NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
October 5, 2000
Projections for next year raise serious questions about farm cash flow, according to a farm management specialist at North Dakota State University. While crop prices and the cost of fuel and fertilizer are concerns, the level of government farm support is the most important question for 2001 facing producers.
“I can remember looking at the payment schedule after the 1996 Farm Bill “Freedom-to-Farm” was signed,” says Andy Swenson of the NDSU Extension Service. “Now the reduced payments spelled out in the legislation are here and may pose a serious problem for producers next year.”
Producers enrolled in the program to receive an annual production flexibility contract payment from 1996 to 2002 (often called the AMTA, or Agricultural Market Transition Act payment). Payments in 1997, 1998 and 1999 were similar. The 2000 payment declined slightly and the lowest scheduled payments will be made in 2001 and 2002. Total AMTA payments in North Dakota were $241 million in 1999, $225 million in 2000, and will be about $183 million in 2001.
However, the reduction of the AMTA payment would be dwarfed by the absence of Market Loss Assistance (MLA) payments, Swenson says. Each year from 1998 to 2000, annual legislation was passed to provide market loss assistance to bolster farm income in the face of low commodity prices. In 1999 and 2000 this payment was equivalent to an extra 1999 AMTA payment. “Whether similar legislation will be enacted for 2001 is a $241 million dollar political question for N.D. producers,” Swenson says.
“I can think of reasons why legislation for market loss assistance in 2001 will occur and reasons why it may not occur,” he says. “First, if crop prices continue to be low there will be tremendous pressure to do something. There probably is not enough agreement on whether, or how, to change the farm bill before it expires. Therefore, as in 1998, 1999, and 2000, congress may buy time by providing another MLA in 2001 to offset low prices. However, legislating an MLA may be more difficult than in the past. One reason is the sticker shock of U.S. farm assistance, which was a record $22.7 billion in 1999, and is projected to be $28 billion this year. Also, there may be less political pressure because 2001 is not an election year. Lastly, previous aid legislation has been sold as helping the typical family farm. Although all producers enrolled in the farm program received the MLA, statistics show that the bulk of aid has gone to large operations. Therefore, this contradiction of goals and action may be addressed.”
In summary, AMTA payments to North Dakota farmers will drop 19 percent from $225 million in 2000, to $183 million in 2001. Whether payments similar to the MLA received in the past three years will be forthcoming in 2001 is a large cash flow planning wild card. If producers only receive the AMTA and no additional assistance through legislation, it would represent a reduction of $283 million dollars of income, or about $13 per crop acre. For comparison purposes, $13 per acre is nearly 40 percent of the average cash rent rate per acre in North Dakota.
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Source: Andy Swenson, (701) 231-7379
Editor: Tom Jirik, (701) 231-9629