Business, Legal & Accounting Glossary
The body of law governing the cultivation of various crops and the raising and management of livestock to provide a food and fabric supply for human and animal consumption.
The law as it relates to agriculture is concerned with farmers, ranchers, and the consuming public. Agricultural law is designed to ensure the continued, efficient production and distribution of foods and fibers. Through a vast system of regulations that control the various aspects of agricultural practice, federal and state governments are able to provide for the needs of both agriculturalists and consumers.
Agricultural law is a relatively new phenomenon. Farmers have always been subject to established contract, real property, and estate laws, but it wasn’t until the mid-1980s that federal and state governments began treating the production of food and fiber as a calling worthy of special legal treatment.
State regulations concerning the inspection, promotion, and improvement of farm production were in place in the United States’s infancy, but the federal government’s first foray into the promotion of farming was the Homestead Act of 1862 (ch. 75, 12 Stat. 392 [repealed 1976]). This act encouraged the westward expansion of European Americans by selling federally owned lands for farming. Another method of sale was land debt, a financial arrangement in which farmers agreed to pay the federal government a certain amount from their yearly profits in exchange for the land. Congress passed subsequent legislation concerning land ownership for farming purposes, but federal lands were eventually exhausted, and in 1976, these late-nineteenth- and early-twentieth-century acts became unnecessary and were repealed.
The colonial and pioneer families that practiced farming generally raised a variety of animals and crops, depending on what the soil would yield. This seminal arrangement came to be known as the family farm. The family farm community was rich in resources derived from land, not money, and from this unique prosperity grew a lifestyle with a status all its own. Expendable income was not a priority for farm families. The values attached to their way of life placed a higher premium on plentiful food, vast land ownership, and a spiritual fulfillment derived from farming. Farmwork was difficult, and the farmer was different from the rest of society; it was against this backdrop that federal and state legislators began to work when addressing the pressing issues that farmers would come to face.
The years following the Civil War were especially fruitful for farming communities. World War I saw an increase in the value of farm products, and in the Roaring Twenties, robust prices were maintained by a general public capable of buying food and clothing. However, in the months before the stock market crash of October 1929, the value of farmland and its products began to decrease. This was due in part to high tariffs on manufacturing equipment essential to farming, which allowed U.S. manufacturers to price farming equipment without foreign competition. It was also due in part to a new emphasis on mass productivity inspired by the industrial revolution. The ability of farmers to increase production on less land led to lower prices and, eventually, fewer family farms.
The Great Depression of the 1930s eliminated many family farms. As the general public became less able to buy such basic farm products as food and clothing, food prices dropped drastically, and farmers found themselves without the profits for their mortgage payments. Foreclosures became routine. Farm families considered foreclosures a breach of the government’s promise to allow productive farm families to keep their land, and vast numbers of farmers organized to withhold food from their markets in an effort to force product prices higher. A smaller number of farmers resorted to violence to prevent other farmers from delivering their goods to the market. Several foreclosures were also prevented by force.
The unrest of the early 1930s in the Great Plains states eventually led to widespread state legislation that limited the rights of banks to foreclose on farms with undue haste. Action was also taken on the federal level. To avoid a national farmers’ strike planned for May 13, 1933, President Franklin D. Roosevelt signed the Agricultural Adjustment Act (7 U.S.C.A. § 601 et seq.) on May 12. This act was the first in a series of federal laws that provided compensation to farmers who voluntarily reduced their
output. Parts of the act were declared unconstitutional by the Supreme Court in 1936, in part because the Court considered agriculture a matter of local concern. Congress and President Roosevelt continued to press the issue, with the amended Agricultural Adjustment Act of 1938, which contained more federal control of production, benefit payments, loans, insurance, and soil conservation.
The test case for the new Agricultural Adjustment Act was Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122 (1942). In Wickard, Ohio farmer Roscoe C. Filburn sued Secretary of Agriculture Claude R. Wickard over the part of the act concerning wheat acreage allotment. Under the act, the U.S. Department of Agriculture (USDA) had designated 11.1 acres of Filburn’s land for wheat sowing and established a normal wheat yield for this acreage. Filburn defied the department’s directive by sowing wheat on more than 11.1 acres and exceeding his yield. This constituted farm marketing excess, and Filburn was penalized $117.11 by the department. When Filburn refused to pay the fine, the government issued a lien against his wheat and the Agriculture Committee denied him a marketing card. This card was necessary to protect Filburn’s buyers from liability for the fine, and to protect buyers from the government’s lien on Filburn’s wheat.
Filburn sued to invalidate the wheat acreage allotment provision, arguing in part that it was beyond the power of the federal government to enforce such farming limitations. Even though Filburn did not intend to sell much of the wheat, the Supreme Court reasoned that because all farm product surplus had a substantial effect on interstate commerce, it was within the power of the U.S. Congress to control it. This decision affirmed the power of Congress to regulate all things agrarian, and the U.S. farmer, for better or worse, was left with a meddlesome lifetime friend in the federal government.
As the United States enjoyed economic prosperity through the 1950s and 1960s, the number of family farms remained relatively stable. Farm families learned to work with the federal government and its dizzying stream of agencies, regulations, and paperwork. Nevertheless, the mid-1980s saw another farm crisis. Widespread financial difficulty led to the loss of hundreds more family farms and prompted further federal action.
In response to this crisis, Congress passed an extensive credit-relief package in 1985, over the protest of President Ronald Reagan’s agriculture secretary, John R. Block. The several bills in this package provided for additional federal monies for loan guarantees, reduction of lender interest rates, and loan advancements.
This farm crisis was triggered by a combination of natural disasters, market shifts, lower prices, and production improvements. Furthermore, the onset of corporate farming, which involves mass production of farm products, forced farm families to consistently reckon with the harsh realities of the financial world.
Dissatisfaction with federal farm laws and policy led Congress in 1996 to pass the Federal Agriculture Improvement and Reform Act, which came to be known as the Freedom to Farm Act (Pub.L. 104–127, Apr. 4, 1996, 110 Stat. 888). The law, which was trumpeted by conservatives as the means to end 60 years of federal farm subsidies and to reinvigorate the free market, reduced regulatory burdens on farmers and ended requirements that farmers idle land to qualify for crop subsidies. However, the central part of the law consisted of “market transition payments”—the USDA paid farmers to compensate them for the possibility that farm subsidies might end in six years. This departed from the traditional federal practice where support payments were inversely related to crop prices—the higher the crop prices, the lower the support payments.
The Freedom to Farm Act gave farmers more than three times as much in cash subsidies in 1996 and 1997 than they would have received under the previous five-year farm bill. Even with these payouts, farm income began to fall in 1998, leading Congress to reverse course and authorize billions of dollars in farm relief. By 2002, Congress had abandoned the idea that the federal government should not subsidize farmers. It passed the Farm Security and Rural Investment Act of 2002 (Farm Bill 2002), Pub.L. 107–171, May 13, 2002, 116 Stat. 134, which set agricultural policy for the next six years. It is estimated that the total subsidies paid out over this period will reach $200 billion.
While government involvement in farming continues, the face of U.S. farming is evolving. Most farmers are now trained in business and keep abreast of farming trends, technological and manufacturing improvements, and the stock market. Many family farms have adapted by specializing in the mass production of one or two particular foods or fibers, like corporate farms. Other farmers have formed what is called a cooperative, a group of farmers dedicated to the most profitable sale of their products. By pooling their resources and producing a variety of goods, cooperative farmers are able to weather low-price periods and postpone sales until a product price reaches a high level.
Agriculture has become a powerful lobbying group in state capitals across the country, and the political issues are myriad. The industry itself is split into competing special interests, according to product. Family farms and cooperatives are often at odds, although sometimes they join forces against massive corporate farming. Farming interests are frequently opposed by advocates for the environment and food purity. The government does not always seem to act in the best interests of farmers, and farmers and their creditors continually struggle for leverage. Federal and state regulations seek to provide some predictability for the players in these struggles.
According to the Wickard case, the U.S. Congress has the power to regulate agricultural production under Article I, Section 8, of the federal Constitution, and Congress has left virtually nothing to chance. The numerous programs and laws that promote and regulate farming are overseen by the secretary of agriculture, who represents the USDA in the president’s cabinet. The USDA is the government agency that carries out federal agricultural policy, and it is the most important legal entity to the farmer.
Usually, some two dozen agencies are housed within the USDA, all charged with carrying out the various services and enforcing the numerous regulations necessary for the efficient, safe production of food and fiber. Other administrative agencies can affect a farmer’s legal rights, such as the Food and Drug Administration (FDA), the Interior Department, and the Treasury Department, but the USDA is the single department to which every farmer must answer.
The Agricultural Adjustment Acts establish and maintain prices for crops by preventing extreme fluctuations in their availability. These acts empower the secretary of agriculture to allot a certain amount of farmland for the production of a specific crop, and to apportion the land among the states capable of producing the crop. State agricultural committees then assign a certain amount of the land to various counties, and the counties in turn assign the land to local farms. This system guards against crop surpluses and shortages, and preserves economic stability by preventing extreme fluctuations in crop prices.
The Commodity Credit Corporation (CCC) exists within the USDA to further the goal of stabilizing food prices and farmers’ incomes. The CCC provides disaster relief to farmers, and it controls prices through an elaborate system of price support. Loans to farmers and governmental buyouts of farm products allow the CCC to maintain reasonable price levels. The secretary of the CCC is also authorized to issue subsidies, or governmental grants, to farmers as another means of controlling prices by maintaining farmers’ incomes. By encouraging or discouraging the production of a particular food or fiber through financial reward, subsidies promote price stability in the markets.
Several federal programs help serve the same purpose of price stability. The secretary of agriculture may set national quotas for the production of a certain farm product. Set-aside conditions, also established by the secretary of agriculture, require farmers to withhold production on a certain amount of cropland during a specified year. Diversion payments are made to farmers who agree to divert a percentage of their cropland to conservation uses, and the Payment in Kind Program allows farmers to divert farmland from production of a certain commodity in exchange for a number of bushels of the commodity normally produced on the diverted land. Federal crop insurance, emergency programs, and indemnity payment programs protect farmers against unforeseen production shortfalls. The Farm Credit Administration, established by Congress as an independent agency in the executive branch of government, provides funds for farmers who are unable to purchase feed for livestock or seed for crops.
Also in place are federal programs and regulations that provide for the coordination of farm cooperatives, standardization of marketing practices, quality and health inspections, the promotion of market expansion, the reporting of farm statistics, and the administration of soil conservation efforts. For example, the Soil Conservation and Domestic Allotment Act (16 U.S.C.A. §§ 590 et seq. ) directs the secretary
of agriculture to help farmers and ranchers acquire the knowledge and skill to preserve the quality of their soil. The federal Food Stamp Program helps to support domestic food consumption and economic stability for consumers and farmers alike by subsidizing the food purchases of people with low incomes.
Under Title VII of the United States Code, the secretary of agriculture is charged with coordinating educational outreach services. The Morrill Act (7 U.S.C.A. §§ 301-05, 307, 308), passed by Congress in 1863, granted public land to institutions of higher education for the purpose of teaching agriculture. In 1887, the Hatch Act (7 U.S.C.A. § 361a et seq.) created agricultural experiment stations for colleges of agriculture, and in 1914, the Smith-Lever Act (7 U.S.C.A. § 341 et seq.) created the Extension Service, which allowed agriculture colleges to educate farmers not enrolled in school.
In the Extension Service, agents are hired by an agriculture college to help farmers address a variety of farming issues, and to promote progress in farming by providing farmers with information on technological advances. Many farm families have been helped by the land-grant programs, but some critics have argued that this college system too often emphasizes increased productivity and frenzied technological advancement at the exclusion of small-scale farm operations. In the mid-1990s, the Extension Service began to branch out. The Minnesota Extension Service, for example, began to address such issues as teen drug abuse and child neglect. This use of agricultural monies for social services has disappointed some and pleased others.
One high-profile controversy involves the Bovine Somatatropin (BST) bovine growth hormone. The BST hormone increases the milk output of dairy cows. The Milk Labeling Act bills passed by Congress in April 1993 regulate the use of the drug by requiring the secretary of agriculture to conduct a study of its economic effect on the dairy industry and on the federal price support program for milk. The act also requires the producers of the milk from cows treated with BST to keep records on its manufacture and sale. Proponents of the drug extol its production benefits, but opponents argue that increasing productivity is less important than ensuring food purity.
Homestead protection is another form of federal relief, which helps keep farms out of foreclosure. To qualify for homestead protection, farmers must show that they have received a gross farm income that is comparable to that of other local farmers, and that at least 60 percent of their income has come from farming. A 1993 case challenged the definition of this type of relief. Schmidt v. Espy, 9 F.3d 1352 (8th Cir.1993), was a suit brought by the Schmidt family to stop the FmHA from calling in the Schmidts’ farm loan. The USDA had ruled that because the Schmidt farm had suffered net losses, it could not qualify for homestead protection. The Schmidts took their case to the U.S. district court, which affirmed the USDA’s decision.
The Eighth Circuit Court of Appeals reversed the decision. According to the appeals court, the statutory definition of income for purposes of homestead protection is gross income, not gross profits. The court reasoned that because homestead protection is normally sought by financially distressed farmers, limiting the protection to profitable farmers would run contrary to the purpose of homestead protection.
The Tenth Amendment grants states the right to pass laws that promote the general safety and well-being of the public. Because courts have found that agricultural production and consumption directly affect public health and safety, states are free to enact their own agricultural laws, provided those laws do not conflict with federal laws and regulations.
Many state laws provide for financial assistance to farmers. By issuing loans or providing emergency aid, states are able to ensure the survival of family farms and continued agricultural production. The states also have the power to impose agricultural liens, which are claims upon crops for unpaid debts. If a farmer is unable to make timely payments on loans for services or supplies, the state may sue the farmer to gain a security interest in the farmer’s crops. States also enact laws to supervise the inspection, grading, sale, and storage of grain, fertilizer, and seed.
Municipalities can also set regulations that ostensibly control agricultural production. The subject of wetlands, for example, is within the jurisdiction of local governing bodies. In Ruotolo v. Madison Inland Wetlands Agency, No. CV 93-0433106, 1993 WL 544699 (Conn.Super., Dec. 23, 1993), Michael Ruotolo, a farmer in Madison, Connecticut, challenged a municipal regulation that prevented him from filling in wetlands located on his property. Ruotolo wanted to plant nursery stock on the area after moving earth to raise the ground level, but the Madison Wetlands Regulation precluded the filling in of any wetlands. According to a state statute, however, farming was permitted on some wetlands of less than three acres.
Ruotolo asserted a right to farm, and argued that since the state law and the local regulation were in conflict, the state law should prevail. However, in previous proceedings between Ruotolo and the Madison Inland Wetlands Agency, the agency had found that the wetland on Ruotolo’s property had “continual flow,” and was therefore subject to more protection than standing-water wetlands. Because the state statute prevented even farmers with less than three acres from filling in wetlands with continual flow, Ruotolo was prevented from farming the wetlands on his property.
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This glossary post was last updated: 8th October, 2021 | 0 Views.