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Friday, April 29, 2011

Biomass Crop Assistance Program (BCAP): Status and Issues

Megan Stubbs
Analyst in Agricultural Conservation and Natural Resources Policy

The Food, Conservation, and Energy Act of 2008 (P.L. 110-246, 2008 farm bill) created the Biomass Crop Assistance Program (BCAP). The two main purposes of BCAP are (1) to support the establishment and production of eligible crops for conversion to bioenergy in selected areas, and (2) to assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation of eligible material for use in a biomass conversion facility. BCAP is intended to assist with the bioenergy industry’s hurdle of continuous biomass availability.

The U.S. Department of Agriculture’s (USDA’s) Farm Service Agency (FSA) implemented one portion of BCAP—the Collection, Harvest, Storage, and Transportation (CHST) matching payment program—on June 11, 2009, through a Notice of Funds Availability in the Federal Register. The partial implementation created a possible unintended consequence of market competition for wood shavings, wood chips, sawdust, and other wood “scraps” between traditional purchasers—namely landscapers and particleboard manufactures—and facilities that convert biomass to energy. The issuance of the BCAP proposed rule on February 8, 2010, suspended CHST program enrollment and proposed rules for the implementation of the remainder of the BCAP program.

USDA issued the BCAP final rule on October 27, 2010, implementing both program components. The two main components of BCAP are split into two forms of payments: annual and establishment payments, which share in the cost of establishing eligible biomass crops and maintaining production; and matching payments, which share in the cost of the collection, harvest, storage, and transportation of biomass to an eligible biomass conversion facility. The payments have different eligibility and sign-up requirements, payment rates, and contract lengths. Funding for the program is mandatory through the Commodity Credit Corporation (CCC) and was originally authorized at a “such sums as necessary” level. Recent congressional actions have capped the program in FY2010 and FY2011. In response to these reductions, USDA has temporarily suspended the matching payment portion of the program. The annual and establishment payment portion of BCAP is still accepting proposals.

While BCAP is in the early stages of implementation, concerns regarding eligibility, sustainability, and funding continue to be discussed. These issues could shape future congressional action on the program in the context of budgetary measures and possible reauthorization in the next farm bill.



Date of Report: April 19, 2011
Number of Pages: 18
Order Number: R41296
Price: $29.95

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Wednesday, April 27, 2011

Agricultural Conservation: A Guide to Programs


Megan Stubbs
Analyst in Agricultural Conservation and Natural Resources Policy

The Natural Resources Conservation Service (NRCS) and the Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA) currently administer over 20 programs and subprograms that are directly or indirectly available to assist producers and landowners who wish to practice conservation on agricultural lands. The number, scope, and overall funding of these programs has grown in recent years. This growth can cause some confusion over which problems and conditions each program addresses, and specific program characteristics and performance. The programs are as follows: 
  • Agricultural Management Assistance (AMA) Program 
  • Chesapeake Bay Watershed Program 
  • Cooperative Conservation Partnership Initiative (CCPI) 
  • Conservation Operations (CO); Conservation Technical Assistance (CTA) 
  • Conservation Reserve Program (CRP) 
  • CRP—Conservation Reserve Enhancement Program (CREP) 
  • CRP—Farmable Wetlands Program 
  • Conservation Security Program 
  • Conservation Stewardship Program (CSP) 
  • Emergency Conservation Program (ECP) 
  • Emergency Watershed Program (EWP) 
  • Environmental Quality Incentives Program (EQIP) 
  • EQIP—Agricultural Water Enhancement Program (AWEP) 
  • EQIP—Conservation Innovation Grants (CIG) 
  • Farmland Protection Program (FPP) 
  • Grassland Reserve Program (GRP) 
  • Healthy Forest Reserve Program (HFRP) 
  • Resource Conservation and Development (RC&D) Program 
  • Voluntary Public Access and Habitat Incentive Program 
  • Watershed and Flood Prevention Operations 
  • Watershed Rehabilitation Program 
  • Wetland Reserve Program (WRP) 
  • Wildlife Habitat Incentive Program (WHIP) 
This tabular presentation provides basic information introducing each of the programs. In each case, a brief program description is followed by information on major amendments in the 2008 farm bill (P.L. 110-246); national scope and availability; states with the greatest participation; the backlog of applications or other measures of continuing interest; program funding authority; FY2011 funding; the FY2012 Administration budget request; statutory authority; the authorization expiration date; and a link to the program’s website.


Date of Report: April 22, 2011
Number of Pages: 30
Order Number: R40763
Price: $29.95

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Friday, April 22, 2011

Agricultural Credit: Institutions and Issues

Jim Monke
Specialist in Agricultural Policy

The federal government has long provided credit assistance to farmers, in response to insufficient lending in rural areas or a desire for targeted lending to disadvantaged groups. One federal lender is the Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA). It issues direct loans to farmers who cannot qualify for regular credit, and guarantees repayment of loans made by other lenders. Thus, FSA is called a lender of last resort. Of about $240 billion in total farm debt, FSA provides about 2% through direct loans, and guarantees about another 4%-5% of loans. Another federally related lender is the Farm Credit System (FCS), a cooperatively owned, federally chartered lender with a statutory mandate to serve agriculture-related borrowers. FCS makes loans to creditworthy farmers, and is not a lender of last resort. FCS accounts for about 40% of farm debt. Commercial banks are the largest farm lender and hold 44% of total farm debt.

While the global financial crisis that escalated in 2008 was slower to affect agricultural balance sheets than the housing market, it has begun to take its toll. Net farm income fell by 30% in 2009, reducing some farmers’ ability to repay loans—particularly among dairy, hog, and poultry farms. But farm income rebounded by one-third in 2010, to near record levels. Delinquency rates (loans that are more than 30 days past due) on residential mortgages began to rise in 2005, but delinquency rates for agricultural loans did not begin to rise until mid-2008 and have not risen as quickly. The delinquency rate on residential mortgages may have peaked at 11.3% in June 2010; it reached 3.5% for agricultural loans in September 2010.

Because of the financial turmoil, the USDA farm loan program has seen significantly higher demand. In FY2010, FSA had $6 billion of authority for new loans and guarantees, up from $3.4 billion a few years ago. An FY2010 supplemental appropriation added over $950 million in loan authority to a $5.1 billion regular loan authority. An FY2011 appropriation, although still not final, is proposed at about $4.6 billion of loan authority.

Term limits have been part of the USDA farm loan program since 1992. They encourage farmers to graduate to commercial loans by placing a maximum number of years that farmers are eligible. However, Congress had suspended application of the guaranteed operating loan term limit to prevent some farmers from being denied credit. At the end of 2010, Congress let a suspension in the 2008 farm bill expire, and now the term limit statute is being applied. In the 112
th Congress, H.R. 1233 would retroactively extend the suspension to December 31, 2011, and H.R. 1422 and S. 368 would retroactively extend the suspension to December 31, 2013. USDA has said that about 1,600 current borrowers had reached the limit in 2010 and would not qualify for more guaranteed operating loans.

The FCS is seeking to expand its authority through a broader list of permissible investments. The 2008 farm bill did not expand FCS’s lending authority, but a proposed rule would allow FCS to “invest” through bonds or other assets to finance certain rural infrastructure, housing facilities, and rural business investment companies. Under statute, FCS cannot be a lender to these nonfarm entities. Disposition of the proposed rule awaits action by the Farm Credit Administration (FCA), the federal regulator. FCA’s fall 2010 regulatory agenda listed the rule as “undetermined” and did not anticipate a decision. Congress does not have a role in this regulatory decision.



Date of Report: April 12, 2011
Number of Pages: 20
Order Number: RS21977
Price: $29.95

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Wednesday, April 20, 2011

Japan’s 2011 Earthquake and Tsunami: Food and Agriculture Implications


Renée Johnson
Specialist in Agricultural Policy

The March 11, 2011, earthquake and tsunami in Japan caused widespread devastation that affected many of the country’s agricultural and fishery areas. The nuclear crisis that followed at the Fukushima Daiichi Nuclear Plant, and the subsequent detection of radioactive contamination of food produced near the disabled facility, further raised fears about the safety of Japan’s food production systems and its future food exports. Most reports acknowledge that Japan’s current production and supply shortages, along with rising food safety concerns and possible longer-term radiation threats to its food production, could limit Japan’s food exports while possibly increasing its need for food imports in the future. It is still not clear what effect, if any, Japan’s current food supply and demand situation will have on world farm commodity markets and food prices.

Following initial reports about possible radioactive contamination of foods, many countries increased their surveillance of food imports from Japan. In addition to the United States, others imposing heightened surveillance measures include the European Union, Canada, Australia, New Zealand, India, and most Asian nations, such as China and Hong Kong, Indonesia, Malaysia, Singapore, Korea, and Thailand, among others. Import restrictions vary by country but broadly cover milk and milk products, vegetables and fruit, and seafood and meat from those prefectures with a perceived risk of contamination, specifically Fukushima, Ibaraki, Tochigi, and Gunma. Several international organizations, including the various organizations of the United Nations, are closely monitoring global concerns about the safety of foods produced in Japan.

The Japanese government has taken steps to monitor and restrict, if necessary, the distribution of contaminated foods. Testing has been conducted nearly daily to detect possible radioactive contaminants on a wide range of plant and animal products, including fish, and also tap water in some of the coastal prefectures as well as in southern prefectures near the disabled Fukushima facility. In March 2011, Japan’s government made a series of announcements restricting the distribution and consumption of certain vegetables harvested in Fukushima, Ibaraki, Tochigi, and Gunma prefectures, and fresh raw milk produced in Fukushima prefecture. In April 2011, there were additional announcements regarding possible contaminated fish products, and also an announcement restricting spinach and leafy greens from Chiba prefecture.

In the United States, the two principal agencies that regulate U.S. food imports—the Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA)—have taken steps to address these concerns. Following Japan’s announcement that some foods had been contaminated by radiation, FDA issued an “Import Alert” for certain milk products and fresh vegetables produced or manufactured in the Japanese prefectures of Fukushima, Ibaraki, Tochigi, and Gunma. As of early April, FDA’s import alert does not cover Japanese seafood. Both FDA and USDA have announced that they are taking extra steps to better track U.S. food imports from Japan, working in conjunction with existing border inspectors at the Department of Homeland Security’s U.S. Customs and Border Protection (CBP).

Other U.S. agencies are also addressing concerns about whether radiation from Japan might affect food production in the United States or in U.S. territories in the Pacific. The Environmental Protection Agency (EPA) is continuously monitoring the nation’s air and is regularly monitoring drinking water, milk, and precipitation for environmental radiation. To date, the results of EPA’s drinking water, precipitation, and milk sampling and air monitoring have shown detected radiation below levels that are a public-health concern.



Date of Report: April 13, 2011
Number of Pages: 15
Order Number: R41766
Price: $29.95

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Consumers and Food Price Inflation


Randy Schnepf
Specialist in Agricultural Policy

Joe Richardson
Specialist in Social Policy


The heightened commodity price volatility of 2008 and 2010 and the subsequent acceleration in U.S. food price inflation associated with those market shifts raised concerns and generated many questions about farm and food price movements by Members of Congress and their constituents. This report responds to those concerns by addressing the nature and measurement of retail food price inflation. For a discussion of the relationship between farm and retail prices, and the major factors influencing retail food prices, see CRS Report R40621, Farm-to-Food Price Dynamics.

During the 1991 to 2006 period, U.S. food prices were fairly stable—annual food price inflation, as measured by the U.S. Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) for all food (excluding alcoholic beverages), averaged a relatively low 2.5%. However, several economic factors emerged in late 2005 that began to gradually push market prices higher for both raw agricultural commodities and energy costs, and ultimately retail food prices. U.S. food price inflation increased at a rate of 4% in 2007 and at 5.5% in 2008—the highest since 1990 and well above the general inflation rate of 3.8%.

By late 2008 the inflationary price trends had reversed. Prices for many raw agricultural commodities had already started to decline by late spring of 2008; however, owing to lags in the adjustment process, it was not until November 2008 that monthly food price inflation fell to near 0%, and it actually declined from February through May 2009. Annual food price inflation dropped from 5.5% in 2008 to 1.8% in 2009. Although the price inflation trend reversed itself in mid-2009, average annual food price inflation continued to fall hitting 0.8% in 2010. USDA projects that annual food price inflation will accelerate into a range of 3%-4% in 2011 as surging commodity and energy costs drive inflation higher in the latter half of 2011.

The all-food CPI has two components—food-at-home and food-away-from-home. The food-athome CPI is most representative of retail food prices and is significantly more volatile than the food-away-from-home index. The food-at-home CPI is projected in a range of 3.5% to 4.5% for 2011, compared with a 3% to 4% annual inflation rate for food-away-from home prices. This difference is partially explained by the larger share of farm products in the final price of retail foods than in food-away-from home. Farm product prices are, in general, substantially more volatile than the other marketing and processing costs that enter into retail or ready-to-eat foods.

Many wages and salaries, as well as federal programs (including several domestic food assistance programs), are linked to price inflation through escalation clauses in order to retain their purchasing power. For households where income and federal benefits do not keep up with price inflation, declines in purchasing power are real and immediate. However, even for households with escalation clauses, a time lag usually occurs between the time the price inflation is measured and the time when the wage or program benefit is adjusted upward to compensate.

The 2008-2009 global economic crisis—which encompassed higher retail prices, unemployment, income loss, and lower effective household purchasing power—resulted in higher participation rates in the federal food and nutrition programs. The past decade has seen a tremendous expansion in use of USDA’s food and nutrition assistance programs—federal expenditures totaled $94.8 billion in FY2010 and marked the 10
th consecutive year in which food and nutrition assistance expenditures exceeded the previous historical record. Since FY2004, expenditures for food and nutrition assistance have more than doubled.


Date of Report: April 14, 2011
Number of Pages: 33
Order Number: R440545
Price: $29.95

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