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Eliminating Fruit and Vegetable Plant Restrictions
January 24, 2007

A USDA analysis projects that if planting restrictions in the U.S. farm program were eliminated, program participants would expand dry edible bean plantings by about 83,000 acres.  Non-participants would reduce dry bean plantings by 56,000 acres, leaving a net increase of about 27,000 acres.

The price of dry edible beans would subsequently decline, reducing gross returns per acre, while prices and gross returns per acre would rise slightly for other crops.

The USDA Economic Research Report (No. ERR-30, 54 pp, Nov 2006) was authored by Demcey Johnson, Barry Krissoff, Edwin Young, Linwood Hoffman, Gary Lucier, and Vince Breneman.

It can be found online at - there, the report can be found as a summary, in its entirety, and in segments that analyze:

"        Base acreage and planting restrictions under the 2002 Farm Act

"        Agronomic and economic barriers to expanding fruit and vegetable production

"        Competition for land between program and fruit and vegetable crops

"        Planting dry beans on base acreage: economic tradeoffs

"        Discussion and implications

Participants in U.S. farm programs are restricted from planting and harvesting wild rice, fruit, and most vegetables (non-program crops, including dry edible beans) on acreage historically used for program crops (known as base acreage).

However, a recent World Trade Organization challenge to
U.S. programs has created pressure to eliminate planting restrictions. Although eliminating restrictions would not lead to substantial market impacts for most fruit or vegetables, the effects on individual producers could be significant, say the USDA study authors. Some producers who are already producing fruit and vegetables could find that it is no longer profitable, while others could profitably move into producing these crops. Producers with base acreage are the most likely to benefit, because they would no longer face payment reductions.

Eliminating the FAV Provision would affect some crops more than others.  The authors pointed out that because some fruit and vegetables are expensive to produce, program crop producers are more likely to switch to less capital-intensive crops, such as dry beans, or to processing vegetables, such as sweet corn or tomatoes, than to fresh fruit.

For example, producing cantaloupes in
Arizona may require shaping beds, laying plastic mulch, hand thinning and weeding, pollinating, several passes with chemical control agents, irrigating half a dozen times during the season, and removing and disposing of the plastic mulch. At harvest, growers must arrange for harvest labor, haul the melons to a cooler where field heat is removed, and have the product delivered to market quickly.

In contrast, harvesting equipment used in soybean operations would be more adaptable for dry beans, and many growers already have the experience needed to produce dry beans.

The Effect on Dry Beans

The study used a simple supply and demand model to illustrate potential adjustments that might occur for the dry bean market. Dry beans were selected as a case study, because they are one of the commodities where producers would likely expand production if planting restrictions were eliminated, due to their agronomic and economic characteristics.

Dry beans are unique for two reasons, the authors write: 1) they have more area devoted to them than area for any other fruit and vegetables, and 2) many producers could easily expand production because they already have the experience and equipment needed to produce dry beans.

If payments were not reduced when dry bean plantings increased, how much would these farmers raise production? Would producers who do not have a history of planting fruit and vegetables elect to produce dry beans or some other crop? The study authors looked at a model farm in Cass County, N.D. as a case study, and then considered the potential overall market adjustments if dry bean acreage expanded nationally.

The authors say several points emerge clearly from the analysis:

"        Eliminating planting restrictions induces a shift in planting of dry edible beans. Dry bean acreage would expand for program participants and decline for non-participants.

"        A net increase in dry bean acreage would push down the average return per acre. Plantings of other crops simultaneously would decline slightly, and prices would increase slightly.

"        Program participants would not necessarily gain market revenue from the policy change. Price declines for dry beans would negate some of the potential gain from planting flexibility. The effect on non-participants would also be ambiguous, with losses in revenue from dry beans offset (in part) by gains in revenue from other crops.



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