97050: Food and Agriculture Issues in the 105th Congress

Jean Yavis Jones
Environment and Natural Resources Policy Division

December 28, 1998

CONTENTS

SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
USDA Budget and Appropriations
Agricultural Trade
Agricultural Research and Extension
Farm Issues

Grains, Cotton, and Oilseeds
Tobacco
Sugar
Peanuts
Dairy
Crop Insurance

Food Issues

Meat and Poultry Inspection
Food Safety
Food and Nutrition Programs
Organic Foods

Conservation
Tax Relief for Farmers

SUMMARY

After almost 2 years of record highs, farm prices for many commodities began to decline in 1997. Until then wheat, feedgrains, cotton, and oilseed farmers were enjoying the benefits of high prices, expanding markets, and federal "market transition" (or "contract") pay-ments provided under the 1996 farm law. These lump sum payments to farmers, which decline over 7 years, are guaranteed regardless of farm prices. They replaced earlier target price support payments that were tied to individual crops and rose or fell conversely with market prices. Marketing loan rates, also linked to farm prices, were capped at the 1995 level by the 1996 law.

The 105^th Congress took several actions to provide income relief for farmers. The Emergency Farm Financial Relief Act, P.L. 105-228, enacted on August 12, 1998, provided early release in October 1998 of $5.5 billion in FY1999 contract payments to farmers. The Congress approved $4.2 billion in emergency farm aid as part of a $60 billion FY1999 agriculture appropriation bill (H.R. 4101). This bill was vetoed by the President because it did not contain the $7.3 billion farm aid package advanced by Senate Democrats, which also called for removing the farm bill loan rate cap, at a cost of some $5 billion. With no annual appropriation enacted, USDA programs were funded under stopgap spending measures until the enactment of a final, omnibus FY1999 appropriation measure (P.L. 105-277). It contained some $5.9 billion in emergency aid to farmers, but left the loan caps in place.

The USDA also approved the early release (in October) of some $1.3 billion in FY1999 Conservation Reserve Program payments to farmers.

In the trade arena, despite backing from many farm groups, the House rejected fast-track legislation (H.R. 2621) to expedite consideration of trade agreement implementing legislation. Congress, however, approved legislation (P.L. 105-194) exempting credit guarantees for agriculture from U.S. sanctions on India and Pakistan. Farm legislators also helped defeat a House attempt on July 22, to stop U.S. trade with China. U.S. and Canadian officials continue to try to resolve disputes over Canadian grain and livestock transport in the United States. And, U.S. cattle producers have filed an anti-dumping petition against Canada and Mexico, alleging losses due to unfair live cattle imports. The USDA is considering a variety of options for shoring up pork prices, which have plummeted as a result of over production.

In other areas, after enacting a major tax relief measure in 1997 (P.L. 105-34), the House passed another tax bill (H.R. 4579) that would have benefitted farmers. A modified version of this bill, containing some $600 million in tax breaks for farmers was in the finally enacted omnibus appropriation law (P.L. 105-277). Tobacco settlement legislation (S. 1415) containing payments to growers was pulled in June 1998 after several weeks of Senate debate. Other actions were taken on: a law (P.L. 105-185) reforming the agriculture research system and restoring food stamp benefits to certain legal aliens; USDA proposed milk marketing order reforms and national standards for organically produced foods; legislation proposing country-of-origin labeling, and a child nutrition reauthorization bill (H.R. 3874, P.L. 105-336).

MOST RECENT DEVELOPMENTS

On October 31, 1998, the President signed the Child Nutrition and WIC Reauthorization Amendments of 1998 (P.L. 105-336). This law extended authority for WIC and other child nutrition programs through FY2003.

On October 21, the President signed the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-277), containing FY1999 appropriations for the USDA and other government agencies, plus $5.9 billion in emergency aid for farmers, along with special tax breaks for them. Previously, on October 8, the President vetoed the FY1999 agriculture appropriations bill (H.R. 4101) approved by the House and Senate that contained some $4.2 billion in emergency farm aid. The reason given for the veto was that the bill did not remove the caps on commodity loan rates (at a cost of some $5 billion), which was advocated by a Senate Democratic $7.3 billion farm aid proposal presented on September 21, 1998. The farm aid package in the finally enacted omnibus appropriation law did not change the commodity loan rates.

In early August, Congress approved and the President signed S. 2344 (P.L. 105-228) allowing the early release of some $5.5 billion in FY1999 full-year contract payments to farmers. Instead of waiting until December 1998 and September 1999, farmers will be able to take their full payments in October 1998, just one month after receiving their final FY1998 contract payments ($2.9 billion). To further shore up farm income, the USDA permitted the early release of $1.3 billion in FY1999 payments to farmers enrolling acreage in the Conservation Reserve Program (CRP), which provides payments to farmers for taking environmentally sensitive land out of production.

BACKGROUND AND ANALYSIS

USDA Budget and Appropriations

For FY1999, the Administration budget requested $58.1 billion in total budget authority for USDA and related agencies (except for the Forest Service, which is funded by Interior Appropriations). This is $8.6 billion more than FY1998 appropriations for USDA programs. Over two-thirds (67%) of the amount requested for FY1999 is for food and nutrition programs; 24% is for agricultural programs; and the remaining 9% is for conservation programs, rural development, and foreign assistance. Most USDA spending (about three-fourths) is for mandatory programs. These are programs for which there is a permanent source of funding, such as farm commodity and conservation programs financed by the CCC, or programs with authorizing law requirements that direct specific levels of appropriations in order to be fully funded, such as food stamp and child nutrition programs.

Appropriations. Two major appropriations measures affecting USDA programs were enacted during the first session of the 105^th Congress -- an FY1997 emergency supplemental appropriation (P.L. 105-18) and full-year FY1998 appropriations (P.L. 105-86). Additionally, Congress approved several continuing appropriations resolutions for FY1998 while awaiting agreement on a full-year appropriation measure. In the second session, the Clinton Administration requested supplemental funding of $645 million for natural disaster relief, $85 million of which was to go for agriculture programs and civil rights activities in the USDA. The enacted measure (H.R. 3579) signed on May 1, 1998, (P.L. 105-174) provides FY1998 supplemental appropriations totaling $175.6 million for USDA agriculture programs: $159.8 million for emergency disaster relief and $15.8 million for non-emergency funding (primarily for loans and USDA civil rights activities).

In the second session, the House and Senate completed action on their respective versions (H.R. 4101 and S. 2159) of FY1999 agriculture appropriations, and the Conference agreement on this measure (H.R. 4101) was approved by the House on October 2 and by the Senate on October 6, 1998. It provided a total of just under $60 billion for food and agriculture programs in FY1999, including $4.2 billion in emergency farm aid to help farmers suffering losses due to falling farm prices and natural disasters. The Administration vetoed this measure on October 8, 1998, because it did not contain a $7.3 billion farm aid package proposed by Democrats that included removal of the 1996 farm law's cap on marketing loan rates. Removal of the loan cap would have provided farmers some $5 billion in additional deficiency payments in FY1999. Senate Democrats were unsuccessful in their efforts to remove the loan cap during floor consideration of both the FY1999 Agriculture and Interior Department appropriations bills. Proponents of raising or removing the loan cap assert that it will provide a safety net for farmers when prices fall. Opposition to removing the cap comes from those who fear that it will exacerbate already price-depressing surpluses, undermine the market-oriented changes made by the 1996 farm law, and substantially increase federal spending.

The conference agreement on the FY1999 omnibus appropriations bill (P.L. 105-277/H.R. 4328) was signed into law on October 21, 1998. The measure contains $55.9 billion in regular FY1999 appropriations for the U.S. Department of Agriculture and related agencies and $5.9 billion in emergency disaster and economic assistance for agriculture, for a total of $61.8 billion. The $5.9 billion in emergency funding includes: $3.057 billion in "market loss" payments, of which $2.857 billion is for grain and cotton farmers and $200 million for dairy farmers; $1.5 billion for 1998 crop loss payments; $875 million for farmers affected by multiple years of disasters; $200 million in livestock feed assistance; and $31 million to cover the cost of making or guaranteeing $440 million in additional farm operating loans.

The $55.9 billion in regular USDA and related agencies appropriations for FY1999 in P.L. 105-277 is about equal to the House-passed level (H.R. 4101), $1.2 billion below the Senate-passed level (S. 2159), and $2.1 billion below the Administration request. Of this amount, $42.25 billion is for mandatory programs and $13.69 billion for discretionary spending. Even excluding the additional emergency aid spending, total budget authority is significantly higher than the $49.5 billion appropriated in FY1998, mainly because of a change in the formula for determining how much is required to reimburse the Commodity Credit Corporation (CCC) for its net realized losses. In order to stay within the discretionary spending allocation for the bill, P.L. 105-277 either limits or eliminates FY1999 funding for several mandatory programs. It prohibits the spending of any of the $60 million authorized for FY1999 for the Fund for Rural America, and reduces spending for commodities in the Emergency Food Assistance Program (EFAP) by $10 million. The law also concurred with a House provision to prohibit the FY1999 spending ($120 million) for a new mandatory agricultural research program; restrict the amount of acreage that can be enrolled in the Wetlands Reserve Program; and limit payments in the Environmental Quality Incentives Program (EQIP). P.L. 105-277 also extends the statutory deadline for federal milk marketing order reform from April 4 to October 9, 1999, and waives the statute of limitations on certain civil rights complaints against USDA.

[For more information, see CRS Report 98-201, Appropriations for FY1999: U.S. Department of Agriculture and Related Agencies, CRS Report 98-478, Agriculture Provisions in the FY1998 Emergency Supplemental Appropriations Act (P.L. 105-174), and CRS Report 97-600, Food and Agriculture Provisions in the FY1997 Supplemental Appropriations Act.]

Budget Act and Resolutions. In other budget-related areas, the 105^th Congress approved and the President signed, on August 5, 1997, the Balanced Budget Act of 1997 (P.L. 105-33).This is projected to reduce total government mandatory spending by $263 billion and achieve a balanced federal budget in 5 years. It contained no spending reductions for agriculture programs. It did, however, contain provisions adding $1.5 billion to the food stamp program over the next 5 years to moderate the impact of some $23.3 billion in net reductions through FY2002 that were made to food stamp spending by the 1996 welfare law (P.L. 104-193). In the second session, the Senate approved its concurrent budget resolution setting forth spending for fiscal years 1999-2003 (S.Con.Res. 86) on April 2, 1998. The House Budget Resolution (H.Con.Res. 284) was approved by the House on June 5, 1998. There was no further action on the budget resolution. (For more information, see CRS Issue Brief 98012, The Budget for Fiscal Year 1999.)

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