WASHINGTON D.C. (DTN)--The Coalition for a Competitive Food and Agricultural System has sent senators papers opposing an increase in the loan rates on grains and against any increase in the Conservation Reserve Program, which idles land.

The coalition, which lobbied heavily in favor of the Freedom to Farm plan in 1995 and 1996, has sent senators papers on loan rates and the Conservation Reserve Program.

The coalition says raising loan rates "is a good way to ensure low grain prices for a long time" because raising the rates "simply encourages even more production."

The coalition says raising loan rates is "a worse idea than the house countercyclical program" because "the House bill would guarantee revenue while raising loan rates would guarantee a price." The price guarantee, the coalition says, "spurs excess production while the revenue guarantee would not."

The coalition also says raising loan rates is a "a poor way to improve farm income" because "if prices somehow did improve in spite of the loan rates rate increase (most likely due to a crop failure) farmers would not receive any assistance from the loan program. Thus they would have little help from the government and few bushels to sell at the higher price."

The coalition adds that raising loan rates is "the fastest way for the U.S. to violate the [World Trade Organization] amber box spending limit."

The group adds that the United States "is precariously close to exceeding the cap now. Raising loan rates makes it exceedingly likely that the U.S. would violate the WTO at some point. That could mean all countries could retaliate against U.S. farm products."

Raising loan rates, is not "necessary as a means of providing a new countercyclical farm program," the group says, because the crop insurance program "coupled with the existing loan program, provides not one, but two substantial 'countercyclical' farm programs that farmers can utilize."

The coalition suggests that senators ask farmers if they want direct payments or an increase in loan rates and "most will choose direct payments."

The coalition also points out that "one of the goals of the next trade round is to substantially reduce domestic, trade distorting subsidies (i.e. like the loan program). What does it say about the U.S. commitment to lowering trade barriers in farm products if the U.S. dramatically increases its trade distorting subsidies right before the new trade round is launched?"

The coalition also says the Conservation Reserve Program should not be increased beyond the current 36.4 million acre cap because the CRP "should be targeted toward protecting truly fragile land" and the current cap "is more than sufficient."

The coalition says raising the cap on the CRP "is bad for farmers. Resource idling contributes the steadily increasing price of agricultural land that raises farmers' average cost of production and makes it harder for tenant farmers or beginning farmers to enter the business."

The group also says raising the cap "is bad for rural economies" because it results in economic losses and "would undermine the U.S. competitive position in world markets" due to a loss of output.

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