in

relation to corn.

The Agricultural Programs Adjustment Act of 1984 mandated a 20-percent ARP and a

10-percent PLD for the 1984-85 crops of wheat. Cash payments for the land diversion

were $2.70 per bushel. For the 1984 crop only, the Secretary was required to offer

producers a voluntary PIK diversion program for an additional 10-20 percent of their

base. The 1984 Act also authorized an ARP of up to 15 percent for the 1985 crop of

feed grains.

Title X changes the formula by which crop acreage bases are calculated.

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Cross Compliance

If an acreage reduction program is in effect for wheat or feed grains, the Secretary

may require, as a condition of eligibility for loans and purchases, that the acreage

planted to any other program crop with an ARP in effect be limited to the acreage

base for that crop. Discretionary cross compliance is a provision of P.L. 99-253

(app. 2). If a set-aside is in effect, compliance with other commodity programs may

be a condition of eligibility for loans, purchases, or payments.

Wheat Harketing Quotas

The Secretary is required to conduct a nonbinding poll (by mail ballot) of eligible

wheat producers by July 1, 1986, to determine whether they favor mandatory

production limits. To be eligible to vote, farmers must have produced at least one

crop of wheat during 1981-85 on a wheat acreage base of at least 40 acres.

The Secretary may set national marketing quotas for the 1987-90 crops of wheat. If

quotas are announced, a referendum must be held by August 1, 1986, to determine

whether farmers (who have produced at least one crop of wheat during 1981-85) favor

quotas or not. If 60 percent of those voting favor quotas, the Secretary must

proclaim quotas for the 1987-90 wheat crops. Each farm's marketing quota would then

be determined by multiplying the farm's average production during 1981-85, adjusted

for acreage reduction programs, by the ratio of the national quota to U.S.

production during 1981-85, adjusted for ARPs and natural disasters.

If marketing quotas are in effect, the target price would be established at not

less than $4.65 per bushel or the national average cost of production per bushel,

whichever is higher. The loan rate would be set at $3.55 per bushel, or 75 percent

of the national average cost of production, whichever is higher. The cost of

production, as determined by the Secretary, must reflect variable expenses, general

farm overhead, taxes, insurance, interest, and capital replacement costs, but

exclude residual returns for management and risk.

Other Provisions

The 1985 Act also includes the following provisions for wheat and feed grains.

Price Support for Corn Silage

During crop years 1986-90, the Secretary may make loans and purchases available

to producers who cut, purchase, or exchange corn for silage and agree to participate

in an acreage reduction or set-aside program. The Agricultural Programs Adjustment

Act of 1984 contained similar provisions for crop years 1984-85.

Export Certificates for Wheat and Feed Grains

Title X contains provisions for two optional export certificate programs for wheat

and feed grains.

Corn Marketing Year

Title X changes the marketing year for corn from October 1-September 30 to September

1-August 31.

14
1986 Programs

On January 13, 1986, the Secretary announced the target prices, loan rates, and

acreage reductions applicable to the 1986 crops of wheat and feed grains. Target

prices will be held at 1985 levels: $2.60 per bushel for barley, $3.03 for corn,

$2.88 for grain sorghum, $1.60 for oats, and $4.38 for wheat. Loan rates for 1986

were set at $1.56 per bushel for barley, $1.92 for corn, $1.82 for grain sorghum,

$0.99 for oats, $1.63 for rye, and $2.40 for wheat. The Secretary reduced the wheat

and corn loan rates the full 20 percent from the basic levels. The feed grain

target prices and loan rates are based on the feed value of barley, grain sorghum,

oats, and rye compared with corn; the values are 81.5, 95, 51, and 85 percent,

respectively. The required acreage reductions for 1986 are 25 percent for wheat and

20 percent for feed grains. The 2 1/2-percent paid land diversions for wheat and

feed grains required by the 1985 Act are included in the reductions. Winter wheat

producers who limit the acreage planted for harvest to 65 percent of their wheat

base may be eligible to receive diversion payments on 10 percent of the wheat

acreage base.

On January 29, 1986, the Secretary announced that producers may request 100 percent

of their diversion payments and 40 percent of their projected deficiency payments

when they sign up for the program. Payment rates for the 2 1/2-percent PIK paid

land diversion will be $0.57 per bushel for barley, $0.73 for corn, $0.65 for grain

sorghum, $0.36 for oats, and $1.10 for wheat. The cash payment rate for the

additional diversion for winter wheat is $2 per bushel. Producers who have

price-support loans--regular, special, or farmer-owned reserve--on any commodity on

the day the advance payment is requested must make that loan collateral available to

satisfy their PIK obligation. Producers who do not have commodities under loan, or

producers whose commodities under loan are insufficient to meet their PIK

entitlements, will be issued negotiable certificates in the net remaining monetary

amount due them.

TITLE V: COTTON

The 1985 Act continues the cotton programs through crop year 1990, with some

significant additions aimed at making cotton more competitive in world markets.

Marketing loans--with two different repayment plans--and marketing certificates paid

to first handlers of Upland cotton are required when the world market price is below

the loan rate.

Target Prices and Price-Support Loans

The minimum target price for Upland cotton decreases from $0.81 per pound for the

1986 crop to $0.729 per pound for the 1990 crop (table 5). The 1981 Act, in

comparison, set minimum target prices for Upland cotton that increased from 71 cents

per pound to $0.86 per pound for the 1982-85 crops (app. 1). The Agricultural

Programs Adjustment Act of 1984, however, eliminated the increase for 1985 and the

target price remained at the 1984 level of 81 cents per pound.

Nonrecourse loans will be available for the 1986-90 crops of Upland cotton. The

minimum 1986 loan rate will be at least $0.55 per pound. The loan levels for the

1987-90 crops will again be determined by using the formula in the 1981 Act:

o 85 percent of the average spot market price for Strict Low Middling 1 1/16-inch

(SLM 1 1/16") Upland cotton (micronaire 3.5-4.9) at average U.S. location

15
Table 5-Upland cotton progrna levels, crop years 1986-90

Item 1986 1987 1988 1989 1990

Cents per 'pound

Target price 81 79.4 77 74.5 72.9

Loan rate 55 I/ I/ I/ I/

Percent

Maximum acreage reduction 25 25 25 25 25

1/ See text for the formula that will be used to determine the loan rate for crop years 1987-90.

during 3 years of the 5-year period (excluding the years with highest and

lowest prices) ending July 31 in the year in which loan level is announced, or

o 90 percent of the average adjusted price of the five lowest priced growths

quoted for Middling 1 3/32-inch cotton, c.i.f. (cost, insurance, freight)

Northern Europe for the 15-week period beginning July 1 of the year in which

the loan level is announced, whichever is lower.

The loan rate cannot be reduced by more than 5 percent from the preceding year's

rate and in no event less than $0.50 per pound. The minimum in the 1981 Act was

$0.55.

If the average Northern Europe price is less than the average U.S. spot market price

for any crop, the Secretary may increase the loan level to no more than the average

U.S. spot market price. The Secretary must determine and announce the loan level

for any Upland cotton crop no later than November 1 of the calendar year preceding

the marketing year for which the loan applies.

As in the 1981 Act, Upland cotton loans will mature 10 months from the first day of

the month in which the loan is made. During the 10th month of the loan period,

producers may extend their loan for an additional 8 months. Requests to extend the

loan period will not be approved, however, when the average spot market price of SLM

1 1/16" cotton in the preceding month exceeds 130 percent of the average spot price

for the preceding 36-month period.

Loan Repayment

If the world market price for Upland cotton (adjusted to U.S. quality and location)

is below the loan level, the Secretary must implement a loan repayment plan

(marketing loan) to make U.S. cotton more competitive in world markets. The

Secretary may implement either of two plans.

o Under Plan A, producers may repay their loans at a level announced at the same

time the loan rate is announced. The repayment level cannot be less than 80

percent of the loan rate and, once announced, cannot be changed.

o Under Plan B, producers may repay their loan at the prevailing world market

price for Upland cotton (adjusted to U.S. quality and location) or the loan

level, whichever is lower. For the 1987-90 crops, if the world market price is

less than 80 percent of the loan level, producers may repay their loan at a

rate (not more than 80 percent) that the Secretary estimates will minimize loan

forfeitures, accumulation of stocks, and Government storage costs and that will

allow free marketing of cotton in domestic and international markets.

16
The Secretary may offer Upland cotton producers loan deficiency payments. Producers

eligible to obtain loans must agree not to receive them. As with wheat and feed

grains, payments are determined by multiplying the loan payment rate (loan level

minus repayment level) by the amount of cotton eligible for the loan. As much as

half of the payment may be made in negotiable marketing certificates.

Marketing Certificates

The CCC must issue negotiable marketing certificates to first handlers of cotton

(individuals or businesses who regularly buy or sell Upland cotton) who have entered

into agreements with the CCC to participate in the certificate program if either

plan A or plan B fails to make U.S. Upland cotton fully competitive in world markets

and the world market price (adjusted to U.S. quality and location) is below the loan

repayment rate. The value of the certificates is based on the difference between

the loan repayment rate and the world market price. Handlers may redeem the

certificates for cash, CCC-owned cotton, or other commodities. Certificate owners,

to the extent practicable, can designate the storage facility and commodities they

wish to receive. If a handler does not present a certificate to the CCC for

redemption within a reasonable number of days after issuance, as determined by the

Secretary, the CCC will deduct reasonable storage costs and other carrying charges

from the value of the certificate. Any price restrictions on the disposition of CCC

commodities do not apply to the redemption of certificates. Certificates are

transferable as approved by the Secretary. Further, the Secretary must ensure that

certificate commodities will not adversely affect income of producers. Payments

must be made in the form of marketing certificates as necessary to make new cotton

in inventory on August 1, 1986, available at competitive prices.

For both the marketing loan and the market certificates, the Secretary must issue a

formula defining the world market price and a mechanism for periodic announcement of

such price.

National Program Acreage

As under the 1981 Act, the 1985 Act establishes the NPA for Upland cotton at the

number of harvested acres needed (based on the weighted national average of the farm

program payment yields) to meet domestic and export needs, less imports, plus any

desired increase or decrease in carryover stocks. The Secretary must announce the

NPA for Upland cotton no later than November 1 of the preceding calendar year, and

the NPA must be at least 10 million acres. The program allocation factor for Upland

cotton is again computed by dividing the NPA by the number of acres the Secretary

estimates will be harvested. The allocation factor may not exceed 100 percent.

Whenever an acreage reduction program (ARP) is in effect, the NPA and allocation

factor need not be calculated.

Farm Program Acreage

A farm's individual program acreage for Upland cotton is determined, as in the 1981

Act, by multiplying the allocation factor times the acreage planted to Upland cotton

on the farm. The individual farm program acreage with an ARP in effect is the

acreage on the farm planted to cotton for harvest within the permitted acreage. The

permitted acreage is the crop acreage base for Upland cotton less the percentage

reduction required by the ARP.

As with wheat and feed grains, if producers plant at least 50 and less than 92

percent of their permitted cotton acres and devote the rest to nonprogram crops (any

agricultural commodity other than wheat, feed grains, Upland cotton, ELS cotton,

17
rice, or soybeans), the individual farm program acreage is set at 92 percent of the

permitted acreage for the purpose of calculating deficiency payments. Any acreage

considered planted may not be used as conserving acreage in any ARP or PLD.

Title X establishes the formulas by which crop acreage bases and farm program

payment yields are calculated under a new acreage base and program yield system for

wheat, feed grains, Upland cotton, and rice.

Deficiency Payments

USDA will again make deficiency payments to participating Upland cotton producers if

the national average market price received by farmers is below the target price

during the calendar year which includes the first 5 months of the marketing year.

The payment rate is the difference between the target price and the national average

price or the loan rate, whichever is higher. The quantity on which payments are

made is determined by multiplying the individual farm program acreage by the farm

program payment yield. Up to 5 percent of these payments may be made as a

payment-in-kind (PIK). The total quantity on which deficiency payments are made

will be reduced by the amount on which any disaster payment is made.

Disaster Payments

The disaster provisions for Upland cotton are the same as those for wheat and feed

grains. (See page 9.)

Acreage Reduction

The 1985 Act continues the Secretary's authority to implement acreage reduction and

land diversion programs. The Secretary must operate any acreage reduction program

to result in carryover stocks of 4 million bales of Upland cotton to the extent

practicable. Figure 4 shows the areas where Upland cotton is produced in the United

States. The amount of acreage placed in the conservation reserve must be considered

when determining the need for any acreage reduction. The Secretary must announce an

ARP by November 1 of the calendar year preceding the year in which the crop is

harvested. The acreage limit is determined by reducing the crop acreage base of

each farm by a uniform percentage, not to exceed 25 percent.

When an ARP is in effect, a certain percentage of each farm must be devoted to

conserving uses. The amount is determined in the same manner as for wheat and feed

grains. As with those programs, the Secretary may allow all or part of the reduced

acreage to be devoted to certain designated nonprogram crops if such production is

needed to provide adequate supplies, will not increase the cost of price-support

programs, and will not adversely affect farm income.

The provision for haying and grazing on reduced acreage is the same as for the wheat

and feed grain programs.

As under the 1981 Act, the Secretary may offer producers a paid land diversion (PLD)

if such payments will help adjust the total national acreage to desired levels.

Payments may be made whether or not an ARP for Upland cotton is in effect. The

Secretary may determine amounts payable through the submission of bids or other

means, as appropriate. The Secretary must limit the total acreage to be diverted in

any county so as not to adversely affect the local economy. Diverted land must be

devoted to conservation uses. Reduced or diverted acreage may again be used for

wildlife food plots or habitats and the Secretary may authorize USDA to pay for part

of the cost.

18
Figure 4

Harvested Acres of Cotton, by County, 1982

Less than 5,000

:5.000-24.999

U 25,000 or more

U.S. Total: 9,737,798 acres
Inventory reduction payments may be made to producers who agree to forgo obtaining

loans and receiving deficiency payments and who do not plant Upland cotton for

harvest in excess of the crop acreage base less half of any acreage required to be

diverted from production under an ARP and PLD. Payments would be made in-kind,

subject to availability. The payment rate and quantity would be the same as that

determined for loan deficiency payments.

The 1981 Act gave the Secretary the discretion to set ARP and PLD levels with no

restrictions. Congress later intervened with the Agricultural Programs Adjustment

Act of 1984 for the 1985 crop of Upland cotton. If stocks in the United States on

July 31, 1985, exceeded 3.7 million bales, the Secretary had to implement a PLD of

at least 5 percent and was authorized to use an ARP of up to 20 percent. The

payment rate for the PLD depended on carryover stocks on July 31, 1985--27.5 cents

per pound if stocks were above the trigger level of 3.7 million bales, 30 cents per

pound if stocks exceeded 4.1 million bales, and 35 cents per pound if stocks

exceeded 4.7 million bales. The 1985 Act, on the other hand, limits the acreage

reduced under an ARP to 25 percent and targets carryover stocks at 4 million bales.

Cross and Offsetting Compliance

The Secretary may require, as a condition of eligibility for Upland cotton loans and

payments, that the acreage planted to any other program crop with an ARP in effect

be limited to the acreage base for that crop. Also, USDA may not require a producer

to comply with the program on one farm to be eligible for loans and payments on

another.

Extra Long Staple Cotton

The Extra Long Staple Cotton Act of 1983 deleted the marketing quota and allotment

provisions for extra long staple (ELS) cotton from permanent law and replaced it

with program provisions similar to those for Upland cotton. Beginning with the 1984

crop, nonrecourse loans are available for a 10-month period with a possible 8-month

extension. The 1983 Act sets target prices at 120 percent of the loan level. USDA

makes deficiency payments to producers whenever the average market price received by

producers is below the target price. The payment rate is the difference between the

target price and the average market price during the first 8 months of the marketing

year or the loan rate, whichever is higher.

The quantity of ELS cotton eligible for deficiency payments is determined by

multiplying the farm program payment yield by the acreage planted to ELS cotton for

harvest. ARP's and PLD's are authorized. Crop acreage bases and farm program

payment yields are based on the average planted acreage and the actual yields during

the preceding 3 years, adjusted for natural disasters.

The 1985 Act changes the calculation of the loan rates for crop years 1986-90. The

loan rate formula is 85 percent of the average market price received by producers

during 3 years of the 5-year period (excluding the years with the highest and lowest

prices) ending July 31 in the year in which the loan level is announced. The

announcement date for the loan is also changed from November 1 to December 1. Under

the 1983 Act, the loan rate was set at not less than 150 percent of the Upland

cotton loan level.

Other Provisions

The 1985 Act also contains the following additional provisions affecting cotton.

20
Special World Import Quota

The 1985 Act (like the 1981 Act) provides for a special limited global import quota

for Upland cotton. The quota amount equals a 21-day domestic mill supply of cotton

and will be opened up for any month in which the average spot market price of SLM 1

1/16" cotton exceeds 130 percent of the average spot market price for that quality

for the preceding 36-month period. A 90-day period from the effective beginning day

of the quota will be allowed for cotton entering the United States under the quota.

CCC Sales Price Restriction

The CCC minimum sales price cannot be less than 115 percent of the loan rate in

effect for SLM 1 1/16" Upland cotton, with adjustments for grade, quality, location,

and other factors the Secretary deems appropriate, plus carrying charges. If the

marketing loan provisions are in effect, the sales price minimum is 115 percent of

the average repayment rate.

Skip-row Planting

The 1985 Act continues skip-row rules for classifying acreage to Upland cotton and

the area skipped.

1986 Programs

USDA announced a target price of $1.0248 per pound and a loan rate of $0.854 per

pound for the 1986 crop of ELS cotton on December 31, 1985. A 25-percent ARP was

also announced for Upland cotton on January 13, 1986, and a 10-percent ARP was

announced for ELS cotton on February 12. Also on February 12, the Secretary

announced a target price of $0.81 per pound for Upland cotton. Advanced deficiency

payments (30 percent of the projected total deficiency payments) will be made in

cash during the signup period (March 6-April 11) to producers who request them. The

proposed formula for determining the world price, adjusted to U.S. quality and

location, will be published at a later date. The loan rate and repayment rate may

not be announced until after the world price is determined and announced. If the

adjusted world price is determined to be below the loan rate, USDA will implement

Plan A. Loan deficiency payments will be paid to eligible producers who agree to

forgo obtaining loans at a rate equal to the difference between the loan rate and

the repayment rate.

TITLE VI: RICE

Income support, through target prices and deficiency payments, and price support,

through loans and purchases, are again available to rice producers. New provisions

in the 1985 Act, marketing loans and marketing certificates, are aimed at making

rice more competitive in world markets.

Target Prices and Price-Support Loans

The 1985 Act establishes minimum target prices that decrease from $11.90 per cwt for

1986 to $10.71 per cwt for 1990 (table 6). The 1981 Act established minimum target

prices that increased from $10.85 per cwt for 1982 to $12.40 per cwt for 1985; the

Agricultural Programs Adjustment Act of 1984 lowered the 1985 level to $11.90 per

cwt (app. 1).

21
Table 6--Rce program levels, crop years 1966-90

Item 1986 1987 1988 1989 1990

Dollars per cwt

Target price 11.90 11.66 11.30 10.95 10.71

Loan rate 7.20 I/ I/ I/ I/

Percent

Maximum acreage reduction 35 35 35 35 5

I/ See text for the formula that will be used to determine the loan rate for crop years 1987-90.

The 1986 loan level is $7.20 per cwt. For the 1987-90 crops, the 1985 Act sets the

minimum rates at 85 percent of the simple average of the season prices received by

producers during the preceding 5 marketing years, dropping the years with the

highest and lowest prices, but no more than 5 percent below the previous year's rate

and not lower than $6.50 per cwt. The rate must be announced by January 31 (March 1

under the 1981 Act) of the calendar year in which the crop is harvested. The 1985

Act limits the loan term to 9 months beginning with the month after the application

is made.

Under the 1981 Act, loan rates were adjusted proportionally to changes in the target

prices. For example, if the target price increased from 1 year to the next, loan

rates would increase by the same amount. The Secretary could reduce the loan level

to encourage exports, but not lower than $8 per cwt.

Loan Repayment

The Secretary must offer producers marketing loans for their 1986-90 crops.

Producers may repay their loans at the prevailing world market price, as determined

by the Secretary, or 50 percent of the loan rate for 1986-87 crops, 60 percent of

the loan rate for the 1988 crop, and 70 percent of the loan rate for the 1989-90

crops, whichever is higher. In no case may the loan be repaid at a rate higher than

the announced loan level.

As a condition of repaying the loan at a lower level, the Secretary may require

producers to purchase negotiable marketing certificates, redeemable for CCC-owned

rice, for up to half the difference between the loan level and the repayment rate.

If rice is not available in the State or at a location outside the State acceptable

to the producer, the producer may redeem the certificates for cash. Producers, to

the extent practicable, can designate the storage facility where they wish to

exchange their certificates.

As with wheat, feed grains, and Upland cotton, the Secretary may offer loan

deficiency payments. Producers eligible for loans would receive these payments in

return for agreeing not to take out a loan. The payment rate is the difference

between the loan level and the repayment rate. At least half of the payment must be

made in marketing certificates. The Secretary must issue a formula for defining the

world market price and a mechanism for periodic announcement of such price.

Marketing Loan for the 1985 Crop

Beginning April 15, 1986, producers of the 1985 rice crop may be eligible for

marketing loans or loan deficiency payments. If producers have outstanding loans on

April 15, 1986, they can repay the loans at the world market price, as determined by

22
the Secretary. Producers may be required to purchase marketing certificates for up

to the full difference between the 1985 loan rate and the repayment level,

redeemable for CCC-owned rice.

If producers have not sold their rice on April 15, they can receive loan deficiency

payments, regardless of their eligibility for loans. The payment will be computed

by multiplying the difference between the 1985 loan rate and the repayment level by

the quantity of rice unsold or undelivered under a sales contract. All or part of

the payment may be made in marketing certificates.

Neither the gain realized from the marketing loan nor the loan deficiency payments

are subject to the $50,000 payment limitation.

Marketing Certificates

The CCC must issue negotiable marketing certificates to persons who have entered

into agreements with the CCC to participate in the certificate program whenever the

world price for a class of rice (adjusted to U.S. qualities and location) falls

below the loan repayment rate for that class of rice. The value of each certificate

is the difference between the repayment rate and the prevailing world market price

for that class of rice. The certificates may be redeemed for cash, rice, or other

commodities owned by the CCC. To the extent practicable, certificate owners may

designate the storage facility and commodities they wish to receive. Certificates

are transferable to persons approved by the Secretary. Any price restrictions on

the disposition of CCC commodities do not apply to the redemption of certificates.

The CCC may deduct reasonable storage costs and other carrying charges from the

value of the certificates if they are not redeemed within a reasonable number of

days after issuance, as determined by the Secretary. The Secretary must ensure that

certificate commodities do not adversely affect income of producers.

National Program Acreage

The Secretary must announce an NPA for rice by January 31, except for those years

when an ARP is in effect. The NPA for rice represents the number of harvested acres

needed (based on the weighted national average of the farm program payment yields)

to meet domestic and export needs, less imports. This acreage may be adjusted for

any desired increase or decrease in carryover stocks. The program allocation factor

for rice--between 80-100 percent--is again determined by dividing the national rice

program acreage by the number of harvested acres, as estimated by the Secretary.

The allocation factor is not needed when an ARP is in effect.

Farm Program Acreage

A farm's individual program acreage is the product of the allocation factor and the

acreage planted to rice for harvest on the farm. However, if an ARP is in effect,

the individual farm program acreage is the acreage planted on the farm for harvest

within the permitted acreage (the crop acreage base less the percentage reduction

specified by the ARP). If producers plant at least 50 and less than 92 percent of

their permitted acreage to rice and devote the rest to conserving uses or nonprogram

crops (any agricultural commodity other than wheat, feed grains, Upland cotton, ELS

cotton, rice, or soybeans), then the individual farm program acreage is equal to 92

percent of the permitted acreage for the purposes of calculating deficiency

payments. Any acreage considered planted under this provision cannot be used as

conserving acreage in any ARP or PLD.

23
Title .X establishes the formulas by which crop acreage bases and farm program

payment yields are calculated under a new acreage base and program yield system for

wheat, feed grains, Upland cotton, and rice.

Deficiency Payments

USDA will make deficiency payments to participating rice producers if the national

average price received by farmers for rice during the first 5 months of the

marketing year is below the target price. The payment rate is again the difference

between the target price and either the national average price or the loan level,

whichever is higher. The total deficiency payment is the payment rate times the

farm program acreage for rice times the farm program payment yield established for

the farm. Up to 5 percent of these payments may be made as a payment-in-kind (PIK).

The total quantity of rice on which payments will be made to a producer in any crop

year will be reduced by the quantity of rice on which any disaster payment is made.

Disaster Payments

The disaster provisions for rice are the same as those for wheat and feed grains.

(See page 9.)

Acreage Reduction

The 1985 Act continues the authority of the Secretary to implement acreage reduction

programs (ARP) and paid land diversions (PLD). To the maximum extent practicable,

any ARP must be.operated in a manner that will result in carryover stocks of 30

million cwt of rice. When determining the need for an ARP, the Secretary must

consider the number of acres placed in the conservation reserve. The Secretary. must

announce an ARP by January 31 of the calendar year in which the rice is harvested.

The acreage limit is determined by applying a uniform percentage reduction (not to

exceed 35 percent) to the rice acreage base for each farm. Figure 5 shows the areas

of rice production in the United States.

A percentage of the acreage on each farm must be devoted to conserving uses when an

ARP is in effect. However, as under .the~wheat and feed grain programs, the

Secretary may permit all or part of the reduced acreage to be devoted to certain

designated crops for harvest if such production is needed to provide adequate

supplies, will not increase the cost of the price-support programs, and will not

adversely affect farm income.

The provisions for haying and grazing on reduced acreage are the same as those for

wheat and feed grains.

The Secretary may also offer a PLD to producers if such payments will assist in

obtaining the necessary adjustments in total acreage. A diversion program may be

offered whether or not an ARP is in effect. Diverted cropland (in addition to any

reduced acreage under an ARP) must be devoted to approved conservation practices.

Payments to producers under this program may be determined by the submission of bids

or other such means as the Secretary deems appropriate. The Secretary must limit

the total acreage to be diverted in any county so as not to adversely affect the

local economy. Reduced or diverted acreage may be used for wildlife food plots or

habitats, and the Secretary may authorize USDA to pay a part of the cost for such

efforts.

Inventory reduction payments may be made to producers who agree to forgo obtaining

loans and receiving deficiency payments and who limit the rice planted for harvest

24
Figure 5

Harvested Acres of Rice, by County, 1982

Less than 10,000

US. T10,000-49a999

50,000 or more

U.S. Total: 3,213,559 acres
to the crop acreage base less half of any acreage diverted under an ARP and PLD.

Payments-in-kind will be made, subject to availability. The value of these

payments, like the loan deficiency payments, are determined by multiplying the

payment rate (loan level minus the loan repayment rate) by the eligible quantity of

rice.

The 1981 Act allowed the Secretary to operate acreage reduction and land diversion

programs with no restrictions. The Omnibus Budget Reconciliation Act of 1982,

however, mandated a 15-percent ARP and a 5-percent PLD for the 1983 crop. The 1982

Act set the minimum diversion payment at $3 per cwt but allowed a 10-percent

reduction if the program objectives could be met with a lower level. The

Agricultural Programs Adjustment Act of 1984 later set acreage reductions for the

1985 rice crop. If U.S. stocks exceeded 25 million cwt on July 31, 1985, an ARP of

20 percent and a PLD of at least 5 percent were required. As with the 1985 Upland

cotton program, the diversion payment rate depended on the amount of carryover

stocks on July 31, 1985--$2.70 per cwt if stocks were above the trigger level of 25

million cwt, $3.25 per cwt if stocks exceeded 35 million cwt, and $3.50 per cwt if

stocks exceeded 42 million cwt. The new features of the 1985 Act (as compared with

the 1981 Act) are the 35-percent limit on reduced acreage and the 30-million-cwt

target for carryover stocks.

Cross and Offsetting Compliance

As a condition of eligibility for rice loans, purchases, and payments, the Secretary

may limit the planted acreage of any other program crop with an ARP in effect to the

acreage base for that crop. Also, a producer cannot be required to comply with the

program on one farm to be eligible for the rice program on another.

1986 Programs

On January 13, 1986, the Secretary announced a 35-percent acreage reduction program

for the 1986 crop of rice, and on January 29 announced the 1986 national average

loan rate for rice at $7.20 per cwt and the target price for 1986 at $11.90 per cwt.

On March 4, USDA announced that producers may request a cash advance deficiency

payment of 30 percent of the projected total deficiency payment during the signup

period (March 6-April 11). A proposed formula for determining the prevailing world

market price for rice and a mechanism to periodically announce this price will be

published at a later date. Price-support loans for the 1986 crop will have a term

of 9 months beginning after the month in which the application for the loan is

made. Loans may be repaid at any time during the term of the loan at 50 percent of

the loan level or the prevailing world market price for rice at the time repayment

is made, whichever is higher. Producers will not be offered the option of purchasing marketing certificates as a condition of repaying a loan at a reduced rate.

TITLE VII: PEANUTS

The 1985 Act continues the two-tier price-support program for quota peanuts and

additional peanuts through 1990, with minor changes. The Secretary may provide

disaster payments for the 1985-90 crops of peanuts.

National and Farm Poundage Quotas

The Secretary must establish a national poundage quota for each marketing year

1986-90 at a level for domestic edible, seed, and related uses, but in no case below

1.1 million tons (the 1985 quota). The national quota level must be announced by

December 15 preceding the marketing year. The national poundage quota must be

26
apportioned among States based on their 1985 allocations. Under the 1981 Act, the

national poundage quota was specified for each marketing year, beginning with 1.2

million tons in 1982 and decreasing to 1.1 million tons in 1985 (app. 1).

A farm poundage quota will be established for each farm that had a poundage quota in

1985. If the national quota is increased in subsequent years, a farm poundage quota

will be established for each farm which produced and marketed peanuts in at least 2

of the 3 preceding crop years. Any increases in a State's quota must be allocated

equally among farms that had a poundage quota in the preceding marketing year and

farms without a poundage quota that produced and marketed peanuts in at least 2 of

the 3 preceding crop years. Any decreases in a State's quota must be allocated

among farms that had a quota in the preceding marketing year.

The poundage quota for an individual farm must be reduced by the amount of the quota

that was not produced, or considered produced, during any 2 of the 3 preceding

marketing years. All or part of a farm quota may be permanently released by the

owners. The total amount of these reductions and releases must be allocated to

other farms in the State that produced peanuts in any 2 of 3 preceding crop years.

At least 25 percent must be allocated to farms that did not have a poundage quota in

the preceding year.

Producers may voluntarily release poundage quotas to the Secretary for 1 marketing

year with no effect on subsequent years' quotas. Farm poundage quotas may be

adjusted for undermarketing of quota peanuts during previous years. These

adjustments will not affect the national poundage quota, but they cannot exceed 10

percent of the national poundage quota in any year.

Farm Yield

A farm yield of peanuts will be established for each farm equal to the average of

the actual yield per acre for the 3 crop years in which yields were the highest

during crop years 1973-77. If peanuts were not produced on the farm in any 3 years

during the period or if there was a substantial change in the operation during the

period (including a change in the operator or irrigation practices), a yield will be

appraised for the farm based on yields for similar farms in the area.

Quota Peanuts

For any marketing year, quota peanuts are once again those eligible for domestic

edible use, as determined by the Secretary, that are marketed or considered marketed

from a farm and that do not exceed the farm poundage quota. "Domestic edible use"

means use for milling to produce domestic food peanuts, seed, and use on the farm.

Not included are seeds that are unique strains, as determined by the Secretary, and

not commercially available.

Additional Peanuts

"Additional peanuts" is again defined as those peanuts sold from a farm in any

marketing year in excess of the amount of quota peanuts sold from that farm.

Additional peanuts are also those marketed from a farm on which no farm poundage

quota has been established.

Peanut Referendum

The Secretary must conduct a referendum of peanut farmers involved in the production

of quota peanuts by December 15 in order to determine whether such farmers support

27
or oppose poundage quotas. If two-thirds of the farmers voting favor a poundage

quota, then no further referenda need be held during the upcoming 5-year period.

Conversely, if more than one-third of the farmers vote against a poundage quota,

then there will be no quota or price support in effect for the crop produced in the

next calendar year. However, a referendum must be held for the following crop by

December 15 and results announced within 30 days after completion.

Sale, Lease, or Transfer of Farm Poundage Quota

Owners or operators (with the permission of the owner) may sell or lease farm

poundage quotas within a county. An operator's quota may be transferred to another

farm controlled by the operator that is either within the same county or in a

contiguous county in the same State, providing the farm had a poundage quota in the

preceding crop year. If a State's quota was less than 10,000 tons for the preceding

crop, then farm poundage quotas may be sold, leased, or transferred anywhere in the

State. No sale, lease, or transfer may be made from a farm subject to a lien unless

all claimants agree. Also, the county committee must determine that the farm

receiving the farm poundage quota has sufficient tillable cropland to produce the

quota.

Marketing Penalties

The penalty for marketing peanuts for domestic edible use in excess of the farm

poundage quota is 140 percent of the loan level for quota peanuts. As under the

1981 Act, additional peanuts may be purchased from growers solely for the purpose of

crushing or export. A handler who fails to comply with regulations relating to the

disposition and handling of additional peanuts will also be subject to a penalty of

140 percent of the quota loan rate times the quantity of peanuts involved; the

handler penalty under the 1981 Act was 120 percent of the quota loan level.

CCC Resale Price

Any peanuts owned or controlled by the CCC may be available for domestic use, in

accordance with regulations issued by the Secretary, if doing so does not

substantially increase costs to the CCC. Additional peanuts received under loan can

be sold for domestic edible use. The price must cover all Government costs and

cannot be less than 100 percent of the quota loan rate if sold and paid for during

the harvest season (with written consent of the producer), 105 percent of the quota

loan rate if sold before December 31 of the marketing year, and 107 percent of the

quota loan rate if sold after December 31.

Price Support

The national average support rate for the 1986 crop of quota peanuts must be set at

the 1985 rate, adjusted for increases in an index of commodity and service prices,

interest, taxes, and wages paid by producers during calendar years 1981-85. The

support rate for the 1987-90 crops of quota peanuts will be the rate for the

previous crop, adjusted to reflect any increases in the cost of production

(excluding any change in the cost of land) during the previous calendar year. The

support rate cannot be increased by more than 6 percent from the previous year,

however.

Additional peanuts will again be supported at levels the Secretary determines

appropriate, taking into consideration the demand for peanut oil and meal, prices of

other vegetable oils and protein meals, and the demand for peanuts in foreign

markets. The rate must ensure no losses to the CCC. The support rate for both

28
quota and additional peanuts must be announced by February 15. Loan rates for the

1982-85 crops of peanuts are listed in appendix 1.

Disaster Payments

Disaster payment provisions for the 1985-90 peanut crops are contained in title X.

1986 Programs

On January 8, the Secretary announced a national poundage quota of 1,355,500 short

tons for the 1986 crop of peanuts, up 255,500 short tons from the 1985 level. On

February 14, the Secretary announced a national average support level for 1986 quota

peanuts of $607.47 per short ton, up $48.47 from the 1985 level. The 1986 crop of

additional peanuts will be supported at $149.75 per short ton, up $1.75 from the

1985 level.

TITLE VIII: SOYBEANS

The soybean loan program is continued, with the added options of marketing loans and

disaster payments.

Price-Support Loans

Title VIII requires the Secretary to support the price of soybeans through loans and

purchases for the 1986-90 crops. The support price for 1986-87 is set at the 1985

level of $5.02 per bushel. For the 1988-90 crops, the support level will be 75

percent of the simple average of the season prices received by farmers during the 5

preceding marketing years, excluding the years with the high and low prices. The

support level, however, cannot be reduced by more than 5 percent in any year and in

no event below $4.50 per bushel. The minimum rate under the 1981 Act was $5.02 per

bushel (app. 1).

If the loan level, as computed above, would discourage exports and cause excessive

U.S. stocks of soybeans, the Secretary may reduce the rate by the amount necessary

to maintain domestic and export markets, but no more than 5 percent a year or below

$4.50 per bushel. Such a reduction cannot be used to determine subsequent years'

loan rates. The 1981 Act gave the Secretary the discretion to reduce loan rates up

to 10 percent if the average price received by farmers was not more than 105 percent

of the loan level in any marketing year, but no lower than $4.50 per bushel.

Preliminary announcement of the price-support level must be made after August 1,

while the final rate must be announced no later than October 1 and may not be less

than the preliminary level. Acreage reductions in soybeans or other program crops

may not be required as a condition of eligibility for price support. Soybeans for

harvest may not be planted on acreage reduced, set aside, or diverted from

production under any Federal program. Soybeans are not eligible for storage

payments or any reserve program.

Loan Repayment

The Secretary may offer producers a marketing loan if such action would help

soybeans remain competitive in domestic and export markets. Producers would repay

the loan at the loan level or the prevailing world market price, whichever is

lower. If a marketing loan program is used, the Secretary must issue a formula

defining the prevailing world market price and a mechanism 'for periodic announcement

of such price.

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Disaster Payments

Disaster payment provisions for the 1985-90 soybean crops are contained in title X.

TITLE IX: SUGAR

The 1985 Act continues the sugar program for the 1986-90 crops of domestically grown

sugarcane and sugar beets. Disaster payments and provisions for preventing loan

forfeitures and protecting producers from processor bankruptcy are also included.

Price-Support Loans

The Secretary must support the price of sugarcane through nonrecourse loans at a

level of not less than $0.18 per pound for raw cane sugar for all 5 crop years.

Sugar beet prices must be supported through nonrecourse loans at a level that is

fair and reasonable in relation to the loan rate for sugarcane. The minimum support

rates for raw cane sugar under the 1981 Act ranged from $0.17 per pound for the 1982

crop to $0.18 per pound for the 1985 crop (app. 1).

The Secretary may increase the support price based on such factors as is determined

appropriate, including changes during the 2 preceding crop years in the cost of

sugar products or the cost of domestic sugar production, or other circumstances that

may adversely affect domestic sugar production. If the support price is not

increased, the Secretary must submit a report containing the findings, decision, and

supporting data to Congress. The Secretary must announce the loan rate as far in

advance as is practicable. Loans must be made and repaid within 1 fiscal year.

Disaster Payments

Disaster payment provisions for the 1985-90 crops of sugarcane and sugar beets are

contained in title X.

Prevention of Loan Forfeitures

Title IX requires the President to either extend the current 1985/86 quota year for

sugar imports (December 1, 1985-September 30, 1986) by at least 3 months to December

31, 1986, or have the sugar program administered in such a way that forfeitures of

sugar--held by the CCC as collateral for price-support loans--would be no greater

than the quantity that would have been forfeited had the quota year been extended.

Beginning with the next quota year, the President must use all authorities available

to enable the Secretary to operate the sugar program at no cost to the Federal

Government by preventing CCC accumulation of acquired sugar. Also, beginning with

the new quota year, sugar import quotas will not be allocated to any country that is

a net importer of sugar unless officials of that country verify that it does not

export to the United States sugar previously imported from Cuba.

Protection of Producers

If bankruptcy or other insolvency on the part of a processor prevents sugar

producers from receiving maximum benefits from the price-support program within 30

days after the final settlement date stated in the contract between such processors

and producers, the CCC must pay the maximum benefits, less any amount previously

received, on demand by producers. Proof of nonpayment by the processor may be

required. Once the benefits are paid to producers, the CCC must take over and

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pursue all claims against the processor or any other person responsible for

nonpayment. These provisions apply to nonpayments occurring after January 1, 1985.

Title X: GENERAL COMMODITY PROVISIONS

Title X is divided into three subtitles: one relates to the calculation of acreage

bases and program yields, one amends the honey program, and the other contains

several miscellaneous provisions which generally relate to the commodity titles.

Acreage Base and Program Yield System

This system standardizes the calculation of farm and crop acreage bases and program

yields for the wheat, feed grains, Upland cotton, and rice programs.

Farm Acreage Base

The 1985 Act creates a new farm acreage base for use beginning in crop year 1986.

The Secretary, however, may forgo establishing the farm bases in 1986. For crop

years 1987-90, the annual farm acreage base equals the total of the crop acreage

bases established for that farm for that year, the average acreage planted to

soybeans on the farm in 1986 and subsequent crop years, and the average acreage on

the farm devoted to conserving uses, other than the ARP's, during 1986 and

subsequent crop years. The 1981 Act did not define a farm acreage base.

Crop Acreage Base

For each of the program crops, the crop acreage base equals the average of the

acreage planted and considered planted to the crop for harvest on the farm during

the 5 preceding crop years. For Upland cotton and rice that was not planted or

considered planted on the farm in each of the past 5 years, the crop acreage base

equals the average during the years in which the crop was planted. The 1985 Act (as

amended by P.L. 99-253), however, specifies that the crop bases for Upland cotton

and rice cannot exceed the average acreage planted and considered planted in the

preceding 2 crop years. Acreage considered planted includes (1) any reduced,

set-aside, or diverted acreage; (2) acreage producers could not plant due to natural

disaster or other conditions beyond the control of the producer; (3) the difference

between permitted acreage and the acreage actually planted, if such acreage was

devoted to nonprogram crops (other than soybeans or ELS cotton); and (4) any acreage

on the farm which the Secretary determines is necessary to establish a fair and

equitable crop base.

The sum of the wheat, feed grain, Upland cotton, and rice acreage bases on any farm

for any crop year cannot exceed the farm acreage base for that farm in that year,

unless the excess is due to an established practice of double cropping. Double

cropping must have been practiced on the farm in at least 3 of the 5 preceding crop

years.

Crop acreage bases may be adjusted upward in any year. The adjustment, however, is

limited to 10 percent of the farm acreage base for that year. Any increase must

also be matched by a decrease in one or more of the other crop bases on that farm in

that year. The Secretary may suspend nationally any limit on acreage bases for a

crop if a short supply or other emergency situation exists or if market factors

require a suspension.

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Farm Program Payment Yield

The farm program payment yield for crop years 1986-87 is the average program yield

on the farm during crop years 1981-85, excluding the years with the highest and

lowest yield. If no crop was produced or no program yield was established on the

farm during any of those 5 years, then the farm program yield will be based on

average program yields for similar farms in the area.

The Secretary may establish national, State, or county program yields based on

historic yields adjusted for abnormal factors; or when data are not available, the

Secretary must estimate the actual yield for the crop year in question. If any of

these yields are established, the farm program payment yield must balance with

county, State, or national program yields.

For the 1988-90 crops of wheat, feed grains, Upland cotton, and rice, the Secretary

may either base farm program payment yields on the 1981-85 program yields, as

determined above, or on the average of the yields per harvested acre during the 5

preceding crop years, dropping the years with the highest and lowest yield and any

year in which no crop was planted. If the second option is used, the program yields

must be based on the program yields for 1983-86 crop years and the actual yields for

the 1987 and subsequent crop years.

USDA may not establish a farm or crop base or program yield for a farm if the

producer is subject to sanctions for cultivating highly erodible land or converted

wetland. Title XII details these conservation provisions.

Under the 1981 Act, the acreage base for each crop was the acreage planted for

harvest in the preceding crop year, including any acreage producers could not plant

because of conditions beyond their control. At the discretion of the Secretary, the

base could have been the average acreage planted for harvest in the 2 preceding crop

years. The farm program payment yield for wheat and feed grains, under the 1981

Act, was the program yield established for the farm for the previous crop year,

adjusted by the Secretary to provide a fair and equitable yield. For cotton and

rice, the program yields were based on the actual yield per harvested acre for the 3

preceding years, with adjustments for natural disasters.

Honey

The 1985 Act sets the loan levels for the 1986 and 1987 crops of honey at $0.64 and

$0.63 per pound, respectively. The loan and purchase levels for the 1988-90 crops

will be the rate from the previous year reduced by 5 percent, but the level cannot

be less than 75 percent of the average price received by producers in the preceding

5 crop years, dropping the years with the highest and lowest prices. Permanent

legislation, the Agricultural Act of 1949, had required that the honey loan level be

set between 60 and 90 percent of parity (app. 1).

As with wheat, feed grains, and soybeans, the Secretary may offer marketing loans.

Producers would repay the loans at a level the Secretary determines will minimize

loan forfeitures, not result in excessive stocks, reduce Government storage costs,

and maintain competitiveness of honey in domestic and export markets. If the

Secretary determines that a person knowingly pledged adulterated or imported honey

as collateral for a loan, such person will be ineligible for loans and purchases for

3 succeeding crop years in addition to any other penalty prescribed by law.

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Payment Limits and Payment Review

Payments received under the wheat, feed grain, Upland cotton, ELS cotton, and rice

programs are again limited to $50,000 for all payments per person per year except

for disaster payments, which are limited to $100,000 per person per year. The

payment limit does not include (1) loans and purchases; (2) compensation for public

recreation or resource adjustment, excluding land diversion payments; (3) any gain

realized from repaying a marketing loan at a level lower than the announced loan

rate; (4) any deficiency payments made as a result of lowering the basic loan rate

under the wheat and feed grain programs; (5) any loan deficiency payments; (6) any

inventory reduction payments; or (7) any benefits received as a result of any cost

reduction actions by the Secretary. As under the 1981 Act, payment limits do not

apply to land owned by States or State agencies if the land is farmed primarily to

further a public function.

The 1985 Act adds ELS cotton to the provision. in the Agricultural Act of 1938

concerning payments made under the wheat, feed grain, Upland cotton, or rice

programs. The facts used to determine such payments are final and not subject to

review if they conform to regulations issued by the Secretary or the CCC.

Advance Deficiency and Diversion Payments

The Secretary must make advance deficiency payments available to producers who

participate in the 1986 wheat, feed grain, Upland cotton, and rice programs if an

acreage limitation or set-aside has been established and it is likely that

deficiency payments will be made. Such payments may be made for the 1987-90 crops.

The payments must be made as soon as practicable after the producer signs the

contract agreeing to participate in the program. Advance payments may not exceed 50

percent of project deficiency payments and may be made in cash, CCC-owned

commodities, or any combination thereof. Up to half of the advance payments may be

made in commodities or certificates, with the producer choosing which to receive.

Certificates must be redeemed within 3 years of issuance, with the CCC paying the

storage costs until they are redeemed.

If land diversion payments are made in any crop year, the Secretary may also advance

at least 50 percent of those payments to producers.

Advance Recourse Commodity Loans

The Secretary may make advance recourse loans available to producers for commodities

with nonrecourse loan programs, if such action is necessary to provide adequate

operating credit to producers. The recourse loans may be made under terms and

conditions prescribed by the Secretary, except that producers must obtain crop

insurance.

Interest Payment Certificates

The Secretary may provide negotiable certificates to producers who repay their

wheat, feed grain, Upland cotton, or rice loans with interest. The amount of the

certificate would equal the interest paid, redeemable for any of the those

commodities owned by the CCC, subject to availability.

Payment in Commodities

Titles III through VI authorize the Secretary to make payments-in-kind (PIK). Such

payments (except marketing certificates for Upland cotton and rice) may be made by

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delivering the commodity to the producer at a warehouse or similar facility, transferring negotiable warehouse receipts, issuing negotiable certificates redeemable

for CCC commodities, or other methods the Secretary determines appropriate.

Wheat and Feed Grain Export Certificate Programs

This section provides two optional export certificate programs for the 1986-90 crops

of wheat and feed grains.

Cash Export Certificate Program

The Secretary may establish a program to encourage exports of wheat. or feed grains

from private stocks. Producers who participate in the wheat and feed grain programs

would receive export certificates. Each certificate would specify both a monetary

value and a quantity of the commodity. The total amount of wheat or feed grains

covered by the certificates is determined by multiplying the export production

factor times the total acreage planted by program participants times the average

farm program payment yield. The export production factor is the estimated quantity

of the crop available for export divided by the estimated domestic harvest.

Certificates would be distributed to eligible producers so that each receives

certificates having an aggregate face value equal to the rate of return for that

crop. In calculating the rate of return, the Secretary must consider regional

marketing costs including transportation. Certificates would be redeemable for cash

or, at the option of the Secretary, the commodity involved only when the holder has

exported an amount of the crop (including processed wheat or feed grains) equal to

the quantity designated on the certificate.

If sufficient funds are available, the CCC must spend a certain amount of money to

carry out the program. The amount is calculated by multiplying the acreage planted

for harvest by participating producers times the average program yield for the crop

times $0.21 per bushel for wheat, $0.11 per bushel for corn, and rates the Secretary

deems reasonable for grain sorghum, oats and, if designated, barley. Any funds used

under this program must be in addition to funds authorized for other export

promotion programs. The CCC may buy and sell certificates.

Export Marketing Certificates

The Secretary may issue export marketing certificates denominated in bushels of

wheat or feed grains to producers who participate in those programs and who also

comply with the following provisions. If no acreage reduction or set-aside is in

effect, producers must limit the acreage planted for harvest to the crop acreage

base and, if an ARP is in effect, comply with the reduction specified by the program.

At least 3 months before the beginning of the marketing year, the Secretary must

issue export marketing certificates to eligible producers who planted at least 50

percent of their wheat or feed grain crop base. The aggregate amount of certificates

must equal total exports as estimated by the Secretary for the marketing year.

Producers would receive certificates for their share of the export crop, determined

by multiplying the ratio their crop acreage base has in relation to the total

acreage bases of all participating producers times total exports, rounded up to the

nearest full bushel. Any certificates issued would apply only to the upcoming

marketing year. If estimated exports exceeded the sum of certificates issued 7

months after the beginning of the marketing year, the Secretary may issue additional

certificates to producers who initially received them.

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When producers sell their crops during the marketing year, they also turn over the

export certificates to the buyer. If the producer has less wheat or feed grains to

sell than the quantity listed on the certificates because of reduced yields or other

reasons, the producer may'sell the certificates to any person before the end of the

marketing year. The CCC may buy and sell certificates to facilitate their use.

No person would be able to export wheat or feed grains (including products thereof)

without surrendering the accompanying marketing certificates to the Secretary at the

time of export. Failure to comply could carry fines up to $25,000, 1 year in

prison, or both. These provisions would not apply to commodities owned by the CCC

or provided to exporters as part of an export promotion program. This program, if

implemented, would divide the market; participants would be able to sell their crop

in both the domestic and export markets, while nonparticipants would be limited to

selling their commodities in the domestic market only.

CCC Sales Price Restrictions

The CCC may not sell any of its wheat, corn, grain sorghum, barley, oats, or rye

stocks at less than 115 percent of the current national average loan rate, adjusted

for current market differentials plus carrying charges. If the marketing loan

provisions are in effect, the sale price cannot be less than 115 percent of the

average loan repayment rate for the crop.

Disaster Payments for the 1985-90 Crops of

Peanuts, Soybeans, Sugar Beets, and Sugarcane

Disaster payments may be made available to producers, at the discretion of the

Secretary, for any of the 1985-90 crops of peanuts, soybeans, sugar beets, or

sugarcane because of drought, flood, or other natural disaster. Prevented planting

payments will be based on the acreage intended to be planted to the commodity or the

acreage planted for harvest in the preceding year (including any acreage which the

producer was prevented from planting to such commodity, or other nonconserving

crops), whichever is smaller. The payment is calculated as 75 percent of the farm

program payment yield times 50 percent of the loan and purchase level for the crop.

Reduced yield payments will be made if the total quantity of the crop harvested on

any farm is less than the potential production obtained by multiplying 60 percent of

the farm program yield by the acreage planted for harvest. The payment calculation

is 50 percent of the loan level for the deficit in production below the 60-percent

level.

Cost Reduction Options

The Secretary is required to implement one or more of the following cost reduction

options whenever the options would reduce direct and indirect Government costs of a

commodity program without adversely affecting the income of small- and medium-sized

producers participating in the program. First, the Secretary may purchase a

commodity from commercial markets when a nonrecourse loan program is in effect for

that commodity, if such purchases will probably be less than the comparable cost of

acquiring the commodity through loan defaults later. Second, the Secretary may

provide for settlement of a nonrecourse loan at less than the total amount of

principal and accumulated interest due if the settlement would yield savings to the

Government. In no case may the settlement be reduced below the amount of principal

due. Third, when a production control or loan program is in effect for a major

commodity, the program may be reopened any time prior to harvest if the Secretary

determines that (1) domestic or world supply and demand conditions have

substantially changed, and (2) without further adjustments, the Government and

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producers will be faced with burdensome surpluses. The Secretary would accept bids

from participating producers to convert planted acreage to conserving uses. Such

bids would be for payments-in-kind and would not be subject to the $50,000 payment

limitation, but would be limited to $20,000 per year per producer for each commodity.

Multiyear Set-Asides

The Secretary may enter into multiyear set-aside contracts with producers as part of

the programs in effect for the 1986-90 crops of wheat, feed grains, Upland cotton,

and rice. The contract period, however, may not extend beyond the 1989 crop year.

Only producers participating in one or more of the programs would be eligible for

the contracts. Producers would be required to devote the set-aside acreage to a

vegetative cover, with the Secretary providing cost-sharing incentives. Grazing

would be prohibited, unless the area was declared a disaster area by the President

and the Secretary found there was a need for grazing as a result of the disaster.

Supplemental Set-Aside and Acreage Reduction Authority

For the 1986-90 crops of wheat and feed grains, the Secretary again has the

authority to announce a set-aside or acreage reduction program if such action is

needed because of an embargo ordered by the executive branch of the Federal

Government.

Grain Reserves

Title X continues two grain reserve programs.

Farmer-Owned Reserve (FOR)

The 1985 Act revises the farmer-owned reserve. To promote orderly marketing in

times of abundant supply, the Secretary must again provide original or extended

price-support loans to encourage producers to store wheat and feed grains for

extended periods. The loans are made for 3 years and may be extended as warranted

by market conditions. Loans were made for 3-5 years under the 1981 Act. FOR loan

rates must be at least the current loan level or higher, as determined by the

Secretary.

Whenever the market price for the commodity has attained a specified level (commonly

known as the release price), the Secretary may increase the interest rate on loans

that have been made and may design other methods to encourage producers to redeem

their loans and market their grain. The release level is set at 140 percent of the

regular loan rate announced for the crop or the corresponding target price,

whichever is higher. Under the 1981 Act, the release price was determined by the

Secretary.

The upper limit on the amount of grain placed in the reserve is now specified as a

percentage of the estimated total domestic and export use during the marketing

year--30 percent for wheat and 15 percent for feed grains. The limits may be

increased by 10 percent if the Secretary determines higher levels are necessary.

The 1981 Act authorized the Secretary to set upper limits, but at no lower than 700

million bushels for wheat and 1 billion bushels for feed grains. The 1985 Act sets

minimum levels at 17 percent for wheat and 7 percent for feed grains of the

estimated total domestic and export use. If the amount of stocks in the FOR is

below these levels or if the market price is below the release price, the Secretary

must encourage producer participation by offering increased storage payments,

interest waivers, or other incentives.

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Producers will again be penalized if they redeem their wheat or feed grain loans

when reserve stocks are below the upper limits and market prices are below the

release level. The Secretary may recover storage payments and assess additional

interest or other charges. The interest rate charged participants in the program

will not be less than the interest rate charged the CCC by the U.S. Treasury, except

that the Secretary may waive or adjust such interest as necessary. Loans may be

called in prior to the maturity date only if the Secretary determines that emergency

conditions exist which require that such commodities be made available in the market

to meet urgent domestic or international needs. As with the 1981 Act, the 1985 Act

provides that whenever the reserve loan program is in effect, the CCC cannot sell

any of its wheat or feed grains stocks at less than 110 percent of the release

level. This restriction will not apply to sales of corn used for gasohol

production, commodities which have substantially deteriorated, or sales or disposals

from the emergency feed program.

Food Security Wheat Reserve

The food security wheat reserve, created to provide wheat for emergency food needs

in developing countries, is extended until September 30, 1990.

Normally Planted Acreage

Whenever a set-aside is in effect during crop years 1986-90 for wheat or feed

grains, or both, the Secretary may limit a farm's normal crop acreage. Producers

who fail to comply would be ineligible for loans, purchases, and payments under the

wheat and feed grain programs. If marketing quotas are in effect for any of the

1987-90 crops of wheat, normal planted acreage would be limited to the farm's

individual program acreage.

Special Grazing and Hay Program

Authority for the special wheat acreage grazing and hay program is continued through

the 1990 crop year.

Advance Program Announcement

The Secretary may offer producers an alternative program for any of the 1987-91

crops of wheat, feed grains, Upland cotton, and rice. If the Secretary has not made

final program announcements in any county before a certain date, producers could

choose between the program announced for that crop year or the alternative. For any

county, the date would be 60 days prior to planting (as determined by the Secretary)

or June 1 for wheat, September 30 for feed grains, November 1 for Upland cotton, and

January 31 for rice, whichever is later.

Under the alternative program, producers would be eligible for loans and payments by

complying with any acreage reduction program established for the previous year. For

the 1987-90 crops, loans would be made at levels announced for the current year.

Deficiency payments would be calculated on the same basis as they were calculated in

the previous year. Cash or in-kind payments, equal to the difference between the

current year's loan level and previous year's loan level, would also be made. For

the 1991 crop, loans would be made at 1990 levels and deficiency payments would be

based on 1990 target prices. Cash or in-kind payments would be based on the

difference between the 1990 and 1991 loan rates. The farm's crop acreage base and

program payment yield would be those established for the farm in the preceding crop

year.

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Normal Supply

If the supply of wheat, corn, Upland cotton, or rice during the marketing year for

any of the 1986-90 crops is not likely to be excessive and acreage controls are not

necessary, as determined by the Secretary, the total supply of the commodity is

deemed not to exceed normal supply. No contrary decision can be made for that

marketing year.

Marketing Year for Corn

The marketing year for corn is changed from October 1-September 30 to September 1-

August 31.

Federal Crop Insurance

The Federal Crop Insurance Corporation (FCIC) may borrow money from the CCC any time

FCIC has insufficient funds to pay farmers' claims for insured crop losses.

The Secretary must conduct a study examining (1) the FCIC practice of offsetting a

producer's winter and spring wheat crops to determine benefits due under Federal

crop insurance policies, and (2) the feasibility of including winterkill of winter

wheat as a loss covered by crop insurance. The report, including recommendations,

is due to Congress by June 21, 1986.

Cost of Production Review Board

The National Agricultural Cost of Production Standards Review Board is extended for

5 years to September 30, 1990. The 1985 Act also adds a provision that allows a

member of the board to serve for more than one term.

Liquid Fuels

The CCC may make commodities available for sale at no or reduced cost to encourage

production of liquid fuels.

TITLE XI: TRADE

The 1985 Act changes or expands several food aid and export promotion activities.

Some changes are meant to stimulate private sector development in recipient

countries; others allow nongovernment organizations to sell some donated food aid to

help finance distribution of the remainder. Targeted assistance and intermediate

credit guarantee programs supplement export promotion programs. The 1985 Act

exempts specific commercial program shipments from cargo preference requirements and

increases the mandated percentage of food aid shipments to be carried on U.S. flag

vessels.

U.S. Food Assistance

Significant changes in U.S. food aid programs affect their developmental

assistance. The 1985 Act amends the policy objectives contained in Public Law

(P.L.) 480 to authorize the use of foreign currencies accruing under the program to

encourage development of private enterprise and enhance food security in developing

countries through local food production. A new Food for Progress program is

authorized to use U.S. food resources more effectively to support countries that

have made commitments to introduce or expand free enterprise elements in their

38
agricultural economies. In another change, private voluntary organizations (PVO's)

that distribute food aid will have greater ability to sell some of the donated

commodities to help distribute the remainder. Donations authorized under section

416 of the Agricultural Act of 1949, as amended, are expanded in types and volume of

commodities.

P.L. 480 Title I

Under title I, a foreign government purchases U.S. agricultural commodities with

long-term concessional credit and generates local currencies when it sells them on

its domestic market. Changes in the program shift the benefits of some of those

revenues from the public to the private sector in the recipient country. At least

10 percent of the resources of the title I program, in the form of local currencies,

would be loaned to private financial intermediaries (such as banks, cooperatives, or

nonprofit voluntary agencies), which, in turn, are to loan those funds to private

enterprises within the recipient country. The United States will enter into a loan

agreement with the financial intermediary for these local currencies and must be

repaid in a manner that will permit conversion of the local currencies to dollars.

The 10-percent minimum may be waived if the President determines that its

enforcement would significantly reduce the level of agricultural commodities

furnished under title I. The United States may not enter into agreements if the

currencies generated under the program could not be productively used and absorbed

in the private sector of the recipient country. The program may not be used to

promote the production of agricultural commodities that would compete in world

markets with U.S. agricultural products. To the maximum extent practicable, 5

percent of the repayments from the U.S. Government loan to the intermediaries are

authorized for technical assistance, including market development activities, among

other uses. The President must annually report to Congress on activities carried

out under the program.

P.L. 480 Title II

Title II authorizes commodity donations through government-to-government agreements,

PVO's, and the World Food Program (WFP). The minimum tonnage requirement of title

II is set at 1.9 million tons in fiscal years 1987-90, of which 1.425 million tons

for nonemergency programs must be distributed through PVO's, cooperatives, and the

WFP. Until 1985, the previous minimum had been 1.7 million tons, of which 1.2

million tons had to be distributed through PVO's and the WFP. The International

Security and Development Cooperation Act of 1985 set minimum levels at 1.8 million

tons and 1.9 million tons in fiscal years 1986 and 1987, respectively, with at least

1.3 million tons and 1.425 million tons to be distributed by PVO's and the WFP,

respectively. The new minimums may be waived if the President determines and

reports to Congress that the commodities cannot be used effectively.

The President must ensure that at least 75 percent of the nonemergency minimum be

processed, fortified, and/or bagged commodities, although this requirement may be

waived. No such minimum had been set before.

At least 5 percent of the aggregate value of donated commodities distributed under

nonemergency title II programs may be sold by PVO's within the recipient countries.

A PVO must include in its request for title II commodities a description of the

intended uses of the foreign currencies that would be generated by such sales.

The title II funding authorization has been changed from a calendar year basis to a

fiscal year basis, and the ceiling on the authorization level ($1 billion) may be

waived by the President.

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Food for Progress

The 1985 Act authorizes a new, multiyear Food for Progress program to assist

developing countries committed to market-oriented agricultural policy reform. Food

for Progress is to distribute at least 75,000 tons annually under authority of

section 416 of the Agricultural Act of 1949, as amended by the 1985 Act. P.L. 480

title I funds may finance additional commodities. CCC spending may not exceed $30

million (exclusive of the cost of the commodities). A maximum of 500,000 tons per

year through fiscal year 1990 is set. The CCC may purchase commodities for use

under this program if CCC stocks are insufficient. Food for Progress shipments

should not displace commercial sales of U.S. commodities. Annual reports to

Congress on the program's operations are required.

Section 416

Section 416 of the Agricultural Act of 1949, as amended, previously allowed overseas

donations of CCC dairy products, wheat, and rice. The 1985 Act expands the types of

commodities that may be donated, adding other grains, oilseeds, and other edible

agricultural commodities acquired by the CCC. Commodities may not be used in this

program in amounts that will reduce the amounts available for domestic programs.

The commodities may not be furnished to a country if that country is unable to use

the commodities efficiently and effectively. Similarly, the commodities may not be

provided if their distribution interferes with usual marketings of the United States

or disrupts world prices of agricultural commodities and normal patterns of

commercial trade with developing countries. The requirement for safeguarding usual

marketings of the United States must not be used to prevent providing commodities to

countries that have not traditionally purchased the commodities from the United

States or that cannot purchase the commodities from the United States through

commercial or concessional arrangements. The commodities provided under this

authority are to supplement those provided under P.L. 480.

The 1985 Act allows, for specified purposes, the sale or barter of at least 5

percent of the aggregate value of commodities and products furnished under this

program to PVO's and cooperatives. The organizations that sell or barter the

commodities must report annually to the Secretary, who, in turn, must report to

Congress on such operations.

Although the permanent legislation did not specify minimum quantities, the 1985 Act

requires an annual minimum of 500,000 tons or 10 percent of CCC's uncommitted stocks

of grains and oilseeds, whichever is less, and 10 percent of CCC's uncommitted dairy

stocks, but not less than 150,000 tons, to the extent that dairy stocks are

available. Of these quantities 75,000 tons are to be distributed through the Food

for Progress program. The minimum volumes may be waived under specified conditions.

Commodities distributed under authority of section 416 may be furnished in connection

with P.L. 480 title I sales or agricultural export bonus or promotion programs.

Special Assistant for Agricultural Trade and Food Aid

The 1985 Act establishes the position of a Special Assistant for Agricultural Trade

and Food Aid who will advise the President on trade and aid issues. Among other

responsibilities, the assistant must annually submit a report to the President and

Congress containing a global analysis of world food needs and production, an

identification of at least 15 target countries most likely to emerge as growth

markets for agricultural commodities in the next 5--10 years, and a detailed plan for

using available export and food aid authorities to increase U.S. agricultural

exports to those targeted countries.

40
Other Food Aid Provisions

The 1985 Act reduces the minimum share of P.L. 480 title I funds allocated for P.L.

480 title III (Food for Development) from 15 to 10 percent. Child immunizations are

specified both as a self-help measure under title I and as a title II activity. At

least 0.1 percent of P.L. 480 funds will support a "farmer-to-farmer program," a

technical assistance program, in fiscal years 1986 and 1987. A maximum of 25

percent of these funds may be channeled through such institutions as land-grant

universities. The 1985 Act reauthorizes P.L. 480 through 1990.

Maintenance and Development of Export Markets

The export market development subtitle outlines U.S. agricultural trade policy and

authorizes several export promotion programs and measures to stimulate lagging

overseas sales. Contract sanctity is upheld. The 1985 Act mandates collection of

information on certain trade practices of other countries.

Agricultural Trade Policy

The 1985 Act defines the goals of U.S. agricultural trade policy as follows:

o To provide through all means possible agricultural commodities and products for

export at competitive prices, with full assurance of quality and reliability of

supply;

o To support the principle of free trade and the promotion of fairer agricultural

trade;

o To cooperate fully in all efforts to negotiate reductions in barriers to fair

trade;

o To aggressively counter unfair trade practices;

o To remove foreign policy constraints to maximize U.S. economic interests

through agricultural trade; and

o To provide for consideration of U.S. agricultural trade interests in the design

of national fiscal and monetary policy that may foster continued strength of

the dollar.

Trade Negotiations and Consultations

Through the 1985 Act, Congress urges the President to negotiate with other parties

to the General Agreement on Tariffs and Trade (GATT) to revise its rules and codes

with the goal of reducing agricultural export subsidies, tariffs, and nontariff

trade barriers. The Secretary must, in coordination with the U.S. Trade

Representative, confer with representatives of other major agricultural producing

countries to initiate and pursue agricultural trade consultations. Annual reports

on progress of the consultations are due to Congress starting July 1, 1986.

Export Credit and Credit Guarantee Programs

The 1985 Act establishes a new intermediate credit guarantee program to supplement

existing CCC credit and credit guarantee programs. The existing short-term credit

guarantee program (on credit of up to 3 years) is authorized at $5 billion annually

through fiscal year 1990, the same level as in fiscal year 1985. The fee charged

41
users of the program may not exceed 1 percent of the credit extended under the

transaction. The 1985 Act amends the intermediate credit programs to allow

intermediate credit guarantees (on credit of 3-10 years). To guarantee export

sales, the CCC must make available not less than $500 million through fiscal year

1988, and not more than $1 billion in fiscal year 1989. The agricultural export

credit revolving fund is reauthorized through fiscal year 1990, although no funding

level is specified.

Targeted Assistance

Under a targeted assistance program, the Secretary must provide annually $325

million or an equal value of CCC commodities specifically to counter or offset the

adverse effect of subsidies, import quotas, or other unfair trade practices. The

term "subsidy" includes an export subsidy, tax rebate on exports, financial

assistance on preferential terms, financial assistance for operating losses,

assumption of costs or expenses of production, processing, or distribution, a

differential export tax or duty exemption, a domestic consumption quota, or other

method of furnishing or ensuring the availability of raw materials at artificially

low prices. The 1985 Act authorizes priority assistance to producers of those

agricultural commodities which have been found to have suffered from unfair trade

practices under section 301 of the Trade Act of 1974 or which have suffered from

retaliatory actions related to such a finding.

Market Development and Expansion

Under another program, at least $2 billion in CCC commodities must be provided

through fiscal year 1988 to U.S. exporters, users, processors, or foreign purchasers

at no cost to encourage the development, maintenance, and expansion of U.S.

agricultural export markets. The goal of this program is to help make U.S.

commodities more competitive by offsetting subsidies or other unfair trade

practices, the adverse effects of price support levels temporarily above

competitors' export prices, or fluctuations in exchange rates. These commodities

will, as necessary, be used in conjunction with intermediate export credit programs

for the export sale of breeding animals and for the establishment in developing

countries of facilities to assist agricultural imports. Also, under this program,

the Secretary may make available to commercial exporters transferable "green dollar

export certificates" to be redeemed within 6 months of issuance for CCC commodities.

The 1985 Act requires equal treatment of domestic and foreign purchasers and users

in cases where U.S. imports of manufactured products made with these commodities

would place domestic users at a competitive disadvantage. Among foreign purchasers,

priority shall be given to those who are traditional purchasers of U.S. agricultural

commodities and products and who continue to purchase a greater amount of them than

in a previous representative period. The 1985 Act requires that reasonable

precautions be taken to prevent resale of the commodities and to avoid displacement

of usual U.S. marketings.

If a country fails to meet the financial qualifications for the CCC export credit

and credit guarantee programs, the Secretary may provide agricultural commodities

and products to them to the extent necessary, at reduced cost, so they may meet the

qualifications.

In those export promotion programs which include a bonus or incentive payment, the

Secretary must try to use 15 percent of the program funds (or value of the

commodities involved) annually to promote exports of poultry, beef, or pork meat and

meat products.

42
Pilot Barter Program

Under section 416, a pilot barter program for strategic materials is authorized for

at least two countries in fiscal years 1986-87. Private trade channels are to be

used to the extent practicable. The Secretary must submit a report on the operation

of the program to Congress after the end of each fiscal year.

Cooperator Market Development Program

In the 1985 Act, Congress urges the continuation of the cooperator market

development program of the Foreign Agricultural Service (FAS). That program helps

develop new markets and expand and maintain existing markets for U.S. agricultural

commodities. FAS should work with nonprofit agricultural trade organizations as

much as possible. Congress also encourages greater funding for promotion of

value-added and processed products.

Agricultural Attache Reports

The Secretary must require USDA officers and employees, including those stationed

abroad, to annually submit reports documenting other countries' programs that

provide direct or indirect support for agricultural exports and that impede the

entry of U.S. agricultural exports. Such reports should also identify U.S.

agricultural export opportunities. The Secretary must report this information to

Congress and others.

The U.S. Trade Representative, after reviewing these reports and other information,

must identify export subsidies or export promotion techniques and identify markets

(in order of priority) in which U.S. export subsidies can be used most efficiently

in offsetting benefits of foreign export subsidies. The Trade Representative must

report these findings to the Secretary and Congress.

The Secretary and the Trade Representative must convene a meeting, at least once a

year, of the Agricultural Policy Advisory Committee and the agricultural technical

advisory committees to develop specific recommendations for actions to be taken by

the Federal Government and private industry to reduce or eliminate trade barriers

and to expand U.S. agricultural export opportunities.

Contract Sanctity and Producer Embargo Protection

The 1985 Act further defines the goals of U.S. trade policy as follows:

o To foster and encourage agricultural exports;

o To not restrict or limit the export of such commodities and products except

under the most compelling circumstances;

o To prohibit or limit the export of such commodities or products only in time of

a national emergency declared by the President under the Export Administration

Act; and

o To honor contracts entered into before the imposition of any prohibition

or limitation on the export of such commodities or products.

The 1985 Act also adjusts compensation to producers of commodities for which export

controls are imposed.

43
Study to Reduce Foreign Exchange Risk

The Secretary must study the feasibility, practicability, and cost of implementing a

program to reduce the risk of foreign exchange fluctuations encountered by buyers of

U.S. agricultural exports under export credit programs. The study is to determine

whether agricultural exports, under export credit programs, would be enhanced if the

United States assumes the exchange risk of the buyer should the value of the dollar

rise compared with the trade-weighted index of the dollar. The report is due to

Congress by June 21, 1986.

Cargo Preference

The 1985 Act substantially changes cargo preference laws which required that 50

percent of U.S. Government-sponsored exports be shipped on U.S. flag vessels. The

1985 Act clarifies that requirement and mandates a gradual increase in the share of

particular exports, mostly food aid,' that must be carried on U.S. flag vessels. The

cargo preference requirements do not apply to specific commercial agricultural

export programs such as the export credit, credit guarantee, blended credit, and

export enhancement programs. However, in 1986 and 1987, 60 percent and 70 percent,

respectively, of food aid exports must be shipped on U.S. flag vessels. In 1988 and

thereafter, at least 75 percent must be shipped on U.S. flag vessels. The calendar

years for complying with these requirements are the 12-month periods beginning April

1, 1986. Through 1989, the Secretary of Transportation must ensure that a specified

amount of P.L. 480 title II commodities is shipped from Great Lakes ports. The

minimum tonnage of agricultural commodities to be exported under programs subject to

the cargo preference requirements is set by a formula but may be waived by the

President.

The Secretary of Transportation must finance any increased ocean freight charges

which result from specified changes to cargo preference laws. If ocean freight and

ocean freight differential costs on commodities subject to cargo preference

requirements exceed 20 percent of the value of such commodities and such ocean

freight and differential costs, then the U.S. Department of Transportation (DOT)

must pay the excess. If the DOT lacks funds for the increased costs, then cargo

preference requirements will revert to previous law.

The 1985 Act establishes a National Advisory Commission on Agricultural Export

Transportation Policy to study ocean transportation of agricultural exports subject

to cargo preference laws and to make recommendations for improving the efficiency of

such transportation. The commission must submit an interim report to the President

and Congress by December 23, 1986, and a final report by December 23, 1987.

Agricultural Imports

The 1985 Act mandates several other actions and studies, most related to the effects

of agricultural imports on domestic industries.

Trade Consultations

The 1985 Act requires consultations between FAS and other agencies, including the

Animal and Plant Health Inspection Service, before relaxing or removing any

restriction on agricultural imports. Similarly, consultations are mandated between

the Secretary and the U.S. Trade Representative before such actions are taken.

44
Apricot Study

In conjunction with the U.S. Trade Representative, the Secretary must submit a

report to Congress on the effect of apricot imports on the domestic apricot

industry. The report must also measure the extent and nature of apricot subsidies

in countries that export apricots. The report is due by April 22, 1986.

Brazilian Ethanol Imports

The 1985 Act requires the Secretary to study the effect of imported Brazilian

ethanol on the domestic prices of corn and other grains and on the domestic ethanol

refining industry. In consultation with the U.S. Trade Representative and the

International Trade Commission, the Secretary must determine what relief should be

granted because of the interference of subsidized Brazilian ethanol with the domestic

ethanol industry. The Secretary must report to Congress by February 21, 1986.

Oat Imports

The Secretary must study the effect on domestic farm programs of increased oat

imports and report to Congress no later than December 23, 1986.

Trade Practices

The 1985 Act requires or calls for several actions including those relating to

tobacco imports and unfair agricultural trade practices. The act also requires

export sales of CCC dairy products and amends the CCC Charter Act to require barter

agreements to the maximum extent practicable.

Tobacco Pesticide Residues

All flue-cured or burley tobacco offered for import must be certified to be free of

any pesticide residue that is prohibited by the Federal Insecticide, Fungicide, and

Rodenticide Act (FIFRA). Lacking certification, such tobacco must be inspected at

the point of entry to determine compliance. Tobacco failing inspection is barred

from entry. Periodic sampling, as determined by the Secretary, is required of

flue-cured and burley tobacco offered for import to determine whether it conforms to

pesticide residue requirements.

Export Displacement

The Secretary must assess each activity administered by the Secretary or USDA that

assists the production, marketing, or use of any agricultural commodity in a foreign

country and that the Secretary determines is likely to have a detrimental effect on

the promotion of U.S. agricultural exports. The study must determine if the

assistance activity has such adverse effects. The Secretary must report the results

to Congress by December 23, 1986, for current programs and on a regular basis for

subsequent programs.

Export Sales of Dairy Products

Through fiscal year 1988, at least 150,000 tons of CCC dairy products must be sold

annually for export at prices set by the Secretary, if such sales will not interfere

with usual U.S. marketings nor disrupt world prices of agricultural commodities and

normal patterns of commercial trade. Sales are to involve at least 100,000 tons of

butter and 20,000 tons of cheese annually.

45
Unfair Trade Practices

The President must take appropriate action to ensure a prompt and satisfactory

resolution of specified complaints regarding subsidies and discriminatory tariffs of

the European Communities (EC). The President must also act to balance the level of

concessions in trade between the United States and the EC.

Thai Rice

Congress urges the Secretary of Commerce to immediately consider implementing

countervailing duties upon imports of rice from Thailand.

End Users of Imported Tobacco

Any flue-cured or burley tobacco imports must be accompanied by a written

identification of all end users. If the importer does not know the identity of an

end user, the importer must identify all purchasers to whom the importer expects to

transfer such imported tobacco. The Secretary must submit a report to Congress by

April 1, 1986, on the identification of end users and amounts purchased. Additional

reports on the implementation of this authority are due by November 15, 1986, and

annually thereafter.

Barter of Agricultural Commodities for Strategic Materials

The 1985 Act amends the CCC Charter Act to require, to the maximum extent

practicable, barter of CCC commodities for strategic and critical material produced

abroad. Normal commercial trade channels must be used and commercial marketings

must not be disrupted. If the Strategic Petroleum Reserve falls below prescribed

levels, and upon request from the Secretary of Energy, the CCC must, to the maximum

extent practicable and with approval from the Secretary, make available CCC

commodities worth at least $300 million to barter for petroleum products. The

Secretary must provide technical assistance relating to bartering of agricultural

commodities and products to U.S. exporters who request such assistance.

TITLE XII: CONSERVATION

The conservation title implements "sodbuster," "swampbuster," and conservation

reserve programs that are designed to remove highly erodible land and wetlands from

crop production. The 1985 Act also extends several other conservation programs.

Highly Erodible Land Conservation

Provisions protecting highly erodible land include "sodbuster" and conservation

compliance. These provisions prohibit USDA program benefits to any person who

produces an agricultural commodity on highly erodible land without the use of

conservation practices appropriate for that land. Failure to comply with either

provision results in the loss of eligibility for any price-support loans, purchases,

and payments; farm storage facility loans; Federal crop insurance; disaster

payments; new loans made, insured, or guaranteed by the Farmers Home Administration

(FmHA) if the loan would be used for a purpose that contributed to excessive erosion

of highly erodible land; and payments for the storage of CCC-owned commodities.

Local conservation districts will determine the appropriateness of the conservation

practices; the Secretary will make the determination if the land is not located

within a conservation district.

46
The sodbuster provision became effective December 23, 1985, except for land cultivated to produce agricultural commodities during crop years 1981-85, including land

set aside, diverted, or otherwise not cultivated under a program administered by the

Secretary, and land that has not yet been mapped for classification purposes. After

January 1, 1990, or 2 years after land has been mapped and classified by the Soil

Conservation Service (SCS), all persons producing agricultural commodities on highly

erodible land must have begun implementing a conservation plan to be eligible for

Government program benefits. Those persons actively implementing a conservation

plan have until January 1, 1995, to fully complete it.

SCS must complete soil survey mapping as soon as possible for use in determining

land capability classifications.

Wetlands Conservation

Also referred to as "swampbuster," this provision prohibits USDA program benefits to

producers who convert wetlands to cropland after December 23, 1985. Failure to

comply with this provision will render persons ineligible for any price-support

loans, purchases, and payments; farm storage facility loans; Federal crop insurance;

disaster payments; new loans made, insured, or guaranteed by FmHA if the loan would

contribute to wetlands conversion; or payments for the storage of CCC-owned

commodities.

Exempt from this provision are persons with wetlands for which conversion began

before December 23, 1985, artificial wetlands, or wetlands that can be used in the

production of agricultural commodities as a result of natural conditions (such as

drought) without the destruction of natural wetlands characteristics. Artificial

wetlands are those created from nonwetlands as a result of activities such as fish

farming, irrigation, and flood control. The prairie pothole region provides an

example of a natural condition. There, during dry years, production of an

agricultural commodity in the potholes is feasible without destroying the wetlands'

natural characteristics. The Secretary may exempt a person from ineligibility where

the environmental effects of the conversion activity are deemed minimal.

In carrying out this provision, the Secretary must consult with the Secretary of the

Interior in identifying wetlands areas, determining exemptions, and issuing

regulations.

Conservation Reserve

The conservation reserve provision proposes to assist, through contract, owners and

operators of highly erodible cropland in conserving and improving the soil and water

resources of their farms and ranches. This purpose will be met by establishing a

conservation reserve of 40 to 45 million acres by 1990. Highly erodible cropland

acreage will be placed into the reserve at the rates shown in table 7. The

Table 7--Conservation reserve acreage, crop years 1986-90

Range 1986 1987 1988 1989 1990

Million acres

Minimum I/ 5 15 25 35 40

Maximum - 45 45 45 45 45

1/ The Secretary may reduce the number of acres placed in the reserve by up to 25 percent if rental

payments will probably be significantly lower in the following year.

47
Secretary may also include lands not highly erodible, but which pose a serious

environmental threat or suffer continued degradation of productivity due to

salinity. No more than 25 percent of the cropland in any one county may be placed

in the reserve except where it is determined that to do so would have no adverse

effect on the local economy. Where practicable, at least one-eighth of the total

conservation reserve acreage should be devoted to trees.

Landowners or operators desiring to participate in the conservation reserve must

agree to implement a plan approved by the local conservation district to place

highly erodible cropland into grasses, trees, and other acceptable vegetative covers

for 10 to 15 years. They must further agree not to harvest, graze, or make other

commercial use of the forage for the duration of the contract, except where the

Secretary permits, as in a drought or similar emergency. The conservation plan must

describe the measures and practices required; the commercial use, if any, to be

permitted; and the amount of cropland base and allotment history, if any, to be

permanently retired. The amount of the reduction in cropland base acreage and

allotment history, during the life of the contract, will be based on the ratio

between acreage placed in the reserve and total cropland acreage on the farm for

those crops which have production adjustment programs in place. The Secretary,

however, may preserve the cropland base and allotment history on the acreage placed

in the reserve for the purpose of any Federal program unless the owner and operator

agree under the contract to retire that cropland base and allotment history

permanently.

The Secretary must pay an annual fee sufficient to compensate for the conversion of

highly erodible land to grass and trees and the retirement of any cropland base and

allotment history. The compensation, in the form of annual rental payments, may be

determined through the submission of bids. The acceptability of each bid may be

based on the extent of erosion and the productivity of the acreage diverted.

Different eriteria may be established in various States and regions to determine the

extent to which erosion may be abated. Priority may be given to owners and

operators with the highest level of economic stress, and where appropriate, for the

establishment of shelterbelts, windbreaks, stream borders, filter strips of

permanent grass, or trees that significantly reduce erosion.

The annual rental payments may be made in cash or in-kind and may be made prior to

the implementation of the contract by owners or operators. The total payment may

not exceed $50,000 per year, and will not affect the total amount of payments that

are available under other programs. USDA must make the payments as soon as possible

after October 1 of each year. The Secretary must also provide technical assistance

and 50 percent of the cost of establishing conservation practices. These payments

must be made as soon after the expenses occur as is feasible.

Land on which ownership has changed in the 3-year period preceding the first year of

the contract will be ineligible for the conservation reserve unless the land was

acquired by will or succession as a result of death, or prior to January 1, 1985, or

where the Secretary determines that the land was acquired under circumstances that

provide adequate assurance that it was not purchased for the purpose of being placed

in the reserve. Ownership is not a requirement for eligibility provided the person

has operated the land for the 3-year period preceding the first year of the contract

and will continue to control the land for the duration of the contract.

The Secretary may modify or terminate an individual contract if the owner or

operator agrees to the change and if the action is in the public interest. If the

contract is violated, the owner or operator forfeits all rights to past, present,

and future rental and cost-share payments or must accept adjustments to payments

48
that the Secretary determines appropriate. On transfer of ownership or lease, the

new owner or operator has the option to continue the current contract, enter into a

new contract, or refuse to participate.

Title XII authorizes the Secretary to carry out the conservation reserve program

through the CCC in fiscal years 1986-87. In fiscal year 1988 and subsequent years,

the Secretary may use CCC facilities, services, and funds only if the CCC has

received funds targeted for the conservation reserve.

Other Provisions

The conservation title also includes the following provisions.

Appeal Procedure and Tenant Protection

The Secretary must establish an appeal procedure to allow any person adversely

affected by any of the sodbuster, swampbuster, and conservation reserve provisions

to have their case reviewed. The ineligibility of a tenant or sharecropper because

of violations of the sodbuster or swampbuster provisions will not cause the landlord

to be ineligible for commodity programs except on those lands operated by the tenant

or sharecropper. The Secretary will also provide adequate protection for tenants

and sharecroppers, including a provision to share payments received under the

conservation reserve.

Technical Assistance for Subsurface Water

The Secretary may provide plans and technical assistance to aid State and local

governments and their river basin commissions in protecting ground water and surface

waters, in reducing flood hazards which might adversely affect the quality or

quantity of their water, and in controlling salinity. The Secretary must provide

Congress with a detailed evaluation of the plans and assistance by February 15, 1987.

Soil and Water Conservation

The 1985 Act extends the Soil and Water Resources Conservation Act of 1977,

requiring USDA to assess soil and water resources in 1995 and again in 2005.

Softwood Timber

FmHA may reschedule repayment of delinquent loans using future revenue produced from

the planting of softwood timber crops on marginal lands that were previously used as

cropland or pasture. The accrued interest on a reamortized loan may be included in

the new principal and subject to interest charges. FmHA may defer repayment of the

reamortized loan until the timber produces revenues or 45 years, whichever is

sooner. The borrower must complete repayment within 50 years of the date of

reamortization. To be eligible, no fewer than 50 acres must be placed in the

production of softwood timber, no liens on the land must exist other than the lien

being reamoritized, and the loan amount may not exceed $1,000 per acre. No more

than 50,000 acres may be entered in the program.

Dryland Farming

Dryland farming is included as an objective of energy and water conservation.

49
Farmland Protection

The 1985 Act amends the Farmland Protection Policy Act to include an annual report

of the program and to enable Governors, where a State policy or program exists, to

bring suit against Federal agencies to enforce the protection of farmland.

1986 Reserve Program

On January 13, 1986, the Secretary announced that highly erodible land placed in the

conservation reserve will be ineligible for farming for 10 years and must be planted

with a permanent vegetative cover. The amount of the annual rental payments will

depend on the bids per acre and the number of acres under the 10-year contracts.

Participants also will receive 50 percent of eligible costs of establishing trees or

grass on the acreage placed in the reserve.

The Secretary announced further details on January 29. All land in classification

levels VI, VII, and VIII, and land in capability classes II through V that was

planted to a crop and tilled during 2 of the 1981-85 crop years and is eroding at

three times the tolerance level (generally 4 to 5 tons per acre per year for deep

soils) will be eligible for 1986 contracts. Table 8 lists the amount of acreage

eligible for 1986 contracts by State and region, approximately 69.5 million acres;

figure 6 illustrates the distribution of the eligible acreage across the United

States. Producers wishing to participate applied at their local Agricultural

Stabilization and Conservation Service (ASCS) office March 3-14. The application

must include bids for the annual rental payments. Rental and cost sharing payments

will either be made in cash or in negotiable PIK certificates.

TITLE XIII: CREDIT

Title XIII contains a number of provisions related to the Consolidated Farm and

Rural Development Act. Some provisions are designed to help farmers repay their

loans (such as interest rate reductions and conservation easements); others are to

assist them after foreclosure (such as disposition of farmland and homestead

protection). The major changes in the credit title, however, are the shift from

direct to guaranteed loans as specified by the funding levels, and the protection

for buyers of farm products, the "clear title" provisions.

Eligibility for Real Estate and Operating Loans

The 1985 Act adds joint farming operations to the eligibility list (farmers,

ranchers, farm cooperatives, private domestic corporations, and partnerships) for

FmHA farm ownership, soil and water conservation, recreation, and farm operating

loans. A joint operation exists when two or more farmers work together sharing

equally or unequally one or more of the following: land, labor, equipment, expenses,

and income.

Owners of a larger than family-sized farm are also now eligible for farm ownership

and farm operating loans provided they are related by blood or marriage, all are or

will be the actual farm operators, and each holds an interest which when taken

separately is no larger than a family-sized farm.

The Secretary may not restrict eligibility for farm ownership, soil and water

conservation, recreation, and farm operating loans only to farmers who had FmHA

loans outstanding on December 23, 1985.

50
Water and Waste Disposal Facilities

The 1985 Act changes the water and waste facility loan and grant program. Grant

rates (the proportion of the project covered by the grant) will be based on a

graduated scale with higher rates given to communities with lower income and

population levels. The rates for projects serving more than one community will be

based on median population and income levels of all the communities involved. The

grant limit remains at 75 percent of the development cost of the project. Grants

may be used to pay local share requirements of other Federal grant-in-aid programs

when permitted by law. In making water or waste facility loans, the Secretary must

consider recommendations made by the applicant or borrower concerning design and

materials used and must justify any required changes.

The Secretary may make grants to private nonprofit organizations that provide

technical assistance and training to associations wanting to build or improve water

or waste facilities, or both. Organizations experienced in providing assistance to

Table 8-Acreage eligible for 1966 conservation reserve contracts, by State and region

Region and State Acres Region and State Acres

Northeast: Delta States:

Connecticut 47,800 Arkansas 465,600

Delaware 13,900 Louisiana 178,300

Maine 82,100 Mississippi 1,092,900

Maryland 241,800 Total 1,736,800

Massachusetts 44,400

New Hampshire 23,000 Northern Plains:

New Jersey 151,400 Kansas 2,525,300

New York 536,300 Nebraska 3,142,200

Pennsylvania 1,142,900 North Dakota 2,053,900

Rhode Island 2,500 South Dakota 1,655,600

Vermont 49,500 Total 9,377,000

Total 2,335,600

Southern Plains:

Appalachia: Oklahoma 1,459,700

Kentucky 1,431,400 Texas 11,465,300

North Carolina 1,142,000 Total 12,925,000

Tennessee 1,589,600

Virginia 606,300 Mountain:

West Virginia 203,700 Arizona 54,400

Total 4,973,000 Colorado 3,677,600

Idaho 1,697,700

Southeast: Montana 4,995,600

Alabama 842,200 Nevada 192 100

Florida 388,800 New Mexico 54 ,3200

Georgia 766,200 Utah 329,300

Puerto Rico 226,500 Wyoming 350,100

South Carolina 214,300 Total 11,840,000

Total 2,438,000

Pacific:

Lake States: Alaska NA

Michigan 779,300 California 634,000

Minnesota 1,904,200 Hawaii 53,700

Wisconsin 1,830,300 Oregon 1,009,800

Total 4,413,800 Washington 1,582,400

Total 3,279,900

Corn Belt:

Illinois 3,053,200

Indiana 1,529,400 United States 69,489,600

Iowa 6,624,200

Missouri 4,072,600

Ohio 891,100

Total 16,170,500

NA = Not available.

51
Figure 6

Cropland Eligible for the Conservation Reserve, 1986

r.-:o:-- o - o -o . . . . . . . -

0 - 5 percent

;:5 · j - 10 percent

.,-..~' 10 - 15 percent

/. 15 - 20 percent

20 - 30 percent

30 percent and over
associations serving rural areas, where residents have low income and water supply

systems or waste facilities are unhealthy, will receive priority. Between 1 and 2

percent of the funding for water and waste facility grants must be available for

technical assistance and training grants.

The Secretary must study the practicality and cost effectiveness of making loans and

grants for rural water and waste disposal facilities at individual locations,

instead of central or community locations. The study must specifically examine the

feasibility of small multiuser drinking water facilities, the cost of connecting

rural homes into community water systems, improvements to small community water

systems, and alternative rural drinking water systems. The report was due to

Congress by April 22, 1986.

Oil, Gas, and Mineral Rights as Collateral

Mineral rights are not to serve as security for farm ownership loans made after

December 23, 1985, unless specifically included in the appraised value of the

collateral. Any compensation the borrower receives for surface damage to the land

resulting from mineral exploration or recovery may be counted as part of the

collateral securing the loan.

Proceeds from mineral sales or leases may be used to make payments on farm

ownership, operating, disaster, or economic emergency loans provided the value of

the mineral rights was not used to secure the loan. This provision does not apply

to loans for which liquidation or foreclosure proceedings were pending on December

23, 1985.

Nonsupervised Accounts

The Secretary must place a portion (10 percent or $5,000, whichever is less) of any

farm operating loan in a nonsupervised bank account. The account may be used by the

borrower for necessary family living expenses or other needs consistent with a

previously agreed upon farming or ranching plan. If the reserve is exhausted, the

Secretary may adjust the farm plan with the borrower and may consider rescheduling

the loan or extending additional credit.

Eligibility for Emergency Loans

The 1985 Act changes some of the eligibility requirements for FmHA emergency loans.

Individual applicants must operate farms not larger than family size to be eligible

for operating loans and must own and operate farms not larger than family size to be

eligible for real estate loans. Farm cooperatives, private domestic corporations,

partnerships, and joint operations are eligible for emergency loans when the

majority interest in these businesses is held by citizens who meet the criteria of

individual applicants. When the holders of a majority interest in the business are

related by blood or marriage, they must own or operate family-sized farms, and at

least one holder must operate such a farm.

No emergency loans will be made for production losses that could have been covered

under the Federal Crop Insurance Act, beginning with crops planted and harvested in

1987. Producers, however, are still eligible for emergency loans when prevented

from planting a crop because of flood, drought, or other natural disaster. The

Secretary may no longer make emergency loans to applicants able to obtain credit

elsewhere. No emergency loan may exceed the amount of the actual loss or $500,000,

whichever is less, for each disaster. Also, the 1985 Act repeals the authority to

make subsequent annual production emergency loans.

53
Prompt Approval of Loans and Loan Guarantees

The Secretary must approve or disapprove an application for a loan or loan guarantee

and notify the applicant of the decision within 60 days of receiving the application.

The notice must specify the reasons for disapproval, if that is the action taken.

Applicants must be notified within 20 days if their application is incomplete.

Funds for approved loans must be disbursed within 15 days, unless a longer period is

agreed to by the applicant or funds are not yet available. USDA must act on

disapproved applications which have been reversed upon administrative or judicial

appeal within 15 days. Requests from lending institutions for FmHA "approved

lender" status (thus expediting the guaranteed loan application process) should be

reviewed and acted upon within 15 days of receipt. These provisions apply only to

those applications received after December 23, 1985.

The FmHA guaranteed farm loan program must be responsive to the needs of borrowers

and lenders and must provide, under reasonable conditions, for payment of guaranteed

proceeds of a defaulted loan prior to completion of the liquidation process.

Appeals

FmHA borrowers, loan guarantee recipients, and applicants for loans and guarantees

who have been directly and adversely affected by a decision of the Secretary must

receive written notice of the decision and must be provided the opportunity for an

informal meeting and a hearing. The appeal procedure must be included in the

notice. Applicants have the right to examine their loan files and to be represented

during any informal meeting or hearing.

The Secretary must study the administrative appeal procedure used in FmHA farm loan

programs and report the findings to Congress by September 1, 1986. The study must

examine the number and types of appeals initiated; the extent to which initial

administrative actions are reversed, modified, or sustained on appeal; the reasons

for the reversals, modifications, or sustainments; the number and disposition of

appeals where lawyers are present; the amount of time required to complete an appeal

and the reasons for delays; the feasibility of using administrative law judges in

the appeal process; and the desirability of electing FmHA county committee members.

Disposition and Leasing of Farmland

Farmland acquired by the Secretary must be sold or leased (in that order of

priority) to operators of not larger than family-sized farms provided the sale price

reflects the average annual income expected from farming the land; the sale will not

adversely affect local farmland values; and the sale or lease will not adversely

affect acreage allotments, marketing quotas, or assigned acreage bases. The

Secretary may also use leases with options to buy, installment sales, or other

similar devices. When leasing the land, USDA must give special consideration to the

previous owner or operator if the person has sufficient financial resources,

management skills, and experience as determined by the Secretary to assure a

reasonable chance of success.

If two or more qualified applicants want to buy or lease the same piece of land, the

local FmHA county committee will select the operator by majority vote. Large parcels

must be subdivided into family-sized tracts, and specific conservation practices may

be required on highly erodible land as a condition of sale or lease. If the

Secretary decides to administer farmland through management contracts, the contracts

must be offered on a competitive bid basis with preference given to small businesses

in the area. The Secretary must have implemented these provisions by March 23, 1986.

54
Release of Normal Income Security

The Secretary must release from normal income security (that is, remove the lien on

proceeds from the normal sale of farm commodities and livestock) an amount

sufficient to meet essential household and operating expenses. The release need not

be made if the loan has been accelerated.

Financial Statements and Plans

FmHA must provide a loan summary statement to a borrower, upon request, describing

the status of the borrower's loans during the summary period. The statement must

include the amount of principal outstanding at the beginning of the summary period,

the interest rate, the amount of payments made, the amount of principal and interest

due at the end of the period, any delinquencies, a schedule of payment dates and

amounts, and the procedure for obtaining additional information.

The Secretary must study the appropriateness of FmHA's farm and home plan. If the

plan is inappropriate, the Secretary should evaluate alternative forms, the need for

a new plan, and the steps to be taken to improve or replace the current form. The

report is due to Congress by April 22, 1986. The Secretary cannot use or require

the FmHA coordinated financial statement in connection with loan applications

submitted after December 23, 1985.

Authorized Loan Amounts

Table 9 outlines the loan levels authorized by the 1985 Act for fiscal years

1986-88. No more than 25 percent of the amounts authorized for guaranteed ownership

and operating loans may be transferred to the authorizations for direct loans in

each of the fiscal years. Twenty-five percent of direct ownership and operating

loans made in any fiscal year must be to low-income, limited resource borrowers; the

minimum level had been 20 percent under previous legislation.

Debt Restructuring and Conservation Easements

The Secretary may acquire and hold an easement on real estate for conservation,

recreational, and wildlife purposes provided the term of the easement is at least 50

Table 9--FmHA loan authorizatlon levels, fiscal years 1986-88

Type of loan 1986 1987 1988

Mi Illion dollars

Farm ownership and operating loans 4,000 4,000 4,000

Direct ownership, not less than 260 195 130

Direct operating 1,740 1,305 870

Total direct loans 2,000 1,500 1,000

Guaranteed ownership, not less than 260 325 390

Guaranteed operating 1,740 2,175 2,610

Total guaranteed loans 2,000 2,500 3,000

Emergency loans, direct or guaranteed 1,300 700 600

Water and waste disposal loans, direct 340 340 340

Business and Industrial loans, guaranteed 250 250 250

Community facility loans, direct 115 115 115

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years; the property is wetlands, upland, or highly erodible land, and deemed

suitable by the Secretary; the property secures any loan made and held by FmHA where

the borrower is unable to repay the loan in a timely manner or the land is already

part of FmHA inventory; and the upland or highly erodible land was planted in row

crops each year during 1983-85. The terms of the easement will specify the purposes

for which the land may be used, the conservation measures to be taken, and the

recreational and wildlife uses to be allowed. Payment for the easement on land

secured by a loan will be made by canceling the part of the outstanding principal

corresponding to the proportion of the total acreage subject to the easement. The

amount of canceled principal may not exceed the value of the land on which the

easement is acquired. Loans made after December 23, 1985, are not eligible for

these easements.

Interest Rate Reduction Program

Effective December 23, 1985, through September 30, 1988, the Secretary must provide

a program to reduce interest rates on FmHA guaranteed loans. The Secretary will

contract with lenders to reduce the interest rate on a loan by a specified minimum

amount for a period not to exceed the remaining loan term, or 3 years, whichever is

shorter. The Secretary will pay up to half the cost of reduction to a maximum

payment equal to the cost of a 2-percent rate reduction. To be eligible for the

interest reduction, a borrower must be unable to obtain sufficient credit elsewhere,

be otherwise unable to make payments on the loan in a timely manner, and have an

estimated cash income that will equal or exceed the estimated expenses for the

upcoming 12 months. The total cost of the program may not exceed $490 million.

Homestead Protection

In the event of foreclosure by the Secretary or the Administrator of the Small

Business Administration, bankruptcy, or voluntary liquidation to avoid foreclosure

or bankruptcy, a farm borrower may, on request, be allowed to retain the principal

residence and a reasonable amount of adjoining land for a period of 3 to 5 years for

family sustenance. The borrower must apply for occupancy by December 23, 1988, pay

reasonable rent, and maintain the property during the period. To be eligible, the

borrower must have exhausted all other remedies for loan extension or restructuring;

sold at least $40,000 of farm products annually in at least 2 years during 1981-85;

received at least 60 percent of gross annual income from farming during at least 2

of the 5 years; and occupied the residence and engaged in farming or ranching during

the 5-year period. At the end of the rental period, the borrower is given the first

opportunity to reacquire the property.

Rural Utilities

Eligibility for borrowing at a Farm Credit System Bank for Cooperatives is expanded

to include cooperatives or other entities (as well as their subsidiaries) that have

received a loan, loan commitment, or loan guarantee from the Rural Electrification

Administration (REA); have received a loan or commitment from the Rural Telephone

Bank; or have been certified as eligible for a loan by the REA administrator. Only

rural utility cooperatives that had 60 percent of their voting control held by

farmers, aquaculture producers, or other eligible cooperatives were previously

eligible to borrow from a Bank for Cooperatives.

Rural Development and Finance Corporations

During fiscal year 1986, the Secretary will guarantee loans made by public agencies

or private organizations to nonprofit national rural development and finance

corporations that establish affiliated statewide programs to provide financial

56
assistance to rural businesses. These corporations must demonstrate the ability and

financial commitment necessary to carry out the objectives. Twenty million dollars

from the Rural Development Insurance Fund will be used for the loan guarantees until

exhausted. Grants will also be available to the corporations during fiscal year

1986 for establishing rural development programs that complement the loan guarantees.

Protection for Purchasers of Farm Products

Certain State laws permit lenders to enforce liens against a purchaser of farm

products even if the purchaser does not know the sale violates the lender's security

interest and the purchaser lacks any practical method of discovering the existence

of such interests. Congress determined that these laws subject purchasers to double

payments and that these double payments inhibit competition and obstruct interstate

commerce of farm products. Therefore, the 1985 Act includes new "clear title"

provisions to remove such obstructions.

Each State may create a statewide central filing system which would be operated by

the State's Secretary of State. USDA would certify such a system if it met the

following requirements: lenders would file financial statements, signed by both the

lender and debtor, with the Secretary of State's office; all statements would be

compiled into a master list organized by type of commodity; buyers, commission

merchants, and selling agents would register with the office; and the Secretary of

State would then regularly distribute to the buyers, merchants, and agents the

sections of the master list that cover the farm products in which they indicated an

interest. Buyers could also request information on a specific producer.

Effective December 23, 1986, a buyer who buys farm products in the ordinary course

of business from producers will receive the commodity free of security interests

even though the lien could be enforced and the buyer knows of its existence, with

the following exceptions. Buyers would be subject to the liens if they received

written notice of the security interest from lenders or producers within 1 year of

the purchase, failed to pay for the commodities, failed to register with the

Secretary of State (in States that have a central filing system) when the lender had

a financial statement on file, or received the sections of the master list in which

they expressed an interest from the Secretary of State and did not secure a waiver

or release from the lender. These provisions will also apply to commission

merchants and selling agents who sell farm products for others.

A lender, as part of loan agreement, may require a list of buyers, commission

agents, and selling agents to or through whom the producer may sell the farm

products securing the loan. A producer will be fined $5,000 or 15 percent of the

value of the products sold, whichever is greater, if the products are sold to a

person not on the list, unless the producer notifies the lender in writing of the

buyer's identity at least 7 days prior to the sale or accounts for the sales

proceeds to the lender not later than 10 days after the sale.

Other Provisions

The credit title also includes the following provisions.

Recordkeeping for Limited Resource Borrowers

FmHA may now make operating loans to limited resource borrowers who have real estate

loans to pay for training in farm and ranch recordkeeping.

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County Committees

Two of the three FmHA county committee members must now be elected by local farm

operators, while the third member is appointed by the Secretary. The Secretary had

previously appointed all three. Committee members will continue to serve 3-year

terms. FmHA county committees meet monthly to review loan applications and

determine applicant eligibility.

Study of Federal Farm Credit System

The Farm Credit Administration must study the need for an insurance fund to protect

against losses and stabilize the financial condition of the Farm Credit System. The

findings are due to Congress by June 21, 1986.

Small Farmer Training and Technical Assistance

The Secretary must maintain the FmHA Small Farmer Training and Technical Assistance

Program at current levels for fiscal years 1986-88.

TITLE XIV: AGRICULTURAL RESEARCH, EXTENSION, AND TEACHING

Title XIV amends the National Agricultural Research, Extension and Teaching Policy

Act of 1977, as amended, and other statutes relating to research, extension, and

teaching programs. Most of the provisions are permanent legislation, except for

funding authorizations, and need no continuing authority. However, some changes in

existing programs have been made, most expiring provisions are continued, and some

new programs are added.

Responsibilities of the Secretary

The Secretary must coordinate efforts of State cooperative institutions and

Extension Services, the Joint Council on Food and Agricultural Science, the National

Agricultural Research and Extension Users Advisory Board, and other appropriate

institutions in assessing the status of, and developing a plan for, the transfer of

new technologies, particularly biotechnology, to the farming community. Small- and

medium-sized farms are to be given special emphasis. The Secretary must also

establish appropriate controls over the development and applied uses of

biotechnology in agriculture.

Councils and Boards

The 1985 Act continues authorization of the Joint Council on Food and Agricultural

Sciences, the National Agricultural Research and Extension Users Advisory Board, and

the Animal Health Science Research Advisory Board. A new provision would require

the Secretary to appoint one food technologist to the Joint Council.

Grant Authority and Funding

The amount available for "high priority" competitive research grants is increased

from $50 million to $70 million per year for fiscal years 1986-90. Grants awarded

under the Research Facilities Act are on a matching fund basis, with the Secretary

determining the matching requirement. Authorized funding for grants to eligible

institutions is $20 million annually for fiscal years 1986-90. The Secretary must

report to Congress annually concerning institutions ineligible to participate

because of failure to repay. The annual funding authority for grants and

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fellowships for food and agricultural science education continues at $50 million

through fiscal year 1990. Annual authorization for funding animal health and

disease research programs remains constant at $60 million. Panels that review

applications for grants are exempt from provisions of the Federal Advisory Committee

Act.

Grants for Research and Extension at 1890 Land-Grant Colleges

The 1985 Act extends indefinitely the requirement that at least 6 percent of the

total funding each year under the Smith-Lever Act be used for extension work at 1890

land-grant colleges as well as the Tuskegee Institute. The authorized funding

levels for grants to upgrade 1890 land-grant college extension facilities, including

the Tuskegee Institute, is $10 million annually through fiscal year 1990 for

assisting in the purchase of equipment and land; construction, alteration, or

renovation of buildings; and providing facilities to conduct extension work in their

respective States. Federal funds cannot be used to pay overhead costs of the

eligible institution. The Secretary must deduct from the next succeeding annual

allotment any carryover of funds in excess of 5 percent of the preceding annual

allotment made to that institution.

Federal and State Partnerships

The Secretary should designate at least one State cooperative institution to conduct

policy research on emerging technological, economic, sociological, and environmental

effects on the structure of agriculture. This research must specifically examine

the role of food production, processing, and distribution systems on the use of

diversified farm plans; energy, water, and soil conservation technologies;

cooperatives; and rural community resource management by small- and medium-sized

family farms. The Secretary should also designate one State agricultural experiment

station and one Agricultural Research Service (ARS) facility to examine the issues

of reducing farm input costs; improving soil, water, and energy conservation on

farms and in rural areas; using sustainable agricultural methods; adopting alternative processing and marketing systems; and encouraging rural resource management.

Grants for International Trade Development Centers

The'Secretary must operate a program that makes grants to States for creating or

expanding international agricultural trade development centers in the United

States. Grants will be on a matching formula of 50 percent Federal funds and 50

percent State funds. The State share may include funds from local governments and

private sources. The Secretary must give preference to existing international trade

development centers and to land-grant colleges and universities that have continuing

agricultural programs, that use an interdisciplinary approach, that State and

Federal agencies operate jointly, and that have an effective communication system to

conduct international conferences and trade negotiations. Activities of these

centers may include establishing permanent data bases that contain information on

international marketing and problems facing exporters within foreign countries (such

as language barriers, identification of government representatives, transportation,

insurance, and financing), and housing exhibits that can be used for trade seminars

and trade negotiations.

Agricultural Information and Personnel Exchange with Ireland

The Secretary must undertake discussions with representatives of the Government of

Ireland to provide for a greater exchange of agricultural, scientific, and

educational information, techniques, and data; and to promote joint investment

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ventures, cooperative research, and expansion of trade. Agricultural producers,

students, teachers, and agribusiness personnel must be included in the exchange.

Extended Contractual Powers

Cooperative agreements may serve as legal instruments between USDA and State

cooperative institutions, State departments of agriculture, colleges, universities,

other research or educational institutions, Federal or private agencies or

organizations, or individuals. USDA may establish cost-reimbursable agreements with

State cooperative institutions, without competition, to acquire goods or services,

including personal services, or to carry out agricultural research, extension, or

teaching activities. Reimbursable costs may include direct costs of performance and

indirect costs not to exceed 10 percent of the direct cost.

Technology Development Research Program

The Secretary may enter into cooperative agreements on a shared cost basis--

50-percent matching funds--or allow the use of a Federal facility or service on a

cost-sharing or cost-reimbursable basis to develop new agricultural technologies

that can be used on small- and medium-sized farms. Funding to support the special

technology development research program will not exceed $3 million annually (fiscal

years 1986-90) from funds appropriated for ARS. A project may not receive more than

$50,000 per fiscal year or more than $150,000 in total.

Supplemental and Alternative Crops

The Secretary must initiate development and implementation of a research and pilot

project program for supplemental and alternative crops, beginning October 1, 1986.

This program will examine the adaptability of supplemental and alternative crops,

establish pilot projects in areas of declining demand for traditional crops,

establish processes for transferring research to onfarm practices, and establish

processing, storage, and transportation facilities for pilot projects as determined

by the Secretary. The pilot program may also conduct comprehensive resource and

infrastructure assessments, develop and expand domestic and export markets for the

crops, and provide technical assistance to farm owners, operators, and marketing

cooperatives.

Aquaculture

The 1985 Act makes nonprofit private research institutions eligible to participate

in aquaculture assistance programs. Funding for the assistance programs is

authorized at $7.5 million annually for fiscal years 1986-90. No more than 50

percent of a State's matching grant may be made as an in-kind contribution. The act

expands eligibility for aquaculture research, development, and demonstration centers

to include nonprofit private research institutes, State agricultural experiment

stations, colleges, and universities with aquaculture research capacity. The

Secretary must, to the extent practicable, locate aquaculture centers so that they

represent regional aquaculture opportunities in the United States.

Funding for Agricultural Research Programs, Extension Education,

and Federal Agricultural Research Facilities

The 1985 Act authorizes general funding for agricultural research through fiscal

year 1990. The amount of funding increases from $600 million for fiscal year 1986

to $640 million for fiscal year 1990. Funding authorizations for research at State

agricultural experiment stations are also continued through fiscal year 1990. The

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authorization level increases from $270 million in fiscal year 1986, to $310 million

in fiscal year 1990. Extension program funding continues through fiscal year 1990,

increasing from $370 million in fiscal year 1986 to $420 million in fiscal year 1990.

The 1985 Act also authorizes funds for Federal agricultural research facilities for

fiscal years 1988-90 for planning, constructing, and repairing buildings and for

buying or leasing land by ARS, with planning limited to $500,000 and total cost

limited to $5 million. The Secretary must submit to Congress a report on

construction activity by location within 60 days of the end of each fiscal year.

Soybean Research Advisory Institute

The 1985 Act repeals authorization for this institute.

Smith-Lever Act

The Smith-Lever Act provides that Cooperative Extension work consists of developing

practical applications of research and of providing instruction and practical

demonstrations of existing or new technologies or practices in agriculture,

including the use of solar energy, home economics, and rural energy. The Secretary

may conduct educational, instructional, demonstration, and publications distribution

programs. Such programs will be on a matching basis between the Extension Service

and private industry or individual funds (no more than 0.5 percent of the funds

appropriated to the Extension Service may be used to match funds for this

provision). A report due to Congress on December 23, 1987, will show progress of

these programs and make recommendations regarding how similar private sector

initiatives could be used by the Extension Service.

Market Expansion Research

The Secretary, using available funds, must increase USDA research programs that

are directed at developing technology to overcome barriers to expand sales of U.S.

agricultural commodities and products in domestic and foreign markets. Research

programs for developing procedures to meet plant quarantine requirements and to

improve the transporting and handling of perishable agricultural commodities must

also be expanded. The Secretary must also conduct research on formulating new uses

for farm and forest products, particularly industrial and value-added products. The

Federal share must not exceed 50 percent of the cost of each project and may not be

less than $10 million annually.

Pesticide Resistance Study

The Secretary should study the detection and management of pesticide resistance.

The study should review existing efforts to examine and identify the mechanisms,

genetics, and ecological dynamics of target populations of insect and plant pests

which are becoming resistant to pesticides. The study must review existing efforts

to monitor current and historical patterns of pesticide resistance and develop a

strategy for establishing a national pesticide resistance monitoring program,

involving Federal, State, and local agencies, and the private sector. The study is

due to the President and Congress by December 23, 1986.

Critical Agricultural Materials

The 1985 Act amends the Critical Agricultural Materials Act to require the Secretary

to carry out demonstration projects to promote the development or commercialization

of native agricultural crops that could supply critical agricultural materials for

61
strategic and industrial purposes. The Secretary may use grants, contracts, or

cooperative agreements with any person or institution, and make available

commodities from CCC stocks on a reimbursable basis to carry out this project.

Expansion of Education Study

The 1985 Act authorizes the Secretaries of the Departments of Agriculture and

Education to expand the Study of Agricultural Education on the Secondary Level

currently being conducted by the National Academy of Sciences. The expanded study

would include the potential use of modern technology in teaching agricultural

programs at the secondary school level and the recommendations of the National

Academy of Sciences on how the technology can be most effectively used in teaching

agricultural programs.

Grants for Financially Stressed and Dislocated Farmers

The Secretary must provide special grants to education and counseling programs that

develop income alternatives for farmers who have been adversely affected by the

current farm and rural economic crisis or displaced from farming. These programs

will consist of education and counseling services that assess human and nonhuman

resources; assess income alternatives; identify opportunities available for farmers

in the local community, county, and State; implement financial planning and

management strategies; and match such farmers with specific opportunities, such as

new businesses, other off-farm jobs, job search programs, and retraining skills.

The Secretary may also provide support to mental health officials in developing

outreach programs in rural areas. The grants must be issued between December 23,

1985, and December 23, 1988.

Annual Report on Family Farms

The Secretary's annual report to Congress on the status of the family farm is

expanded to include several new topic areas:

o Information on how existing agricultural and agriculture-related programs are

being administered to strengthen the family farm in the United States.

o An assessment of how current and proposed credit laws and Federal income,

excise, estate, and other tax laws affect the structure of, returns to, and

investment opportunities of farm owners, both foreign and domestic.

o Identification and analysis of new food and agricultural production and

processing developments, especially in the area of biotechnology. The analysis

must evaluate the potential effect of such technological developments on the

economic structure of the family farm system, the competitive status of

domestically produced agricultural commodities and foods in foreign markets,

and the achievement of Federal agricultural program objectives.

o An assessment of the credit needs of family farms and the extent to which those

needs are being met.

o An assessment of how economic and trade policies of the United States affect

the financial operation of, and prospects for, family farm operations.

62
o An assessment of the effect of Federal farm programs on farmers who derive most

of their income from nonfarm sources and farmers who derive most of their

income from farm sources.

o Other information that would aid Congress in preserving and strengthening the

family farm system of U.S. agriculture.

Human Nutrition Research

The Secretary must submit to Congress, by December 23, 1986, a comprehensive plan

for implementing a national food and human nutrition research program, including

recommendations relating to research directions, educational activities, and funding

levels necessary to carry out the plan. The Secretary must also submit a report on

USDA's human nutrition research hot later than 1 year after the plan is received,

and annually thereafter.

The 1985 Act also requires the Secretaries of the Departments of Agriculture and

Health and Human Services to jointly assess existing scientific literature and

research on the relationship between dietary and blood cholesterol and human health

and nutrition and the role of dietary calcium and its importance in human health and

nutrition. Both Secretaries must report their assessments and recommendations for

further research (including budget estimates) to Congress by December 23, 1986.

Agricultural Productivity Research

Title XIV authorizes a new agricultural productivity research program. One purpose

of the program is to facilitate and promote scientific investigation to improve

productivity, maintain soil fertility, reduce soil erosion, and conserve energy and

natural resources. Another purpose of the program is to facilitate research of

agricultural production systems that are located in areas possessing various soil,

climatic, and physical characteristics; that have been managed using farm production

practices that rely on purchased items or on conservation practices; and that can

shift from purchased inputs to natural production practices.

To carry out these objectives, the Secretary must identify and classify existing

information and research reports on agricultural productivity, including information

related to legume-crop rotation; the use of green manure, animal manures, and

municipal wastes in agricultural production; soil acidity; liming; intercropping;

the role of organic matter in soil productivity and erosion control; the effect of

topsoil loss on soil productivity; and biological methods of weed, disease, and

insect control. The Secretary must then identify which reports provide useful

information and make these available to farmers and ranchers through the Extension

Service. The Secretary must also identify gaps in the information and carry out

research to fill them.

The Secretary, in cooperation with Federal and State research agencies and

agricultural producers, will conduct research projects that are broadly

representative of U.S. agricultural production, including small farms. These

projects may involve crops, soils, production methods, weeds, insects, and

diseases. Projects that emphasize planting a sequence of crops must last 5-15

years. USDA must ensure that farmers and ranchers are aware of projects being

conducted and that the projects are open for public observation.

The Secretary must submit a report to Congress not later than June 21, 1986,

describing the design of the research projects; not later than March 23, 1987,

describing the results of the literature search; and not later than April 1, 1987,

63
and each April 1 thereafter, describing progress of projects conducted under this

program. The annual reports must summarize and analyze data collected and recommend

new research. Information from these research projects will be made available to

the public through Federal and State Extension Services.

TITLE XV: FOOD STAMP AND RELATED PROGRAMS

Title XV is divided into three subtitles: food stamp provisions, commodity

distribution provisions, and nutrition and miscellaneous provisions. The first

subtitle continues the Food Stamp Program (FSP) through September 30, 1990, with

major changes as summarized below. The second subtitle extends the Temporary

Emergency Food Assistance Program (TEFAP) through September 30, 1987. The third

subtitle authorizes expanded food, nutrition, and consumer education programs and

expands nutrition monitoring of the needy.

Food Stamp Eligibility and Benefits

The 1985 Act amends several provisions of the Food Stamp Act of 1977 relating to

eligibility requirements and benefits of the FSP. Figure 7 illustrates the use of

the Food Stamp Program, by State, for fiscal year 1984.

Residents of publicly operated community mental health centers were eligible to

participate in the FSP during fiscal years 1984-85; the 1985 Act makes the

eligibility permanent. Only narcotic addicts or alcoholics who lived under the

supervision of a private nonprofit institution for participation in a drug or

alcoholic treatment program had been eligible for food stamps before the legislated

changes. The 1985 Act also authorizes these centers to accept food stamps.

The 1985 Act expands the definition of disabled persons. Households with disabled

members are permitted a medical care deduction and an unlimited excess shelter cost

deduction. Gross income less deductions equals net income, which is used in

determining eligibility and benefit levels. The expanded definition of disabled

will include the following:

o Recipients of State-financed Figure 7

Supplemental Security Income (SSI) Average Monthly Participation in the Food

benefits who do not receive Stamp Program, by State, 1984

Federal SSI benefits. The State

SSI benefits must be based on SSI Thousand participants

disability criteria or criteria

used under pre-SSI programs for

aid to the permanently and totally

disabled and blind.

o Recipients of public disability

retirement pensions who have a

permanent disability based on

special Social Security

Administration rules.

o Veterans receiving pensions for

nonservice-connected disabilities.

" Under 100 E 201-300 ~ 401-500

o Recipients of railroad retirement ~100-200 301-400 Over 500

disability annuities who must meet

64
Social Security Administration disability criteria to receive their annuity or

qualify for Medicare.

Households in which all members receive payments under either the Aid to Families

with Dependent Children (AFDC) Program or the SSI Program will be automatically

eligible to receive food stamps through September 30, 1989. These households will

not have to meet the income standards or asset standards that other households must

meet to qualify for food stamps. These households will not be terminated from the

FSP solely on the basis of termination from the AFDC or SSI programs. The Secretary

must report to Congress by December 23, 1987, on the effect of categorical

eligibility on program administration, error rates, eligibility levels, and benefit

costs.

The portion of an educational grant, loan, or other educational assistance that is

used to pay tuition and mandatory fees for postsecondary education will be excluded

from household income for the purposes of determining eligibility and benefit

levels. The exclusion previously applied only to students in institutions of higher

education. Educational loan origination fees and insurance premiums will also be

excluded. Farmers may now reduce their countable income by the losses incurred from

their self-employed farm operations. Earnings from on-the-job training programs

under the Job Training Partnership Act will count as earned income, except for

dependents under age 19. The earned income deduction will increase from 18 percent

to 20 percent of earned income, effective May 1, 1986. This deduction compensates

households for mandatory work-related expenses such as taxes and union dues.

Effective May 1, 1986, the combined deduction for actual dependent care costs and

excess shelter costs will be separated. The maximum deduction for dependent care

costs will be $160 per month with no adjustments for inflation or geographic

variations. The maximum excess shelter cost deduction will be $147 per month in the

48 contiguous States and the District of Columbia. The deductions for Alaska,

Hawaii, Guam, and the U.S. Virgin Islands will reflect the differences in their

shelter costs. The maximum deduction will continue to be revised each October based

on changes in the shelter costs of the Consumer Price Index for all urban

consumers. The maximum combined monthly dependent care and excess shelter cost

deduction was previously $139 in the 48 contiguous States and the District of

Columbia, $242 in Alaska, $199 in Hawaii, $169 in Guam, and $102 in the U.S. Virgin

Islands.

On May 1, 1986, the $1,500 asset limit for nonelderly households increases to

$2,000. Assets include cash and resources that can easily be converted to cash such

as checking and savings accounts, stocks, and bonds. Only the equity value or the

portion of the fair market value exceeding $4,500, whichever is more, of certain

vehicles will be counted as an asset. The $1,500 asset limit for households

composed of one elderly person only rises to $3,000. Under previous legislation,

the $3,000 limit applied only to households of two or more persons, when at least

one of the persons was age 60 or over.

The 1985 Act specifies that if a household member other than the head of the

household does not comply with certain work requirements, then only that household

member is barred from the FSP. Previous legislation disqualified an entire

household if any household member failed to comply with the work requirements. If

the household head fails to meet the work requirements, the entire household is

still disqualified from receiving food stamps. The normal disqualification period

for failing to meet the work requirements is 2 months. Each adult member of a food

stamp household must repay the value of food stamps that were overissued to the

household.

65
Household heads age 16 and 17 will no longer be automatically exempt from meeting

the work requirements. These persons must comply with the work requirements if they

are not attending school at least half-time or participating in an employment and

training program. Previous legislation did not impose the work requirements on

persons under age 18.

State agencies must provide a means for certifying and issuing food stamps to

eligible homeless people and to ensure that only eligible homeless people

participate in the FSP. States will be prohibited from participating in the Food

Stamp Program if the Secretary determines that State or local sales taxes are

collected for food purchased with food stamps. This provision becomes effective on

October 1 of the calendar year in which the State legislature next meets for a

regular session. The Secretary may extend this date, if necessary, but to no later

than October 1, 1987.

The existing pilot projects that provide cash rather than food coupons to households

composed entirely of persons age 65 or over or persons eligible for SSI will

continue through September 30, 1990, at the request of the States. These pilot

projects would have ended December 31, 1985.

States may stagger issuance of food stamp benefits throughout the entire month as

long as no household goes longer than 40 days without receiving food stamps.

Previous legislation had required States to issue food stamps during the first 15

days of the month. The Secretary must require States to issue food stamp benefits

through specified alternative methods if the methods improve the integrity of the

program. Previous legislation allowed alternative methods for issuing food stamp

benefits at the discretion of the Secretary.

The Secretary may allow States to test simplified applications for food stamps and

standardized benefits in five statewide and five local sites. In these sites,

households with members who receive AFDC, SSI, or Medicaid benefits will be eligible

to receive food stamps regardless of the household's income and asset level, as long

as the income does not exceed 130 percent of the Federal poverty level. Benefits to

these households would be based on the size of the household and the AFDC benefits,

the income eligibility standard for Medicaid, or at State option, the AFDC or

Medicaid needs standards. However, the average food stamp benefits may not be less

than the average that would have been provided under regular procedures.

States may collect the value of food stamps that were overissued to recipients

through unemployment compensation agencies. State food stamp agencies would

reimburse these agencies for the cost of collecting overpaid food stamp benefits.

As with other means of collection in cases of intentional violation, States can keep

50 percent of the money collected.

Food Stamp Funding Levels Table 1O-Auttorizod funding for the Food Stamp Program I/

The 1985 Act provides funding ceilings Fiscal year Funding level

for the FSP through fiscal year 1990

(table 10). In determining these Billion dollars

levels, Congress used Congressional

Budget Office estimates of the cost of 1986 13.037 1987 13.93

the Food Stamp Program (including 1988 14.741

effects of the 1985 Act) and added 3 1989 15.435

percent to the estimate in fiscal year 1990 15.970

1986, 5 percent in fiscal year 1987, 6 I/ Includes Puerto Rico's nutrition assistance

percent in fiscal year 1988, and 7 blocF grant.

66
percent in fiscal years 1989 and 1990. The totals include the annual allocation for

Puerto Rico's nutrition assistance block grant.

The Secretary must make reductions in any fiscal year when benefit requirements will

exceed the authorized funding levels. Under previous legislation, the Secretary was

required to reduce benefits when benefit requirements exceeded the funding provided.

Employment and Training Programs

Each State must implement an employment and training program by April 1, 1987, to

assist food stamp recipients in obtaining skills, training, and experience that will

increase their chances of finding employment. A State may disqualify a person from

the FSP for refusing to participate in an employment and training program.

An employment and training program is defined as a program that meets at least one

of the following requirements:

o Job search programs with terms and conditions comparable to those for job

search in the Aid to Families with Dependent Children (AFDC) Program. However,

the State is not required to pay participant expenses in excess of $25 per

month per participant and may require a job search at the time of the

application.

o Training programs determined by the State to enhance the ability of food stamp

recipients to search for jobs or obtain employment.

o Workfare programs as described in the Food Stamp Act.

o Programs that provide work experience or training or both and that enable

program participants to move promptly into regular public or private employment.

o Other programs, projects, or experiments such as supported work programs, as

approved by the Secretary.

The States will design employment and training programs subject to the approval of

the Secretary. Work assignments under the program must serve a useful public

purpose and should take into consideration the participant's prior training,

experience, and skill, if possible. Under no circumstances should the work

assignments in the employment and training program lead to the dismissal of workers

not participating in the program. Work programs must provide participants the same

benefits and working conditions as nonparticipants who perform comparable work for a

similar number of hours.

A participant is required to work a number of hours equal to the household's monthly

food stamp benefit divided by the Federal or State minimum wage, whichever is

higher. The total number of required work hours, including any training program or

other employment, cannot exceed 120 per month. The 1985 Act requires the States to

reimburse all participants in the employment and training program for their actual

transportation costs and other costs that are reasonably necessary and directly

related to their participation in the program. However, the States may limit the

reimbursement to $25 per month per participant.

The States may establish employment and training programs where participation is

voluntary. Persons exempt from the program must be permitted to participate to the

extent the State determines it to be practicable. The States may exempt persons

from participating if participation would be impracticable for a number of reasons

67
including lack of job readiness and employability, the remote location of work

opportunities, and the lack of child care. Entire categories of food stamp

recipients could be exempt if a State determines that a participation requirement

would be impracticable due to lack of work opportunities and the cost effectiveness

of requiring participation. For example, all recipients in a specified geographic

area with high levels of unemployment could be exempt from an employment and

training program. Recipients participating in the FSP for fewer than 30 days could

also be exempt, subject to the Secretary's approval.

The 1985 Act requires the Secretary to take the following actions concerning

establishing and implementing an employment and training program:

o Issue guidelines to ensure that employment and training programs are provided

to native Americans on reservations.

o Set performance standards that designate the minimum proportions of nonexempt

persons subject to the work requirements. These standards must be in place

within 18 months after implementing an employment and training program. The

standards cannot exceed 50 percent of nonexempt persons through September 1989.

o Vary performance standards based on differences in the types of persons

required to participate and the type of employment and training program

established. The performance standards must reflect the cost to the States and

the extent of participation by persons exempt from the program.

o Consider voluntary participation and other factors such as reduced food stamp

participation, when determining if a State complied with the performance

standard.

o Ensure that States meet the employment and training program requirements

outlined in their State plans. The Secretary may withhold Federal funds

for food stamp administration and operation of employment and training programs

if a State fails to meet, without good cause, the program requirements or

performance standard.

o Allocate to the States, from funds appropriated for the Food Stamp Program, the

following amounts for operating an employment and training program: $40 million

in fiscal year 1986, $50 million in fiscal year 1987, $60 million in fiscal

year 1988, $75 million in fiscal year 1989, and $75 million in fiscal years

1990-91. The Secretary may reimburse the States for 50 percent of the costs

exceeding those allocated from the above funds.

o Submit a report on the effectiveness of the employment and training programs to

Congress by January 1, 1989.

Workfare

Heads of households who are 16 or 17 years old will no longer be exempt from

complying with the workfare program unless they are attending school at least

half-time or enrolled in an employment or training program. The 1985 Act revises

provisions for persons exempt from work requirements in the FSP because they are

participating in a community work experience program under the AFDC program. The

maximum number of hours of work per month required under the AFDC work program will

equal the amount of AFDC benefits plus the value of food stamps divided by the

Federal or State minimum wage, whichever is higher. Under previous legislation, the

maximum number of work hours permitted did not reflect the receipt of food stamps.

68
Program Administration

The 1985 Act contains several provisions relating to the administration of the FSP,

either by the States or by USDA. States may now operate the FSP and Commodity

Distribution Programs in the same area. Previous legislation had banned the

Commodity Distribution Program from operating in the same area as the FSP.

Exceptions were where federally donated commodities were distributed to victims of

natural disasters or to participants in the Commodity Supplemental Food Program, the

Food Distribution Program on Indian reservations, or the Temporary Emergency Food

Assistance Program.

The Secretary must establish a disaster task force to assist the States in providing

food stamps as quickly as possible during disasters. The task force will consist of

appropriate food stamp, disaster, and related program personnel at national and

regional levels. The Secretary will send task force members to disaster areas when

it would be cost effective. The task force will provide technical assistance to

State and local officials by coordinating policy matters and monitoring the

emergency assistance efforts.

The Secretary must study the food stamp quality control system to determine the best

method for obtaining information that would enable States to improve program

administration and to provide data for use in withholding Federal funding for

excessive error rates. Further, the Secretary must contract with the National

Academy of Sciences for an independent study on the quality control system. These

studies are due to Congress by December 23, 1986.

Until June 23, 1986, the Secretary may not reduce a State's Federal share of food

stamp administrative costs because the State had excessive error rates in

administering the program. The Secretary must restructure the food stamp quality

control system, publish regulations about the new system before June 23, 1987, and

begin implementing the system by December 23, 1987. The new system will take into

account the results of the two studies on the existing quality control system.

The 1985 Act requires the Secretary to develop a model plan on the automation of

data processing and computerization of information systems for the FSP. This plan

must be ready for comments by October 1, 1986, and finalized by February 1, 1987.

The States must submit plans for improved automated data processing and information

retrieval systems by October 1, 1987, for the Secretary's approval and begin

implementing the plans by October 1, 1988. The State plans must be based on the

Secretary's model plan. The Secretary must submit a report to Congress by April 1,

1988, evaluating each State's plan. The report will analyze any additional steps

that each State needs to take to ensure cost-effective, efficient computer systems.

The report must be updated periodically.

Financial institutions may not charge a fee for redeeming food stamps if the stamps

are submitted according to Federal Reserve requirements.

One adult member of all households applying for food stamps must certify in writing,

under penalty of perjury, that all information contained in the application and

periodic reports is accurate. The 1985 Act mandates verification of household size,

where questionable, and permits States to require verification of other information

that is used in determining eligibility. The Secretary may require States to use

photographic identification cards if the use of the cards would preserve program

integrity and be cost effective. States may let households use photographic

identification cards issued under another public assistance program. Under previous

69
legislation, the Secretary could only authorize photographic identification cards if

the cards were needed in project areas to protect program integrity.

The Secretary must develop standards for periodic review of the hours that food

stamp offices are open to ensure that employed persons have access to the program.

Administrative units will be established in project areas with 5,000 or more

participating households to detect, investigate, and assist in prosecuting people

suspected of committing food stamp fraud.

States must encourage food stamp recipients to participate in the Expanded Food and

Nutrition Education Program (EFNEP). State agencies should allow EFNEP officials,

where practicable, to display information about EFNEP in food stamp offices.

Effective October 1, 1986, applicants and recipients of SSI and Social Security will

be informed of the availability of the Food Stamp Program, assisted in making a

simple application to receive food stamps, and certified for food stamps based on

information in Social Security files. The Secretary must report to Congress by

April 1, 1987, on the nature and extent of costs incurred by the Secretary of Health

and Human Services in providing Food Stamp Program information and simplified

applications at Social Security Administration offices.

Puerto Rico Block Grant Table I I-Authorized funding levels for

Puerto Rico's nutrition assistance program

The funding levels authorized for Fiscal year Funding level

Puerto Rico's nutrition assistance

block grant program remains at $825

million for fiscal year 1986 but

increases in each of the following 1986 825.00

years (table 11). This program was 1987 852.75

1988 879.75 initiated in July 1982 to replace the 1989 908.25

Food Stamp Program in Puerto Rico and 1990 936.75

was funded at $825 million per year.

Commodity Programs

The Secretary may purchase and distribute commodities for use in the Commodity

Supplemental Food Program, the Food Distribution Program (on Indian Reservations and

in the Trust Territory of the Pacific Islands), and in summer camps, charitable

institutions, and declared disaster areas through September 30, 1990. Title XV

extends the authority for commodity purchases and distribution mandated by the

Agriculture and Consumer Protection Act of 1973, as amended. To provide nutrition

assistance to the needy, nonprofit organizations (such as schools) receiving

commodities under section 32 of the Act of August 24, 1935, may transfer their

commodities to other nonprofit organizations that can use them without waste or cost

to low-income persons.

Commodity Supplemental Food Program

The 1985 Act extends authority for the Commodity Supplemental Food Program (CSFP)

and the elderly feeding pilot projects through September 30, 1990. The act also

increases administrative funds by 15 percent of the value of bonus and donated

commodities outside the food packages. Local agencies may distribute CSFP

commodities to low-income elderly persons if the funds they receive to operate the

program exceed those necessary for women, infants, and children, subject to the

approval of the Secretary. Moreover, the Secretary must approve additional CSFP

70
sites if funds are available and if the new sites will not reduce existing

participation by women, infants, children, or the elderly.

Conmmodity Distribution

The commodity distribution subtitle contains the following provisions.

Definition of Emergency Feeding Organizations

Emergency feeding organizations include charitable institutions, food banks, hunger

centers, soup kitchens, and similar public or private nonprofit agencies. These

organizations have priority for receiving commodities and Federal assistance in

paying for distribution costs.

Availability and Distribution of Commodities

The Secretary may distribute commodities to agencies that operate the Temporary

Emergency Food Assistance Program (TEFAP). These commodities include, but are not

limited to, dairy products, wheat or wheat products, rice, honey, and corn meal.

Beginning April 1, 1986, the Secretary must report to Congress semiannually on the

types and amounts of commodities made available for distribution under TEFAP.

Commodities will be available for distribution through the commodity distribution

programs at no charge or credit if they are available in CCC inventories and not

otherwise committed. States are encouraged to offer TEFAP in rural areas.

Department of Defense commissary stores may donate surplus, unmarketable food to

local food banks.

The 1985 Act extends the National Commodity Processing Program through June 30,

1987. Under this program, the USDA enters into agreements with processors to

convert commodities into various end products desired by recipient agencies such as

schools participating in the National School Lunch Program.

TEFAP Funding

The authorization level for TEFAP funding is $50 million annually for fiscal years

1986-87. This money must be used for the State and local costs incurred in

operating the program. Beginning January 1, 1987, the States must match Federal

funds on a dollar-for-dollar basis for funds not provided to emergency feeding

organizations, using cash or in-kind contributions. States that will not hold

legislative sessions by January 1, 1987, will have until October 1, 1987, to match

TEFAP administrative funds. Under the 1985 Act, TEFAP ends September 30, 1987.

TEFAP Reports

The Secretary must submit an annual report on the extent that donated commodities

displace commercial sales. The Secretary also must report to Congress by April 1,

1987, on the volume and types of commodities distributed under TEFAP; the types of

State and local agencies receiving the commodities; the populations served by the

program and their characteristics; the Federal, State, and local costs of commodity

distribution operations; and the amount of Federal funds allocated to cover State

and local costs.

Nutrition and Miscellaneous Provisions

The nutrition and miscellaneous subtitle contains the following provisions.

71
Cash-in-Lieu of Commodities and Commodity Letters of Credit

The 1985 Act allows school districts which participated in the pilot project study

of cash-in-lieu of commodities and conmmodity letters of credit under the National

School Lunch Program to continue receiving this alternative form of assistance

through June 30, 1987. These school districts may receive bonus commodities to the

same extent as other school districts, but only in the form of commodities and not

cash-in-lieu of commodities or letters of credit.

Gleaning of Fields

State and local governments are encouraged to enact tax and other incentives for

producers who allow nonprofit organizations to collect and distribute unharvested

food and for shippers who donate or charge reduced rates for transporting gleaned

food.

Food, Nutrition, and Consumer Education

State Cooperative Extension Services must expand food, nutrition, and consumer

education programs for low-income persons. States may use the existing Expanded

Food and Nutrition Education Program in

operating the expanded program. The Table 12--Authorized funding levels for an expanded food, nutritlon' and consuner Secretary must evaluate the education progrm effectiveness of the expanded program

and report to Congress by April 1, Fiscal year Funding level

1989. Authorized funding levels for

the expanded program are shown in table Million dollars

12. These funds supplement any other 5

funds allocated for State Cooperative 1987 6

Extension Service activities for food, 1988 8

nutrition, and consumer education. 1989 8 1990 8

Nutrition Monitoring

The Secretary must include a representative sample of low-income persons in USDA's

Continuing Survey of Individual Food Intake and any nationwide food consumption

survey. USDA must collect data on food purchases and other household expenditures

by low-income persons.

Title XVI: MARKETING

Provisions in this title are new, unless otherwise indicated, and are grouped into

five subtitles: Beef Promotion and Research Act of 1985; Pork Promotion, Research,

and Consumer Information Act of 1985; Watermelon Research and Promotion Act;

Marketing Orders; and Grain Standards. Table 13 compares the major features of the

promotion orders. Cotton, dairy, eggs, potatoes, wheat, and wool currently have

promotion programs in effect.

Beef Promotion and Research Act of 1985

This subtitle replaces the Beef Research and Information Act of 1976. It

establishes a procedure (referred to as an order) for carrying out a promotion and

research program to strengthen the beef industry's position in the marketplace, and

to maintain and expand markets and uses of beef and beef products. Financing will

be provided through assessments on all cattle sold in the United States and beef

72
Table 13-B-eef, pork, and watermelon promotion programs

Item Beef order Pork order Watermelon plan

Implementation Mandatory Mandatory Based on Secretarial

findings

Effective date 120 days after publication 90 days after issuance of Not specified

of proposed order final order

Persons affected Beef producers and Pork producers and Watermelon producers and

importers importers handlers

Administrative Cattlemen's Beef Promotion National Pork Producers National Watermelon

organizations and Research Board Delegate Body Promotion Board

Beef Promotion Operating National Pork Board

Committee

Assessment rate $1 per head of cattle or 0.25-0.50 percent of the Equal amounts from

the equivalent for beef market value of hogs or producers and handlers

and beef products pork

Referendum:

Date Not later than 22 months 24 to 30 months after Not specified

after issuance of the order issuance of the order

Approval required forContinuation Majority of those voting Majority of those voting n.a.

Implementation n.a. n.a. Two-thirds of those voting

(or those voting who control

two-thirds of the watermelons produced and handled

during a specified period)

and a majority of both

producers and handlers

voting

n.a. = Not applicable.

products imported into this country. The Secretary must issue a beef promotion and

research order within 120 days after publishing a proposal for such order and

holding a public hearing.

The order establishes a Cattlemen's Beef Promotion and Research Board, composed of

beef producers and importers. The board will administer the order, elect members to

serve on the Beef Promotion Operating Committee, investigate violations of the

order, and recommend order amendments to the Secretary. Producer representation on

the board will be based on one representative for each State with 500,000 or more

cattle. Those States with fewer than 500,000 cattle will be combined into regional

units containing at least 500,000 cattle, with one representative for the region.

States with over 500,000 head will get an additional representative for each

additional million cattle. Importer representation will be determined by the

Secretary on a proportional basis by converting volume of imported beef and beef

products into live animal equivalents.

The Secretary will appoint board members from nominations made by certified State

organizations. More than one organization may be certified in a State. To

represent producers, a State cattle association or general farm organization must

meet the following criteria:

73
o A majority of its paid membership must be cattle producers or its membership

must represent a majority of the cattle producers in the State;

o It must represent a substantial number of producers that produce a substantial

number of cattle in the State;

o It must have a history of stability and permanency; and

o Its primary purpose must be to promote the economic welfare of cattle producers.

Ten members elected by the board and 10 producers elected from qualified State beef

councils will serve on the Beef Promotion Operating Committee. A qualified State

beef council is the beef promotion organization in the State recognized by the

board. To be elected by the State councils, the 10 producers must also be State

council directors. The committee must develop promotion, research, consumer

information, and industry information projects. In drafting these projects, the

committee, to the extent practicable, must take into account similarities and

differences among beef, beef products, and veal, and must ensure that segments of

the beef industry that enjoy a unique consumer identity receive equitable and fair

treatment.

Assessments to finance the order will be collected from persons buying cattle from

producers (qualified State beef councils will collect the assessments in their

State) and beef importers (funds will be paid directly to the board). The

assessment rate will be $1 per head of cattle or the equivalent thereof in the case

of imported beef and beef products. Producers who participate in a program operated

by a qualified State beef council will receive credit of up to 50 cents per head.

The board must establish an escrow account to be used for assessment refunds. Any

person who paid the assessment and does not support the program may receive a

one-time refund. Insufficient funds in the escrow account cannot be the basis for

not providing the person a refund, unless the order is discontinued. At that time,

the board must prorate the amount of refunds among all eligible persons who demanded

a refund.

A referendum must be conducted not later than 22 months after issuance of the order

among persons who have been producers or importers during a representative period.

Continuation of the order requires majority approval of producers voting in the

referendum. The Secretary may conduct further referendums on request of 10 percent

or more of producers to determine whether producers favor termination of the

program. The Secretary must stop collection of assessments within 6 months after

discontinuing the order. All referendums will be conducted at county Extension

offices and allow requests for absentee ballots.

U.S. district courts will have jurisdiction to enforce regulations issued under this

act. The Secretary may investigate alleged violations of the order. The Secretary

can assess a civil penalty of not more than $5,000 for each violation. Funds

collected by the board cannot be used to influence Government policy. This order

does not preempt or supersede other beef promotion programs operated in the United

States.

The Beef Research and Information Act of 1976 authorized a beef promotion order for

cattle producers. For the order to become effective, producer approval was

required; two-thirds of those voting in a referendum had to favor the program. A

referendum was held in July 1977 with 56.4 percent voting for the order. Lacking

the required level of approval, no program was implemented. Congress amended the

1976 Act in 1979, changing the two-thirds requirement to a simple majority. Another

74
referendum was held in February 1980. Only 34.5 percent of the producers voted

favorably; again, no order was implemented.

Pork Promotion, Research, and Consumer Information Act of 1985

This subtitle establishes a procedure (also called an order) for carrying out a

program of promotion, research, and consumer information to strengthen the position

of the pork industry in the marketplace, and to maintain, develop, and expand

markets for pork and pork products. The Secretary must issue an order, effective 90

days after publication.

The order establishes a National Pork Producers Delegate Body. The duties of the

body include recommending the initial rate of assessment (and any increase

thereafter) and allocating the aggregate amount of assessments collected to State

associations. This body will consist of producers and importers appointed by the

Secretary from nominees selected by State associations. A State association is the

one organization of pork producers in the State recognized by the State's Governor.

If no such organization is recognized, a State association may be an organization of

at least 50 pork producers that markets at least 10 percent of the pork (measured in

pounds) sold in the State.

At least two producer members must be appointed to the body from each State, with

additional membership allocated based on market shares. For 1986, shares will be

assigned based on one share for each $400,000 of farm market value of hogs marketed

from the State (as determined by the Secretary based on the annual average of farm

market value in the most recent 3 calendar years), rounded to the nearest $400,000.

For 1987 and thereafter, shares will be determined based on one share for each

$1,000 of the aggregate amount of assessments collected, minus refunds, rounded to

the nearest $1,000. If the number of shares is less than 300, the State can have

two producer members; 300-599, three producer members; 600-999, four producer

members; and more than 1,000, one additional member for each 300 additional shares

in excess of 1,000 shares, rounded to the nearest 300.

Shares will be assigned to importers, for 1986, based on one share for each $575,000

of market value of imported hogs, pork, or pork products (as determined by the

Secretary based on the annual average of- imports in the 3 most recent calendar

years), rounded to the nearest $575,000. For each year thereafter, shares will be

allocated based on one share for each $1,000 of the aggregate amount of assessments

collected, minus refunds, from importers, rounded to the nearest $1,000. Three

importer members will be appointed to the body for the first 1,000 shares, and one

additional member for each 300 shares in excess of 1,000 shares, rounded to the

nearest 300.

The order also provides for a 15-member National Pork Board, composed of producers

representing at least 12 States and importers. The Secretary will appoint the

members from nominees submitted by the body. The board must develop promotion,

research, and consumer information projects; submit such projects to the Secretary

for approval; administer the order; investigate alleged violations of the order; and

recommend order amendments to the Secretary.

The assessment rate to finance the order will initially be the lesser of 0.25

percent of market value of hogs, pork, or pork products sold or imported or an

amount established by the Secretary based on a recommendation by the body. The rate

may be increased, but by not more than 0.1 percent per year with an upper limit on

the total assessment rate of 0.5 percent. Any increase in the rate above 0.5

75
percent must be approved by producers and importers in a referendum. Any person who

paid the assessment but does not support the program may receive a refund.

Funds collected by the board from assessments must be distributed in the following

manner. Each State association will receive an amount of funds equal to the

aggregate amount of assessment attributable to hogs produced in that State, minus

its share of refunds, times a percentage determined by the body, but in no event

less than 16.5 percent. If a State association conducted a pork promotion program

between July 1, 1984, and June 30, 1985, and would have collected a greater amount

of funds than their allotment, it will receive the larger amount.

The National Pork Producers Council will receive an amount of funds equal to 37.5

percent of the aggregate amount of assessments collected throughout the United

States from the date the assessment begins until the board is appointed; 35 percent

thereafter until the referendum is conducted; 25 percent until 12 months after the

referendum is conducted; and no funds thereafter except what it obtains from the

board. Any funds not distributed will be kept by the board. No funds collected

through the assessments may be used to influence legislation or Government policy.

For the order to remain in force, a referendum must be held between 24 and 30 months

after the issuance of the order among persons who have been pork producers and

importers during a representative period. Continuation of the order requires

majority approval of producers and importers voting in the referendum. Further

referendums, to determine termination or suspension of the order, may be conducted

on request of 15 percent or more of producers and importers during a representative

period. The Secretary need not conduct more than one referendum in a 2-year period.

U.S. district courts have the jurisdiction to enforce regulations issued under this

act. The Secretary may investigate alleged violations of the order. The Secretary

may assess any person a civil penalty of not more than $1,000 for each violation

plus any unpaid assessment. States may not impose additional or different

regulations relating to pork promotion, except regulations related to public health,

during the time that assessments are collected.

Watermelon Research and Promotion Act

This subtitle authorizes the Secretary to establish an orderly procedure for

developing and financing a program of research, advertising, and promotion designed

to strengthen the watermelon's competitive position in the marketplace, and to

establish, maintain, and expand domestic and foreign markets for watermelons

produced in the United States. Financing for the program will come from assessments

on watermelons harvested in the 48 contiguous States for commercial use. When

sufficient evidence, as determined by the Secretary, is presented by watermelon

producers and handlers, or whenever the Secretary has reason to believe that a plan

is needed, hearings will be held on a proposed plan. A watermelon promotion plan

must be issued if the Secretary finds such plan would carry out the purposes stated

above, based on evidence presented at the hearing.

The plan would establish a National Watermelon Promotion Board composed of an equal

number of producer and handler representatives and a public representative.

Producers and handlers would submit nominations to the Secretary for appointment to

the board. The board will develop research and promotion projects, which must be

approved by the Secretary before they are implemented; administer the plan;

investigate alleged violations; and recommend amendments of the plan to the

Secretary.

76
Assessments which are set by the board must be the same, on a per unit basis, for

both producers and handlers. Handlers are responsible for collecting assessments

from producers and submitting them to the board. All watermelon producers or

handlers who do not support the plan can demand a refund.

After a plan has been issued, the Secretary must conduct a referendum at county

Extension offices among eligible producers and handlers during a representative

period to ascertain whether they favor the plan or not. For a plan to be

implemented, it must be approved by two-thirds of those voting in the referendum or

by producers and handlers voting who have control of two-thirds of the watermelons

produced and handled during a representative period and by a majority of both

producers and handlers voting. The Secretary may conduct further referendums at any

time, at the request of the board, or at the request of at least 10 percent of the

watermelon producers and handlers eligible to vote in a referendum. The Secretary

must discontinue the plan when its termination or suspension is favored by a

majority of those voting in the referendum and by those producers and handlers

voting who control more than 50 percent of the total volume of watermelons produced

and handled by those voting in the referendum.

The Secretary may investigate alleged violations of the plan. The Secretary may

assess a civil penalty of not less than $500 nor more than $5,000 for each

violation. Funds may not be used to advertise or promote private brand names, to

make false or unwarranted claims of watermelons or uses of competing products, or to

influence Government policy.

Marketing Orders

The maximum penalty for marketing order violations occurring after December 23,

1985, increases from $500 to $5,000.

The 1985 Act prohibits the Secretary from terminating any marketing order before

January 16, 1986. The Secretary also may not terminate any order for a commodity

for which there is no Federal price support program, unless Congress is notified 60

days before the termination date. A statement of reasons must be included in the

notice.

The 1985 Act prohibits the disclosure of any marketing order information that can be

considered as trade secrets and commercial or financial information that comes

within the exemption contained in the Freedom of Information Act. In the case of

milk marketing orders, information may be released if authorized by the milk handler

to whom the information pertains. To release names and addresses of producers

participating in marketing orders and agreements, Congress must be notified at least

10 legislative days prior to the release and the release must be justified by the

Secretary.

Grain Standards

The Federal Grain Inspection Service and the Agricultural Research Service must

cooperate in developing new grain classifications standards that take into account

characteristics other than those visually evident. The agencies must submit

semiannual reports on their efforts to Congress.

If any foreign government requests that moisture content remain a criterion in the

official grade designations of grain, then such criterion will be used in

determining the grade of grain shipped to that country.

77
The Office of Technology Assessment (OTA), in consultation with the Secretary, must

study U.S. grain export quality standards and grain handling practices. The report

is due to Congress by December 1, 1986. The 1985 Act specifies five areas of

investigation:

o The study must evaluate the competitive problems the United States faces in

international grain markets that may be attributed to grain quality standards

and handling practices rather than price.

o The study must identify the extent to which U.S. grain export quality standards

and handling practices have contributed to the recent decline in U.S. grain

exports.

o OTA must perform a comparative analysis between U.S. grain quality standaras

and grain-handling technologies and those of its major grain export competitors.

o The study must evaluate the consequences on U.S. export grain sales, the cost

of exporting grain, and the prices received by farmers should U.S. export grain

elevators be subject to requirements that (1) no dockage or foreign material

(including dust) once removed from grain be recombined with any grain if there

is a possibility that the grain may be exported, (2) no dockage or foreign

material may be added to grain that may be exported if it will reduce the grade

or quality of the grain or reduce the ability of the grain to resist spoilage,

and that (3) no blending of grain with different moisture contents may be

permitted if the difference is more than 1 percent.

o OTA must evaluate the current method of classifying grain, the feasibility of

using new technology to correctly classify grains, and the effect of new seed

varieties on exports and users of grain.

TITLE XVII: RELATED AND MISCELLANEOUS MATTERS

Title XVII contains a variety of sections largely independent of the other titles.

Provisions are new unless otherwise indicated.

Processing, Inspecting, and Labeling

As of May 23, 1986, all edible poultry imported into the United States will be

subject to the same inspection, sanitary, quality, species verification, and residue

standards that are applied to poultry produced in the United States. The poultry

must also be processed in facilities with conditions comparable to U.S. plants.

Poultry not meeting U.S. standards will be denied entry.

Each foreign country that exports meat to the United States must obtain a

certificate issued by the Secretary stating that the country uses reliable

analytical methods to ensure compliance with U.S. standards for residues in meat.

No meat will be permitted entry from a country that does not obtain a certificate.

The Secretary may issue regulations under which cattle, sheep, hogs, goats, and

other animals that have been administered an animal drug banned for use in the

United States may be imported for human consumption.

The Comptroller General must study USDA's and the Department of Health and Human

Services' current product purity and inspection regulations for imported food

products. The study must evaluate the effectiveness of Federal regulations and

inspection procedures to detect prohibited chemical residues and foreign matter in

food or live animals. A report is due to Congress by December 23, 1986.

78
The Secretary must perform random spot checks of potatoes entering the Northeastern

United States and report the findings to Congress.

Agricultural Stabilization and Conservation Committees

The 1985 Act changes some provisions relating to local and county Agricultural

Stabilization and Conservation (ASC) committees. These committees, composed of

farmers, help administer USDA's commodity and conservation programs. There will be

three local administrative areas in each county. In counties with fewer than 150

farmers, the county committee may reduce the number of local' administrative areas to

one. The Secretary may include more than one county or parts of different counties

in a local administrative area when there are insufficient farmers in an area to

establish a slate of candidates for a local committee election. Previous law stated

that the local areas could not include more than one county or parts of different

counties.

The 1985 Act, as amended by P.L. 99-253, requires that each local administrative

area have one local committee with at least three members. Elections will be held

every 3 years, instead of annually, to choose committee members. Counties with more

than three local committees on December 23, 1985, may have more than one committee

per administrative area. Only one administrative area may hold an election in any

year and only farmers who participate in Federal programs within the area will be

eligible to vote.

Each local committee must meet once each year, and members will receive compensation.

Additional meetings without compensation may be held at the direction of the county

committee and with the approval of the State committee. The 1985 Act also specifies

the duties of local ASC committees:

o Serve as advisors to the county committee, in counties where there is more than

one local committee;

o Periodically meet with the county and State committees to be informed on farm

program issues;

o Discuss farm program concerns and issues with local producers;

o Report to county and State committees and other interested persons on changes

in farm programs recommended by local producers; and

o Perform other functions as required by law or requested by the Secretary.

The Secretary now has the authority to use local and county committees to carry out

other USDA programs and functions in addition to their present duties. These

changes apply only to members elected to local committees on January 1, 1986, and

thereafter.

National Agricultural Policy Commission Act of 1985

The 1985 Act establishes a National Commission on Agricultural Policy to study the

structure, procedures, and methods of formulating and administering U.S. agricultural policies, programs, and practices. Specifically, the commission must examine

the following:

o The effectiveness of existing agricultural programs in improving farm income.

79
o Possible program improvements to help retain the family farm.

o The effect of legislative and administrative changes to agricultural policy on

planning and long-term profitability of farmers.

o The effect on farmers of the existing system of formulating and implementing

agricultural policy.

o The effect of national and international economic trends on U.S. agricultural

production.

o The means of adjusting U.S. agricultural policies and programs to meet changing

economic conditions.

o Potential areas of conflict and compatibility between the structure of making

agricultural policy and long-term stability in policy and practices.

o Changing demographic trends ad 'the manner in which such trends affect

agriculture.

o The role of State and local governments in future agricultural policy.

The commission must also study conditions in rural areas of the United States and

how these conditions relate to the provision of public services by Federal, State,

and local governments. The rural issues to be examined will include the following:

o An analysis of conditions that reflect the declining rural economy, including

economic and demographic trends, and rural and agricultural income and debt.

o Trends and fiscal conditions of rural local governments.

o Trends in the delivery of rural public services.

o The effect of deregulating transportation, telecommunications, and banking

industries on the rural economy and delivery of public services.

o Trends of Federal, State, and local government financing, delivery, and

regulation of public services in rural areas.

The commission must submit annual reports of findings and recommendations to the

President and Congress before December 23 each year of the commission's existence.

The commission is scheduled to terminate on December 23, 1990.

The commission will include 15 members appointed by the President and the chairmen

and ranking minority members of the House and Senate agriculture committees. The

congressional members serve by virtue of their positions and have full voting

rights. The appointed members are selected from nominees representing producers,

processors, exporters, transporters, shippers, input suppliers, credit institutions,

and consumers. Each State Governor will nominate two to four potential members.

The President may not appoint more than one individual from a particular State nor

more than seven individuals of the same political party.

National Aquaculture Improvement Act of 1985

This subtitle amends the National Aquaculture Act of 1980 by giving the Secretary

primary responsibility for coordinating with the Secretaries of the Departments of

80
Commerce and the Interior the revision and implementation of the National

Aquaculture Development Plan. The plan will include programs of research,

assistance, and training. USDA will have primary responsibility for coordinating

and disseminating aquaculture information. The 1985 Act designates the Secretary as

the permanent chairman of the coordinating group and establishes a National

Aquaculture Information Center within USDA. The center must collect and analyze

scientific, technical, legal, and economic information relating to aquaculture,

including acreage, water use, production, marketing, culture techniques, and other

relevant matters. The center will also serve as a repository for the collected

information and will arrange with foreign nations for the exchange of information

relating to aquaculture.

The Secretary must study the aquaculture industry's access to relevant Federal

programs and report the findings to Congress by December 31, 1986. The Secretary of

Commerce must also study, and report to Congress by December 31, 1987, the effect on

traditional fisheries by competition from commercial aquacultural enterprises. The

study must assess adverse effects, by species and geographical region, and recommend

measures to offset the effects. The Secretary of the Interior, in consultation with

the Secretary of Commerce, must identify, and report the findings to Congress by

December 31, 1987, exotic species introduced into the United States as a result of

aquaculture activities and determine potential benefits and effects of the introduced species. All three Secretaries must report on the status of U.S. aquaculture

and the implementation of the Development Plan to Congress by February 1, 1988.

Funding for administering the Aquaculture Act is authorized at $1 million annually

for fiscal years 1986-88.

Special Study and Pilot Project on Futures Trading

USDA and the Commodity Futures Trading Commission must study the manner in which

agricultural commodity futures markets and agricultural commodity options markets

might be used by producers to provide them with price stability and income

protection. The study must also determine the Federal budgetary effect of this

approach compared with the cost of the commodity price support programs. The

results are due to Congress by December 31, 1988.

The Secretary must also conduct a pilot program in at least 40 counties which

actively produce wheat, feed grains, soybeans, and cotton. This program, in

cooperation with futures and options market representatives and the chairman of the

Commodity Futures Trading Commission, will involve an extensive educational program

for a reasonable number of producers, as determined by the Secretary. Producers

selected for the program will participate in the trading of these agricultural

commodities on a futures or options market in a manner designed to protect and

maximize the return on their own production. Under the terms of the project,

participating producers will receive assurances from the Secretary that the net

return received for their commodities will be no less than the county loan level for

the crop.

Animal Welfare

The Secretary must set standards governing the humane care, treatment, and

transportation of animals by dealers, research facilities, and exhibitors. These

standards will describe minimum requirements for handling, housing, feeding,

watering, sanitation, ventilation, shelter from extremes of weather and

temperatures, adequate veterinary care, and separation by species; exercise of dogs;

and an adequate physical environment for primates. The standards for animals in

81
research facilities must also include requirements for animal care, treatment, and

practices in experimental procedures to ensure that pain and stress to the animals

are minimized. Each research facility is required to show upon inspection, and to

report at least annually, that these rules are being followed.

Each research facility must establish at least one committee of not fewer than three

members appointed by the chief executive officer of the facility. These members

must possess sufficient ability to assess animal care and practices in an

experimental research facility and represent society's concerns regarding animal

welfare. One member must be a veterinarian and another must represent general

community interests. The committee must inspect, at least semiannually, all animal

study areas and facilities of the research facility. Inspections, however, are

prohibited from interrupting any research experiment. The committee must also file

a certification report of each inspection. Members of the committee may not release

confidential information from the research facility. Each research facility must

provide training for scientists, animal technicians, and other personnel involved

with animal care and treatment in the facility. The National Agricultural Library

must establish an information service on employee training and animal

experimentation to reduce animal pain and stress.

Civil penalties authorized under the Animal Welfare Act are increased from

$500-$1,500 to $1,500-$2,500. The criminal penalty is increased from $1,000 to

$2,500. Provisions in this subtitle take effect December 23, 1986.

CCC Storage Contracts

The 1985 Act amends the CCC Charter Act by stipulating that any contracts for the

use of storage facilities of terms greater than 1 year must have an annual rental

rate that is less than the rate charged for 1-year contracts. If CCC does not use

contracted space and determines that it no longer needs the space, the owner of the

facility can be given a reasonable time to lease the space to another person, which

would relieve CCC of the remaining terms of the contract.

Emergency Feed Program

Producers may now receive feed through the Emergency Feed Program if they do not

have sufficient feed of adequate nutritive value suitable for their type of

livestock or poultry. Under previous provisions, producers could qualify for the

program only if they had insufficient feed for the estimated period of the

emergency. The CCC may make feed available to persons in areas in which feed grains

are normally produced but are unavailable because of natural disaster. The feed may

be available through feed dealers at a price not less than 75 percent of the county

loan rate. CCC bears the cost, including transportation and handling, in making the

feed available.

Controlled Substances Production Control

Beginning December 23, 1985, any person convicted under Federal or State law of

planting, cultivating, growing, producing, harvesting, or storing a controlled

substance will be ineligible for any price supports or payments; farm storage

facility loans; crop insurance; disaster payments; any loans made, insured, or

guaranteed by FmHA; and payments for the storage of CCC-owned commodities during

that and the 4 succeeding crop years.

82
Unleaded Fuel in Agricultural Machinery

The Secretary and the Administrator of the Environmental Protection Agency (EPA)

must jointly conduct a study on the use of fuel containing lead additives and

alternative lubricating additives in gasoline engines used in agricultural

machinery. The study will analyze potential mechanical problems that may be

associated with the use of such fuel in engines. The study must be published in the

Federal Register by January 1, 1987, and a report sent to the President and Congress

(including public comments) by June 1, 1987.

Between January 1, 1986, and December 31, 1987, the EPA must determine the average

lead content of leaded gasoline sold in the United States for each 3-month period.

If the actual lead content falls below an average of 0.2 grams of lead per gallon in

any 3-month period, the EPA must report to Congress and publish the notice in the

Federal Register. Until January 1, 1988, EPA may not issue, under the Clean Air

Act, regulations to control or prohibit lead additives in gasoline that would reduce

the average lead content to less than 0.1 gram per gallon. To carry out these

provisions, $1 million is authorized without fiscal year limitation.

Potato Advisory Commission

The Secretary should consider establishing a Potato Advisory Commission. This

commission would address industry concerns including trade, quality inspections, and

pesticide use. The recommendations of the commission would be reported to Congress

and the public.

Viruses, Serums, Toxins, and Analogous Products

The 1985 Act amends the Virus-Serum-Toxin Act to make it unlawful for any person,

firm, or corporation to ship or deliver in intrastate (as well as interstate)

commerce any worthless, contaminated, dangerous, or harmful virus, serum, toxin, or

analogous product intended for use in the treatment of domestic animals. The

Secretary may issue a special license for preparing virus, serums, toxins, and

analogous products under expedited procedures with assurances of purity and safety

to meet emergency conditions in a limited market, local situation, or other special

circumstances. Any virus, serum, or toxin sold for export or intrastate commerce

during the 12 months prior to December 23, 1985, would not be considered in

violation of the Virus-Serum-Toxin Act (as a result of not being licensed or not

being produced in a licensed establishment) until January 1, 1990. The exemption,

however, must be claimed by the firm making the product by January 1, 1987.

Federal Insecticide, Fungicide, and Rodenticide Act Funding

Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) funding for fiscal year

1986 is set at $68,604,200. A maximum of $11,993,100 is available for research.

Users Fees for Reports, Publications, and Software

The Secretary may charge reasonable fees for furnishing on request copies of

software programs, pamphlets, reports, or other publications, including electronic

publications, prepared by USDA.

Confidentiality of Information

USDA must maintain the confidentiality of information it collects for statistical

purposes by publishing such data in aggregate form. The information is exempt from

83
mandatory disclosure and may not be used in judicial or administrative proceedings

without the consent of the person involved.

Land Conveyance to Irwin County, Georgia

The Secretary must deliver to the Board of Education of Irwin County, Georgia, a

quitclaim deed conveying to the board all rights of the United States to 0.3 acre in

Irwin County, Georgia.

National Tree Seed Laboratory

Fees received by the National Tree Seed Laboratory (part of the U.S. Forest Service)

for tree seed testing services are considered a reimbursement to current funding to

cover the costs of providing the service.

Control of Grasshoppers and Mormon Crickets

The Secretary must implement a program to control grasshoppers and Mormon crickets

on all Federal lands. On request of the Federal agency responsible for the land or

a State Department of Agriculture, USDA must treat Federal, State, or private lands

that have high levels of infestation of grasshoppers or Hormon crickets, unless

delaying treatment will optimize biological control and will not cause greater

economic damage to adjacent landowners. USDA will pay 100 percent of the cost for

control on Federal lands, 50 percent of the cost on State lands, and 33.3 percent of

the cost on private rangelands.

Study of a Strategic Ethanol Reserve

The Secretary must study the cost effectiveness, economic benefits, and feasibility

of establishing, maintaining, and using a Strategic Ethanol Reserve, in relation to

the existing Strategic Petroleum Reserve. The study must be completed by December

23, 1986, and must include the benefits and losses related to the U.S. economy, farm

income, employment, Government commodity programs, and the trade deficit from using

a Strategic Ethanol Reserve, rather than the Strategic Petroleum Reserve; and an

estimate of the savings from storing ethanol as opposed to storing the amount of

CCC-held grain necessary to produce the ethanol. The Secretary may establish the

reserve if the study shows that a Strategic Ethanol Reserve is cost effective,

beneficial to the U.S. economy, and feasible compared with the Strategic Petroleum

Reserve.

TITLE XVIII: GENERAL EFFECTIVE DATE

The general effective date of all provisions within this act that do not have

separate effective dates is December 23, 1985 (when the President signed the

legislation).

84
APPENDIX I: COMMODITY PROGRAM LEVELS, CROP YEARS 1982-86

Commodity Unit 1982 1983 1984 1985 1986 1/

Dairy: 2/

Milk support level 3/ Dollar per cwt 4/13.49 13.10 4/13.10 4/12.60 11.60

13.10 12.60 12.10

11.60

Net CCC purchases

(milk equivalent) 5/ Billion pounds 13.8 16.6 10.4 11.5 NYA

Total milk production do. 135.0 139.0 137.4 140.5 NYA

Wool, support level 6/ Cents per pound 137 153 165 165 178

Mohair, support level 6/ do. 398 463 517 443 493

Wheat:

Target price Dollars per bushel 4.05 4.30 4.38 4.38 4.38

Loan level do. 3.55 3.65 3.30 3.30 2.40

Reduced acreage Percent 15 15 20 20 22.50

Paid land diversion do. -- 5 10 10 7/2.50

Payment-in-kind do. -- 8/10-30 9/10-20 --

National base acreage Million acres 90.6 90.8 93.9 93.9 92.6

Corn:

Target price Dollars per bushel 2.70 2.86 3.03 3.03 3.03

Loan level do. 2.55 2.65 2.55 2.55 1.92

Reduced acreage 10/ Percent 10 10 10 10 17.50

Paid land diversTEn 10/ do. - 10 -- -- 7/2.50

Payment-in-kind do. -- 8/10-30 --

National base acreage Million acres 81.5 11/101.1 81.4 83.3 81.9

Grain sorghum:

Target price Dollars per bushel 2.60 2.72 2.88 2.88 2.88

Loan level do. 2.42 2.52 2.42 2.42 1.82

Reduced acreage 10/ Percent 10 10 10 10 17.50

Paid land diversion 10/ do. -- 10 -- -- 7/2.50

Payment-in-kind do. -- 8/10-30 -- -- --

National base acreage Million acres 7.7 11/101.1 18.4 19.9 18.8

Barley:

Target price Dollars per bushel 2.60 2.60 2.60 2.60 2.60

Loan level do. 2.08 2.16 2.08 2.08 1.56

Reduced acreage 10/ Percent 10 10 10 10 17.50

Paid land diversion 10/ do. -- 10 -- -- 7/2.50

National base acreage Million acres 10.4 11/19.1 11.6 13.2 12.4

Oats:

Target price Dollars per bushel 1.50 1.60 1.60 1.60 1.60

Loan level do. 1.31 1.36 1.31 1.31 .99

Reduced acreage 10/ Percent 10 10 10 10 17.50

Paid land diversion 10/ do. -- 10 -- -- 7/2.50

National base acreage Million acres 10.4 11/19.1 9.9 9.9 9.1

Rye:

Loan level Dollars per bushel 2.17 2.25 2.17 2.17 1.63

Upland cotton:

Target price Cents per pound 71.00 76.00 81.00 81.00 81.00

Loan level 6/ do. 57.08 55.00 55.00 57.30 55.00

Reduced acreage Percent 15 20 25 20 25

Paid land diversion do. -- 5 -- 10 --

Payment-in-kind do. -- 8/10-30-- -- --

National base acreage Million acres 15.3 15.4 15.6 15.8 15.6

ELS cotton:

Target price 6/ Cents per pound -- -- 99.00 103.14 102.48

Loan level 6/ do. 99.89 96.25 82.50 85.95 85.40

Reduced acreage Percent --- -- 10 10 10

National marketing quota 1,000 bales 157 102 -- --

National allotment 1,000 acres 120.2 80.1 -- --- --

National base acreage do. -- - 68.3 66.0 77.7

See footnotes at end of table. --Continued

85
APPENDIX I: COMMODITY PROGRAM LEVELS, CROP YEARS 1982-86--CONTINUED

Commodity Unit 1982 1983 1984 1985 1986 1/

Rice:

Target price Dollars per cwt 10.85 11.40 11.90 11.90 11.90

Loan level do. 8.14 8.14 8.00 8.00 7.20

Reduced acreage Percent 15 15 25 20 35

Paid land diversion do. -- 5 -- 15--

Payment-in-kind do. -- 8/10-30

National base acreage Million acres 4.0 4.0 4.2 4.2 4.2

Peanuts:

Loan level, quota Dollars per ton 550 550 550 559 607.47

Loan level, additional do. 200 185 185 148 149.75

Marketing poundage quota 1,000 tons 1,200 1,167 1,134 1,100 1,355.50

Soybeans, loan level Dollars per bushel 5.02 5.02 5.02 5.02 4.77

Sugar:

Loan level, raw cane Cents per pound 17.00 17.50 17.75 18.00 18.00

Loan level, refined beets do. 20.15 20.86 20.76 21.06 21.09

Honey, loan level 12/ do. 60.4 62.2 65.8 65.3 64.0

-- = Program not used in that crop year.

NYA = Not yet announced.

I/ Levels could change as a result of the Balanced Budget and Emergency Deficit Control Act of 1985.

V/ Figures presented on a marketing year basis, October I-September 30.

3/ Support level for milk with 3.67 percent milkfat.

4/ For 1982, the support price for milk was $13.39 per cwt from October 1-20 and $13.10 per cwt for the

rest of the marketing year. For 1984, the support price was decreased to $12.60 per cwt on December I.

For 1985, the support price was decreased to $12.10 per cwt on April I and to $11.60 per cwt on July I.

5/ Price support purchases of butter, cheese, nonfat dry milk, evaporated milk, and dry whole milk,

plus exports on which CCC issued in-kind certificates, less CCC sales for unrestricted use.

6/ Determined by statutory formula.

7/ Payments-in-kind (PIK).

8/ Producers could choose any level of participation from 10 to 30 percent, inclusive. However, for

Upland cotton producers, the sum of the PIK acres plus the paid diversion acres could not exceed 30

percent of the base; therefore participants who elected to participate in the paid diversion would

decrease their PIK acreage to 25 percent of the base. Producers also had the option of submitting bids

to remove their entire crop-specific acreage base from production.

9/ Producers could choose any level of participation from 10 to 20 percent, inclusive.

TO/ There are two established bases for the 1982-85 acreage reduction programs for feed grains: one for corn and sorghum; the other for barley and oats.

II/ Combined totals: corn and sorghum; barley and oats.

12/ Determined by statutory formula for the 1982-85 crops.

86
APPENDIX 2: MAJOR AGRICULTURAL LEGISLATION, 1933-86

Agricultural Adjustment Act of 1933 (P.L. 73-10)

Signed May 12, 1933

The first major price-support and acreage reduction program

Set parity as the goal for farm prices

Achieved acreage reduction through voluntary agreements with producers

Regulated markets through voluntary agreements with processors and others

Used processing taxes to offset cost of program

Agricultural Adjustment Act Amendments of 1935 (P.L. 74-320)

Signed August 24, 1935

Gave President authority to impose import quotas when imports interfered with

agricultural adjustment programs

Designated 30 percent of customs receipts to promote agricultural exports and

domestic consumption and help finance adjustment programs

Soil Conservation and Domestic Allotment Act (P.L. 74-461)

Signed February 29, 1936

Payments to farmers authorized to encourage conservation

Set parity as the goal for farm income

Agricultural Adjustment Act of 1938 (P.L. 75-430)

Signed February 16,,.1938

Modified Soil Conservation and Domestic Allotment Act

Provided for acreage allotments, payment limits, and protection for tenants

First comprehensive price-support legislation with nonrecourse loans

Marketing quotas established for several crops

Steagall Amendment of 1941 (P.L. 77-144)

Signed July 1, 1941

Required support of many nonbasic commodities at 85 percent of parity or higher

Amended to require 90 percent of parity and extended for 2 years after World War II

Commodity Credit Corporation Charter Act (P.L. 80-89)

Signed June 29, 1948

Provided the legal entity through which USDA stabilizes prices and facilitates the

efficient distribution of agricultural commodities

Agricultural Act of 1948 (P.L. 80-897)

Signed July 3, 1948

Shifted price supports from fixed to flexible

Modernized the parity formula

Agricultural Act of 1949 (P.L. 81-439)

Signed October 31, 1949

Became part of fundamental legislation along with 1938 Act; last major act without

an expiration date

Superseded 1948 Act, postponing flexible price supports

Cushioned impact of new parity formula

Agricultural Trade Development and Assistance Act of 1954 (P.L. 83-480)

Signed July 10, 1954

Became the basic act for selling and bartering surplus commodities overseas and

for overseas relief

87
Agricultural Act of 1954 (P.L. 83-690)

Signed August 28, 1954

Established flexible price supports beginning in 1955

Authorized a CCC reserve for foreign and domestic relief

National Wool Act of 1954 (Title VII of the Agricultural Act of 1954)

Authorized direct income payments for wool and mohair equal to the difference

between the prices received and certain support levels

Agricultural Act of 1956 (P.L. 84-540)

Signed Hay 28, 1956

Began Soil Bank program for long- and short-term removal of land from production

Consolidated Farm and Rural Development Act (P.L. 87-128)

Signed August 8, 1961

Authorized USDA farm-lending activities

Food and Agriculture Act of 1962 (P.L. 87-703)

Signed September 27, 1962

Continued feed grain acreage reduction program

Provided two-tiered feed grain supports with price-support payments and

nonrecourse loans

Proposed a mandatory wheat program, which was voted down by referendum

Agricultural Act of 1964 (P.L. 88-297)

Signed April 11, 1964

Established a wheat marketing certificate program

Began a cotton PIK program

Food Stamp Act of 1964 (P.L. 88-525)

Signed August 31, 1964

Provided the legislative base for the Food Stamp Program

Later superseded by the food stamp provisions (title XIII) of the Food and

Agriculture Act of 1977

Food and Agriculture Act of 1965 (P.L. 89-321)

Signed November 3, 1965

First in a series of comprehensive, multiyear farm laws; lasted 5 years

Extended voluntary acreage controls to wheat and cotton

Extended wheat certificate program from 1964

Agricultural Act of 1970 (P.L. 91-524)

Signed November 30, 1970

Provided a more flexible approach to supply control through set-asides

Limited Government payments to $55,000 per crop

Agriculture and Consumer Protection Act of 1973 (P.L. 93-86)

Signed August 10, 1973

Target prices and deficiency payments replaced price-support payments

Lowered payment limit to $20,000

Emphasized expanded production to meet world demand

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Food and Agriculture Act of 1977 (P.L. 95-113)

Signed September 29, 1977

Raised price and income supports

Continued flexible production controls and target prices

Established farmer-owned reserve for grains

Set up new two-tiered peanut program

Food Stamp Act of 1977

Title XIII of the 1977 Act (permanently amended the Food Stamp Act of 1964)

Eliminated purchase requirement

Simplified eligibility determinations

National Agricultural Research, Extension, and Teaching Policy Act

Title XIV of 1977 Act

Made USDA the lead Federal agency for agricultural research, extension, and

teaching programs

Consolidated the funding for these programs

Federal Crop Insurance Act of 1980 (P.L. 96-365)

Signed September 26, 1980

Expanded crop insurance from experimental program to a national program covering

all crops

Agriculture and Food Act of 1981 (P.L. 97-98)

Signed December 22, 1981

Contained a number of cost-cutting measures

Set specific target prices for 4-year length of bill

Eliminated rice allotments and marketing quotas

Lowered dairy supports

Omnibus Budget Reconciliation Act of 1982 (P.L. 97-253)

Signed September 8, 1982

Froze dairy price supports

Mandated loan rates and ARP's for 1983 crops

Temporary Emergency Food Assistance Act of 1983 (P.L. 98-8)

Signed March 24, 1983

Authorized distribution of CCC-owned foodstuffs to indigent persons

Extra Long Staple Cotton Act of 1983 (P.L. 98-88)

Signed August 26, 1983

Eliminated marketing quotas and allotments

Tied ELS cotton support to Upland cotton through formula

Dairy and Tobacco Adjustment Act of 1983 (P.L. 98-180)

Signed November 29, 1983

Froze tobacco price supports

Launched a voluntary dairy diversion program

Established a dairy promotion order

Agricultural Programs Adjustment Act of 1984 (P.L. 98-258)

Signed April 10, 1984

Froze target price increases provided in 1981 Act

Authorized paid diversions for feed grains, Upland cotton, and rice

Provided wheat PIK program for 1984

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Balanced Budget and Emergency Deficit Control Act of 1985 (P.L. 99-177)

Signed December 12, 1985

Designed to eliminate the Federal budget deficit by October 1, 1990

Mandated annual reductions in Federal outlays including agriculture

Food Security Act of 1985 (P.L. 99-198)

Signed December 23, 1985

Allowed lower price and income supports

Lowered dairy price supports and established dairy herd buy-out program

Targeted conservation reserve at erosive croplands

Farm Credit Restructuring and Regulatory Reform Act of 1985 (P.L. 99-205)

Signed December 23, 1985

Implemented interest rate subsidy for farm loans

Restructured Farm Credit Administration

Technical Corrections to Food Security Act of 1985 Amendments (P.L. 99-253)

Signed February 28, 1986

Made cross compliance for wheat and feed grains discretionary instead of mandatory

Changed acreage base calculations

Specified election procedure for local ASC committees

Food Security Improvements Act of 1986 (P.L. 99-260)

Signed March 20, 1986

Made further changes in the Act of 1985 (see app. 5)

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APPENDIX 3: GLOSSARY OF AGRICULTURAL POLICY TERMS

Acreage allotment. An individual farm's share, based on its previous production, of

the national acreage needed to produce sufficient supplies of a particular crop.

Acreage-reduction program (ARP). A voluntary land retirement system in which

farmers reduce their planted acreage from their base acreage. Farmers are usually

not paid for ARP participation, although it can be required for participation in

other agricultural programs.

Advance recourse loans. Price-support loans made early in a crop year to farmers to

enable them to hold their crops for later sale, usually within the marketing year.

Farmers must repay the recourse loan with interest and reclaim their collateral.

Agricultural Marketing Service (AMS). A USDA agency that establishes standards for

grades of cotton, tobacco, meat, dairy products, eggs, fruits, and vegetables;

operates grading services; and administers Federal marketing orders.

Agricultural Research Service (ARS). A USDA agency which conducts basic, applied,

and developmental research of regional, national, or international concerns in the

fields of livestock; plants; soil, water, and air quality; energy; food safety and

quality; nutrition; food processing, storage, and distribution efficiency; nonfood

agricultural products; and international development.

Agricultural Stabilization and Conservation Service (ASCS). A USDA agency

responsible for administering farm price- and income-support programs as well as

some conservation and forestry cost-sharing programs; local offices are maintained

in nearly all farming counties.

Animal and Plant Health Inspection Service (APHIS). A USDA agency established to

conduct regulatory and control programs to protect animal and plant health.

Basic commodities. Six crops (corn, cotton, peanuts, rice, tobacco, and wheat)

declared by legislation as requiring price support.

Bilateral agreement. A two-country agreement for the exchange of specified products.

Carryover. The supplies of a farm commodity not yet used at the end of a marketing

year. Marketing years generally start at the beginning of the new harvest for a

commodity.

Casein. A processed milk byproduct.

Commodity Credit Corporation (CCC). A wholly owned Federal corporation within

USDA. CCC functions as the financial institution through which all money

transactions are handled for farm price and income support.

Commodity Futures Trading Commission (CFTC). An independent Government commission

which regulates trading on the 11 U.S. futures exchanges. CFTC also regulates the

activities of numerous commodity exchange members, public brokerage houses,

commodity trading advisors, and commodity pool operators.

Conservation district. Any unit of local government formed for the purpose of

carrying out a local soil and water conservation program.

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Conservation plan. A combination of land uses and practices to protect and improve

soil productivity and to prevent soil deterioration from erosion or other adverse

effects.

Conservation reserve program. A long-range program under which farmers voluntarily

contract to take cropland out of production for 10 to 15 years and devote it to

conserving uses. In return, farmers may receive an annual rental payment for the

contract period and assistance either in cash or in-kind (PIX) for carrying out

approved conservation practices on the conservation acreage.

Converted wetlands. Wetlands that have been drained or otherwise manipulated for

the purpose of producing agricultural commodities. See Wetlands.

Crop acreage base. For wheat, feed grains, Upland cotton, and rice, the average of

the acreage planted and considered planted to the crop for harvest during the 5

preceding crop years.

Deficiency payment. Government payment made to farmers who participate in feed

grain, wheat, rice, or cotton programs; payment rate is per bushel, pound, or

hundredweight, based on the difference between a target price and the market price

or the loan rate, whichever difference is less. See Target price.

Disaster payment. Federal aid provided to farmers for feed grains, wheat, rice, and

Upland cotton when either planting is prevented or crop yields are abnormally low

because of adverse weather and related conditions. The Secretary has the option to

offer disaster payments for the 1985-90 crops of peanuts, soybeans, sugarcane, and

sugar beets.

Environmental Protection Agency (EPA). An independent Government agency established

in 1970 and charged with the responsibility of coordinating effective governmental

action on the part of the environment.

Export allocation or quota. Control applied to exports by an exporting country

to limit the amount of goods leaving that country. Such controls usually are

applied in time of war or during some other emergency requiring conservation of

domestic supplies.

Extension Service. USDA's educational agency. One of the three partners in the

Cooperative Extension Service with State and local governments. All three share in

financing, planning, and conducting the education programs.

Extra long staple (ELS) cotton. Long staple is considered cotton that is 1-3/8" or

more in length. Host ELS cotton is grown in the Southwest and called American Pima

cotton.

Family-size farm. A farm that (1) produces agricultural commodities for sale in

such quantities so as to be recognized in the community as a farm and not a rural

residence; (2) produces enough income (including off-farm employment) to pay family

and farm operating expenses, pay debts, and maintain the property; (3) is managed by

the operator; (4) has a substantial amount of labor provided by the operator and

family; and (5) uses seasonal labor during peak periods and a reasonable amount of

full-time labor.

Farm. Defined by the Bureau of the Census in 1978 as any place that has or would

have had $1,000 or more in gross sales of farm products.

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Farm acreage base. The total of the crop acreage bases (wheat, feed grains, Upland

cotton, and rice) for that farm for that year, the average acreage planted to

soybeans, and the average acreage devoted to conserving uses (excluding ARP's).

Farm Credit Administration. The Government agency responsible for the supervision,

examination, and coordination of the Farm Credit System.

Farm Credit System. A system of borrower-owned banks providing loans to the

agricultural sector. Federal land banks make long-term farm and rural real estate

loans. Federal intermediate credit banks provide funds to production credit

associations that make short- and intermediate-term loans to farmers, ranchers,

farm-related businesses, and commercial fishermen. Banks for cooperatives make

loans to all kinds of agricultural and aquatic cooperatives.

Farmer-owned reserve (FOR). Program designed to provide protection against wheat

and feed grain production shortfalls and provide a buffer against unusually sharp

price movements. Farmers place their grain in storage and receive extended

nonrecourse loans for 3 years, with extensions as warranted by market conditions.

Interest on the loan may be waived, and farmers may receive annual storage payments

from the Government. Farmers cannot take grain out of storage without penalty

unless the market price reaches a specified "release price." When the release price

is reached, farmers may elect to remove their grain from the reserve but are not

required to do so. However, at that point the storage and interest incentives may

be reduced or eliminated.

Farmers Home Administration (FmHA). A USDA agency that provides credit for those in

rural America who are unable to get credit from other sources at reasonable rates

and terms.

Federal crop insurance. A voluntary risk management tool, available to farmers

since the thirties, that protects them from the economic effects of unavoidable

adverse natural events. Administrative costs are appropriated by the Congress and

30 percent of the insurance costs are federally subsidized.

Federal Crop Insurance Corporation (FCIC). A wholly owned Federal corporation

within USDA that administers the Federal Crop Insurance Program.

Federal Grain Inspection Service (FGIS). A USDA agency that establishes official

U.S. standards for grain and other assigned commodities and administers a nationwide

inspection system to certify those grades.

Federal marketing orders and agreements. To promote orderly marketing, a means

authorized by legislation for agricultural producers to collectively influence the

supply, demand, or price of particular commodities. Approved by a required

number of a commodity's producers--usually two-thirds--the marketing order is

binding on handlers of the commodity. It may limit total marketings, prorate the

movement of a commodity to market, or impose site and grade standards.

Feed grain. Any of several grains most commonly used for livestock or poultry feed,

such as corn, grain sorghum, oats, and barley.

Food grain. Cereal seeds most commonly used for human food, chiefly wheat and rice.

Food Stamp Program. A USDA program designed to help low-income households buy an

adequate, nutritious diet. The program began as a pilot operation in 1961 and was

made part of permanent legislation in the Food Stamp Act of 1964.

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General Agreement on Tariffs and Trade (GATT). An agreement negotiated in 1947

among 23 countries, including the United States, to increase international trade by

reducing tariffs and other trade barriers. This multilateral agreement provides a

code of conduct for international commerce. GATT also provides a framework for

periodic multilateral negotiations on trade liberalization and expansion. Seven

sessions have been held, most recently the Tokyo Round Multilateral Trade

Negotiations, which began in 1973 and ended early in 1979.

Green dollar export certificates. The Secretary may make available transferable

certificates to commercial agricultural exporters for market expansion and

development activities. Certificates would then be redeemed within 6 months of

issuance for CCC commodities.

Highly erodible cropland. Highly erodible land that is in cropland use, as

determined by the Secretary. See Highly erodible land.

Highly erodible land. Land that is classified by the Soil Conservation Service

(SCS) as class IV, VI, VII, or VIII land under the land capability classification

system or land that has an excessive average annual rate of erosion.in relation to

its soil loss tolerance level as determined by the Secretary.

Hydric soil. Soil that, in its undrained state, is flooded long enough during a

growing season to develop an anaerobic condition that supports the growth and

regeneration of hydrophytic vegetation.

International trade barriers. Regulations used by governments to restrict imports

from, and exports to, other countries. Examples are tariffs, embargoes, import

quotas, and unnecessary sanitary restrictions.

Import quota. The maximum quantity or value of a commodity allowed to enter a

country during a specified time period.

Land capability classes. A system of expressing the suitability of a soil for

agricultural use. Soils are grouped (classes I through VIII) according to their

limitations when used for field crops, the risk of damage when they are used, and

the way they respond to treatment. The numerals indicate progressively greater

limitations and narrower choices for practical use.

Loan rate. The price per unit (bushel, bale, or pound) at which the Government will

provide loans to farmers to enable them to hold their crops for later sale.

Marketing certificate. A certificate which may be redeemed for a specified amount

of CCC commodities.

Marketing loan. Authorizes producers to repay their commodity loan at a lower

"market" level.

Marketing quota. Under certain agricultural programs, that quantity of a commodity

that will provide adequate and normal market supplies. When marketing quotas are in

effect (only after approval by two-thirds or more of the eligible producers voting

in a referendum), growers who produce in excess of their farm acreage allotments are

subject to marketing penalties on the "excess" production and are ineligible for

Government price-support loans. Quota provisions have been suspended for wheat,

feed grains, and cotton since the sixties; rice quotas were abolished in 1981.

Poundage quotas are still used for domestically consumed peanuts, but not for

exported peanuts.

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Multilateral. Agreements or programs involving three or more countries, such as the

General Agreement on Tariffs and Trade. See Bilateral.

National Agricultural Cost of Production Standards Review Board. Established in

1981 to annually review the cost of production methodology used by USDA in

price-support programs.

National farm program acreage. The number of harvested acres of feed grains, wheat,

Upland cotton, and rice needed nationally to meet domestic and export use and to

accomplish any desired increase or decrease in carryover levels. Program acreage

for an individual farm is based on the producer's share of the national farm program

acreage.

Nonrecourse loans. Price-support loans to farmers to enable them to hold their

crops for later sale, usually within the marketing year. The loans are nonrecourse

in that farmers can forfeit without penalty the loan collateral (the commodity) to

the Government as settlement of the loan. See Loan rate.

Normal crop acreage. The acreage on a farm normally devoted to a group of

designated crops. When a set-aside program is in effect, a farm's total planted

acreage of such designated crops plus set-aside acreage cannot exceed the normal

crop acreage, if the farmer wants to participate in the commodity loan program or

receive deficiency payments.

Normal yield. A term designating the average historical yield established for a

particular farm or area. Normal production would be the normal acreage planted to a

commodity multiplied by the normal yield.

Office of Technology Assessment (OTA). Established in 1972, OTA is a nonpartisan

support agency which serves Congress. Its purpose is to provide analyses of

emerging, difficult, and technical issues that confront our society.

Paid diversion. A voluntary land retirement system in which farmers are paid for

foregone production from their base acreage.

Parity price. Originally, the price per bushel, pound, or bale that would be

necessary for a bushel today to buy the same quantity of goods (from a standard

list) that a bushel would have bought in the 1910-14 base period at the prices then

prevailing. In 1948, the parity price formula was revised to make parity prices

dependent on the relationship of farm and nonfarm prices during the most recent

10-year period for nonbasic commodities. Basic commodities, including wheat, corn,

rice, peanuts, and cotton use the higher of the historical formula or the new

formula.

Payment-in-kind (PIK). Used by CCC in both export and domestic commodity programs,

PIK certificates, expressed as a dollar value, may be redeemed either for

commodities or, in some cases, for cash.

Payment limitation. A limitation set by law on the amount of money any one

individual may receive in farm program payments, such as deficiency and disaster

payments, each year under the feed grain, wheat, cotton, and rice programs. The

limitation, currently $50,000, does not include the value of loans received, any

gain realized from a marketing loan, deficiency payments made as a result of

lowering the basic loan rate (under the wheat and feed grain programs), loan

deficiency payments, inventory reduction payments, and benefits received as a result

of cost reduction actions by the Secretary.

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Permanent legislation. The statutory legislation upon which many agricultural

programs are based (for the major commodities, principally the Agricultural

Adjustment Act of 1938 and the Agricultural Act of 1949). Although these laws are

frequently amended for a given number of years, they would once again become law if

current amendments, such as the 1985 Act, were to lapse or new legislation not be

enacted.

Program crops. Wheat, corn, barley, grain sorghum, oats, Upland cotton, and rice.

Program yield. The farm commodity yield of record determined by averaging the yield

for the past 5 years, dropping the high and low years.

Public Law 480. Enacted in 1954 to expand foreign markets for U.S. agricultural

products, combat hunger, and encourage economic development in developing

countries. Makes U.S. agricultural commodities available through low-interest,

long-term credit under title I of the act, and as donations for famine or other

emergency relief under title II. Under title I, the recipient country agrees to

undertake agricultural development projects to improve its own food production or

distribution. Title III authorizes "food for development" projects.

Puerto Rico block grant. Annual funding to provide food assistance to needy persons

in Puerto Rico in lieu of the Food Stamp Program.

Rural Electrification Administration (REA). A USDA agency which assists rural

electric and telephone utilities to obtain financing.

Set-aside. A program to limit production by restricting the use of land. Restricts

the amount of a farmer's total cropland base used for production rather than on the

acres used to produce a specific crop. See Normal crop acreage.

Shelterbelt. A plant barrier of trees, shrubs, or other approved perennial

vegetation designed to reduce wind erosion.

Skip-row planting. Planting in uniform spaces one or more rows to a commodity

(especially cotton), then skipping one or more rows.

Soil Conservation Service (SCS). A USDA agency responsible for developing and

carrying out national soil and water programs in cooperation with landowners,

operators, and others.

Subsidy. Any national tax rebate on exports, financial assistance on preferential

terms, financial assistance for operating losses, assumption of costs or expenses of

production, processing, or distribution, a differential export tax or duty

exemption, domestic consumption quota, or other method of ensuring the availability

of raw materials at artificially low prices.

Target option program. A program in which wheat producers, at the Secretary's

discretion, choose from a schedule of target prices and corresponding acreage

reduction levels.

Target price. A price level established by law for wheat, feed grains, rice, and

cotton. If the market price falls below the target price, an amount equal to the

difference (but not more than the difference between the target price and

price-support loan levels) is paid to farmers who participate in commodity

programs. See Deficiency payment.

96
Tariffs. A system of duties imposed by government on imported goods.

Temporary Emergency Food Assistance Program (TEFAP). Established in 1983 to provide

CCC-owned foodstuffs, at no charge, to States in amounts relative to the number of

unemployed and needy persons. The food is distributed by charitable organizations

to eligible recipients.

U.S. Trade Representative. An independent Government agency charged with

administering the U.S. trade agreements programs.

Vegetative cover. Perennial grasses, legumes, or shrubs with an expected lifespan

of 5 years, or trees.

Wetlands. Land that has a predominance of hydric soils and that is inundated by

surface or ground water often enough to support a prevalence of hydrophytic

vegetation typically adapted for life in saturated soil conditions. See Hydric soil.

Whole herd buy-out program. Program whereby producers may submit bids to the

Secretary for the purpose of ending milk production in return for payment.

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APPENDIX 4: SELECTED REFERENCES

Abbott, Phillip. Foreign Exchange Constraints to Trade and Development. FAER-209.

U.S. Dept. Agr., Econ. Res. Serv., Nov. 1984.

Johnson, James D., Richard W. Rizzi, Sara D. Short, and R. Thomas Fulton.

Provisions of the Agriculture and Food Act of 1981. AER-483. U.S. Dept. Agr.,

Econ. Res. Serv., Mar. 1982.

Langley, James A., and J. Michael Price. Implications of Alternative Moving Average

Loan Rates. AER-538. U.S. Dept. Agr., Econ. Res. Serv., Aug. 1985.

Paarlberg, Phillip L., Alan J. Webb, Arthur Morey, and Jerry A. Sharples. Impacts

of Policy on U.S. Agricultural Trade. ERS Staff Report AGES840802. U.S. Dept.

Agr., Econ. Res. Serv., Dec. 1984.

Reichelderfer, Katherine H. Do USDA Farm Program Participants Contribute to Soil

Erosion? AER-532. U.S. Dept. Agr., Econ. Res. Serv., Apr. 1985.

Shane, Mathew D., and David Stallings. Financial Constraints to Trade and Growth:

The World Debt Crisis and its Aftermath. FAER-211. U.S. Dept. Agr., Econ. Res.

Serv., Dec. 1984.

U.S. Department of Agriculture, Economic Research Service. A Summary Report on the

Financial Conditions of Family-size Commercial Farms. AIB-492. Mar. 1985.

. Agricultural Food Policy Review: Commodity Program Perspectives.

AER-530. July 1985.

. Analysis of Policies to Conserve Soil and Reduce Surplus Crop

Production. AER-534. Apr. 1985.

. Barley: Background for 1985 Farm Legislation. AIB-477. Sept.

1984.

Corn; Background for 1985 Farm Legislation. AIB-471. Sept. 1984.

Cotton: Background for 1985 Farm Legislation. AIB-476. Sept.

1984.

Dairy: Background for 1985 Farm Legislation. AIB-474. Sept. 1984.

Federal Credit Programs for Agriculture. AIB-483. Nov. 1984.

Financial Characteristics of U.S. Farms, January 1985. AIB-495.

July 1985.

History of Agricultural Price-Support and Adjustment Programs,

1933-84. AIB-485. Dec. 1984.

Honey: Background for 1985 Farm Legislation. AIB-465. Sept. 1984.

Oats: Background for 1985 Farm Legislation. AIB-473. Sept. 1984.

Peanuts: Background for 1985 Farm Legislation. AIB-469. Sept. 1984.

98
. Possible Economic Consequences of Reverting to Permanent

Legislation or Eliminating Price and Income Supports. AER-526. Jan. 1985.

Rice: Background for 1985 Farm Legislation. AIB-470. Sept. 1984.

Sodbusting: Land Use Change and Farm Programs. AER-536. June 1985.

Sorghum: Background for 1985 Farm Legislation. AIB-475. Sept. 1984.

Soybeans: Background for 1985 Farm Legislation. AIB-472. Sept.

1984.

Sugar: Background for 1985 Farm Legislation. AIB-478. Sept. 1984.

The Current Financial Condition of Farmers and Farm Lenders.

AIB-490. Mar. 1985.

Tobacco: Background for 1985 Farm Legislation. AIB-468. Sept. 1984.

Wheat: Background for 1985 Farm Legislation. AIB-467. Sept. 1984.

· Wool and Mohair: Background for 1985 Farm Legislation. AIB-466.

Sept. 1984.

U.S. Department of Agriculture, World Agricultural Outlook Board. Agriculture in

the Future: An Outlook for the 1980's and Beyond. AIB-484. Dec. 1984.

99
APPENDIX 5: SUMMARY OF THE FOOD SECURITY IMPROVEMENTS ACT OF 1986

The Food Security Improvements Act of 1986 (P.L. 99-260) was passed by Congress on

March 12, 1986, and signed by the President on March 20, 1986. The provisions

summarized below make "technical corrections" to the Food Security Act of 1985.

Nonprogram Crops

The 1986 Act limits the crops that can be planted under the 50-92 provisions of the

1985 Act (see the Farm Program Acreage sections of titles III-VI). Under the 1985

Act, any crops other than wheat, feed grains, cotton, rice, and soybeans can be

seeded on the underplanted acreage. The crops allowed by the 1986 Act, however,

include only sweet sorghum, guar, sesame, safflower, sunflower, castor beans,

mustard seed, crambe, plantago ovato, flaxseed, triticale, rye, commodities grown

for experimental use (including kenaf), and commodities for which no substantial

lomestic production or markets exist but which could be used to make industrial

iroducts that are now imported. These crops can be planted only if the Secretary

determines that such production will probably not increase the cost of price support

programs, will not adversely affect farm income, and is needed to provide adequate

supplies of the crop or to encourage domestic production of industrial raw

materials. These restrictions do not apply to producers who planted (or contracted

to plant) a nonprogram crop on the permitted acreage before February 26, 1986.

Haying and grazing are permitted on the underplanted acreage at the request of the

State ASC committee, unless the Secretary determined that there would be an adverse

economic effect.

Protection of Crop Acreage Bases

The 1986 Act adds a related provision concerning crop acreage bases (title X). If a

producer plants for harvest at least 50 percent of the permitted acreage to a

program crop (wheat, feed grains, Upland cotton, or rice); devotes the rest to a

crop other than peanuts, soybeans, ELS cotton, or the commodities listed above; and

does not receive deficiency payments under the 50-92 provisions, then 50 percent of

the permitted acreage is considered planted in crop years 1986-87, 35 percent in

1988, and 20 percent in 1989.

Farm Program Payment Yields

Under the 1986 Act, if the farm program yield for the 1986 crop is reduced by more

than 3 percent from the 1985 program yield, the Secretary must make up the

difference to the 3-percent level in CCC-owned commodities. For the 1987 crop, if

the program yield declines more than 5 percent from 1985, the Secretary must make up

the difference to the 5-percent level in CCC-owned commodities. For the purposes of

calculating farm program payment yields for crop years 1988-90, the 1986 program

yield cannot be reduced more than 10 percent below that of 1985.

Haying and Grazing

The 1986 Act changes the provisions for haying and grazing on diverted wheat and

feed grain acreage to permit haying and grazing, if requested by the State ASC

committee, during the 5 principal growing months of the 1986 crop year. The grazing

provisions for 1987-90 remain the same (see the Acreage Reduction section in titles

III-IV).

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Dairy

The 1986 Act increases the deduction taken from the price of milk received by

producers to fund the whole herd buy-out program. The act increases the deduction

as much as $0.12 per cwt during April 1, 1986, through September 30, 1986, to offset

the March 1 reductions in Federal payments required by the Balanced Budget and

Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings).

The 1986 Act also requires the Secretary to hold a hearing within 90 days of

receiving a proposal to amend a milk marketing order to provide for marketwide

service payments. Implementation of the service payments, if approved, would be

required within 120 days after the hearing (see the Milk Marketing Order section of

title I).

Advance Recourse Loans

The 1986 Act expresses a sense of Congress (a nonbinding request) that the Secretary

should provide the advance recourse loans authorized in title X of the 1985 Act to

1986 commodity program participants. However, the 1986 Act restricts the loans to

producers unable to obtain credit elsewhere to finance production of the 1986 crop

and limits the loans to $50,000 or 50 percent of the estimated price support loan

(based on the program yield and farm program acreage intended to be planted),

whichever is less. Producers must provide a first lien on the crop as security for

the loan and obtain crop insurance.

Special Assistant for Agricultural Trade and Food Assistance

The 1985 Act created the position of a Special Assistant for Agricultural Trade and

Food Aid (title XI). The 1986 Act, aside from changing the title slightly, requires

that the person be appointed by May 1, 1986. The eligible salary would be changed

from level I to no less than level III of the Executive Pay Schedule, as determined

by the President.

Targeted Export Assistance

The 1986 Act changes the 1985 Act to require that at least $110 million of CCC funds

or commodities be used annually in fiscal years 1986-88 for a targeted export

assistance program. The 1985 Act (title XI) had set the minimum level at $325

million annually.

Market Development and Expansion

The 1985 Act mandated that at least $2 billion in CCC-owned commodities be used

during fiscal years 1986-88 on export market enhancement (title XI). The 1986 Act

changes that level to at least $1 billion, but not more than $1.5 billion in

CCC-owned commodities over the same period. The 1986 Act retains the provision,

however, that the commodities should be used in equal amounts in each of the fiscal

years.

Overseas Donations Under Section 416

This provision requires the Secretary to estimate year-end, uncommitted CCC stocks

by March 31, 1986. The Secretary must also publish an estimate of the amount of CCC

stocks to be used under section 416 (title XI) during fiscal year 1986 in the

Federal Register by March 31, 1986.

101
Food Stamps

The 1986 Act changes the due date of the required Food Stamp Program quality control

studies (Program Administration section of title XV) from December 23, 1986, to 1

year after the contract is signed by USDA and the National Academy of Sciences. No

date is set for the study contract itself. The 1986 Act also extends the deadlines

for publishing regulations and implementing the revised quality control system until

6 months after the reports are submitted to Congress.

External Combustion Engine Research

This provision permits CCC to export up to $30 million in agricultural commodities

per year to finance research and development of external combustion engines using

nonpetroleum fuels.

102
INDEX

Acreage base, 1, 8, 12-15, 17, 18, 20, Crop insurance, 9, 33, 38, 46, 47, 53,

23, 24, 26, 31, 32, 34, 37, 54, 90, 82, 89, 93, 101

92, 93, 100

Acreage reduction program (ARP), 8, 9, Dairy products, 2, 4-6, 40, 45, 71, 91

12-14, 15, 17, 18, 20, 21, 23, 24, 26, Dairy export incentive program, 2, 5

29, 31, 34, 36., 37, 87-89, 91, 96, 100 Dairy indemnity program, 5

Additional peanuts, 26-29 Deficiency payment, 6, 8, 9, 13, 15,

Advance deficiency payments, 26, 33 17, 18, 20-24, 26, 92, 96

Advance program announcement, 37 Disabled persons, 64

Advance recourse commodity loans, 33 Disaster payment, 9, 18, 24, 26, 29,

Agricultural productivity, 63 30, 33, 35, 37, 46, 47, 82, 88, 92,

Agricultural Stabilization and Conser- 95, 100

vation Service (ASCS), 50, 91 Disaster task force, 69

Agricultural trade policy, 41

Animal welfare, 81, 82 Embargo protection, 43

Appeal procedures, 49, 54 Emergency Feed Program, 37, 82

Aquaculture, 56, 60, 80, 81 Emergency loan, 53

Asset limit, 65 Erosion, 46, 48, 63, 92, 94, 96, 98

Export certificate, 14, 34, 35, 42, 94

Barley, 7, 8, 12, 13, 15, 34, 35, 93, 96, Export Credit Revolving Fund, 42

98 Export displacement, 45

Basic loan rates, 7, 9, 33, 95 Export promotion, 34, 35, 38, 41-43

Barter, 40, 43, 45, 46 Export sales, 6, 42, 45

Beef, 3, 42, 72-74 Extension Service, 61, 63, 72, 92

Biotechnology, 58, 62

Farm acreage base, 31, 93

Cargo preference, 38, 44 Farm and home plan, 55

Casein, 2, 3, 91 Farm Credit System, 56, 58, 93

Clear title, 50, 57 Farm program payment yield, 8, 9, 17,

Commodity Credit Corporation (CCC), 2, 3, 18, 20, 23, 24, 31, 32, 34, 35, 37,

5, 17, 21-23, 28, 30, 33-35, 37, 38, 96, 100, 101

40-42, 45-47, 49, 62, 71, 82, 84, 88, Farmer-owned reserve (FOR), 1-9, 12-18,

89, 91, 94, 95, 97, 100-102 20-24, 26-29, 30-51, 53-84, 87-102

Commodity distribution program, 69, 71 Farmer-to-Farmer Program, 41

Commodity processing program, 71 Farmers Home Administration (FmHA), 46,

Confidentiality of information, 83 47, 49, 50, 53-58, 82, 93

Conservation, 1, 12, 13, 18, 24, 32, Farmland protection, 50

46-50, 54-56, 59, 63, 79, 87, 90-92, Federal Insecticide, Fungicide, and

94, 96 Rodenticide Act (FIFRA), 45, 83

Conservation easements, 50, 55 Feed grains, 1, 6-9, 12-15, 17, 18,

Conservation reserve, 12, 18, 24, 46-50, 22-24, 31-37, 81, 82, 88-90, 92-96,

90, 92 100

Converted wetlands, 32, 92 Financial statements, 55, 57

Cooperative agreements, 60, 62 Food for development, 41, 96

Coordinated financial statement, 55 Food for progress, 38, 40

Corn, 7-9, 13-15, 34, 35, 37, 38, 45, 71, Food security wheat reserve, 37

91, 93, 95, 96, 98 Food stamps, 64-66, 68-70, 102

Cost of production, 14, 28, 38, 95 Foreign Agricultural Service (FAS), 43,

Cost reduction, 33, 35, 95 44

Cotton, 8, 9, 15-18, 20-24, 26, 31-33, Futures trading, 81, 91

36-38, 72, 81, 88, 89, 91-96, 98, 100

Credit Guarantee Program, 41 General Agreement on Tariffs and Trade

Crop acreage base, 1, 8, 12, 13, 17, 18, (GATT), 41, 94

20, 23, 24, 26, 31, 34, 37, 92, 93, 100 Grain standards, 72, 77

103
Grasshoppers, 84 Paid land diversion (PLD), 9, 13, 15,

Grazing, 12, 13, 18, 24,36, 37, 100 18, 20, 23, 24, 26, 89, 95

Green dollar export certificates, 42, 94 Parity, 2, 6, 32, 87, 95

Ground water, 49, 97 Payment limit, 33, 88

Guaranteed loans, 50, 54, 56 Payment-in-kind (PIK), 18, 24, 95

Peanuts, 26-29, 35, 91, 92, 94, 95, 99,

Haying, 12, 13, 18, 24,100 100

Highly erodible land, 32, 46-48, 50, 54, Public Law 480 (P.L. 480), 39-41, 44,

56, 94 96

Homestead protection, 50, 56 Pork, 3, 42, 72, 75, 76

Honey, 31, 32, 71, 98 Potato Advisory Commission, 83

Individual farm program acreage, 8, 9, 17, Poundage quota, 26-29, 94

18, 23, 37 Prevented planting payments, 9, 35

Interest payment certificates, 33 Price support, 1-3, 5, 6, 12, 14, 15,

Interest rate reduction program, 56 18, 21, 24, 26, 28-30, 36, 42, 46,

International trade, 45, 59, 94 47, 77, 81, 82, 87-91, 94-96, 98,

Inventory reduction payments, 6, 13, 20, 100, 101

24, 33, 95 Puerto Rico, 67, 70, 96

Ireland, 59

Quota peanuts, 26-29

Joint farming operations, 50

Real estate loans, 53, 57, 93

Lamb, 3 Reduced yield payments, 9, 35

Land-grant colleges, 59 Rice, 8, 9, 18, 21-24, 26, 31-33,

Liquid fuels, 38 36-38, 40, 46, 71, 89, 91-96, 99, 100

Loan deficiency payments, 6, 8, 13, 17, Rye, 7, 8, 12, 15

20-23, 26, 33, 95

Loan level, 7-9, 14-18, 20-24, 26, 28-30, Set-aside, 8, 9, 12-14, 29, 36, 88

32, 33, 35-37, 55, 81, 82, 89, 92, Sodbuster, 46, 47, 49

94-96, 98 Softwood timber, 49

Soil, 13, 47, 49, 50, 59, 63, 87, 88,

Marketing certificates, 15, 17, 21-23, 91, 92, 94, 96-98

26, 33-35 Soil Conservation Service (SCS), 47,

Marketing loan, 6-8, 15-17, 21-23, 29, 94, 96

32, 33, 35, 94, 95 Sorghum, 7, 8, 12, 13, 15, 34, 35, 93,

Marketing orders, 4, 5, 72, 77, 91, 93, 96, 99, 100

101 Soybeans, 8, 18, 23, 29-31, 32, 35, 61,

Mental health centers, 64 81, 92, 93, 96, 99, 100

Milk diversion program, 2, 3 Strategic ethanol reserve, 84

Mohair, 6, 88, 99 Strategic materials, 43, 46

Multiyear set-aside, 36 Strategic petroleum reserve, 46, 84

Sugar beets, 30, 35, 92

National program acreage (NPA), 8, 17, 23 Sugarcane, 30, 35, 92

National Tree Seed Laboratory, 84 Supplemental food program, 69, 70

Nonrecourse loan, 6, 15, 20, 30, 33, 35, Swampbuster, 46, 47, 49

87, 88, 93, 95

Nonsupervised accounts, 53 Target option program (TOP), 9

Normal income security, 55 Target prices, 6-9, 14, 15, 18, 20-22,

Normal supply, 38 24, 26, 36, 37, 88, 89, 92, 96

Nutrition, 63, 64, 67, 70-72, 91 Targeted assistance program, 42

Nutrition monitoring, 64, 72 Temporary Emergency Food Assistance

Program (TEFAP), 64, 71, 97

Oats, 7, 8, 13, 15,34, 35, 93, 96, 98 Tobacco, 2, 3, 45, 46, 89, 91, 99

Office of Technology Assessment, 78, 95 Trade barriers, 41, 43, 94

Oil, gas, and mineral rights, 53

Operating loan, 50, 53, 55, 57 Unleaded fuel, 83

104
Wetland, 32, 46, 47, 56, 92, 97

Wheat, 1, 6-9, 12-15, 17, 18, 22-24, 31-38,

40, 71, 72, 81, 88-96, 99, 100

Wheat marketing quotas, 6, 14

Whole herd buy-out, 3, 97, 101

Wildlife food plots, 13, 18, 24

Wool, 6, 72, 88, 99

Workfare, 67, 68

World Food Program, 39

U.S. Government Printing Office: 1990 - 261-455/20149

105
UNITED STATES DEPARTMENT OF AGRICULTURE

ECONOMIC RESEARCH SERVICE

1301 NEW YORK AVENUE, N. W.

WASHINGTON, D. C. 20005-4788