USDA ANALYZES FLEXIBILITY PLAN MODEST SHIFTING OF ACREAGE SEEN

USDA ANALYZES FLEXIBILITY PLAN MODEST SHIFTING OF ACREAGE SEEN

A preliminary U.S. Department of Agriculture analysis of the House Agriculture Committee's "planting flexibility" plan projects only modest changes in the amount of acreage producers plant to any crop over the course of the 5-year farm bill.

The analysis also estimates the total cost of changes made to current commodity programs at more than $3.5 billion over 5 years, primarily because of expensive new oilseed and dairy provisions.However, because the analysis is based on supply and demand projections made last November, the analysis is subject to change when the department incorporates newer forecasts into its budget assumptions later this summer.

Under the House farm panel's flexibility plan, producers are allowed to

shift plantings on up to 25 percent of their program crop and historical oilseed acres without loss of base, or acreage eligible for long-term government benefits.

However, because producers would be required to give up government payments on any "flexed" acreage, critics of the plan argue that it is not true flexibility. Rather than freeing farmers to plant for the marketplace, it forces them - as does current law - to choose between government target prices and often less-attractive market prices.

Surprisingly, however, the USDA analysis shows a slight increase in oilseed acreage under the House flexibility plan, despite the fact that the strong corn target price has tended to discourage additional soybean production.

USDA officials say the shift is based on an expected $30 to $40 a bushel higher market return for soybeans than for corn. For some producers, that premium would outweigh the attractiveness of the higher corn target.

But a dramatic drop in projected 1989-90 corn ending stocks since the current underlying budget assumptions were made could change that relationship, officials said. An increase in oilseed acreage could be less than expected because of stronger corn prices.

However, for now, USDA's analysis projects soybean acreage increasing an

average of 1.1 million acres over the 5-year farm bill under the House plan. In percentage terms, the increase is less than 2 percent, based on 60.7 million planted soybean acres in 1989.

The increase is similarly modest for cotton, which is already expected to increase this year from the 10.6 million acres planted in 1989. USDA projected cotton acres increasing an average of 300,000 in 1991-95, or less than 3 percent above 1989 levels.

Corn acreage is projected to fall an average of 700,000 acres, a drop less than 1 percent from 106.2 million planted in 1989. Wheat plantings are estimated to drop by an average of 400,000, also less than 1 percent of 1989's 76.6 million planted acres.

USDA estimated the net 5-year cost of the oilseed marketing loan at about $3 billion. This increase is partially offset, however, by other changes that lowered the cost of the wheat and feedgrains program by $1.8 billion.

In deference to industry concerns that the flexibility plan would lead to a loss of oilseed acres, the farm panel included a provision that protected those acres.

USDA officials said that provision did not become a factor in the analysis. Even without the limitation, a net shift of program crops into oilseed acres was not expected, they said.