GOP Wants Agriculture IRA’s;
USDA Seeks Renewed Subsidies

WASHINGTON —(AP)— New IRA-type savings accounts would allow agriculture producers to sock away their income in good years to help them through rocky times and dramatic price swings, under a bill proposed by farm-state lawmakers.

The savings accounts would give producers "the same sort of income assurance so farm families don't continue to go from boom to bust in a matter of months," said Sen. Pat Roberts, R-Kan., a co-sponsor of the bill.

The legislation runs counter to a plan by Clinton administration Agriculture Secretary Dan Glickman to "revisit" the 1996 farm law and expand government assistance to producers. Projections are that 1998 will be a poor year for most farmers.

The current low prices, however, present a good opportunity to drum up enthusiasm for the savings accounts, said Rep. Kenny Hulshof, R-Mo., the main author of the House version, which has more than five dozen sponsors.

"The prediction that this is not going to be a good year for the farm community, that will help generate grassroots support," said Hulshof, who has been speaking to Farm Bureau groups to promote the bill.

Supporters have made overtures to House Ways and Means Committee Chairman Bill Archer on the measure's behalf. But Archer, R-Texas, has made no commitment, said Hulshof, who serves on the tax-writing panel.

Backers of the savings accounts say the market-oriented farm law is working and the savings accounts would complement income averaging as a way to manage income fluctuations from year to year.

The income-averaging provision in last-summer's balanced-budget and tax-cutting agreement restored to farmers a tax advantage that allows them to average the prior three years of income when paying taxes for 1998, 1999 and 2000. That is a temporary break, but one that is especially good for high-income years, and lawmakers said last week they hope to make it permanent as well.

The Farm and Ranch Risk Management, or FARRM, accounts, will help ease farmers through bad years, supporters said.

"Many agriculture producers are denied much-needed credit not because they're a bad farmer or a bad credit risk but because of income variability," Roberts said. "This bill will give farmers and ranchers a much-needed tool to smooth the peaks and valleys that hurt farm income and make agriculture lending such a risky venture."

Farmers would be allowed to make tax-free contributions to the accounts of up to 20 percent of their annual taxable income. The money could be held in the accounts for up to five years without penalty and would be taxable on withdrawal. Money held more than five years would be subject to a 10 percent penalty.

Their proposal comes at a time when wheat prices are in the doldrums and many growers in the upper Midwest are facing financial ruin because of a series of bad crops caused by disease and poor weather.

Glickman, on the other hand, wants Congress to restore authority he once had to expand commodity marketing loans and speed payment of federal farm subsidies.

The 1996 law gave farmers more flexibility to switch between crops in response to market demands, but there is less of a safety net for farmers in bad times. Farm subsidies are no longer tied to fluctuations in income. Instead, the payments are fixed and declining each year.

"We're going to have a period of stress for a while," Glickman told reporters. "You have to have some kind of support system there.

"I am not trying to undo the 1996 farm bill," Glickman added. "We don't need to be in an ideological box. That would be highly irresponsible."

Sen. Kent Conrad, a North Dakota Democrat who backs Glickman's proposal, says the savings accounts would provide no help this year.

"We're going to need every penny we can get our hands on ... to help people now," Conrad said. "That's my focus right now."

Expanding the commodity loans would cost taxpayers an estimated $3.6 billion over the next six years. The loans cost the government money when farmers forfeit crops rather than repay the loans. At the relatively low rates set in 1996, growers are unlikely to forfeit crops.

The savings accounts would cost far less, about $500 million over five years.

Sen. Dick Lugar, the Senate Agriculture Committee chairman, said the price downturn is part of a cycle that will right itself when large world grain supplies are reduced, and "quick fix" government intervention is not warranted.

"This is not good policy and I would oppose that," said Lugar, R-Ind., in reference to Glickman’s proposal.

The most acute problem is wheat. Although farmers expect to harvest nine percent less winter wheat — or about 1.71 billion bushels — compared with last year, prices will likely hover at about $3 per bushel, compared with $4 in 1997.

Including spring wheat now being planted, total U.S. wheat production this year is projected at 2.3 billion bushels, a seven percent drop from last year.

The lower crop estimate won't lift prices because more wheat remains in storage from last year and export demand is weak. At the same time, U.S. growers face a strong challenge from the European Union.

If the European Union uses aggressive subsidies to move its large wheat stocks, Glickman said, "I will press vigorously to meet that threat."

Early predictions for the nation's corn crop, meanwhile, indicate farmers will bring in 9.64 billion bushels, which would be the second-largest on record. Soybean growers are tentatively projected to harvest 2.8 billion bushels, a three percent increase over last year's record.

The early corn outlook, based on farmers' planting intentions, is for a harvest about 275 million bushels larger than last year's and second only to 1995's 10.1 billion bushels. Most corn is used as livestock feed, and lower prices naturally benefit livestock producers.

As with wheat, corn price projections are down. The Agriculture Department predicts prices could go as low as $2.05 a bushel, compared with $2.71 two years ago.

The initial prediction for soybeans continues a trend in which more farmers are planting them to take advantage of relatively higher prices. But soybean prices are falling as well and could reach a 10-year low of $4.75 a bushel this year, compared with $7.35 two years ago.

Soybean exports have been slowing even as American farmers continue to plant bigger crops, leading to a forecast for the highest level of soybeans in storage in 11 years after this fall's harvest.

The tentative cotton forecast predicts a 10 percent drop in U.S. production, at 16.7 million bales. Export forecasts are down 20 percent, however, and cotton producers are suffering from stiff competition from clothing and other textile imports, the Agriculture Department said.