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2002 Farm Bill Affects New Mexico's Dairy, Peanut, Wool, Grain and Cotton Farmers

LAS CRUCES ­ For New Mexico farmers, the 2002 Farm Bill will mean a controversial new dairy subsidy program, an end to decades-old peanut quotas, reinstatement of wool subsidies and familiar programs for grain and cotton farmers.

The 2002 Farm Bill includes a controversial direct subsidy for dairy producers. A Congressional study found the measure would benefit dairies with fewer than 800 cows -- about half the size of an average dairy in New Mexico. (05/24/2002) (NMSU Agricultural Communications Photo by Norman Martin)

The bill expands conservation funding and raises acreage limits for the Conservation Reserve Program, which has idled thousands of acres in eastern New Mexico. The $122 billion package signed May 13 also funds nutrition and rural development programs.

A new direct subsidy program for dairy producers provides payments when the price of milk falls below a set level. Subsidies are limited to a farm's first 2.4 million pounds of milk annually. The projected price tag is $1.3 billion over three and a half years.

Although regulations aren't final, a Congressional study shows the subsidy would benefit dairies with fewer than 800 cows­about half the size of New Mexico's average dairy.

"There's some feeling that the smaller, lower-tech producers in the Northeast, New England States and Upper Midwest will benefit at the expense of the large, very advanced dairies in the Southwest and Western states, which milk thousands of cows,"said Rhonda Skaggs, an agricultural economist with New Mexico State University.

"It's not going to fit our dairy producers,"said Floyd McAlister, Roosevelt County agricultural agent with NMSU's Cooperative Extension Service. "We can produce milk cheaper than anybody in the country."

New Mexico ranks seventh nationally in milk production, and the dairy industry's economic impact in the state is an estimated $1.8 billion annually. Four of New Mexico's counties rank in the top 25 nationally for milk production: Chaves County, at No. 11; Doa Ana, 18; Roosevelt, 23; and Curry, 25.

The Farm Bill signals the end of an era for New Mexico's peanut producers, who grow more than 80 percent of the nation's Valencia peanuts. A marketing quota system that's been in place for decades will be phased out.

"Peanuts that were marketed under a quota, which was essentially a license to sell in this country, received a price that was about double the world market price," Skaggs said. "This involved a very high degree of monitoring and management and control in the marketplace, and the 2002 legislation changes that."

In eastern New Mexico, only 4,800 acres ­ about a third of the peanut acreage ­ was grown under the quota, McAlister said. However, farm program stability and demand for Valencias, a niche crop, kept prices up as eastern New Mexico farmers struggled with drought and low grain and cotton prices. "Raising peanuts has kept the irrigated producer in business," McAlister said. "It's not highly profitable, but it's been a consistent money maker."

The $16 million Valencia crop is grown primarily in Roosevelt, Curry and Lea counties. A number of producers are cutting back on peanut acreage this year because of uncertainty about prices without a quota system, McAlister said. He believes peanut plantings could be half of the typical 12,500 acres.

"I've talked to several producers who are going to put in a circle of cotton instead of peanuts," said R.D. Baker, superintendent of NMSU's Agricultural Science Center at Clovis.

The Farm Bill calls for the government to buy out farmers' peanut quotas over the next five years, replacing the quota program with a policy similar to those for grains in past years, Skaggs said.

The 2002 legislation reinstates wool and mohair subsidies that were phased out in the mid-1990s. However, the new program will not contain incentives for top-quality fleeces.

"New Mexico producers benefited from earlier policy, because they produced a very clean, consistent, high quality wool," Skaggs said. "It was one of the few government programs that had a direct incentive for producing high quality product."

"Emphasis has gone from quality to quantity," said James Duffey, Chaves County Extension agent. "Those with poor quality wools will now benefit just as much as those with the high quality fine wools we grow in New Mexico."

The subsidies will be similar to those for grains and cotton, Skaggs said. "It will involve a guaranteed target or ideal price, and producers will receive the difference between that price and what the market is actually paying them."

New Mexico producers sheared 255,000 sheep in 2000, producing $1.4 million worth of wool. That year, New Mexico had about 20,000 angora goats, with mohair valued at $260,000.

New Mexico's grain and cotton farmers will find that everything old is new again in the 2002 Farm Bill. In the face of the lowest commodity prices since the 1940s, the bill incorporates a cornucopia of familiar subsidy programs for grains and cotton.

"There's going to be a loan rate, which is kind of a rock-bottom price guaranteed by the government to provide some type of market floor protection," Skaggs said. "There's also going to be a direct payment, which is similar to what was given to producers between 1996 and 2002, and there's reestablishment of the target price deficiency payment program eliminated in the 1996 Farm Bill, which gives farmers the difference between a guaranteed price established by Congress and what the market is actually paying."

The 2002 Farm Bill authorizes up to $9 billion more annually for conservation programs, an 80 percent increase over 1996 spending levels. It raises the limits on farmland enrolled in the Conservation Reserve Program (CRP) by an additional 3 million acres. However, regulations have limited the percentage of farmland in a county that can be enrolled.

"Eastern New Mexico counties had a high level of CRP enrollment, beginning in 1985 with the inception of the program,"Skaggs said. "There will probably be increased interest in CRP, assuming that some of those counties are not at the maximum level of land that could be enrolled."

Skaggs says although most farm programs apply to a handful of commodities ­ mainly dairy products, feedgrains, wheat and cotton ­ ranchers and vegetable growers are eligible for conservation programs.

"The bill subsidizes conservation practices for both livestock and crop operations," Skaggs said. "New Mexico has received quite a bit of funding from that in the past and stands to receive increased funding for it in the future."

The Farm Bill will take final form in the coming weeks, as regulations are developed and funding is set during the appropriations process.