12.1 Introduction

The 1996 farm bill made sweeping changes to U.S. farm policy. Many changes such as planting flexibility were good and have achieved their desired impact. However, broad economic trends from the Asian economic collapse to the dot-com stock market run-up and subsequent implosion, to the energy price spike of 2000 — all had effects on farm finances and commodity prices that were certainly outside the vision of the policy makers who crafted the 1996 farm bill. According to the Commission on 21st Century Production Agriculture, "midway through 2000" crop prices were "at or near historic lows." 

The only relief came in the form of federal ad hoc emergency market loss payments. These payments helped sustain our nation's food and fiber and provided relief for an ailing agricultural economy. According to the USDA, direct government payments accounted for three-fourths of net cash income for major field crops in 1999 and two-thirds in 2000. However, as ad hoc distributions, they were more bandage than cure.

The economic realities and shortcomings of the 1996 farm bill led to major farm policy reforms in the 2002 farm bill. An economic safety net was designed, including marketing loans and a countercyclical program, to help offset losses due to low commodity prices. These price protection components performed as intended; providing economic assistance when most needed and saving taxpayer support in times of stronger commodity prices.

With respect to our nation's farms and ranches, NASDA's recommendations are based on the principles of fostering financial stability, maintaining planting flexibility, and providing a safety net that provides meaningful assistance to all producers.

Financial Stability: Producers need stable and predictable financial support including access to adequate credit, appropriate tax incentives, and risk management opportunities.

Planting Flexibility: Federal farm policy should maintain planting flexibility.

Safety Net: The business of agriculture is high risk. Thus, farm policy should provide producers of all commodities with reasonable protections against both financial and production losses beyond their control.

U.S. agriculture continues to experience structural changes at a breathtaking pace. Agri-business consolidation, globalization, renewable energy, and the growth of foreign trade opportunities and competition have fundamentally changed the nature of farming and farm economics. 

In the 21st century, the traditional approach to farm policy will not be enough to ensure adequate opportunities for success. The extent of global competition for U.S. producers has expanded into capital, tax burdens, labor supplies, environmental and regulatory constraints, food safety concerns, land costs, and the relative degree of access to foreign markets. In one sense, all of these factors can be viewed merely as different forms of risk to be managed.