The period of US farm bills where the instruments were designed around compensation policies that used price support/supply management programs allowing farmers to remain in production during long periods of low prices—the result of four centuries of publicly-sponsored developmental policies—ended with the adoption of the 1996 Farm Bill.
In some important ways, the demise of price support/supply management programs can be traced back to three changes in the 1980s: 1) the ascendancy of neo-classical economic theory over an approach that recognized that agriculture was different from other economic sectors, 2) a downturn in grain exports after 1981 that was blamed on high loan rates, and 3) the mishandling of farm programs in the early 1980s that resulted in significantly reduced plantings in 1983. That being said, it must be acknowledged that there was continuous opposition to these programs, on the part of some, going back to their institution as a part of the New Deal.
The 1985 Farm Bill reduced support prices and provided export enhancement programs in a futile but unrelenting effort to “recapture” export markets, partly reflecting grain importers buying from an increasingly diverse set of export competitors as acreages were brought into production and the technology that had increased yields in the US spread to other countries.
At the same time agribusiness firms began lobbying against acreage reduction programs because those programs reduce the demand for new equipment, parts and repairs, and agrochemical inputs. They wanted to sell products for as many acres as possible. They bolstered their argument with free-market, neoclassical economic theory that saw agriculture as no different from any other industry.
In the run-up to what was initially to be the 1995 Farm Bill—it was delayed into early 1996, thus becoming the 1996 Farm Bill—the National Grain and Feed Foundation commissioned a 1994 study by the consulting firm Abel, Daft, and Earley which held that large-scale land idling had retarded the growth of US agriculture. During this period, Congress was operating under the Gramm-Rudman-Hollings Balanced Budget Act, leaving the agriculture committees with a reduced budget with which to work.
Then a crop shortfall sent prices soaring. With 10-year projections showing massive corn imports by China, it became possible to convince people that there was no longer a need for farm bills. Thus was born the 7-year Federal Agriculture Improvement and Reform Act of 1996, known as Freedom to Farm, and its provisions to dismantle the existing price support/supply management programs.