1. Increasing Production, Trade, and Opportunities for Family Farmers

Farm and Foreign Agricultural Services mission area includes three agencies: the Farm Service Agency (FSA), the Foreign Agricultural Service (FAS), and the Risk Management Agency (RMA). This mission area serves production agriculture, helping to keep America’s farmers and ranchers in business as they face the uncertainties of weather and markets.

These agencies deliver commodity, credit, conservation, and emergency assistance programs that help improve the stability and strength of the agricultural economy, expand overseas markets for U.S. agricultural products, and promote world food security. They also sanction the provisions by the private sector of a broad-based crop insurance program and other risk management tools.

The ongoing evolution of the Farm and Foreign Agricultural Services mission area, through reorganization, crop insurance reform, and farm program changes, has profoundly altered the way it operates. The Federal Agriculture Improvement and Reform Act of 1996 replaced the traditional Federal role in some farm programs with the economic forces of the marketplace. The management of risk in this volatile setting has moved more fully to an emerging partnership between Government and the private sector.

The public interest calls for a dynamic, efficient agriculture that provides a sustainable, safe, and affordable food and fiber supply. The challenge is to serve this public interest at a time of diminishing resources and a decreased role for the Federal Government.

Accomplishment Highlights

WTO Victory Expands Beef Exports
The United States won a major victory in the first case brought to the World Trade Organization (WTO) under the new Sanitary and Phytosanitary (SPS) Agreement. In August, the WTO upheld the claims of the United States and Canada that the European Union’s (EU) import ban on meat from hormone-treated animals was inconsistent with the EU’s commitments under the WTO’s SPS Agreement. This ban, initiated in 1989, has stopped over $100 million in U.S. beef exports annually.

Education, Technical Assistance, and Training Assist U.S. Exports
USDA continued to alert American farmers and exporters about foreign sales opportunities. In 1997, USDA continued to target cooperatives and small, socially disadvantaged, and minority firms. New partnerships were formed with vocational agriculture teachers, 4-H, and FFA representatives to inform more of the public--particularly young farmers--of the dynamics of agricultural exports and the need to get more producers and companies exporting. In addition, the Foreign Agricultural Service worked with the FFA and United Negro College Fund to organize an international intern program offering interested students an opportunity to gain international experience by working in FAS overseas offices.

Funding and Payment Guarantees Support U.S. Exports
In 1997, export programs and services were refined and expanded to meet the changing demands of the international marketplace and to keep pace with the competition. For the first time, funding offered under the Foreign Market Development Program was provided to export organizations through a competitive process. Under the 1997 Market Access Program allocations, 84 percent of the brand promotion funds will assist small companies and cooperatives. Funding has been cut significantly for large companies and will be eliminated entirely in the 1998 allocation process. In 1997, U.S. exporters reported the first sales under the Supplier Credit Guarantee Program. In addition, a new Facilities Credit Guarantee Program was launched. The program provides payment guarantees to help finance exports of U.S. goods and services for agricultural facilities and emerging markets.

USDA Training Promotes International Trading
Through a variety of training experiences throughout the United States, the Cochran Fellowship Program gave 707 participants from 45 countries exposure to U.S. economic policies, business practices, and products. New programs were initiated in Kenya, Namibia, and Brazil. In Ukraine, USDA, through the Commercial Agriculture Development Project, provided technical assistance and training to develop a system of grades and standards to facilitate domestic and international commerce.

Trade in Biotechnology Products
In 1997, USDA took a leadership role to ensure that farmers and consumers around the world have access to approved products resulting from biotechnology. USDA worked tirelessly in EU countries to convince policymakers of the need for food safety decisions to be based on sound science. Two biotechnology-derived products were cleared for importation by most European countries. The United States is a key proponent of a biotechnology initiative under the Asian Pacific Economic Cooperation (APEC) forum. The United States is sponsoring educational workshops aimed at harmonizing regulatory approaches to biotechnology products among APEC members. USDA worked with Egyptian officials to continue to keep the Egyptian market open to approved agricultural biotechnology products. USDA worked to assure Brazilian officials of the safety of approved biotechnology products, and Brazilian officials approved the importation of 1.5 million metric tons of biotechnology-derived soybeans. The establishment of the U.S.- Indonesia Food and Agricultural Forum ensured continued dialog among senior-level public and private sector officials of both countries on issues related to food safety, genetically engineered products, and trade. This is envisioned as a model to engage the leadership of other countries in a continuing discussion of these important issues.

Monitoring Compliance With Trade Agreements
USDA aggressively monitored foreign countries’ compliance with Uruguay Round Agreement commitments during FY 1997, the second year of the agreement’s implementation. USDA efforts helped safeguard negotiated trade benefits and set a favorable precedent for other countries to implement their agreement commitments. USDA efforts resulted in the Philippines taking major steps to fully open its market for U.S. pork and poultry. Other issues addressed by USDA include Egypt’s import restriction on beef and their ban on poultry, Switzerland’s export subsidies for beef, and Turkey’s import ban on various agricultural products. USDA work also contributed to the opening of formal dispute settlement proceedings by the U.S. Government that challenge Canada’s milk price pooling scheme, a practice that may constrain U.S. dairy exports.

Record-High Exports to North American Neighbors
In FY 1997, U.S. exports to Mexico reached a record $5.2 billion, while U.S. exports to Canada continue to expand and reached a record $6.8 billion. The North American Free Trade Agreement continues to provide the framework for expanded growth in U.S. agricultural exports to our North American neighbors.

International Scientific Cooperation Bears Fruit
USDA scientific cooperation with foreign countries continues to pay off in practical ways for U.S. agriculture. USDA uses science to help solve critical problems such as trade barriers and phytosanitary issues, food safety, and exotic diseases and pests. To help tear down trade barriers to commodities susceptible to the fruit fly, scientists working on postharvest technology have collaborated with Malaysian counterparts to develop quarantine treatments. A Chinese team visited the United States to exchange information on viral diseases of animals, laying the groundwork for the exportation of U.S. Shorthorn cattle and diagnostic equipment to China.

Scientists are also promoting new industrial uses for U.S. agricultural products overseas. Initiatives include collaboration with Hungary on biodegradable plastics from cornstarch, with Argentina on hypoallergenic latex from guayule, and with Mexico on pulp and paper products from crop wastes. Such projects help open new markets for U.S. products and diversify the U.S. export portfolio.

Conservation Reserve Program
USDA conducted several Conservation Reserve Program signups during 1997. Signup 14, a continuous signup, ended September 30, 1997. This allowed automatic enrollment in the CRP of acreage deemed suitable for environmentally valuable practices or located in an Environmental Protection Agency wellhead protection area. More than 20,000 contracts were accepted and over 300,000 acres were enrolled. In addition, Signup 15 was conducted during the period March 3- 28, 1997. The Farm Service Agency (FSA) processed over 250,000 offers to enroll over 23 million acres in the CRP. This was the largest signup in the history of the CRP. More than 16 million acres were accepted for contracts. Software was developed and distributed nationwide to facilitate this signup. Signup 16 was held during the period October 14-November 14, 1997, giving landowners an additional opportunity to participate in a cost-effective, voluntary program to improve their land, water, and wildlife resources. USDA accepted 5.9 million acres into the reserve, with a 13-percent increase in environmental benefits compared to acres accepted in the 15th signup. Signup 17, another continuous signup, began October 1, 1997, and runs until September 30, 1998.

Emergency Livestock Programs
Several emergency livestock programs provided timely relief to livestock producers suffering the effects of severe winter storms and spring flooding, primarily in Minnesota, North Dakota, and South Dakota. The Emergency Feed Grain Donation Program provided $3.5 million to nearly 4,000 farmers in North and South Dakota whose livestock was in danger of perishing due to severe winter storms. The Foundation Livestock Relief Program provided over $22 million in cost share assistance for emergency livestock feed to approximately 30,000 farmers in North and South Dakota and Minnesota. The Livestock Indemnity Program provided relief for livestock losses resulting from natural disasters that occurred between October 1, 1996, and June 12, 1997. FSA County Offices took 36,000 applications in 334 counties in 22 States; as a result, $50 million was disbursed to producers affected by the severe winter storms of 1997. In support of the President’s Action Plan to provide long-term recovery for Minnesota and the Dakotas, over 30,000 livestock producers in those three States received nearly $41 million of the $50 million.

Emergency Conservation Program
FSA allocated over $102 million during 1997 to respond to disaster requests from 36 States. Disaster conditions included hurricane, flood, and drought. The Emergency Conservation Program was implemented at the local level by 488 FSA County Committees in response to these disasters.

Farm Loan Programs
Farm loan programs provided loans and loan guarantees totaling $2.3 billion to 27,512 farm families. Direct operating loans totaling $65 million were provided to 1,927 socially disadvantaged (SDA) farmers, including minority and women farmers. Direct farm ownership loans totaling $15.5 million were provided to 184 SDA farmers. These levels exceeded the targets set by Congress and represent a 74 percent increase over 1993. Further, direct operating and farm ownership loans totaling $233 million were provided to 4,247 beginning farmers. This represents a 20-percent increase over the FY 1996 levels. FSA also developed and implemented a training program for 300 new Agricultural Credit Officers.

FSA Reduces Number of Inventory Farms
From September 30, 1996, to September 30, 1997, FSA reduced the number of outstanding inventory farms from 1,603 to 1,131, a reduction of 29 percent. This represented 164,225 acres of inventory property and a cost savings to the Government of $15.2 million.

Reduction in FTE’s
From 1993 to 1997, FSA reduced its total employment by nearly 5,100 staff years, with over 3,400 being non-Federal county staff years. FTE (full-time equivalent) reductions in 1996 and 1997 and those proposed for 1998 are partly the result of the major program changes made by the 1996 Farm Bill, which is projected to reduce FSA’s workload. FSA’s total FY 1997 FTE reduction of 1,255 (254 Federal and 1,001 non-Federal county) was achieved through buyouts (229 Federal and 697 non-Federal county) and reductions in force (RIF’s) (25 Federal and 304 non-Federal county employees). FY 1997 separation costs for this agency totaled $42.1 million.

Farm Automated Records Management System
Major portions of the Supervised Credit Initiative were completed and implemented. These portions include enhanced automation of the Farm and Home Plan (FHP), Farm Automated Records Management System (FARMS), and the Debt and Loan Restructuring System (DALR$). Laptop computers and software have improved delivery of farm loan programs by bringing the office directly to the customers.

Helping Youth Understand Agriculture
FSA offered several youth initiatives that were funded in FY 1997. These initiatives encouraged low-income rural youths to consider careers in agriculture through training, mentoring, workshops, and career fairs; trained unemployed high school youths in farming, from production to market; introduced agriculture as a vocation to urban youths via workshops and farm work experience; and created an inner-city farmers market owned and managed by youths.

State Committee Appointments
The nomination and reappointment of FSA State Committee members emphasized diversity. Diversity was increased in all categories. For example, the percentage of women and minority members climbed 10 percent from 1996 to 1997.

Total Quality Systems Audit
FSA successfully conducted a pilot program of the Total Quality Systems Audit (TQSA), a customer-focused quality management system which ensures that the commodities purchased for domestic and export food assistance programs meet both U.S. and international quality standards. TQSA uses a numerically based scoring system whereby contracts are awarded only to those suppliers who have thoroughly demonstrated the ability to produce goods that fully meet customers’ expectations. This concept is consistent with the Blair House papers, which encourage program operation and the purchase of goods in accordance with international standards. Those participating in the pilot program included a small and a large grain processor, as well as a bakery mix vendor who employs the mentally disabled.

Commodity Credit Corporation Reevaluates Cooperative Agreements, Saves Money
The Commodity Credit Corporation (CCC) ended a program of cooperative agreements with 16 State licensing authorities, whereby CCC contracted for examination work for CCC-approved warehouses licensed in those States. Projected annual savings from this action are $400,000.

Risk Management Education
On March 21, 1997, Secretary Glickman assigned the Risk Management Agency (RMA) with leadership for the risk management education initiative. He established a steering committee consisting of RMA, the Cooperative State Research, Education, and Extension Service (CSREES), and the Commodity Futures Trading Commission (CFTC), and these participating agencies signed a Memorandum of Understanding April 8. On April 9, the Secretary announced a $5 million commitment for risk management education, and on September 16-17, RMA convened a forum of nearly 500 agricultural leaders to formally kick off its risk management education outreach efforts. The goals of this summit were to (1) raise national awareness of the need for risk management education, (2) establish a national network of those with a major stake in risk management education, (3) expose participants to training in a broad range of risk management issues, and (4) provide a model for State and local efforts.

The summit provided a model for regional, State, and producer-level risk management education training and activities. With the valuable support of CSREES, the National Office of Outreach, and the CFTC, risk management education efforts are sweeping through the States and regions. The impact of these efforts should begin reaching most producers by mid-1998.

Standard Reinsurance Agreement
The Standard Reinsurance Agreement (SRA), which had been in effect from 1995 to 1997, was revised and renegotiated for the 1998 reinsurance year. The resulting 1998 SRA has increased program integrity and accountability while continuing to provide private sector business partners with a reasonable opportunity to generate a profit. The new SRA helps RMA to address the continued development and delivery of risk management tools to the agricultural community. The administrative and operating subsidy paid to the reinsured companies was reduced from 29 percent of premium to 27 percent, and the companies' share of potential underwriting losses was substantially increased. Provisions to improve and simplify operations were also added.

Expansion of Covered Crops
For the 1997 crop year (1998 citrus), 29 different crops with permanent programs established were added to the crop insurance program in 343 counties in 25 States. For crop year 1998 (1999 citrus), coverage will be expanded on 25 different crops in 144 additional counties in 16 States. Producers will have access to crop insurance which provides more protection than the Non-Insured Crop Disaster Assistance Program (NAP).

The Federal Crop Insurance Corporation (FCIC) Board of Directors approved the expansion of Crop Revenue Coverage for the 1997 and 1998 crop years for corn, cotton, grain sorghum, and wheat. CRC is now available on almost 90 percent of the corn, cotton, grain sorghum, wheat, and soybean acres in the United States. As a result, a greater number of producers will have access to this important risk management tool.

Single Delivery System for Crop Insurance
On May 23, 1997, the Secretary announced that crop insurance will be available exclusively through crop insurance agents, beginning in the 1998 crop year. This decision was made after the Secretary obtained a commitment from the private insurance companies to reach out to all of America's farmers and to assure that the highest level of risk management service is extended to everyone. The use of a single delivery system for the crop insurance program will allow USDA to provide better service to producers while maximizing the usefulness of its scarce resources. It also strengthens the ability to partner with the private sector.

Loss Ratios
FCIC tentatively closed its books for the 1997 fiscal year with a loss ratio of 0.56 for the 1997 crop year. The estimate is subject to revision as the crop year develops and more information becomes available. With the loss ratio at 0.56, losses paid to insured producers represent 56 cents for each dollar of premium. This permits FCIC to accumulate reserves against probable future losses.

Revised Regulations for Prevented Planting
In response to concerns from producers, RMA is revising rules on prevented planting. For the past 3 crop years, prevented planting coverage has been a subject of controversy. Producers, commodity groups, and insurance companies have voiced concerns ranging from the levels of prevented planting payments to the difficulties in determining eligible prevented planting acreage. The regulations will also provide improved late and prevented planting coverage, provide more benefits to insureds, eliminate provisions that previously created moral hazard, and simplify the administration of late and prevented planting coverage.

Simplification Saves Money and Time
In response to requirements of the Federal Crop Insurance Reform Act of 1994, RMA identified and evaluated more than 100 simplification suggestions designed to reduce the administrative and operating costs of reinsured companies. Among the actions that have been implemented, RMA restructured actuarial documents to provide pertinent information on fewer pages, which reduced the number of pages printed each year by one-third, or approximately 2 million pages. RMA also approved combined forms and policy dates where possible to make it simpler for producers, agents, and others to perform all required tasks in a timely manner.

Dairy Options Pilot Program
RMA announced a new program for dairy producers that was developed with assistance from two commodity exchanges. Through a liberal cost-share arrangement, the program provides eligible producers valuable commodity trading experience over an 8-month timespan. Under the program, when milk prices fall, producers can offset losses with profits on options positions. The program is scheduled to begin in the summer of 1998. If successful, this approach may serve as a prototype for helping producers of other commodities.