Summary: Reform in U.S. agricultural policy began with passage of the 1985 farm act, which sought to make federal farm programs more market oriented and to reduce the amount of support that the government guarantees farmers for their commodities. The 1990 and 1996 farm acts continued to build on these efforts. However, Congress retained several income- and price-support provisions as a safety net for producers. In particular, nonrecourse loans with marketing loan provisions continue to be available for a number of commodities, including cotton, rice, wheat, feedgrains, and oilseeds. This report answers the following questions: (1) Do marketing loan provisions prevent loan rates from acting as price floors and do they allow U.S. prices to fall to levels that are closer to world prices? (2) How would lower loan rates affect the relationship between U.S. and world prices? (3) How would a lower loan rate affect step two payments for cotton exports and what impact have recent changes in the timing of payments had on the program's effectiveness? (4) What steps could be taken to make the peanut and sugar programs more market oriented?
