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Changes to Deficiency Payments in the 1996 Farm Bill



The 1985 and 1990 Farm Bills made it very difficult for new acreage to qualify for deficiency payments, thus severely diminishing the incentive to convert wetlands to the production of commodity crops. The 1996 Farm Bill completed this task, making it impossible for new acreage to qualify for deficiency payments, and linked the new Freedom to Farm payments to pre-existing crop base acreages. The bill replaced the traditional crop-specific deficiency payments with "production flexibility contracts." Contracts are for 7 years, provide fixed annual payments (independent of market conditions or crop planted), and allow considerable planting flexibility. Payments are based on 85% of past program yield and eligible acreage, and decline by about 30% by the 7th year (2002).


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