Tardy U.S. farm bill does not inspire farmers

By K.T. Arasu
Reuters, 04.26.02, 6:03 PM ET

CHICAGO (Reuters) - The compromise U.S. farm bill, forged after much political wrangling in an election year, comes as too little, too late for farmers trying to decide on their planting intentions this spring, analysts said Friday.

The bill, which aims to raise crop subsidy spending by $4.8 billion a year, was attacked by Brazil as a step backward in free trade, while farmers in Argentina were too steeped in their own economic troubles to give the legislation much thought.

"What's happened is that they have delayed the final enactment of this bill so long that the influence that it will have on the implied decrease in soybean acres and increase in corn acres is rapidly diminishing," said Jay Calhoun, agricultural analyst with Refco Global Research.

Senior Senate and House of Representatives negotiators reached final agreement on a new farm bill earlier Friday.

Negotiators said Thursday that some adjustments were possible to bring the bill into line with a congressional spending limit of $73.5 billion over 10 years, but no major changes were expected.

The pact caps a farmer's annual subsidies at $360,000, down $100,000 from the current level. Details, such as loan rates for corn, soybeans and wheat, could be unveiled later Friday.

A farm group source Friday said farm bill negotiators tentatively agreed to revise 2002/03 loan rates for corn to $1.98 a bushel, up from the current $1.89; soybeans at $5.03, down from $5.26; and wheat at $2.80, up from $2.58.

The rates are crucial to American farmers because they effectively set a floor under commodity prices.

Livestock industry officials said lawmakers had scrapped a controversial proposal to ban meatpackers from owning hogs and cattle more than 14 days before slaughter. Backers had said the ban would give family farmers a better chance at getting a fair price and reduce the economic leverage of large packers.

Opponents contend the ban would have disrupted innovative market arrangements that reward farmers and ranchers for raising animals with higher-quality meat.

"This provision would have destroyed good businesses, harmed livestock producers and created economic instability in rural America," said J. Patrick Boyle, president and chief executive officer of the American Meat Institute.

He said the meat industry was disappointed that the farm bill mandates country-of-origin labeling for meat, fish and produce, adding that it would saddle the industry with nearly $1 billion in additional costs each year.

Carl Anderson, extension economist with Texas A&M University, said the farm bill will not do anything on trimming excess cotton production in the United States.

"We could see cotton acreage creep up to 15 million acres," he said, adding that the much stronger safety net provided by the bill would "definitely not cut back on the planting intentions" of American farmers.

Economist Stuart Ramsey of the DRI-WEFA research group said the farm bill will have no impact on farmers' planting intentions for corn and soybeans for this year.

"The wheat crop was planted months ago, and farmers are planting corn already," he said. "For the most part, what they are proposing is not any different from last year," he said.

In Argentina, where the grain trade has largely been paralyzed by the country's economic turmoil after four years of recession, the U.S. farm bill was taking second place.

"Today, what's going on here in Argentina alone is hurting us. We are complicating matters on our own, without the help of U.S. farm policy," said analyst Enrique Erize of Novitas consultancy.

Argentine farm exports, which accounted for half of the country's $26.5 billion worth of exports in 2001, have been hit by hikes in export taxes, a one-week shutdown of the creaking financial sector and a slump in the peso vs. the dollar.

In Brazil, Agriculture Minister Marcus Vinicius Pratini de Moraes said the farm bill will not help negotiations on a new world trade agreement. "I believe the world needs to ease restrictions, subsidies and internal support given to farmers in rich countries," he told reporters.

In Canada, analysts were waiting for indications of to what extent U.S. farmers make crop switches in the wake of the farm bill.

"In terms of Canada, in the long run it depends on how much of that acreage switch actually occurs," said Dwayne Lee, a grain market analyst with the Canadian Wheat Board.