Modesto, Calif., was the last place Secretary of Agriculture Mike Johanns expected a standing-room-only crowd for the Bush administration's traveling road show farm bill proposal unveiling.

It was not the traditional cotton, rice, corn and wheat growers packing Harvest Hall at the Stanislaus County Ag Center. It was producers of almonds, grapes, walnuts, pistachios, citrus, strawberries, peaches, plums, nectarines and cherries hanging on every word the Midwest-raised secretary of agriculture had to say about the administration's version of what it wants in a 2007 Farm Bill.

It will be Congress who decides what the federal government's farm policy will look like; however, for the first time in history specialty crops are a major part of an administration farm bill proposal.

“Never before have specialty crops had this kind of place in a farm bill in the history of farm bills dating back to the 1920s on the edge of Depression,” said Johanns.

Specialty crops were specifically earmarked for nearly $5 billion in spending in the proposed farm bill. However, the conservation and bio-energy titles of the proposal could have even greater positive impact on California and Arizona, well beyond the specific specialty crops provision.

Overall, what Johanns detailed to producers and others in the heart of California's San Joaquin Valley could impact Western agriculture, as no other farm bill has.

Bio-energy program

The bio-energy initiative to encourage cellulosic ethanol development could have a major impact on not only production agriculture in the West, but on the air quality in California and Arizona, one of the thorniest issues facing agriculture in the West.

However, it was the administration's specific funding package for specialty crops that packed the room.

“The administration's proposal not only gives specialty crops a seat at the table of the farm bill debate, but one of the better seats. It is historic,” said Barry Bedwell, president of the California Grape and Tree Fruit League, Fresno, Calif. “We are very pleased that the administration listened to what we had to say. Now we need to move forward in establishing a general agricultural policy as best we can with the resources available, keeping in mind not only agriculture as a whole, but the consumer and taxpayer.”

More than 75 crops representing 50 states have been lobbying for more federal farm program money under a national coalition called the Specialty Crop Farm Bill Alliance. Legislation has been introduced in Congress for several years to fund a wide array of programs to benefit specialty crops. At least one passed, but none have been funded.

According to USDA data, specialty crops represent more than $50 billion in farm-gate value and account for more than 45 percent of farm-gate crop receipts. Specialty crop producers hope to finally get some financial support by being a part of federal farm policy in the '07 farm bill.

The coalition was asking that the farm bill include funds to:

  • Boost specialty crop marketing around the world.

  • For research into specialty crop production.

  • Improve programs to fight pests and diseases that increasingly threaten U.S. specialty crops.

  • Broaden the use of fruits and vegetables in nutrition programs to promote a healthier America.

  • Enhance specialty crop conservation programs to allow more growers to participate and help protect the environment.

  • Expand the use of block grants to states for addressing specific local producer priorities.

The administration's $5 billion specialty crop package includes funds for most of that. The only significant thing missing is the block grants to states to spend as they see fit on specialty crops.

Merced, Calif., U.S. Rep Dennis Cardoza, chairman of the House Agriculture subcommittee on horticulture and organic agriculture, is the point leader for the specialty crop initiative in Congress.

‘Historic moment’

He also called the administration's proposal an “historic moment for America's specialty crop industry. However, Cardoza and Bedwell also called it a “starting point” in Congress' efforts to draft a final 2007 farm bill.

“We are very encouraged by the administration's proposal. It will help us move forward as we begin to work through the details of the bill with the administration and Congress,” said Bedwell.

“The specialty crop provisions of this farm bill declare that it is time to move forward with policy that helps sustain and enhance this vital and dynamic industry,” said Western Growers spokesman Tim Chelling. Western Growers has been a key player in forming the specialty crop coalition and pushing its agenda to the administration and Congress.

These are the key elements of the Bush administration's specialty crop title:

  • Providing $1 billion for research programs targeted to specialty crops. This initiative will include fundamental work in plant breeding, genetics and genomics to improve crop characteristics such as product appearance, environmental responses and tolerances, nutrient management and pest management.

  • Providing $3.2 billion to improve nutrition assistance programs by purchasing more fruits and vegetables. This funding will support efforts by schools and other participants to offer meals based on the most recent dietary guidelines for Americans by increasing the availability of fruits and vegetables to students participating in the national school lunch and breakfast programs and to participants in other nutrition assistance programs.

  • Increasing the market access program by $250 million. This initiative allows partnerships between the U.S. Department of Agriculture and non-profit domestic agricultural trade associations to share the costs of overseas marketing and promotional activities such as consumer promotions and market research.

Increase trade

Specialty crops would also greatly benefit from the administration's proposals to increase trade programs by nearly $400 million. More than half that increase, $250 million, would be for the federal government's market access program where the USDA and non-profit domestic agricultural trade associations share in the cost of overseas marketing and promotions activities. This could have a major impact on California specialty crop overseas marketing efforts.

Johanns also pledged the support of his department with funds to aid specialty crop groups caught up in trade disputes.

Just like any farm bill that passes, the Bush administration's proposal to Congress does not please everyone on all fronts.

Tim Johnson, president of the California Rice Commission, said increasing direct payments pleases California rice growers, but establishing payment limits, eliminating the three-entity rule and applying means testing to payments “do not reflect the high production costs and high land values associated with rice farming in California.

“You cannot compare an acre of wheat in the Midwest with an acre of rice in California,” added Johnson.

Most commodity groups told USDA the '02 farm bill commodity support program worked as designed, and they wanted it to continue in the new farm bill with minor tweaking. However, none were surprised the administration is proposing what they consider a total overhaul.

Mark Bagby, a spokesman for Calcot, admits to some surprise that the overhaul was not more Draconian.

“It was not the sweeping changes I expected, yet there were major changes that would remove many Western growers from commodity program eligibility. Overall, the administration's proposal would still have a huge negative impact on the West.” he said.

Changes ‘dramatic’

Arizona cotton grower and state farm bureau president Kevin Rogers of Scottsdale, Ariz., said the industry is studying closely the changes, but “at first blush there seems to be dramatic changes.

“Our farming operations are set up under the 2002 farm bill which we have all learned to live with. Changing it with things like removing the three-entity rule will have a dramatic effect on how we farm in the West.”

However, Rogers points out that what was released by Johanns was a proposal. “Congress still has to write the bill,” he noted.

One of the biggest impacts for California in the USDA proposed '07 farm bill would be the end of the Extra Long Staple competitiveness program which helps Pima cotton compete in world markets. California produces more than 90 percent of U.S. Pima cotton. This ELS program similar to the Step 2 program the administration killed in the wake of the World Trade Organization ruling upholding Brazil's contention that the U.S. farm program gave America cotton producers an unfair advantage in world trade.

The ELS program got caught up in that WTO dispute and now the administration is proposing an end to the Pima program.

Bagby echoed Johnson's disappointment in the reduction of the adjusted gross income (AGI) requirement to receive government payments from $2.5 million to $200,000. However, it is unclear if this AGI provision applies only to commodity crops or to all crops on the highly diversified California farms.

Another thorny provision of the administration's proposed bill that could dramatically impact Western agriculture is the proposal that fruit and vegetable crops can be planted on commodity program flex acres. This is prohibited under the current farm program.

Johanns tied this change to the WTO ruling on cotton and said the administration has no choice but to allows fruits and vegetables on commodity crop ground.

Fruit and vegetable growers have fought against this, fearing that commodity crop producers would over plant fruits and vegetable crops and ruin markets. Bedwell, Johnson and Bagby all said this could cause major disruption in Western agriculture.

Assess impact

“Taking away planting restrictions for fruits and vegetables on flex acres would not have a big impact in rice country since about 60 percent of our land is physically suited only for rice, but I can see where it would have a major impact in other areas of California,” said Johnson.

“This change in allowing fruits and vegetables on flex acreage could throw off the economics of the current fruits and vegetables production. Congress and the administration need to address how this will impact fruit and vegetable growers” said Bedwell.

The administration's proposal to include an additional $7.8 billion to protect natural resources through conservation program and to commit an additional $1.6 billion to renewal energy projects will have significant impact on California and Arizona.

As part of the bio-energy package, Johanns wants to spend $210 million in support of an estimated $2.1 billion in loan guarantees for cellulosic ethanol projects.

“We want to move ethanol production out of the Corn Belt to the rest of America, and this is what the cellulosic ethanol initiative is designed to do,” said Johanns.

This could have a huge impact on California, said Johnson, not only allowing California to become a major ethanol producer but to solve air quality and agricultural waste removal issues.

“Only 5 percent of California rice straw leaves California rice farms,” said Johnson. Rice straw burning has all but been banned in California. Growers have successfully developed technology to degrade rice on the farm over the winter, but if that straw could be turned into ethanol, it would be a boom for rice growers in reducing straw removal costs and earning income from the straw.

“A pound of corn converts into ethanol better than rice straw or orchard prunings, but if the technology could be developed to more easily and profitable turn cellulose into ethanol it would be great,” said Johnson, who believes the added federal money could be the incentive to do that.

While it would have a positive impact on rice producers, Johnson says it may have an even greater impact on the San Joaquin Valley and its air quality issues.

The orchards and vineyards that are pulled out each year along with the annual orchard and vine prunings in both the San Joaquin and Sacramento valleys could be a “rich source of cellulosic biomass for ethanol production.

“It could represent a significant positive impact for producers by giving them an end use for their biomass material that they now grind up or burn. It could also have a very positive impact on California's air quality,” said Johnson.

Additional funding for conservation would also be well received in California, believes Bedwell.

“The wine grape industry's push for more sustainable practices fits into this as well as projects to improve air and water quality with EQIP funds for conservation projects,” said Bedwell.

Johanns pledged along with the additional conservation project money will be less complicated procedures to apply for conservation projects funds.

And finally, the changes in “1031” farmland purchases would have an impact. Land values have skyrockets in the West and investors who make handsome profits on land sales must invest it elsewhere or be required to pay capital gains taxes. This has driven investors into rural areas buying large blocks of farmland for exorbitant prices. Farmers are willingly selling out.

However, this drives farmland prices beyond the economic reach of most producers.

The Bush administration proposes that if farmland were bought with 1031 exchange money, the land would no longer be eligible for commodity payments.

However, producers point out that current crop payments on 1031 land keep rents within reason. Take away crop payments to farmers, and it could make investor-charged rents too high.