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Subsidies expected to boost milk, pea output
WASHINGTON -- Lentils and dry peas, two crops American farmers traditionally grew little of, are going to become more popular with growers now that the government will subsidize their production.
Under the farm bill that President Bush signed in May, subsidies commonly reserved for corn, wheat, cotton, soybeans and other crops are being offered for lentils and dry peas, the type of peas used in split-pea soup.
"You can get more yield off peas than wheat and you don't need fertilizer. It will be a tremendous cash crop for the farmers," said Les Knudson, who cleans and bags peas and lentils in Crosby, N.D., near the Canadian border.
"We don't have the marketing channels to handle the kind of volumes that could happen with this," he said.
The farm bill also offers subsidies to peanut growers for the first time and revives payment programs that were ended in the 1990s for honey, wool and mohair. There also is a temporary new subsidy program for milk.
Canada is nervous
Economists say the impact of the programs on consumer prices probably will be modest.
Farmers know they must find more markets for their peas and lentils if they are going to grow them. Lentils are a staple in much of Asia, but other countries such as Canada have been supplying that market. "We need to rob acres from other countries. Canada is quite nervous about this for that very reason," Knudson said.
Dry peas can be used in livestock feed, but growers need to persuade hog producers to use them.
Until the 1996 Freedom to Farm law ended production controls on farmers, there was little of either crop grown in the United States. Last year, farmers harvested less than 400,000 acres of the two crops, primarily in Washington, Idaho and North Dakota. By comparison, farmers harvested 49 million acres of wheat.
Brian Clancey, a British Columbia-based market analyst, sees U.S. lentil and dry pea acreage reaching 1.2 million acres over the next five years.
Without the subsidies, banks "have grown reluctant to finance those crops," he said. "They want to see the growers growing crops where there is some kind of government subsidy coming in."
The subsidies are estimated to cost taxpayers $120 million over the next decade. The actual cost could vary widely depending on how much farmers expand production.
Under the farm bill, farmers will be guaranteed about 12 cents a pound for lentils, about 2 cents more than they can get on the market. The subsidy level for dry peas is about a penny over the market price.
None of the new subsidies is expected to have a significant impact on retail food prices, which are driven more by costs of processing, marketing and transportation than by changes in production and commodity prices, economists say.
The milk subsidies, in effect through 2005, are the result of a compromise among dairy interests. The payments will substitute for a price-setting system, or compact, in New England that ended last year amid opposition from the processing industry and producers in other parts of the country.
Advocates of compacts think there may be more support for them in Congress by the time the subsidies expire.