June 13, 2002 | By: Laura Skillman

The Farm Security and Rural Investment Act of 2002, better known as the Farm Bill, replaces federal legislation passed in 1996 and sets national farm legislation for the next six years.

The 2002 Farm Bill retains some provisions of its predecessor while changing or adding other provisions. The legislation includes provisions on commodities, conservation, trade, nutrition, credit, rural development, research, forestry, and energy.

While there are not a lot of differences between the 1996 and 2002 farm bills, farmers should still get all the details about the new legislation before making any decisions, said Steve Riggins, University of Kentucky grain marketing specialist.

To better understand some of the changes, UK agricultural economists and farm management specialists have put together information for the state's farmers. In western Kentucky, Craig Gibson, farm management specialist with the Ohio Valley Farm Analysis Group, outlined a review of the bill for grain farmers.

While general information is available, more details on the various programs within the legislation will be available when the Farm Service Agency completes work on specific regulations.

Features in the bill of interest to grain producers include higher loan rates for most crops; direct payments for wheat, feed grains, cotton and rice; expanded eligibility of direct payments to oilseed producers; and counter-cyclical payments.

Loan rates vary by county and are set through the U.S. Department of Agriculture's Farm Service Agency. Loan deficiency payments are available when market prices are lower than commodity loan rates.

Additionally, producers will have the option of updating crop base acres using their past four years of planting history to calculate direct and counter-cyclical payments. Yields can be adjusted only for counter-cyclical payments.

Updating will probably will be beneficial to most farmers, said Gregg Ibendahl, UK agricultural economist. To help farmers determine what will be the best route for them, Ibendahl is working on a spreadsheet that can be accessed through the Agricultural Economics department web site. The tool should be available later this month.

Counter-cyclical payments are based on the relationship between market prices and specific target prices set up within the legislation. The payments are based on a farm's program acreage level. Payments are limited to $65,000 per individual per year.

Direct payments to farmers were introduced in the 1996 legislation as production flexibility contract payments and continue in the recently approved legislation with the addition of soybeans and oilseeds, according to Will Snell, UK Extension agricultural economist. Direct payments are made on 85 percent of the base acres and are limited to $40,000 per program participant per year.

Gibson said the 2002 bill does not provide a windfall to grain farmers. In a normal crop year, grain farmers will likely see little additional money than they have been receiving in recent years.

"I think in very general terms, what's scarey is that this bill is designed to help farmers in years of overproduction and low prices. There is limited direct benefit when farmers experience low yields and high prices; prices never seem to offset low yields," Gibson said. "Farmers also need to remember that counter-cyclical payments are not guaranteed. There may not be any if prices move too high. It is important not to necessarily count on them."

In fact, only the direct payments are guaranteed, Riggins said. Even this year, should the quantity of grain become in short supply because of weather conditions, then farmers may receive little additional money.

Both Snell and Gibson noted that this bill provides more for livestock farmers through conservation programs. It provides some opportunity for livestock producers to obtain cost share dollars to meet current and future environmental regulations, Snell said.

There is additional spending in the bill for conservation programs. The legislation expands the Conservation Reservation Program from 36.4 million acres to 39.2 million acres and allows for limited haying and grazing. The Wetlands Reserve Program is continued along with the Environmental Quality Incentive Program which will increase in funding from $200 million to $400 million in 2002 and increase annually to the level of $1.3 billion for fiscal year 2007. The Wildlife Habitat Program also is continued with increased funding.

New conservation programs authorized in the legislation include a Grassland Reserve Program for two million acres and a Conservation Security Program to help producers adopt practices on private agricultural land and in incidental forests.

A national dairy market loss payments (DMLP) program is established in the new legislation. These payments were also paid in 1999-2001 through supplemental legislation to the 1996 Farm Bill. A monthly direct payment will be made to qualifying dairy farm operators whenever the national Class I base price falls below $13.69 per hundredweight in any given month, said William Crist, UK dairy specialist. The payment is 45 percent of the difference between the actual Class I base price and $13.69. The payments are limited annually to 2.4 million pounds of milk produced which is equal to about 130 cows milking 18,000 pounds a year.

Tobacco is not included in the farm bill. Previous income supplements to tobacco farmers [Tobacco Loss Assistance Payments (T-LAP)] were not part of the farm bill and are not included in the 2002 bill.


Craig Gibson, (270) 827-1395; Will Snell, (859) 257-7288; Steve Riggins, (859) 257-7256; Gregg Ibendahl, (859) 257-3616; William Crist, (859) 257-7543