U.S. Farm Policy: Can Fair Be Fixed?

In the scheme of things, the 1996 Federal Agricultural Improvement and Reform Act (FAIR) contained important breaks with a tradition of crop-by-crop subsidies dating back to the Agricultural Adjustment Act of 1933. It freed many producers of "program commodities" (maize, grain sorghum, wheat, barley, oats, cotton and rice) from a system of crop-specific base acre accounting, merged these accounts into a single "whole farm base," and allowed production of any but a few crops on these lands. Overall, the freedom to produce in direct response to market forces, rather than on the basis of crop-by-crop subsidies, as well as the budget discipline of predetermined payments, were important steps in the direction of decoupled lump-sum compensation. Yet from the point of view of advocates of policy reform, FAIR represents an unfinished agenda. A variety of problems and issues remain. First, the coverage of "freedom to farm" is only partial, with numerous commodities left out of the decoupling program. Second, those critical of the distributive impacts of the commodity programs find little to cheer about in the new contracts, and consider the acronym FAIR ironic. Supply responses induced by price levels in the first two years of FAIR have led to substantially lower prices and marketing receipts in 1998. A call has now gone up to resuscitate some form of safety net, such as a return to deficiency payments or an extension and increase in contract payments under the 1996 Act. It is appropriate to move now to finish the unfinished agenda of the 1996 Act by implementing a long term safety net based on some form of revenue assurance (á la Cochrane and Runge, 1992).