NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
August 26, 1999
Market transition payments to North Dakota farmers under the 1996 farm bill, commonly called "Freedom to Farm," now total about $808 million. Despite being dubbed "Freedom to Fail" by its critics, current farm legislation to date has still put about $50 million more into the pockets of North Dakota farmers than the deficiency-payment provisions of the 1990 farm bill would have.
An analysis conducted by an agricultural economist with the North Dakota State University Extension Service shows that deficiency payments to North Dakota would have totaled only about $758 million during the 1996-1998 period. But looking longer term, he says market volatility and global competition are raising some critical questions regarding the future of the U.S. production agriculture sector.
"Few complaints were heard about Freedom to Farm in 1996 when about $311.5 million in transition payments came to North Dakota at a time when wheat and feed grain prices were above the old target price. In other words, none of this money would have been received if the deficiency-payment provision had been in effect," says Dwight Aakre, extension farm management specialist at NDSU.
But the scenario was just the opposite in 1998. Freedom to Farm paid out about $250 million while the previous legislation would have paid out $561 million--a difference of about $311 million.
"On a per-farm basis, that $311 million equates to about $10,400, or about $11 to $12 per acre of cropland in North Dakota," Aakre says. "If this continues for an extended period of time, land rents must adjust downward because farmers have little chance of realizing this savings anywhere else. As of today, returns for the 1999 crop look as bad or worse than last year's."
Aakre says the phasing-down-to-zero payment structure of the Freedom to Farm legislation has created an unintended consequence: the current farm bill is unresponsive to fluctuating incomes brought about by wide swings in market prices.
"After 2002 when this legislation expires, farmers are expected to survive in the `free' market without this type of assistance. If Congress holds to that plan, U.S. agriculture has only seen the tip of the iceberg in terms of financial difficulties at the farm level," Aakre says. "As we stake our future on agricultural exports, our fortunes hinge on how well we can compete in lowering the cost of production."
But the United States has one of the highest standards of living in the world, which is reflected in the cost of doing business, Aakre says, and the cost of doing business domestically may prove to be a competitive roadblock in the global market for agricultural commodities. He notes that many other industries in the United States have found that in order to compete, it was necessary to move production facilities overseas.
"Are we going to let that happen to our production agriculture sector?" Aakre asks. "That's a question anyone with ties to production agriculture in this country should start asking."
###
Source: Dwight Aakre (701) 231-7378
Editor: Dean Hulse (701) 231-6136
Click here for a pdf version of this graphic. (3KB b&w table)