Grassley Commodity Title "Working Draft"
The General Economic Balanced Opportunity Composite Standard is a composite index of factors that are important to agriculture (growing-region precipitation, temperature and exchange rates). The index is normalized by adopting a value of 100 when the exchange rate is set at its 2001 value and when the weather variable is set at its value of 105 in the index. The percentage of decline below the adopted trigger level determines the size of the payment provided to the respective commodity's producers.
The maximum payment available is equal to average per year of the value of production plus marketing loans and market loss assistance payments during the 1996-2001 base period.
The payments to prices or production, prices or production after the base period, and payment recipients are not required to produce a crop.
| Current rate | House Proposal | Grassley proposal | |
| Soybeans | 5.26 | 4.92 | 5.15 |
| Corn | 1.89 | 1.89 | 1.98 |
| Grain sorghum | 1.71 | 1.89 | 1.98 |
| Wheat | 2.58 | 2.58 | 2.71 |
| Barley | 1.65 | 1.70 | 1.73 |
| Oats | 1.21 | 1.21 | 1.27 |
| Rice | 6.50 | 6.50 | 6.83 |
| Minor oilseeds | 0.093 | 0.087 | 0.0977 |
| Upland cotton | 0.5192 | 0.5192 | 0.5452 |
All existing crops receive a 5% increase in loan. Grain sorghum loan is locked at 100% of the corn loan.
Maintain fixed payments at 2002 AMTA levels for traditional program crops. Include soybean acres equal to average certified soybean acreage in 1996-2000 as part of a farm payment acreage. In the event soybean acres would result in total payment acres exceeding a farm's Crop Acreage Base, the producer would be required to reduce payment acres for any crops(s).
Allow all producers the opportunity (optional) to update their base, but not yields.
Establish a soybean payment rate of $0.65 per bushel, reflecting a price relationship between soybeans and corn of 2.5 to 1.0 applied to the corn PFC payment of $0.26. As with PFC crops, soybean payments would be made on 85% of payment acres, for an effective payment rate of $0.5525/bu. Soybeans would use the national average yield for 1981-85 (31 bu./acre). The effective per-acre payment would be $17.13/acre.
$75,000 for marketing loan payments, $40,000 for fixed payments, and $75,000 for the GE-BOCS payment. Support the continuation of the three entity rule and ELIMINATE commodity certificates.
Establish a Farm Savings Account co-pay opportunity. Producers of non-program commodities can contribute up to $2,500 annually, which will be matched through USDA's CCC.
A qualifying producer will be any producer who shares in the risk of producing the commodity and has reported at least $20,000 in estimated income from all agricultural enterprises in each of the preceding 5 taxable years. Beginning producers with at least $20,000 in estimated income from all agricultural enterprises for the applicable year would also qualify.
In counties where 65% of producers receive an indemnity payment during one calendar year, all producers in the county (whether they received an indemnity payment or not) will be able to receive a low interest loan through Rural Development at a 3-4% interest rate equivalent to the size of their deductible on their crop insurance policy.
If a farmer does not have coverage, he or she can receive a loan for the size of their crop, but he or she must buy coverage for the next season. This will encourage farmers to protect their own risk and eliminate the political element associated with local or regional disasters.
Requires USDA to study the effects the 3-entity rule has had on the economic viability of farmers and farming.
This title will include a five-year sunset clause.
Letter from USDA Chief Economist Keith Collins to Sen. Grassley:
This note provides some observations on the evaluation by USTR (U.S. Trade Representative) and USDA staff of proposed countercyclical programs as part of the ongoing farm bill discussions. We greatly appreciate your recognition of the importance of having our domestic support programs be compatible with our existing trade agreements and our overall trade agenda.
This is a particularly difficult proposition, as you well understand. The problem is that tying financial assistance to prices, yields or income clearly makes the support 'trade distorting' and thus in the amber box. The further the financial assistance can be removed from these variables the less likely the program is to be trade distorting, but also the less likely it is to be countercyclical (i.e., to actually provide support to producers in times of clear economic need).
The specific proposal you have advanced has a particularly interesting approach in that it uses unusual indicators as the trigger for farm assistance. The fact that the trigger indicators are not prices, yields or income would suggest this to be green box along with the finding that there is not perfect correlation with prices or income.
However, the final determination, if challenged by another WTO signatory, is difficult to predict because it is impossible to predict how a WTO panel might rule. The critical issue would be how the panel members would view indicators that mimic, even if not perfectly correlated, prices or income.
The concept is intriguing and we will continue to examine it and to work with your staff in evaluating new ideas and possible improvements.