President Reagan has decided to sign the five-year farm bill into law, although the administration is not pleased with some of its key provisions, Agriculture Secretary John R. Block said yesterday.

Block said the president will sign the heatedly debated measure early next week, along with a companion bill that orders a reorganization of the Farm Credit System and gives the Farm Credit Administration new regulatory powers.

Block said that while top administration officials differed on whether Reagan should be counseled to sign the farm bill, he argued "very strongly" that the measure could bring important benefits to farmers.

He termed the bill "the best possible product" that Congress could achieve, given the intense economic stress in agriculture from declining exports, falling prices, overproduction and heavy debt loads.

Block said that lower price supports for basic commodities, continued income supports for farmers and important conservation provisions were "major policy reforms" that would help U.S. agriculture become more competitive in world markets and reduce government involvement in farmers' affairs.

The measure finally agreed upon Wednesday by Congress would do little, if anything, to reduce federal spending on agriculture over the next several years, but it calls for lowered price floors under wheat, corn, rice and cotton in an effort to export more products at competitive rates.

"We are going to be very competitive with this bill," Block said. "The loan rates will be lower, and this will position the United States to compete for its share of the market."

Despite the other changes, Block said that a congressionally mandated assessment on dairy farmers, strict requirements on sugar import quotas and certain provisions that subsidize grain exports continued to concern him.

The dairy assessment will be levied on all dairy farmers to finance a provision requiring the secretary to buy herds and retire them as a means of cutting milk surpluses that have cost the government more than $6 billion since 1981.

Bowing to White House objections, Congress removed from the bill a plan to pay dairy farmers for reducing production and ordered a lowering of the price-support rate beginning in 1987 to discourage overproduction. Supports will drop until federal purchases fall below 5 billion pounds of milk, butter and cheese per year.