Apr 7, 2007

USDA Proposes Ending Fruit, Vegetable Ban on Program Acres

When Agriculture Secretary Mike Johanns announced Jan. 31 that USDA was recommending “planting flexibility of fruits, vegetables and wild rice on base acres” be allowed in the next Farm Bill, Steve Smith was very, very pleased.

“We hadn’t asked for that much,” said Smith, the director of agriculture (fieldman) for Red Gold, the central Indiana tomato processor.

Since the last Farm Bill was passed in 2002, there has been a general shortage of land available to growers of fruits and vegetables for processing. While there has been a restriction in place since 1990 to prevent farmers from planting fruits and vegetables on program-crop base acres, that hadn’t been a major problem until 2002.

That year, Congress made soybeans and other oilseeds program crops. A farm that had been in a corn-soybean rotation suddenly went from 50 percent program crops (corn) to a “base tight” 100 percent. Oilseed land was no longer available for vegetable production.

A Purdue University paper written in 2004 by agricultural economists Kyle Althoff and Allan Gray said: “The 2002 Farm Bill has negatively impacted the finances of new/expanding fruit and vegetable growers interested in diversifying their operations. Producers wishing to grow fruits and vegetables on farms that do not have a historical record of such production must either remove their farm from government program payments or face penalties for planting fruits and vegetables on subsidized acres.

“If a grower removes a farm from the program, he/she will lose the government payments for the entire farm, not just the acres that are planted to fruit or vegetable production. Combined with penalties for producing on any land without historical production in fruits and vegetables, the addition of soybeans as a base eligible crop has unintentionally removed thousands of Midwestern acres previously available for fruit and vegetable production.”

The tomato processing company Red Gold joined with 21 other food processors, 11 associations and 60 growers from the Midwest and Northeast to form the Canned-Frozen Food & Grower Coalition (CFFGC).

The coalition sought but never got an amendment to the Farm Bill to rectify the problem.

Smith said CFFGC wanted vegetable growers to be able to use program land so they could rotate crops to fresh ground – avoiding mounting disease pressures. They wanted Congress to give them the right to grow fruits and vegetables, under contract for processing, on base acres. They didn’t ask for government subsidies and agreed they should be reduced on an acre-for-acre basis if fruit or vegetables were planted.

They wanted Congress to allow landlords to lease farm ground to fruit and vegetable growers, without fear of the land being barred from future government agriculture programs and to ensure protection of “grower history” for alternative crop production.

While Congress never amended the Farm Bill, the proposal made by Johanns for the next bill would sweep away the restrictions entirely, making fruits and vegetables just another crop, like hay, that can be freely grown on program acres without any penalty or reduction in payment, for processing or for fresh market.

“It is more than we asked for,” Smith said.

To otherwise sweeten the pot for horticulturists, Johanns’ proposals “target nearly $5 billion to increase support of fruit and vegetable producers through targeted programs and by providing $1 billion for research programs targeted to specialty crops,” according to the USDA announcement.

All numbers are 10-year projections, not annual figures, and are part of a spending proposal totaling $618 billion over 10 years. In 2006, about 26 percent of farm spending was for program subsidies and another 11 percent for conservation and forestry.

Some 54 percent went for food assistance programs. USDA also proposed adding $3.2 billion to that to “improve nutrition assistance programs by purchasing more fruits and vegetables” for use in national school lunch and breakfast and other nutrition assistance programs.

The administration proposal would also increase funding for the Market Access Program by $250 million. MAP provides funding to nonprofit domestic agricultural trade associations to share the costs of overseas marketing and promotional activities.

Rod Stocking, the Farm Service Agency’s program specialist in Michigan, said that under the 2002 Farm Bill, farmers who had no history of fruit or vegetable production would lose all their program benefits for the contract year if they planted fruit or vegetable crops.

Farmers who had a history of fruit and vegetable production took an acre-for-acre benefit reduction.

The penalty applied to fruits, vegetables and wild rice, but program crop producers could shift acreage among program crops (corn, wheat, soybeans and other oilseeds, sorghum, cotton, rice, barley and oats) or to non-program crops like hay and keep their payments.

Marietta Kendall, the FSA program specialist in Indiana, expanded on Stocking’s explanation. Before 2002, she said, producers had to sign up their farms for the entire period of the Farm Bill, typically five years. During those years, penalties for producing fruits or vegetables on program acres were harsh.

A farmer with 100 base acres could be assessed a financial penalty for producing as little as an acre of sweet corn and selling it by the roadside. That penalty, which might be $20,000, would offset payments until it was paid.

The 2002 Farm Bill changed that. Farmers signed up year by year. If they wanted to plant fruits or vegetables on program acres, they could opt out for the year – but they could not take an acre-for-acre reduction. Planting even 1 acre of sweet corn would cost them their payments for the entire farm.

Implementing the provisions proposed by Johanns would change all that – but leave one glaring hole: The protections originally sought by fruit and vegetable producers against having to compete with subsidized farmers.

Under Johanns’ proposal, farmers who have historically been horticulturists and not producers of program crops will receive no payments for program base acres, since they will have no program base. Program crop farmers who shift into fruits and vegetable production will continue to receive payments on base acres.

The proposal was made “to ensure that direct payments will be considered to be non-trade distorting ‘green box’ assistance.” The World Trade Organization ruled last year, in a case involving cotton and Brazil, that the prohibitions on use of program acres for horticulture violated trade rules.

The fruit and vegetable organization United Fresh applauded the comprehensive Farm Bill proposal announced by Johanns, calling the bill’s reforms on existing USDA subsidies, trade, nutrition, research, energy and conservation programs a step in the right direction for agriculture.

“The administration’s proposal calls for new mandatory spending of $5 billion over 10 years to support specialty crop needs, including many of the measures we’ve been working to advocate through the Specialty Crop Farm Bill Alliance,” said Robert Guenther, United Fresh senior vice president of public policy.

“We are pleased to see the administration recognize through this new proposal the need to increase funding to boost fruit and vegetable consumption and provide research and technical assistance to specialty crop producers to increase our competitiveness.”

Nevertheless, he continued, United Fresh and the specialty crop alliance are concerned that the administration proposed eliminating planting restrictions prohibiting program crop growers from planting fruits and vegetables on land subsidized for other crops.

“That’s simply unfair for America’s fruit and vegetable growers to have to face government subsidized competition, ending a policy that’s been in place since 1985,” said Guenther. “We’re looking forward to stating that case to Congress”

A USDA fruit and vegetable backgrounder written a year ago said:

“A planting flexibility provision in the 1990 Farm Bill allows growers to plant crops other than program crops on their base acreage (acreage used to calculate program support) without losing any base acreage or government payments.

“At the request of the fruit and vegetable industry, the provision prohibits the planting of fruit and vegetable crops on these ‘flexed acres’ to protect growers who do not participate in farm programs (and do not receive government payments) from having to compete against producers who do. Without these restrictions, commodity program producers would be able to grow fruit and vegetables on their base acreage.”