1998 Annual Report of the Secretary/ ARP 1

FY 1998 Annual Report of the Secretary of Agriculture
USDA: Preparing for a New Millennium

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

Farm Service Agency

Mission

Farm Service Agency’s mission is to ensure the well-being of American agriculture and the American public through efficient and equitable administration of farm commodity, farm loan, conservation, environmental, emergency assistance, and domestic and international food assistance programs.

Farm Safety Net

Farm Loan Program
In FY 1998, the Farm Service Agency (FSA) provided over $2.1 billion in loan assistance to over 26,000 family farmers. The Agency:

Provided $789 million in 15,620 direct loans, and $1.435 billion in 10,557 guaranteed loans to family farmers in rural America.
Provided $367.182 million direct and guaranteed loans to 3,186 minority and women farmers in FY 1998, exceeding the targeted allocation set by Congress by 191 percent.
Provided over $490 million in direct loan assistance to more than 7,000 beginning farmers, a 6-percent increase over FY 1997.
Published new proposed rule and developed final rule to streamline the procedures for lenders obtaining FSA loan guarantees.
Initiated new foreclosure and lending policies at USDA in an effort to assure that no farmers will lose their farm because of discrimination.
Developed new farm business plan software for use by customers on their home computers as well as by FSA employees. This software will help farmers develop yearly business plans to make their operations as efficient and profitable as possible.
Decreased direct farm loan delinquency from $2,124,682,363 in FY 1997 to $1,764,873,822 in FY 1998. This is significant, considering the low commodity prices and adverse weather conditions that existed throughout the year.
Decreased the number of Farm Inventory properties from 1,131 in FY 1997 to 791 in FY 1998.

Farm Forums
On April 3 in Lexington, Kentucky, Secretary Glickman kicked off the first of seven farm forums around the country. A crowd of 700 farmers, local and State officials, and agribusiness leaders were mainly interested in tobacco issues. Deputy Secretary Richard Rominger had a farm forum April 3 in Orono, Maine, where over 250 farmers raised concerns about dairy policy, Canadian imports, and ice damage. On April 6 Deputy Secretary Rominger spoke to over 200 farmers in Greenville, Florida. On April 7, Secretary Glickman met with over 200 farmers in Las Cruces, New Mexico, and Deputy Secretary Rominger met with nearly 200 farmers in Salinas, California, the same day about dairy and pesticide concerns. In Aberdeen, South Dakota, Secretary Glickman talked with farmers about cattle prices and wheat issues, and on April 8 in Ames, Iowa, Secretary Glickman and Deputy Secretary Rominger hosted another town hall meeting with 500 farmers on the campus of Iowa State University.

Guaranteed loan delinquency remained low at 2.63 percent, and guaranteed loan loss rate remained less than 1 percent (.78). These figures are significant, considering the low commodity prices and adverse weather conditions that existed throughout 1998.

CCC Nonrecourse Marketing Assistance Loan and Loan Deficiency Payment Program
Nonrecourse marketing assistance loans, for which production of a commodity serves as collateral, allow farmers to pursue alternative marketing strategies at a time when prices typically are at the seasonal harvest-time lows. Loan deficiency payments (LDP’s), an option to loans, provide eligible producers with direct payments when prices are low.

CCC made the following efforts in fiscal year 1998 to help offset farm income losses due to low prices and the adverse effect of natural conditions on the quality of farmers’ output:

Made a total of $7.2 billion in marketing assistance loans to producers. This was $1.9 billion higher than the previous fiscal year, when prices were generally much higher.
Held forfeitures to a fraction of the levels observed in the mid-1980’s when crop prices were also low.
Broadened the eligibility for marketing loans and loan deficiency payments. For example, the change allowed producers who harvested corn for silage to be eligible for marketing assistance loans and LDP’s and for producers with sample grade wheat, contaminated corn, or other below grade commodities also to be eligible for these benefits.
In September 1998 made $3.2 billion in final Production Flexibility Contract payments for FY 1998, bringing the total for the fiscal year to $5.66 billion.

USDA Responds to Natural Disasters Hurting Agriculture

In June 1998, CCC authorized emergency grazing of Conservation Reserve Program acreage in Montana, North Dakota, South Dakota, and Texas, where severe weather conditions had depleted hay supplies or impaired the growth of hay and pasture. In addition, FSA allocated $730,000 in Emergency Conservation Program funds to six Montana counties to help livestock producers provide water to livestock.
On July 9, Secretary Glickman declared Florida a disaster area, making farmers throughout the State eligible for low-interest emergency loans from FSA to recover from damage related to fire and drought. Also on July 9, the Secretary met with farmers and State agricultural officials in the Orlando area, to review the agricultural damage in the State.
In July, Secretary Glickman declared Georgia, Florida, and many counties in Texas to be disaster areas, making farmers and ranchers in those places eligible for emergency loans from USDA. In addition, to alleviate the drought-induced forage shortage, CCC allowed farmers in Texas to use hay land enrolled in the Conservation Reserve Program on an emergency basis, and allowed emergency grazing in 10 other States for the same reason.
On July 28 and 29, Secretary Glickman toured farms hurt by the drought in Oklahoma and Texas to inspect drought damage and met with agricultural leaders and experts in College Station, Texas, to assess the economic implications of the disaster.
On July 29, Secretary Glickman held a round table on the drought and its effects on the Texas economy, with State officials, farmers, and academics at Texas A&M University.
Following the President’s announcement on July 23, 1998, that Texas farmers and ranchers are eligible for low-interest loans from FSA to help them recover from the effects of natural disasters, Secretary Glickman on July 26 extended the same assistance to Oklahoma farmers and ranchers.
On August 5, Secretary Glickman declared the entire State of South Carolina a disaster area. By the beginning of August, CCC designated 143 counties in 11 States allowing eligible producers to hay and graze Conservation Reserve Program acreage in response to feed shortage conditions.
Touring agricultural damage near Sydney, Texas, August 11, Secretary Glickman designated all or parts of Iowa, Montana, and Wyoming as disaster areas, making farmers and ranchers there eligible for low- interest economic emergency loans.

Emergency Assistance

CCC and FSA have:

Approved disaster designations for counties in 43 States.
Developed the FSA Hay Net, a program helping producers in need of hay to connect with those that had it.
Approved haying and grazing of CRP acres in many States to allow producers to feed cattle in disaster-stricken areas.
Made over $97.5 million in low-interest emergency loans.
Disbursed $26.5 million in Emergency Conservation Program cost share assistance.
Disbursed $22.9 million in Noninsured Disaster Assistance Program benefits.
Disbursed $2.8 million in Tree Assistance Program benefits.
Disbursed $4.9 million in Livestock Indemnity Program payments. Administered additional programs to producers as a result of legislation providing over $6 billion for economic and natural disaster relief. In addition, as announced by the Vice President on January 8, 1999, USDA will make about $50 million in direct cash payments to hog producers and increase funding by $80 million for the hog pseudorabies eradication program.

Conservation

Conservation Reserve Program
CCC has:

Made the Conservation Reserve Program (CRP) more environmentally sensitive and sound.
Enrolled nearly 23 million acres of America’s most environmentally sensitive lands for protection in the CRP, freeing up millions of acres of cropland to be put back into production.
Broadened the Conservation Reserve Enhancement Program (CREP) using State and Federal resources to help solve environmental problems. This program provides a framework for CCC to work in partnership with States and local interests to meet State-specific environmental objectives. CREP proposals have already been approved in Maryland, Minnesota, Illinois, New York, Oregon, and Washington.

Food Relief Efforts and Food Security

Continued to expedite shipment of food in response to natural disasters and economic hardship. FSA assisted in providing over 900,000 pounds of food to victims of Hurricane Georges in Puerto Rico.
Worked closely with the Agency for International Development (AID) to advance purchase a variety of commodities used under the provisions of Public Law 83-480 for food assistance overseas and store the products at a U.S. port for use in emergency situations. Over 37,000 metric tons of product were handled throughout the year.
Undertook special efforts to respond to several world emergency food situations. About 200,000 metric tons of assorted food were purchased and delivered to North Korea through the World Food Program. In response to the crises in Indonesia, CCC purchased nearly 60,000 metric tons of food. This fall, the emergency appeal for the Balkans region which includes Serbia and Kosovo resulted in the emergency purchase of 15,000 metric tons of wheat flour.

Conservation Reserve Enhancement Program
On August 26, Secretary Glickman announced $10.4 million in CCC funding for the New York City Watershed Conservation Reserve Enhancement Program (CREP), a Federal-State initiative to protect New York City’s drinking water.

President’s Food Aid Initiative
In July, President Clinton announced a Food Aid Initiative under which surplus commodities that were removed from the domestic market by CCC were disposed of through donations.

This activity included:

The purchase of 1.26 million metric tons (MT) of wheat which will be donated through various food aid programs.
Preparations to purchase another 3.74 million MT to meet the President’s goal of removing 5.0 million MT of wheat from domestic markets.

Food Recovery

In the fall of 1997, USDA hosted the first National Food Recovery and Gleaning Summit to bring together public interest groups, the private sector, farmers, and others to discuss hunger and food recovery. Summit participants set a national goal of increasing food recovery by 33 percent. As a result of the summit, FSA has initiated gleaning activities in at least 26 States. Crops gleaned include apricots, apples, blueberries, cabbage, cantaloupe, celery, cherries, sweet corn, cucumbers, grapefruit, green beans, melons, peaches, peas, peppers, potatoes, squash, strawberries, sweet potatoes, tomatoes, and wheat.
At least 14 new farmers markets were opened in at least 9 States.

Voice for Freer World Trade
On January 7, 1998, Secretary Glickman addressed the Oxford Farming Conference in Oxford, England. He reported on the status of the U.S. agricultural policy and discussed a number of other critical trade matters, including food safety standards based on sound science. He advocated moving world agricultural trade toward a “more open, free and fair global marketplace.”

Civil Rights

Trained 25,581 FSA employees (97 percent of total) on the Introduction to Civil Rights.
Developed a new system to process program complaints using a centralized factfinding office located in Montgomery, Alabama, which reports directly to FSA’s Office of Civil Rights and Small Business Utilization Staff (CR&SBUS). Now, cases are independently reviewed in the field and analyzed by the headquarters CR&SBUS within an average of 47 days.

Foreign Agricultural Service

Mission

The mission of USDA’s Foreign Agricultural Service (FAS) is to serve U.S. agriculture’s international interests by expanding export opportunities for U.S. agricultural, fish, and forest products and by promoting world food security.

Export Initiative for North Dakota
The Foreign Agricultural Service, working with the North Dakota State Department of Agriculture and the Mid-America International Agri-Trade Council, led an outreach effort to stimulate North Dakota’s value-added agricultural exports and support efforts to generate additional economic activity in the depressed agricultural sector of the State. In June, FAS completed an outreach mailing of export assistance materials to more than 1,200 agricultural processors and wholesalers in the State, including more than 400 grain establishments handling grain and soybean commodities.

USDA Goal: Expanding economic and trade opportunities for agricultural producers and other rural residents

In 1998, CCC made full use of its export credit guarantee programs to support U.S. exports; these programs were especially helpful in keeping U.S. products flowing to the troubled markets of South Korea and Southeast Asia. For FY 1998, CCC announced the availability of nearly $5.8 billion in GSM-102 credit guarantees, compared with $3.96 billion in 1997. In FY 1998, export credit guarantee programs facilitated the sale of over $4 billion in U.S. agricultural products.

Secretary Glickman reactivated the Export Enhancement Program (EEP) to partly compensate U.S. poultry producers for markets lost in Europe. He also announced an EEP initiative for barley in response to the European Union’s heavily subsidized sale of barley into the U.S. market. Under the Dairy Export Incentive Program, Secretary Glickman has authorized export bonuses up to the maximum volume and spending limits consistent with our World Trade Organization (WTO) obligations.

Program Development Division, Export Credits Program Area
Five employees in the FAS Export Credits area partnered with five private voluntary organizations to streamline the funding process to private organizations for humanitarian food distribution. This team is a great example of reinvention, and it won Vice President Gore’s Hammer Award. They cut cycle time from 41 to 7 business days, cut hands-off from 10 to 5 people, cut administrative costs by almost $1 million in 1 year, and increased U.S. commodities purchased and food distribution by 28 percent.

USDA worked successfully to open, expand, and maintain markets for U.S. agriculture. In February, the United States and Taiwan signed a market access agreement that has Taiwan lifting its import bans and allowing access for U.S. pork, poultry, and variety meats. Upon Taiwan’s accession to the WTO, Taiwan will cut tariffs and open tariff-rate quotas on a range of agricultural products. In May, the WTO ruled that the European Union must bring its ban on meat from animals treated with growth-promoting hormones into compliance with the WTO panel and appellate body rulings by May 13, 1999. USDA is working to address issues and ensure support for the safe use and trade of agricultural biotechnology products. USDA is working bilaterally with key trading partners such as Argentina, Chile, Japan, and Canada, as well as multilaterally through organizations such as the Asia Pacific Economic Cooperation (APEC) forum.

The U.S. Government continues to implement two major trade agreements–the Uruguay Round Agreement on Agriculture and the North American Free Trade Agreement (NAFTA)–as well as numerous bilateral agreements to open markets for U.S. agricultural products. U.S. exports to our two NAFTA partners–Canada and Mexico–continue to be a bright spot in the export picture. Exports to those two countries were expected to account for 24 percent of total U.S. agricultural exports in FY 1998.

Risk Management Efforts for Socially Disadvantaged Farmers
On March 24, USDA Risk Management Agency staff participated in a Risk Management Education Work Group with a community college and North Carolina Extension staff to design outreach activities directed to agribusiness and farmers, especially limited-resource and socially disadvantaged farmers, in an eight-county area in the Kenansville, North Carolina, area. Also on March 24-25, RMA staff attended the Native American Federal Resources Forum in Helena, Montana, showcasing how USDA’s programs can serve American Indians.

Training under the Cochran Fellowship Program can have many positive impacts. For example, in 1993, You Xim Sun was the assistant manager of the Shanghai No. 1 Provisions Store–a store owned by the Chinese government. While participating in the Cochran Fellowship Program, he learned about the possibilities of an open distribution system in a market economy. With this vision of the future in China, he left his job with the state-owned company and set up his own business. He now runs a successful company that imports food ingredients from the United States and other countries.

Glenzie Kazi of South Africa participated in a horticultural training program under the Cochran Fellowship Program in 1996. After returning to South Africa, Ms. Kazi took over her father’s nursery business. With ideas she had learned in the United States, she bid for and won three large landscaping contracts. She hired 12 new employees and is training four students from the local agricultural school.

To foster better agricultural trade and development cooperation, USDA is participating in bi-national commissions with key countries such as Argentina, Chile, Russia, South Africa, and Ukraine. This participation ensures that agricultural issues are represented in discussions with these key trading partners.

Since 1984, USDA’s Cochran Fellowship Program has provided U.S.-based training for over 6,060 international participants from 56 countries worldwid--middle-income countries, emerging markets, and emerging democracies. Training opportunities are for senior- and mid-level specialists and administrators from the public and private sectors who are concerned with agricultural trade, agribusiness development, management, policy, marketing, and technology transfer. In FY 1998, 567 Cochran fellows from 48 countries received training in the United States.

In 1998, FAS teamed up with the National FFA organization and the United Negro College Fund to provide college students with opportunities to work at agricultural offices in U.S. embassies overseas for up to 3 months. In 1998, FAS offices in Argentina, Austria, Belgium, China, Morocco, Poland, Singapore, South Korea, Spain, Taiwan, and Venezuela participated in the program, providing training and work experience to 15 college students interested in careers in international agricultural trade and related industries.

On August 5, the U.S. embassy in Nairobi, Kenya, was destroyed by a terrorist bomb. A Kenyan citizen working for the FAS office was killed by the bomb blast, and three other FAS employees were injured. Newly enacted legislation will provide compensation to the hundreds of Kenyans who were injured and the families of those who were killed. In addition, USDA employees established a fund to help the victims of this tragedy.

Funding Risk Management Initiatives for Minority Farmers
On June 26, USDA awarded an $85,000 grant to the Salinas, California, Rural Development Center to improve the risk management skills of more than 300 Latino family farmers. And on June 27, USDA awarded a $60,000 grant to develop a risk management education program to benefit Hmong and other Southeast Asian farmers as they begin farming careers near Fresno, California.

USDA Goal: Ensuring food for the hungry, and a safe, affordable, nutritious, and accessible food supply

The United States continues its strong commitment to the World Food Summit goal of reducing the number of undernourished people by half by the year 2015. The U.S. action plan, which will outline U.S. proposals to reduce hunger both in the United States and around the world, will be issued in early 1999.

In FY 1998, the United States provided about 3.5 million tons of food aid to needy countries. (Programs under which food aid is provided are: Titles I, II, and III of Public Law 480, the Food for Progress Program, and Section 416(b).) In addition to the food aid provided under these authorities, President Clinton in July announced a new Food Aid Initiative which is expected to provide 5.0 million metric tons of wheat and wheat products once fully implemented. The initial 2.5 million metric tons were allocated within 3 months.

USDA Goal: Effective customer service and efficient program delivery

FAS opened an office at the U.S.-Mexican border to help identify and resolve border trade issues that impede U.S. agricultural exports. The office, located in Nuevo Laredo, Mexico, also conducts outreach activities into border communities in the United States and Mexico to explain USDA trade programs. U.S. exporters sold more than $5 billion worth of agricultural products to Mexico in 1998, making Mexico our third largest export market.

FAS also opened two new regional export assistance centers in 1998 in Atlanta, Georgia, and Sacramento, California. These offices are developing partnerships with key groups such as State departments of agriculture, universities, trade and economic development groups, State and local governments, regional trade centers, and food industry and farm organizations to alert them to overseas opportunities and sources of private and public export assistance. FAS also has export assistance offices in Des Moines, Iowa, and Portland, Oregon.

Risk Management Agency

Mission

The Risk Management Agency will provide and support cost-effective means of managing risk for agricultural producers in order to improve the economic stability of agriculture.

In April 1998, Secretary Glickman announced steps that USDA would take to improve the safety net for U.S. farmers, including measures to improve the crop insurance program. During the year, the Risk Management Agency (RMA) began or accomplished these initiatives: (1) expanded crop insurance to new crops and new areas (ongoing); (2) suspended the controversial Nonstandard Underwriting Classification System (effective 1999); (3) revised prevented planting provisions (effective 1999); (4) made coverage available more quickly (ongoing); and (5) developed new pilot programs providing producers with increased coverage (effective 1999).

RMA is committed to helping producers find efficient and affordable means of managing risk in order to improve the economic stability of agriculture. In 1998, the agency implemented new pilot programs for sweet potatoes, pecans, and avocado and mango trees, and approved pilot programs for watermelon, rangeland, wild rice, cherry, cabbage, winter squash, mustard, and crambe for the 1999 crop year. RMA also developed an innovative new revenue policy, raised coverage levels to 85 percent for various policies, revised its current nursery program, and made critical changes to several other existing crop policies.

USDA Expands Crop Insurance Protection
On May 8, the Federal Crop Insurance Corporation Board of Directors voted unanimously to authorize a pilot crop insurance program to increase coverage from 75 percent to up to 85 percent of a farmer’s individual yield; to expand the income protection pilot plan for wheat to include all of Montana, Oregon, South Dakota, and Washing-ton; to expand the group Risk Plan crop insurance pilot to test rangeland in 12 Montana counties; to approve a new pilot program for avocado fruit in Dade County, Florida; and to make several improvements to the Crop Revenue Coverage for wheat.

“The two biggest improvements are the ease of starting up and getting into the nursery insurance program, and the fact it adds. . . about 40 percent of the plant material grown in Oregon that was previously uninsurable. That is probably the biggest thing.” —Tom Fessler of Woodburn Nursery and Azaleas Incorporated and past president of the Oregon Association of Nurserymen

“Crop insurance has been our salvation. . . . If it had not been for crop insurance after the devastating losses in 1994 and 1996, we would not have been able to continue.”—Georgia producer Duke Lane, Jr., owner of the second largest peach operation in the United States

Without crop insurance protection to help survive the effects of El Niño, third-generation peach farmer Lewis Holmes says, “I would have had to fold my tent. . . . I am willing to work with the local office in Valdosta, Georgia, and Washington officials to help forge a better risk management program to benefit all farmers. We need to protect American farmers so that they can provide our great country with the food and fiber that our people so richly deserve.” —Lewis F. Holmes, III, member of the Board of Directors of the South Carolina Peach Council

“The Cherry Pilot Crop Insurance program is providing a risk management tool to cherry growers that has never been available before . . . . The pilot could not have been approved at a better time.” —Nora Baldwin, owner of Homestead Orchards in Washington State

Response to Farm Crisis

RMA responded decisively to the distress of farmers affected by declining prices and the catastrophic effects of several years of disastrous weather, including those resulting from El Niño. In the South and West, deviations were approved in the standard loss adjustment procedure for cotton farmers suffering from drought. In the Northwest and Northern Plains, the following changes were approved for the 1999 crop year: (1) new options to existing programs were added to counteract the effects of multiple years of losses, (2) Income Protection for barley was expanded to several States, (3) crambe and mustard crop insurance programs were developed for 18 North Dakota counties, and (4) current programs were expanded, including canola for North Dakota and Revenue Assurance for corn and soybeans in Illinois, Minnesota, and South Dakota. Recommendations were solicited for the development of a pilot program to better protect growers from losses due to wheat scab. In addition to these mostly long-term measures, RMA will pay hard-hit producers an estimated $1.7+ billion in claims for 1998 losses, including over $556 million in Texas, $96.6 million in North Dakota, $114.7 million in Georgia, $95.1 million in California, and $78.9 million in Minnesota.

Agricultural Research Bill

On June 3, President Clinton signed the Agricultural Research, Extension, and Education Reform Act of 1998, Public Law 105-185, sending a message to producers that the Administration was committed to stabilizing and strengthening the crop insurance program. The Act ensured the stability of the program by meeting budget targets and providing permanent funding from (1) offsets from the food stamp administration surplus, (2) decreased compensation to insurance companies, and (3) increased producer fees.

Risk Management Education

The Risk Management Education (RME) initiative was established by Secretary Glickman in 1997 to foster partnerships between the private and public sector that would lead to the creation of a comprehensive RME program. In 1998, Secretary Glickman awarded $3 million in grants to 17 of the 107 applicants who responded to the call for proposals. RMA, the lead government agency, also conducted more than a dozen State and regional conferences to “train the trainers.”

Dairy Options Pilot Program

On June 8, 1998, Secretary Glickman launched the $11 million options pilot program for dairy producers, observing that “with this innovative program, CCC will build on its efforts to help farmers—both large and small—to manage risk.” The first RMA program to use futures markets as a risk management tool, the pilot project allows farmers to offset their losses when milk prices fall, based on projected future earnings.

New Revenue Insurance Policies

In September 1998, the Secretary announced the approval of the Adjusted Gross Revenue (AGR) pilot program, observing that “If this experiment succeeds, we will be closer to the day when we can cover all crops.” The AGR policy will insure a percentage of multiple commodities under one policy, and base coverage on an adjusted 5-year average of gross income reported by the farmer on Schedule F of his or her tax return.

Expansion of Covered Crops

For the 1998 crop year, RMA expanded 28 current crop programs into an additional 187 counties. This expansion added to the staggering national total of 28,154 county crop programs in 2,983 counties. In 1999, expansions will include canola, blueberries, income protection for barley, crop revenue coverage (CRC) for rice, and revenue assurance for corn and soybeans. CRC coverage will also be available for corn, cotton, grain sorghum, and soybeans in Florida and Maryland counties where the crop is already insured under a standard crop insurance policy.

back to :	Content page			to:			Publications News and Information USDA home page