USDA Budget Summary 2006 - Farm and Foreign Agricultural Services

FARM AND FOREIGN AGRICULTURAL SERVICES

MISSION AND RELATIONSHIP TO STRATEGIC GOALS

The Farm and Foreign Agricultural Services (FFAS) mission area has responsibility for the delivery of most programs and services that support USDA strategic goal 1, which is to enhance economic opportunities for American agricultural producers. The mission area conducts its activities in support of the following four key objectives that comprise this strategic goal: (1) expand international market opportunities; (2) support international economic development and trade capacity building; (3) expand alternative markets for agricultural products and activities; and (4) provide risk management and financial tools to farmers and ranchers.

Farm loan and income support programs are key components of USDA’s efforts to provide America’s farmers and ranchers with an economic safety net to help them maintain their operations during difficult times. These programs improve producer access to capital and mitigate market losses, including those resulting from disasters. They also contribute to the success of farms and ranches, a market-based agriculture sector, and thriving agricultural communities.

Key performance measures for these objectives include the value of trade preserved through trade agreement compliance monitoring and enforcement; number of women and children assisted overseas through McGovern-Dole preschool and school feeding activities; annual increase in U.S. bioenergy production; increase in the value of risk protection provided to producers through the Federal crop insurance program; and increase in the percent of loans extended to beginning and socially disadvantaged farmers and ranchers. Program performance may be affected by numerous external factors. For example, preserving market access through trade agreement monitoring and enforcement depends heavily on the actions of other governments and their willingness to meet their trade obligations. Also, the expected market price of farm commodities may dramatically affect the value of commodities protected by crop insurance and therefore the value of risk protection provided. Establishing linkages between program outputs, such as loan amounts, and program outcomes, such as improved economic stability for farmers, is difficult.

FFAS also plays an important role in support of USDA strategic goal 5, which is to protect and enhance the Nation’s natural resource base and environment. FFAS administers and provides support for programs that contribute to improved management of private lands, which is one of two objectives supporting strategic goal 5.

The work of the FFAS mission area is carried out by its three agencies, the Farm Service Agency (FSA), Risk Management Agency (RMA), and Foreign Agricultural Service (FAS).

FARM SERVICE AGENCY (FSA)

FSA supports USDA strategic goal 1 through the delivery of farm credit, disaster assistance, and commodity and related programs. FSA also administers some of the USDA conservation programs that support strategic goal 5. FSA provides administrative support for the Commodity Credit Corporation (CCC) which funds most of the commodity, export, and some of the conservation programs of USDA. To deliver its programs, FSA operates an extensive network of local Service Center-based offices.

The farm credit programs provide an important safety net for America’s farmers by providing a source of credit when they are temporarily unable to obtain credit from commercial sources. Consistent with the Administration’s policies on food and agriculture, the farm credit programs play an important role in enhancing the infrastructure of the food and agricultural system. The 2006 budget supports about $3.8 billion in direct and guaranteed farm loans. This compares to a total program level of $4.0 billion estimated for 2005. As a result of improved repayments and changes in economic assumptions, the amount of subsidy necessary to fund the farm credit programs has generally decreased. The program supports USDA Strategic Objective 1.4: provide risk management and financial tools to farmers and ranchers.

Objective 1.4: Provide Risk Management and Financial Tools to Farmers and Ranchers.

Key Performance Measure

2001

2002

2003

2004

2005

2006

Increase the percent of beginning farmers, racial and ethnic minority farmers, and women farmers financed by FSA

Baseline: 2000 = 27%

30%

33%

34%

40%

35%

36%

Reduce average processing time for direct loans (days) Baseline: 2000 = 43

Reduce average processing time for guaranteed loans (days)

Baseline: 2000 = 16

As has been the case for several years, greater levels of assistance will be offered through guaranteed loans rather than direct loans. Guaranteed loans have lower subsidy costs and are serviced by private lenders. Guaranteed farm operating loans are commonly used by private lenders to continue serving borrowers who become higher credit risks due to economic adversity. Guaranteed farm ownership loans are a critical source of credit for some borrowers because they allow real estate equity to be used to restructure short-term debt. Emphasis will continue to be placed on providing assistance to socially disadvantaged farmers. As required by statute, a portion of both direct and guaranteed farm operating and ownership loan funds is targeted to socially disadvantaged borrowers based on county level demographic data. Although targets vary by loan program and county, on average about 14 percent of loan funds are targeted to socially disadvantaged borrowers.

The 2006 budget proposes loan levels that generally reflect actual usage in recent years. The amounts a farmer may borrow under the direct and guaranteed loan programs are limited by statute. For direct loans, the borrowing limit is $200,000 for any combination of direct farm ownership or operating loans. For guaranteed loans, the borrowing limit adjusts annually for inflation; however, in 2006 the loan limit is expected to be about $800,000 for any combination of guaranteed farm ownership or operating loans.

For farm operating loans, the 2006 budget provides $650 million for direct loans and about $1.5 billion for guaranteed loans. These loan levels will serve an estimated 23,590 farmers, about 14,673 of whom will receive direct loans. The estimates of the number of borrowers served reflect historical average loan amounts of about $44,000 for direct loans and $168,000 for guarantees. The availability of farm operating loans provides farmers with short term credit to finance the costs of continuing or improving their farming operations, such as purchasing seed, fertilizer, livestock, feed, equipment, and other supplies.

For farm ownership loans, the 2006 budget provides $200 million in direct loans and $1.4 billion for guaranteed loans. The 2006 levels will provide almost 6,750 people with the opportunity to either acquire their own farm or keep an existing one. About 1,725 borrowers would receive direct loans and 5,025 would receive guaranteed loans. The estimates of the number of borrowers served reflect historical average loan amounts of about $44,000 for direct loans and $168,000 for guarantees.

The 2006 budget includes $25 million for emergency loans. In 2003-2005, no funding was provided for emergency loans due to the availability of carry-over funding from prior years’ supplemental appropriations. The level of funding requested is expected to be sufficient to fund the emergency loan program given “normal” weather conditions. The 2006 budget also provides funding for Indian land acquisition loans and the Boll Weevil Eradication Loan Program. Due to the successful completion of some eradication programs, the 2006 budget requests $60 million for this program compared to $100 million estimated for 2005.

Funding for State Mediation Grants would be increased to $4.5 million. These grants are made to States to help support certified programs that provide alternative dispute resolution on a wide variety of agricultural issues. Mediation benefits family farmers, including many low-income and socially disadvantaged farmers, who, because of mediation, are often able to resolve credit and other issues and remain on the farm.

A Program Assessment Rating Tool (PART) review of the direct loan programs was conducted as part of the 2006 budget process. The PART analysis revealed that the purpose and management of the direct loan programs were focused and clear, but additional planning and performance measurements were needed. This result is similar to the finding of the PART analysis conducted on the guaranteed loan programs in 2005. As a result of the 2005 guaranteed loan analysis, the Administration began a process to develop meaningful outcome-oriented measures and goals for the direct and guaranteed loan programs. That process is expected to result in a new strategic plan and performance measurements for the farm loan programs. In addition, FSA has been participating with other loan programs within USDA to develop a consistent outcome-based efficiency measure. The cumulative effects of these efforts should enable the direct and guaranteed loan programs to improve their PART scores.

The Commodity Credit Corporation (CCC) provides funding for commodity programs administered by FSA, selected conservation programs administered by FSA and NRCS, and export programs administered by FAS. CCC borrows funds needed to finance these programs from the U.S. Treasury and repays the borrowings, with interest, from receipts and from appropriations provided by Congress.

Changes over the last decade in commodity, disaster, and conservation programs due to policy, weather, and market conditions have dramatically changed the level, mix, and variability of CCC outlays. CCC net outlays have declined from a record high of $32.3 billion in 2000 to $10.6 billion in 2004. Projected outlays are about $24.1 billion in 2005 and $19.1 billion in 2006, reflecting the provisions of the 2002 Farm Bill. CCC outlays in 2005 and in some prior years also included substantial levels of emergency disaster and other ad hoc supplemental assistance.

Commodity loan and income support programs are administered by FSA and financed through CCC. These programs constitute the majority of CCC outlays. The commodity programs are mandated by provisions of the Farm Bill. The programs include direct payments to producers of feed grains, wheat, upland cotton, rice, soybeans, other oilseeds, and peanuts. The direct payments, based on historical program acreage and yields, are set by law and do not vary with market prices or current plantings.

The Farm Bill also provides counter-cyclical payments for producers of the above crops which provide payments when market prices decline below specified target prices. Producers were also given an opportunity to update historical acreage bases and yields for use in determining counter-cyclical payments. Nearly 1.9 million farms were enrolled in the program in 2004. The CCC marketing assistance loan programs are provided for the above commodities as well as for wool, mohair, honey, and pulses to provide protection against sharp declines in market prices.

Marketing assistance loan program levels are projected to rise from $9.1 billion in 2004 to $11.9 billion in 2005 and then to decline to about $10.1 billion in 2006. Loan deficiency payments which totaled $5.3 billion in 2002 declined to less than $0.5 billion in 2004 as prices for several commodities rose. However, with the reversal in price conditions due to abundant agricultural production, loan deficiency payments are projected to exceed $4 billion each in 2005 and 2006. A PART evaluation of the marketing loan assistance program conducted as part of the 2005 budget process determined that the program was “moderately effective.”

The Farm Bill dramatically increased dairy program outlays by establishing a direct payment tied to milk prices. The Milk Income Loss Contract (MILC) program provides payments equal to 45 percent of the difference between $16.94 per hundredweight and the Class I milk price per hundredweight in Boston under the applicable Federal milk marketing order. Due to improved milk prices in 2004, dairy outlays declined to less than $300 million from nearly $2.5 billion in 2003. Due to slightly softening of milk prices, the dairy program outlays are expected to rise to about $600 million in 2005 and then to decline to $200 million in 2006 under the 2002 Farm Bill provisions which allow the MILC to expire at the end of 2005. However, following up on the Presidential commitment, an extension of the MILC is proposed to maintain support to dairy producers for two more years.

The 2006 budget proposes a broad package of deficit reduction measures including legislative changes to make a net reduction in farm program spending by about $587 million in 2006 and $5.7 billion over the ten year period 2006 through 2015. These proposals include: reducing the payment limitation for all CCC commodity payments including marketing loan gains to $250,000 along with removal of the “three entity” rule; making marketing assistance loans based on historical production; reducing all commodity payments to farmers by 5 percent; applying a 1.2 percent marketing assessment on sugar processors; and keeping the costs of the dairy price support program at a minimum.

The proposed legislative changes are consistent with PART evaluation results. A PART review of the MILC conducted for the 2006 budget indicated the program was moderately effective. An evaluation of the dairy price support program indicates that it may be possible to improve its cost effectiveness.

The 2006 budget proposes to continue to limit the CCC bioenergy incentive program, to $60 million instead of $150 million provided by the Farm Bill. Similarly, in 2005 the program was limited to $100 million. A PART review of this program conducted during the 2005 budget process suggested that additional incentives for ethanol were less critical than other Federal assistance, including tax credits and production mandates, and that greater emphasis should be placed on incentives for biodiesel production rather than ethanol. New tax incentives for biodiesel and ethanol enacted in the American Jobs Creation Act of 2004 further reduce the need for the CCC program.

The Farm Bill also provides authority for conservation programs. The Conservation Reserve Program (CRP), a CCC program, is administered by FSA in addition to the Emergency Conservation Program. All other cost-share and easement conservation programs such as the Environmental Quality Incentives Program, Wetlands Reserve Program, Farm and Ranch Lands Protection Program, Conservation Security Program, and Wildlife Habitat Incentives Program are administered by the Natural Resources Conservation Service (NRCS).

CRP is USDA’s largest conservation/environmental program. The purpose of CRP is to assist farm owners and operators in conserving and improving soil, water, air, and wildlife resources by retiring environmentally sensitive land from agricultural production and keeping it under long-term resource-conserving cover. CRP participants enroll acreage for periods of 10 to 15 years in return for annual rental payments and cost-share and technical assistance for installing approved conservation practices. The Farm Bill extended CRP enrollment authority through 2007 and increased the enrollment cap by 2.8 million acres to a total of 39.2 million acres.

Acreage that counts toward the total enrollment cap includes acres enrolled in the CRP through scheduled general signups and those enrolled through a continuous, noncompetitive signup that has been under way since September 1996 with the purpose of enrolling land in filter strips, riparian buffers, and similar conservation practices. Continuous signup includes an initiative announced in December 2003 to restore up to 500,000 acres of floodplains by planting bottomland hardwood trees. Continuous signup acreage also includes enrollment under the Conservation Reserve Enhancement Program (CREP) that is designed to target program benefits to address specific local and regional conservation problems. At this time, 24 States have approved CREP agreements. The Farm Bill also permits up to 1 million acres of wetland acreage to be enrolled under the Farmable Wetlands Program (FWP) as part of the 39.2 million total acreage for CRP. Up to 100,000 acres per State may be enrolled. The Farm Bill also permits managed harvesting of forage from CRP lands (subject to the requirement that environmental benefits be maintained or enhanced) and requires equal consideration be given to soil erosion, water quality, and wildlife.

As of December 2004, CRP enrollment totaled 34.7 million acres, including 31.8 million acres under general signup, 2.2 million acres under continuous non-CREP signup, 0.6 million acres under CREP, and about 120,000 acres under FWP provisions. Another 1.2 million acres have been accepted in the 29^th general signup in 2004 which will be enrolled once the contracts are finalized.

Emergency Conservation Program (ECP). Under this program, the Department shares the cost of carrying out practices to assist and encourage farmers to rehabilitate farmland damaged by natural disasters. In particular, it addresses those problems which if left untreated would:

(e) Government. The Administration expects significant long-term savings and improved services to clientele to result from improvements made in the information technology services and GIS systems, as well as in the IT administrative support services of the three county-based agencies (FSA, NRCS, and the Rural Development mission area). FSA will also make administrative improvements in its servicing of farm credit loans.

RISK MANAGEMENT AGENCY (RMA)

Crop insurance was designed to be the primary risk management tool for farmers and ranchers. Crop insurance helps producers cope with natural disasters, such as flood and drought, so they do not have to leave farming. In addition, the widespread use of crop insurance was meant to eliminate the need for ad hoc disaster payment assistance. However, since 2000, four ad hoc disaster programs have been authorized, covering six crop years for a total cost of about
$10 billion.

Part of the problem stems from the low coverage level of catastrophic crop insurance (CAT), which was designed primarily to encourage widespread participation by charging producers only a $100 fee. However, CAT provides a maximum of 27.5 percent of the crop value for a total crop loss. While the cost to aid uninsured or underinsured producers might not be large, Congress does not want producers who bought adequate crop insurance to be put at a disadvantage, or to discourage them from purchasing coverage in the future. Consequently, disaster payments are structured to ignore crop insurance payments in determining eligibility for assistance.

Therefore, in continuing the Administration's efforts to more effectively budget and administer disaster insurance programs, the 2006 budget includes a proposal to compel producers to purchase more adequate coverage by tying the receipt of direct payments or any other Federal payment for crops to the purchase of crop insurance. This change will ensure that the farmer’s revenue loss would not be greater than 50 percent. Other changes include modifications to the fee for catastrophic coverage which is intended to make the program more equitable in its treatment of both large and small farms, restructuring premium rates to better reflect historical losses, and reductions in delivery costs. The combination of changes is expected to save the government approximately $140 million per year, beginning in 2007. Accordingly, this proposal does not impact the Government cost numbers presented in the table above. In total, this change should ensure that the majority of producers have crop insurance and that the minimum coverage level is sufficient to sustain the producer in times of loss.

RMA administers the Federal crop insurance program which provides a critical means of support for USDA strategic goal 1. The program provides an important safety net that protects producers from a wide range of risks caused by natural disasters as well as the risk of price fluctuations. In recent years, an increasing proportion of risk protection has been provided by revenue insurance which protects against both a loss of yield and price declines.

Objective 1.4: Provide Risk Management and Financial Tools to Farmers and Ranchers.
Key Performance Measure	2001	2002	2003	2004	2005	2006
Increase value of FCIC risk protection coverage (billions) Baseline: 1999 = $30.9	$36.7	$37.3	$40.6	$46.7	$40.0	$41.0

The program is expected to provide about $41 billion in risk protection on about 220 million acres in 2006, about the same number of acres as 2004. This represents about 84 percent of the Nation’s acres planted to principal crops. In 2004, over 50 percent of the policies sold were revenue products which provide protection against both a loss of yield and a decline in commodity prices. Commodity prices are a key external factor which can significantly affect performance measurements for the crop insurance program. In 2004, high commodity prices increased the value of risk protection provided, particularly with respect to coverage under revenue products, to a record $46.7 billion. Current estimates of commodity prices indicate that the value of risk protection provided in 2006 will be down from 2004.

Participation in the Crop Insurance Program by producers is voluntary; however, participation is encouraged through premium subsidies. Crop insurance is delivered to producers through private insurance companies that share in the risk of loss and opportunity for gain. The companies are reimbursed for their delivery expenses and receive underwriting gains in years of favorable loss experience. The 2006 budget requests “such sums as necessary” for the mandatory costs associated with the Crop Insurance Program, including premium subsidies, indemnity payments (in excess of premiums), underwriting gains paid to private companies, reimbursements to private companies for delivery expenses and other authorized expenditures. The 2006 indemnities of $4 billion reflect the statutory loss ratio of 1.075. In addition, producers are expected to pay about $1.5 billion in premiums.

Discretionary costs for the Federal crop insurance program cover Federal salaries and related expenses. The 2006 budget includes about $88 million for these costs, compared to about $71 million for 2005. The increase includes $5.8 million for emerging information technology architecture (EITA). The EITA will replace a decade old information technology system which has reached the end of its useful life, resulting in increased costs to maintain and upgrade to accommodate the expanding role of the crop insurance program. The EITA will provide a web-based entry point for companies participating in the crop insurance program that will, among other advantages, facilitate the detection of fraud, waste and abuse in the crop insurance program by improving data sharing with FSA.

The budget also includes an increase of $6.4 million to maintain and upgrade the legacy information technology systems until the EITA can be developed and $1.8 million for 17 additional staff years. The additional staffing would be focused on reducing fraud, waste and abuse in the crop insurance program and research and development of new insurance products.

The budget includes language to provide $3.6 million for data mining to fill the gap when funding authorized by the Agricultural Risk Protection Act (ARPA) of 2000 expires at the end of 2005. These funds would maintain the data mining/data warehousing system to improve compliance with and the integrity of the Federal Crop Insurance Program.

A PART review of the Crop Insurance Program was conducted as part of the 2004 budget process. The PART analysis revealed that the purpose of the Federal Crop Insurance Program was focused and clear, but additional planning and performance measurements were needed. As a result of the evaluation, the Administration initiated a process to establish adequate long-term and short-term measures and goals, and to identify improvements in the program that will get it closer to becoming a complete risk management tool. This effort has resulted in the development of a new strategic plan, and the program is expected to be reevaluated under the PART during the 2007 budget process.

FOREIGN AGRICULTURAL SERVICE (FAS)

FAS is the lead agency for the Department’s international activities. Operating on a global basis, FAS has five key objectives that provide the means to enhance economic opportunities for American producers: (1) increasing access to overseas markets through trade policy negotiations and compliance monitoring; (2) developing overseas markets for U.S. agricultural products through market development, outreach, and export promotion programs; (3) providing information and analysis on overseas agricultural production and trade developments; (4) administering commercial credit and risk assistance programs to enhance U.S. competitiveness in global markets; and (5) supporting economic development and trade capacity building in developing countries through foreign food aid, technical assistance, training, and related activities.

Expanding markets for agricultural products is critical to the long-term health and prosperity of the U.S. agricultural sector and, with 96 percent of the world’s population living outside the United States, future growth in demand for food and agricultural products will occur primarily in overseas markets. FAS’ international activities play a critical role in helping to open new markets and in facilitating U.S. competitiveness and, by doing so, help to secure a more prosperous future for American agriculture. Support for economic development and trade capacity building reinforces these efforts by helping developing countries to become economically stable and improve their prospects to participate in and benefit from expanding global trade in agricultural products.

CCC Export Credit Guarantee Programs. The CCC export credit guarantee programs, administered by FAS in conjunction with FSA, provide payment guarantees for the commercial financing of U.S. agricultural exports. These programs facilitate exports to buyers in countries where credit is necessary to maintain or increase U.S. sales, but where financing may not be available without CCC guarantees.

The budget includes an overall program level of $4.4 billion for CCC export credit guarantees in 2006. This estimate reflects the level of sales expected to be registered under the export credit guarantee programs. However, the actual level of programming is likely to vary from this estimate, depending upon program demand, market conditions, and other relevant factors during the course of the year.

Of the total program level for export credit guarantees expected to be issued by CCC in 2006, $3.4 billion will be made available under the GSM-102 program, which provides guarantees on commercial export credit extended with short-term repayment terms (up to 3 years), and
$5 million will be made available under the GSM-103 program, which provides intermediate-term credit guarantees (3 to 10 year repayment terms).

For supplier credit guarantees, the budget includes an estimated program level of $1.0 billion for 2006. Under this credit activity, CCC guarantees payments due from importers under short-term financing that exporters extend directly to the importers for the purchase of U.S. agricultural products. Sales registrations under the supplier credit guarantee program have exhibited strong annual growth since inception of the program in 1996, but that growth is now expected to moderate in future years.

The budget also includes an estimated program level of $20 million for facility financing guarantees in 2006. Under this activity, CCC provides guarantees to facilitate the financing of goods and services exported from the United States to improve or establish agriculture-related facilities in emerging markets. By supporting such facilities, these guarantees enhance sales of U.S. agricultural products to countries where demand is constricted due to inadequate storage, processing, or handling capabilities.

A PART review of the CCC export credit guarantee programs was carried out as part of the 2006 budget process, which resulted in an overall rating of “moderately effective”. The review found that the programs are generally well managed but have some weaknesses in strategic planning. In response to those findings, FAS has developed a new long-term performance measure designed to gauge the programs’ market development effectiveness and is developing meaningful performance targets for the programs. FAS also will take steps to develop a process to provide for regular independent evaluations to examine program effectiveness. The 2006 budget reflects the PART findings by including funding to improve claims recoveries for the programs and reducing administrative costs based on demonstrated efficiencies in program management and operations.

Market Development Programs. FAS administers a number of programs in partnership with private sector cooperator organizations, which support the development, maintenance, and expansion of commercial export markets for U.S. agricultural commodities and products. Under the Market Access Program (MAP), CCC funds are used to reimburse participating organizations for a portion of the costs of carrying out overseas marketing and promotional activities, such as direct consumer promotions. Historically, more than 80 percent of MAP funding has been devoted to building export markets for high value products, the fastest growing component of U.S. agricultural exports. MAP participants include nonprofit agricultural trade organizations, State-regional trade groups, cooperatives, and private companies which qualify as small business concerns. The budget provides funding for MAP of $125 million in 2006, a reduction of
$15 million from the 2005 level but unchanged from 2004.

Under the Foreign Market Development (Cooperator) Program, cost-share assistance is provided to nonprofit commodity and agricultural trade associations to support overseas market development activities that are designed to remove long-term impediments to increased U.S. trade. These activities include technical assistance, trade servicing, and market research. Unlike MAP, Cooperator Program activities are carried out on a generic commodity basis and do not include brand-name or consumer promotions. For 2006, the budget continues funding for the Cooperator Program at the current level of $34.5 million.

The budget also includes funding for the Emerging Markets Program at the current annual level of $10 million. Under the program, CCC funds are made available to carry out technical assistance activities that promote the export of U.S. agricultural products and address technical barriers to trade in emerging markets. Many types of technical assistance activities are eligible for funding, including feasibility studies, market research, industry sector assessments, specialized training and business workshops.

The 2002 Farm Bill authorized a new Technical Assistance for Specialty Crops Program to address unique barriers that prohibit or threaten the export of U.S. specialty crops. Under the program, grants are provided to assist U.S. organizations in activities designed to overcome phytosanitary and related technical barriers to trade. For 2006, the budget provides $2 million for the program, which will be carried out with CCC funding.

The budget also includes $2.5 million of CCC funding for the Quality Samples Program (QSP). Under the program, CCC provides funding to assist private entities to furnish samples of U.S. agricultural products to foreign importers in order to overcome trade and marketing obstacles. The program provides foreign importers with a better understanding and appreciation of the characteristics of U.S. agricultural products.

Export Subsidy Programs. The Department currently has two export subsidy programs: the Export Enhancement Program (EEP) and Dairy Export Incentive Program (DEIP). Under these programs, bonus payments are made available to exporters of U.S. agricultural commodities to enable them to be price competitive and thereby make sales in targeted overseas markets where competitor countries are making subsidized sales.

EEP programming has been limited for the past several years due to world supply and demand conditions, and no bonuses were awarded under the program during 2004. In view of this recent performance, the budget assumes an EEP programming level of $28 million for both 2005 and 2006. However, the 2002 Farm Bill established a maximum annual program level for EEP of $478 million, the maximum allowable level under the Uruguay Round export subsidy reduction commitments. Should market conditions warrant, the program can be reactivated and the awarding of bonuses resumed up to the authorized level.

For DEIP, the budget assumes a program level of $52 million for 2006, an increase of $46 million from the current estimate for 2005, based on more competitive world market conditions expected next year. The program level established for DEIP is an estimate of the level of subsidy funding needed to facilitate export sales consistent with projected U.S. and world market conditions. The program level may increase or decrease from the projected level depending upon the relationship between U.S. and world market prices during the course of the programming year.

Trade Adjustment Assistance for Farmers. The Trade Act of 2002 established a new Trade Adjustment Assistance (TAA) Program for Farmers. Under the program, USDA is authorized to make payments to eligible producer groups when the current year’s price of an agricultural commodity is less than 80 percent of the national average price for the 5 marketing years proceeding the most recent marketing year, and the Secretary determines that imports have contributed importantly to the decline in price. Procedures for determining rates and amounts of payments to eligible producers are set forth in the statute. The statute also authorizes USDA to use not more than $90 million annually to carry out the program through 2007.

During 2004, the first full year of implementation, 12 petitions for TAA were approved. Commodities that were certified as eligible for assistance included wild blueberries, Pacific salmon, shrimp, catfish, and lychees. Total program costs for 2004 are estimated at just over
$16 million.

Foreign Food Assistance. The United States plays a leading role in global efforts to alleviate hunger and malnutrition and enhance world food security through international food aid activities. USDA contributes to these efforts by carrying out a variety of food aid programs, which support economic growth and development in recipient countries. These activities are administered by FAS working in close cooperation with FSA and other agencies.

A PART review of USDA food aid activities that was first conducted as part of the 2004 budget process has been updated for this budget. The overall rating for those activities has now been upgraded to “moderately effective”. The original PART found that the programs had strategic planning deficiencies, including the need to identify annual performance goals that are linked to government-wide measures for U.S. foreign food aid. FAS has taken a number of steps to address deficiencies identified in the original PART, including development of a new food aid effectiveness performance measure and baseline. Financial management improvements also have been made, and FAS has contracted for a review of food aid information and reporting systems that will identify improvements in IT systems that should result in efficiencies in program administration.

Public Law 480 (P.L. 480). Assistance provided under the authority of the Agricultural Trade Development and Assistance Act of 1954 (Public Law 83-480) is a primary means by which the United States provides foreign food assistance. In recent years, P.L. 480 assistance has been provided through two program authorities.

· Title I provides for sales of U.S. agricultural commodities to developing country governments and private entities through concessional financing agreements and for donations through Food for Progress grant agreements. In allocating assistance under the Title I program, priority is given to agreements that provide for the export of U.S. agricultural commodities to those developing countries which have the greatest need for food, are undertaking measures to improve their food security and agricultural development, and have demonstrated the potential to become commercial markets. The Title I program is administered by FAS.

· Title II provides for donations of humanitarian food assistance to needy people in foreign countries in response to malnutrition, famine, and other extraordinary relief requirements and to meet economic development needs that address food security. The assistance is provided primarily through private voluntary organizations, cooperatives, or international organizations, primarily the World Food Program of the United Nations. In the case of donations made in response to emergency needs, Title II assistance can also be provided through government-to-government agreements. The Title II program is administered by the Agency for International Development (AID).

For 2006, the budget supports an overall program level for P.L. 480 food assistance of just over $1.1 billion. This includes appropriated funding of $965 million requested in the budget, plus projected unobligated carryover funds and reimbursements to be received from the Maritime Administration for prior year cargo preference related expenses. Together, this funding is expected to support total P.L. 480 commodity assistance of approximately 2.3 million metric tons.

For Title I credit sales and grants, the budget requests appropriated funding of $80 million. Although the request for appropriated funding is reduced from level included in last year’s budget, Title I programming should remain unchanged from the 2005 current estimate of $145 million because of the availability of unobligated carryover funds and projected Maritime Administration reimbursements. Based on current price projections, total Title I commodity assistance during 2006 is expected to be 540,000 metric tons.

For Title II donations, the budget supports an overall program level of $964 million, whic