Agricultural Economics Department


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presentation at Producer Marketing and Risk Management: Frontiers for the 21 st Century A Conference Sponsored by the Food and Agricultural Marketing Policy Section of the American Agricultural Economics Association January 13 and 14, 2000 Homewood Suites Hotel, International Drive, Orlando, Florida


Copyright 2000 by Keith H Coble, Thomas 0. Knight, George F. Patrick, and Alan E. Baquet. All rights are reserved Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.


Freedom to Farm legislation enacted in 1996 was widely perceived as a dramatic step toward a more market oriented farm policy which would create a producer decision environment more conducive to competitive adjustments. Enacted in a time of high market prices and large exports of agricultural products, the transition payments were initially larger than deficiency payments would have provided. Generally, this legislation received strong support from Midwestern and Central Plains states. However, final passage was secured through concessions to legislators from other regions. Abrupt declines in many farm program crop prices in 1998 have tested the support for Freedom to Farm Aggregate net cash income excluding direct government program payments in 1999 is now projected to be $35.4 billion which is 31 percent below the record high of 1997. These changes have brought about a severe test of the Freedom to Farm legislation. This is evidenced by the passage of ad hoc disaster legislation in both 1998 and 1999, after a three-year cessation. In 1999, USDA projects direct government payments to total $22.5 billion -- three times the payment level of 1996, when Freedom to Farm was enacted.

Thus, in 2000 there is widespread debate about the future direction of farm policy. The Secretary of Agriculture has repeatedly called for modifications of farm policy to provide a better "safety net" for agricultural producers. Some have gone as far as suggesting a repeal of the 1996 Farm Bill. Further, substantial attention has been given to crop insurance reform during the past year. The President called for modifications of crop insurance in his State of the Union Address, and a number of bills have been submitted in both Houses of Congress that would significantly modify current crop insurance programs. These proposals generally provide enhanced benefits to producers through increased subsidy percentages for buy-up insurance coverage and/or a higher level of catastrophic coverage. No legislation was ultimately enacted in 1999, but previously budgeted funds will hl

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