The issue of restricting plantings of fruits, vegetables, and wild rice on base acres in the farm commodity programs is a topic of debate in the 2007 farm bill. The purpose of the targeted restriction is to protect growers of unsubsidized fruits and vegetables from competing production on subsidized land. As reasonable as this justification may appear, there have been problems with the policy (see below). Restrictions on planting fruits and vegetables are viewed positively by fresh fruit and vegetable growers, mostly negatively by growers of processing fruits and vegetables, and negatively in the context of world trade rules. First, some midwestern producers who grew primarily vegetables for processing (canned and frozen) have reduced their plantings since soybeans became a program crop in 2002. Companion bills have been introduced in the House and Senate of the 110 th Congress that would allow any producer to use base acres to grow fruits and vegetables for canning and freezing as long as they give up program payments on those acres for one year, but without additional penalties (Farming Flexibility Act of 2007— H.R. 1371 , Baldwin, and S. 1188 , Lugar). Second, in a high-profile case brought to the WTO by Brazil against the United States regarding its cotton program, a settlement panel found that the current restriction on planting specialty crops makes direct payments ineligible for treatment as a nondistorting (green box) subsidy payment for international trade purposes. The Administration proposes that the 2007 farm bill eliminate the fruit and vegetable planting restriction, largely to meet WTO obligations. Retain the current restrictions (status quo). If direct payments are eliminated, the planting restriction issue is irrelevant. Direct compensation. The amount of the payment could be based on the level of direct payments received by program crop growers. Summary of Academic and Industry Studies

Following is a side-by-side comparison of five academic and industry studies on the effects of removing the restriction on planting fruits and vegetables on base acres under the 2002 farm bill. General Conclusions

As indicated by these studies, eliminating the current planting restriction could have an economic effect on certain crops within certain producing areas. However, differences in research approach and scope (e.g., regional versus national; plantings of permanent, perennial crops versus easily rotated, annual crops) complicate a direct comparison across all five studies. Such differences also make it difficult to generalize about the possible economic effects of lifting the current restriction. They reported estimated revenue losses to existing fruit and vegetable growers ranging from about $1.7 billion to $4.0 billion, respectively, in the first year of lifting the restriction. The other three studies did not provide quantitative estimates of the market impacts. However, both the USDA and Michigan State studies indicate that the effects of removing the current restriction likely would be limited to individual producers, commodities, and regions, and that the total industry effects of removing the restriction would be low.
Owners of cropland with a history of growing "program crops" receive federal subsidy payments without regard to what crops are currently being produced on these base acres. In other words, these "direct payments" are decoupled from crop planting decisions. While the direct payments program is characterized as giving producers the flexibility to make planting choices based on actual market conditions instead of subsidy rules, there are restrictions. There is a prohibition on planting fruits, vegetables, and wild rice on program crop base acres. This planting restrictions policy is now under challenge as Congress debates a 2007 farm bill.
The purpose of the fruit and vegetable planting restriction is to protect growers of unsubsidized fruits and vegetables from competing production on subsidized cropland. As reasonable as this justification may appear, there have been problems with the policy. First, producers primarily of processing vegetables (canned and frozen) in the Midwest sharply curtailed production after soybeans became a program crop in the 2002 farm bill. Second, in a high-profile case by Brazil against the U.S. cotton program, the World Trade Organization (WTO) determined that the prohibition on planting fruits and vegetables was not consistent with the rules required of a minimally distorting subsidy. This determination jeopardizes the "green box" classification of direct payments for all program crops. Largely to meet WTO obligations, the Administration proposes that the 2007 farm bill eliminate the fruit and vegetable planting restriction.
Companion bills have been introduced in the House and Senate that would allow any producer to use base acres to grow fruits and vegetables for canning and freezing as long as they give up program payments on those acres for one year, but without additional penalties (Farming Flexibility Act of 2007—H.R. 1371, Baldwin, and S. 1188, Lugar). This partial approach likely would not satisfy WTO concerns. Other options include retaining the status quo, eliminating the restrictions entirely, or eliminating the underlying direct payment. Most fresh fruit and vegetable growers oppose eliminating the restriction without some type of compensation.
This report summarizes and examines five academic and industry studies on the economic effects of removing the fruit and vegetable planting restrictions. These studies indicate that lifting the planting restriction could have an economic effect on certain crops within certain producing areas. However, differences in approach and scope (e.g., regional versus national; plantings of permanent, perennial crops versus easily rotated, annual crops) complicate a direct comparison across all five studies, and make it difficult to generalize about the possible economic effects of lifting the planting restriction. Only two of the studies provide estimates of revenue losses to existing fruit and vegetable growers (ranging from about $1.7 billion to $4.0 billion in the first year of lifting the current restriction). The other three studies do not make quantitative estimates of the impacts, but indicate that adverse effects of removing the restriction likely would be small relative to the overall industry, although there could be larger impacts on individual producers, commodities, and regions.