On the planting restriction

As Congress considers whether to eliminate the the planting restrictions on fruits and vegetables in farm commodity programs, this Congressional Research Service report is helpful in evaluating the real options Congress has.

Although the House Agriculture Committee wants to retain the planting restriction (with the exception of a pilot program in Indiana, the book is not yet written on the issue. In the end, it could be a bargaining chip that is traded away for a few hundred million dollars. A simple solution would be to end direct payments in farm programs. That's a non-starter. Though it would satisfy the WTO cotton case plainly, it would also yield the greatest political havoc.

From the executive summary:


This report summarizes and examines five academic and industry studies on the economic effects of removing the fruit and vegetable planting restrictions. These studies indicate that lifting the planting restriction could have an economic effect on certain crops within certain producing areas. However, differences in approach and scope (e.g., regional versus national; plantings of permanent, perennial crops versus easily rotated, annual crops) complicate a direct comparison across all five studies, and make it difficult to generalize about the possible economic effects of lifting the planting restriction. Only two of the studies provide estimates of revenue losses to existing fruit and vegetable growers (ranging from about $1.7 billion to $4.0 billion in the first year of lifting the current restriction).

Here are the options for Congress, according to CRS

* Retain the current restrictions (status quo). This option would not satisfy concerns in the WTO cotton case and could subject the direct payments program to expenditure limits applied to highly distorting amber box subsidies. Nor does it address the concerns of midwestern fruit and vegetable growers for processing. It could, however, satisfy fresh fruit and vegetable growers who prefer to keep the restriction as compared with simply lifting the restriction. ! Allow fruits and vegetables for processing on base acres, without additional penalty, if growers give up government payments when they plant such crops. This option likely would not satisfy WTO rules because it basically keeps the current planting restriction while creating a smaller penalty for a select group of fruits and vegetables (those for processing). Legislation, such as H.R. 1371/S. 1188, could appease midwestern growers for processing, but likely not fresh produce growers.
Eliminate the restriction on planting fruits and vegetables. This option could remedy violations identified in the WTO cotton case, and it would exceed what is proposed by midwestern growers of CRS-4 fruits and vegetables for processing. Farmers would not have to give up their government payments (nor face additional penalties as they do now) should they grow fruits and vegetables on base acres. However, this action, by itself, likely would not satisfy fresh growers who may want some other form of protection or compensation
because of new competition from subsidized growers.*
* Transition out of direct payments. If direct payments are eliminated, the planting restriction issue is irrelevant. Some are calling for an end to direct payments in the 2007 farm bill, either to score budget savings for other farm bill priorities, or to recognize the inconsistency of making payments to farmers even when farm income is high. Direct payments were intended to be decoupled and eligible for green box treatment. Planting restrictions have become a barrier to this goal. Thus, the fruit and vegetable planting restriction is seen by some as another reason to reconsider the future of direct payments.

If the planting restriction is eliminated and direct payments are retained (in the second or third bullets above), several additional options exist to respond to the concerns of existing fruit and vegetable growers who may perceive additional and unfair competition from new growers who would continue to receive direct and counter-cyclical payments on base acres.

* Direct compensation. Provide some type of direct payment to existing fruit and vegetable growers who do not have base acres on which they plant their fruits and vegetables. The amount of the payment could be based on the level of direct payments received by program crop growers.
* Research assistance. Increase federal funding for university and government research on growing, processing, and distributing fruits and vegetables. Implementation of research findings could lower production costs, increase quality or output, and/or increase demand.
* Increase demand for fruits and vegetables. To the extent that eliminating the planting restriction increases fruit and vegetable production — which could depress prices and revenue as some existing growers fear — federal efforts to increase demand could offset potential revenue shortfalls. Increasing demand could be accomplished in several ways: market promotion (including healthy diet standards, and farmers markets), foreign trade assistance(negotiating trade agreements to export U.S. produce), and government purchases of produce (for feeding and nutrition assistance programs such as Section 32, school lunch programs, and fresh fruit and vegetable snacks for children).