CC96-396 Productcion Flexibility Contracts: Provisions, Implications and the Participation Decision

The Federal Agriculture Improvement and Reform (FAIR) Act of 1996 (P.L. 104-127) was signed into law by President Clinton on April 4, 1996. Most provisions of the new law, including the commodity provisions, will be effective for seven years, 1996-2002. Unlike previous farm bills, provisions relating to commodity supports are grouped together under what is known as the Agricultural Market Transition Act (AMTA) program. Producers of seven commodities: corn, sorghum, barley, oats, wheat, rice and cotton must sign Productive Flexibility Contracts (PFCs) to participate in the AMTA. These seven commodities are referred to as "contract commodities." This publication focuses on the PFCs, beginning with an overview of contract provisions. Potential short- and long-run implications of PFCs are then discussed.