POLICY TOOLS FOR U.S. AGRICULTURE
Ronald D. Knutson
Professor of Agricultural Policy
James W. Richardson
Professor of Agricultural Policy
Danny A. Klinefelter
Professor of Agricultural Finance
C. Parr Rosson
Associate Professor of International Trade
Edward G. Smith
Professor of Agricultural Policy
Roy B. Davis Professor
of Agricultural Cooperation
Agricultural and Food Policy Center
Department of Agricultural Economics
Texas Agricultural Experiment Station
Texas Agricultural Extension
Texas A&M University
FOREWORDThis document summarizes what has been learned
from more than 60 years of experience dealing with more than 100 agricultural
and food policy tools. Contemporary federal policy regarding agriculture has its
origin in the late 1920s. Since that time policy has evolved continuously as
problems, conditions, goals and/or philosophies toward government involvement in
agriculture have changed.
So many policies have been tried or evaluated that it is often said that few,
if any, truly new policy options exist. It is also said that agricultural
policies tend to cycle between various degrees of concern about the need for
income support, conservation, food assistance, and export orientation. These
realities make it possible to learn from our experience with policy tools that
have been tried, as well as those that have been analyzed but for one reason or
another not tried.
This is the third edition of agricultural and food policy tools. The first
publication dated August 1984 had 41 tools. The second dated August 1986 had 69
tools. It was honored by the American Agricultural Economics Association with a
Quality of Communication Award. This edition contains 101 tools. The increased
number of tools reflects the broadened scope of agricultural and food policy as
well as its increased complexity. While every Congress and administration since
1980 has vowed to reduce the complexity of farm bills, they have not succeeded.
This edition, for example, adds a maze of conservation and environment tools
authorized by the 1990 farm bill.
Perhaps most important, this publication has no axe to grind. There is no
hidden agenda. Its purpose is to provide just enough objective and factual
information on a tool to wet the appetite of a congressional staffer who is
thirsty for knowledge, a farm organization director who needs to sharpen his/her
policymaking tools, or a student who is involved in policy education. Because
time is valuable, each tool is allotted a single page.
Keywords: Domestic farm policy, commodity programs, conservation,
environment, international trade policy, marketing policy, demand expansion
programs, food assistance, nutrition, food safety, credit policy.
This publication has benefitted from the comments, suggestions, and work
of many individuals. Primary among these are the staff of the Agricultural and
Food Policy Center, particularly Dawne Hicks, our staff assistant, and Sue
Jones, our editor. Faculty reviewers of the manuscript included John Nichols,
Dan Padberg, John Penson, David Leatham, Larry Lippke, and Gary Williams. Our
friends at the Texas office of the Agriculture Stabilization and Conservation
Service, particularly Lester Byrd, Darrell Davis, and Kermit Decker, reviewed
the sections of the manuscript related to the farm program.
Since the original publication of Tools, we have received many
suggestions, corrections, and additions from our friends in the Economic
Research Service/USDA, from farm organization leaders, and from congressional
staff for whom this publication was designed.
The authors accept full responsibility for any errors that appear in this
Agricultural policy is a broad term used to encompass government programs
that directly affect the prices and incomes received by farmers. Producers and
agribusiness leaders, agriculture related organizations, and government
policymakers must sort through a myriad of potential policy tools in developing
this nation's agricultural policy.
Each policy tool or government program is intended to deal with a specific
farm problem in a specific way. For example, target prices raise farm income
through direct payments from the government while support prices raise income by
setting a floor on market prices. Some policy tools are more effective than
others in accomplishing the objectives for which they are intended. For example,
quotas that dictate the volume a producer can market are more efficient in
controlling production than acreage reduction programs. Policy tools often have
side effects that need to be considered before selections are made. For example,
when price supports are set above world market prices, exports fall.
This publication provides brief descriptions of individual policy tools that
are most directly related to agriculture and the U.S. Department of Agriculture
(USDA). The report is designed to be a comprehensive list of those policy tools
that are used currently, have been used in the past, are used in other
countries, or have been proposed for use in the United States. These tools are
divided into five general categories:
- Domestic Farm Programs - Designed to raise or stabilize farm prices
- Conservation and Environmental Programs - Designed to conserve
natural agricultural resources and protect the environment.
- International Trade Policies - Designed to create a more favorable
trading environment for U.S. farm products.
- Marketing and Demand Expansion Programs - Designed to improve
farmers' position in domestic and foreign markets.
- Food Assistance, Nutrition, and Safety - Designed to improve the
level of living for everyone who consumes food and natural fibers.
- Credit Programs - Designed to ensure agriculture an adequate supply
of debt capital at a reasonable cost.
A single-page summary describes each policy tool with respect to the
- The policy area in which the tool falls.
- What the policy tool is.
- The primary objective of its use.
- When it has been used.
- Experience with its use.
- Consequences of its use.
The following publications offer comprehensive discussions of the policies
described in this publication.
- Halberg, M. C. Policy for American Agriculture. Ames: Iowa State
University Press, 1992.
- Hillman, J.S. Technical Barriers to Agricultural Trade. Boulder,
Colo.: Westview Press, 1991.
- Houck, J. P. Elements of Agricultural Trade Policies. Prospect
Heights, Ill.: Waveland Press Inc., 1992.
- Knutson, R. D., J. B. Penn, and W. T. Boehm. Agricultural and Food
Policy. Englewood Cliffs, N.J.: Prentice Hall, Inc. 1990.
- Tweeten, L. Foundations of Farm Policy. Lincoln: University of
Nebraska Press, 1979.
- Tweeten, L. Farm Policy Analysis. Boulder, Colo: Westview Press,
TABLE OF CONTENTS
Domestic Farm ProgramsIncome Support
- Cost-Sharing Assessment
- Disaster Program
- Federal Multi-Peril Crop Insurance (MPCI)
- Findley Payment, Findley Loan
- Flexibility (Flex)
- Income Insurance
- Marketing Loan
- Payment Limit
- Target Prices, Deficiency Payments
- Commodity Credit Corporation (CCC) Loan Nonrecourse Loan
- Commodity Purchase Program
- Farmer-Owned Reserve
- Acreage Allotment
- Acreage Reduction, Set-Aside, and Diversion
- Cross-Compliance, Limited Cross-Compliance
- Dairy Buyout, Termination Program
- Dairy Diversion Program
- Generic PIK
- Long-Term Land Retirement, Soil Bank, Conservation Reserve Program (CRP)
- Marketing Quotas
- Offsetting Compliance
- Payment in Kind (PIK)
- Two-Tier Milk Pricing
- 0/92 and 50/92
Conservation and Environmental Programs
- Conservation Reserve Program (CRP)
- Agriculture Conservation Program (ACP), Conservation Technical Assistance
(CTA), Great Plains Conservation Program (GPCP)
- Best Management Practices (BMP)
- Conservation Compliance and Sodbuster
- Agricultural Water Quality Protection Program (AWQPP)
- Environmental Easement Program (EEP)
- No Net Loss
- Wetland Reserve Program (WRP)
International Trade ProgramsDomestic Industry Protection
- Cargo Preference
- Import License
- Import Quotas
- Import Tariffs, Countervailing Duties
- Nontariff Trade Barrier
- Section 22
- Tariff-Rate Quota (TRQ)
- Variable Levy
- Voluntary Export Restraint
- Barter/Counter Trade
- International Commodity Agreements
- Long-Term Bilateral Trade Agreements
- Export Embargoes
Trade Barrier Reduction
- Blended Credit
- Direct Export Credit
- Export Credit Guarantees
- Export PIK, Bonus Incentive Commodity Export Program (BICEP)
- Monetary Export Subsidies
- Public Law (P.L.) 480, Food for Peace
- Two-Price Plan
- Export Enhancement Program (EEP)
- Free Trade Agreement (FTA)
- GATT Trigger
- General Agreement on Tariffs and Trade (GATT)
- Generalized System of Preferences (GSP)
- Market Promotion Program (MPP)
- Most Favored Nation (MFN)
- Preferential Trading Arrangements (PTA)
- Checkoff Programs
- Domestic Market Development
- Foreign Market Development, Cooperator Program
- Cooperatives, Capper-Volstead
- Marketing Boards
- Marketing Orders
- Crop and Livestock Production Report
- Export Sales Reporting
- Grades and Standards
- Market News Price Reporting
Food Assistance, Nutrition, and Safety
- School Lunch
- Women, Infants, and Children (WIC) Program
- Cashing Out, Welfare Reform
- Commodity Distribution
- Food Stamps
- Delaney Clause, Zero Tolerance
- Pesticides Regulation, Federal Insecticide, Fungicide and Rodenticide Act
- Nutrition Labeling
Credit ProgramsDebt or Payment Restructuring
- Farm Credit System Capital Corporation
- Interest Buy-Down
- Loan Mediation
- Mandatory Debt Restructuring
- Principal and Interest Deferrals
- Principal and Interest Waivers
- Principal Buy-Down
- Two-Tier Debt Restructuring
Government Regulation and
- Beginning Farmer Programs
- Borrower Education Requirements
- Direct Government Loans
- Economic Emergency Loan Program
- Emergency Disaster Loan Program
- Guaranteed Loans
- Rural Development Administration
Secondary Financial Markets
- Chapter 12 Bankruptcy
- Farm Credit Administration (FCA)
- Farm Credit System Insurance Corporation
- Foreclosure Moratorium
- Warehousing Farm Assets, Agriculture Conservation Corporation
- Secondary Markets for Agricultural Loans