Crisis could scupper landmark farm act

Washington may heed farmers' demand for a stronger 'safety net,'

Hundreds of farmers, hard hit by sharply lower crop and livestock prices, rallied on Capitol Hill this week to call for replacing the so-called "freedom to farm" law with new pricing and production safety nets.

Facing their worst economic crisis since the 1980s - incomes have slid over the past three years and commodity prices have dropped to historically low levels - farmers are exerting mounting pressure for Congress to overhaul or even scrap the sweeping 1996 farm act that is phasing out subsidies and leaving growers more vulnerable to market swings.

Although few in Congress or the administration blame "freedom to farm" for causing today's serious slump, there is a growing consensus in Congress, the administration, and among experts that the 1996 law lacks the flexibility and breadth needed to buoy farmers in hard times. They also agree that short-term fixes must be replaced with new legislation aimed at establishing a more flexible, long-term safety net for farmers, while still allowing the market to work.

Farmers are on "precarious financial footing" and demand for changes to the law is widespread, House Agriculture Committee Chairman Larry Combest (R) of Texas told a packed hearing this week.

The Clinton administration on Wednesday presented Congress with a proposal estimated at $7 billion for fresh emergency aid that would also lay a groundwork for major revisions of the 1996 law, which it said has failed to adequately support farmers in the current crisis.

"Frankly speaking,... farm policy ... has not kept up with the times," Agriculture Secretary Dan Glickman told the House committee. Above all, he said the administration seeks to craft with Congress a farm policy with counter-cyclical income supports, in order to "strengthen the safety net in the long term."

US farmers are suffering in part because record world grain production and weak export demand resulting from the Asian and Russian economic crises have combined to push down commodity prices. US agricultural exports, for example, are projected to reach $49 billion this fiscal year, compared with a record of $60 billion in fiscal 1996, according to the Agriculture Department.

The grain glut is causing projected 1999 crop prices for corn, soybean, hogs, wheat, cotton, and rice all to drop from 25 to 35 percent below what they averaged over the five years from 1993 to 1997. In turn, net farm income is falling, with cash income for fiscal 1999 forecast at $53.7 billion, the lowest level since 1995.

Crop yields in some areas are also falling due to regional weather disasters, including drought in the Mid-Atlantic states and the Pacific Northwest, and flooding in North Dakota. The government estimates the damages from disasters to range from $800 million to $1.2 billion this year.

Government forecasters say they see little relief soon for farmers from the depressed prices and incomes.

Meanwhile, the 1996 farm act has offered less, not more, support for farmers. Under the act, farmers gained freedom over planting decisions as the government largely stopped controlling production or supporting prices. At the same time, the government phased out subsidies by offering fixed, declining income payments in seven-year contracts. Loan rates were also capped.

As a result, Congress has been obliged to respond to the recent farm troubles with emergency funds. Last year, it authorized nearly $6 billion in supplemental income and crop loss payments and more than $1 billion in added credit to family farmers. In August, the Senate passed a bill that would grant an additional $7 billion in emergency aid to growers, an amount Secretary Glickman says the administration supports.

In addition to direct disaster and income relief, proposed short-term aid for farmers includes funds for constructing on-farm storage facilities to handle excess grain, an expansion of the government's set-aside program that pays farmers not to till land

Total government payments to farmers have ballooned from $7.5 billion in 1997 to more than $12 billion last year to $17 billion forecasted for this year.

One key proposal offered by the administration would be to institute "counter-cyclical" income assistance. When crop prices fall below a five-year average, the government would make up a percentage of the shortfall. Payments would also be linked to current planted acreage versus yields, rather than to historic production.

Additional long-term solutions include promoting the wider use of crop insurance and other risk-management tools, as well as promoting agricultural exports, lawmakers and administration officials say.

Farmers and groups that represent them, while seeking to preserve their right to plant what they choose under freedom to farm, largely agree that greater government assistance for farmers is needed. "We need a farm program with tremendous flexibility" that can cope with yearly, global changes in the farm economy, says Leland Swenson, president of the national Farmers Union in Evergreen, Colo.

Rob Grimm, a young corn and soybean farmer in Wilton, Iowa, seeks some government relief from low crop prices. "Somebody's got to grow all the food for the world," he says, "so the government's going to have to figure out how to keep us around."

*Abraham McLaughlin in Iowa contributed to this report.

(c) Copyright 1999. The Christian Science Publishing Society