FarmPolicy

December 18, 2014

Cuba Policy; China (Trade-Biotech); and, the Agricultural Economy

Cuba Policy

Geoff Dyer and Marc Frank reported yesterday at The Financial Times Online that, “The US is to open talks with Cuba about establishing full diplomatic relations and reopening an embassy in Havana, potentially bringing to an end more than five decades of hostility and one of the last vestiges of the Cold War.

“The dramatic move to thaw relations began with a prisoner swap on Wednesday, including three Cuban agents held in US jails and Alan Gross, an American development worker who has been in a Cuban prison for five years on spying charges. The US said an unnamed Cuban man who had provided ‘critical’ intelligence to the US had also been released from a Cuban jail after almost 20 years.”

The FT article explained that, “The push to ease ties with Cuba could bring to an end more than 50 years of US economic sanctions which were put in place just after the Cuban Missile Crisis of 1962 in a bid to isolate the island and contain its ambitions to export communism.”

“‘These 50 years have shown that isolation has not worked. It’s time for a new approach,’ Mr Obama said in a televised address. ‘It does not serve America’s interests, or the Cuban people, to try to push Cuba towards collapse,’ he said. ‘Let us leave behind the legacy of both colonisation and communism, the tyranny of drug cartels, dictators and sham elections.’

US officials said that the administration was relaxing some restrictions on commerce with Cuba, although bigger steps to unwind the embargo would require the approval of Congress,” the FT article said.

Dyer and Frank added that, “Marco Rubio, the Florida senator who is the son of Cuban immigrants, immediately denounced the initiative and said he would work to block efforts at opening trade and commerce with Cuba.”

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Tax Extenders- Budget; Policy Issues; Trade; Ag Economy; and, Regulations

Tax Extenders- Budget

Michael A. Memoli reported yesterday at the Los Angeles Times Online that, “A turbulent lame-duck session of Congress came to a sudden end Tuesday as the Senate rushed to clear a lingering tax bill and some key presidential nominations in a late-night flurry of final votes.

Lawmakers signed off on a deal to extend $45 billion worth of tax breaks through this calendar year, ensuring that businesses and individuals can claim the deductions in their next IRS filings. The 76-16 vote also approved what had been a separate bill to create new tax-free accounts that can be used for the care of disabled family members.”

The article explained that, “The agreement sent lawmakers home earlier than many had expected just a few days ago, when Sen. Ted Cruz (R-Texas) forced members into a marathon weekend session as he made a final, unsuccessful effort to derail President Obama’s new immigration policy during consideration of the $1.1-trillion spending deal.

Congress passed the bill Saturday and Obama signed the package into law without ceremony Tuesday night, the White House announced.”

Mr. Memoli stated that, “The Senate formally adjourned shortly before midnight. The House, which has already wrapped up its work, will follow suit this week.”

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ERS: Food accounts for 13 percent of American households’ budgets

ers

From the U.S. Department of Agriculture’s Economic Research Service (ERS)- “With a 12.9-percent share, food ranked third behind housing (33.6 percent) and transportation (17.6 percent) in a typical American household’s 2013 expenditures. Breaking down food spending further, 7.8 percent of expenditures were spent at the grocery store and 5.1 percent at restaurants. Price changes for the items in the different budget categories relative to each other play a role in the categories’ shares of annual household consumer expenditures. Over the last 10 years, retail food price inflation has often outpaced economy-wide inflation. Between 2004 and 2013, prices for all U.S. goods and services rose an average of 2.4 percent per year, while food prices increased an average of 2.8 percent. Despite higher food price inflation, food’s share of consumer expenditures fell slightly (0.4 percentage points) over the decade, as the budget shares for health care and housing rose. This chart appears in the ERS data product, Ag and Food Statistics: Charting the Essentials. More information on ERS’s food price forecasts can be found in ERS’s Food Price Outlook data product.”

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Policy Issues; Tax Extenders; Budget; Trade- Ag Economy; and, Regulations

Policy Issues

Damian Paletta and Mark Peters reported on the front page of today’s Wall Street Journal that, “A large number of Republican governors are pushing to reshape social-welfare programs with drug testing or other requirements, arguing that the new rules better prepare recipients for employment and assure taxpayers that the benefit money is well spent.

“Gov. Scott Walker of Wisconsin, fresh off his re-election, said he would propose his state join several others in mandating drug screening for people seeking nutrition or cash assistance. Utah Republicans want to require that certain residents allow the state to assist them in finding a job if they want to collect benefits through Medicaid, the health-care program for low-income and disabled Americans. Indiana Gov. Mike Pence is proposing Medicaid recipients kick in at least a few dollars a month as a condition for receiving benefits.”

The Journal writers noted that, “The drug-test push is part of a wave of changes that Republican governors are eyeing for Medicaid, cash assistance, unemployment and nutrition assistance, programs run jointly by federal and state governments.”

Paletta and Peters also explained that, “Drug-screening rules, though they have disqualified relatively few people from benefits, have proved to be the most contentious. Earlier this month, a federal appeals court struck down a 2011 Florida law that required drug screening for people seeking benefits through the Temporary Assistance for Needy Families program, saying the requirement was unconstitutional and that the state hadn’t demonstrated that recipients have more of a drug problem than the general population.

This year, the U.S. Agriculture Department blocked a drug-screening requirement in Georgia for the state’s food-stamp program, which it oversees.”

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ERS: Bulk commodity prices pull down U.S. agricultural export forecast

ers

From the U.S. Department of Agriculture’s Economic Research Service (ERS)- “Fiscal 2015 U.S. agricultural exports are forecast at $143.5 billion, $9.0 billion below fiscal 2014, primarily because of the outlook for lower bulk commodity prices. Grain and feed sales are forecast down 18 percent from fiscal 2014 as lower prices, as well as reduced volumes, reduce the value of corn and wheat exports. Lower prices are expected to reduce oilseed and product exports by 15 percent, despite the outlook for larger export volumes. In contrast, horticultural product exports are forecast to grow 11 percent to $37 billion, making them the largest category of U.S. agricultural exports for the first time. Livestock products are also forecast to grow about 3 percent in fiscal 2015, primarily due to higher meat prices. The trade outlook indicates a decline in U.S. agricultural exports across global regions. Lower prices are expected to reduce the value of exports to China, the largest U.S. agricultural market, by about 7 percent to $24.0 billion. Sales to Canada, the second largest U.S. market, are forecast to hold steady at about $21.8 billion, while sales to Mexico slip about 4 percent to $18.7 billion. Find additional analysis in Outlook for U.S. Agricultural Trade: December 2014.”

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Budget; Biotech; Agricultural Economy; and, Policy Issues

Budget

Ashley Parker and Robert Pear reported in yesterday’s New York Times that, “After moments of high drama, dry process and acrimony, the Senate passed a sweeping $1.1 trillion spending package Saturday night, abruptly ending several days of chaotic legislative maneuvers and clearing the bill for President Obama to sign.

“The legislation, which will fund most of the government through the fiscal year that ends in September, passed in a bipartisan vote, 56 to 40, after a turbulent process — a fitting coda for a governing body that has often failed to govern.”

Robert Pear reported on the front page of today’s New York Times that, “Health insurance companies preserved their tax breaks. Farmers and ranchers were spared having to report on pollution from manure. Tourist destinations like Las Vegas benefited from a travel promotion program.

“Also buried in the giant spending bill that cleared the Senate on Saturday and is headed to President Obama for his signature were provisions that prohibit the federal government from requiring less salt in school lunches and allow schools to obtain exemptions from whole-grain requirements for pasta and tortillas.

“The watered-down standards for school meals were a setback for the first lady, Michelle Obama, who had vowed to fight ‘until the bitter end’ for tougher nutrition standards. But they were a victory for food companies and some local school officials, who had sought changes in regulations that are taking effect over several years.”

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Ag Economy; Biotech; Biofuels; Policy Issues; and, Budget Developments

Agricultural Economy

An update yesterday from the Food and Agriculture Organization of the United Nations stated that, “Latest indications confirm that world cereal production will reach an all-time record of more than 2.5 billion tonnes in 2014.

“Buoyed by bumper crops in Europe and a record maize output in the United States of America, this year’s cereal output should reach 2.532 billion tonnes, including rice in milled terms, or 0.3% higher than 2013, according to FAO’s latest Crop Prospects and Food Situation Report.

“The record global cereal harvest in 2014 will outpace projected world cereal utilization in 2014/15, allowing stocks to rise to their highest level since 2000 and pushing the worldwide stock-to-use ratio, a proxy measure for supply conditions, to rise to 25.2 percent, its highest level in 13 years, according to FAO.”

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Biotech; Biofuels; CFTC; Policy Issues; Budget; and, Ag Economy

Yesterday, lawmakers on Capitol Hill held three separate hearings on important topics germane to U.S. farm and food policy. The hearings highlighted issues associated with biotechnology, biofuels and the Commodity Futures Trading Commission.

Biotechnology, GMO Food Labeling

AP writer Mary Clare Jalonick reported yesterday that, “The food industry is likely to find a receptive Congress come January in its fight against mandatory labeling of genetically modified foods.

“Republicans and Democrats on a House Energy and Commerce subcommittee questioned Wednesday whether requiring a label on any packaged food including genetically modified organisms — or foods grown from seeds engineered in labs — would be misleading to consumers since there is little scientific evidence that such foods are unsafe. The food industry has made a similar argument.

“Congress has shown increasing interest in getting involved in the labeling debate as the food industry has faced a potential patchwork of state laws requiring it. The hearing previewed GOP efforts to push legislation next year that would reaffirm that such food labels are voluntary, overriding any state laws that require them. The bill, introduced by Rep. Mike Pompeo, R-Kansas, has the backing of the food industry.”

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Budget; Policy Issues; and, the Agricultural Economy

Budget

Ashley Parker and Jonathan Weisman reported in today’s New York Times that, “Congressional leaders reached a deal Tuesday on a more than $1 trillion spending package that would fund most of the federal government through the current fiscal year.

“But because negotiations on the package dragged over policy details, House lawmakers also prepared to move on a short-term spending measure that would avert a government shutdown if Congress cannot pass the larger bill by Thursday, when the current funding expires.”

The Times article explained that, “The spending bill would fund nearly all of the federal government through September 2015, except for the Department of Homeland Security, which it would fund only through February, in retaliation for President Obama’s unilateral action to defer the deportation of as many as five million undocumented immigrants. Congressional Republicans plan to take up funding for the agency — which has primary responsibility for carrying out the president’s immigration directive — early next year, when they will control both chambers of Congress and believe they will have more leverage.”

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Budget; Policy Issues; Agricultural Economy; and, Biotech

Budget

Ed O’Keefe reported in today’s Washington Post that, “Plans to quickly approve a $1.1 trillion spending package to keep most of the federal government open through the end of the fiscal year fell apart late Monday, increasing the chance lawmakers will miss a Thursday deadline.

“Just in case, top appropriators said Monday that they were ready to pass a short-term extension of a few days in order to give the House and Senate more time to pass the final bill and end the least productive congressional session in modern history.

“Top leaders spent most of Monday reviewing the final details of the massive spending bill, but hopes of unveiling the legislation by midnight were dashed amid last-minute disagreements over the renewal of a terrorism insurance program.”

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Budget- Policy Issues; Ag Economy; Biotech; Biofuels; Tax Extenders, and Climate

Budget- Policy Issues

David Rogers reported yesterday at Politico that, “House-Senate negotiators neared agreement Sunday on the last pieces of a $1.1 trillion spending bill designed to avert any shutdown this week and put most government agencies on firm footing through next September.

“Building on a long weekend of talks, the goal was to file the giant measure by late Monday and then push for quick floor action before the current funding runs out Thursday night.”

The article noted that, “Child nutrition standards backed by first lady Michelle Obama were in play, though the House agreed to back away from some of its earlier demands.”

The article added that, “To appease the right, the Department of Homeland Security will be kept on a short leash so Republicans can revisit the issue of Obama’s executive order on immigration.”

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Ag Economy; Budget- Immigration; Policy Issues; and, Biofuels

Agricultural Economy- Trade Issues- Biotech, and Transportation News

Anthony Faiola reported on the front page of today’s Washington Post that, “On a velvety green patch of the French countryside, organic farmer Jean Cabaret gave a little shudder. A looming trade deal with the United States, he fears, may make his worst culinary nightmare come true: an invasion of Europe by American ‘Frankenfoods.’

“‘Hormone-boosted beef. Chlorine-washed chicken. Genetically altered vegetables. This is what they want for us,’ warned Cabaret, standing before his majestic herd of free-range cows. ‘In France, food is about pleasure, about taste. But in the United States, they put anything in their mouths. No, this must be stopped.’

“In Europe, this is a season of angsteven paranoia — over a historic bid to link the United States and the 28-nation European Union in the world’s largest free-trade deal.”

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Ag Economy- Trade; Budget; Tax Extenders; Policy Issues; and, CFTC

Agricultural Economy- Trade Issues

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included several observations with respect to the U.S. agricultural economy.

The Fifth District (Richmond) noted that, “Some growers planned fewer equipment purchases relative to a year ago;” while the Tenth District (Kansas City) indicated that, “Farm income expectations fell sharply since the last survey period as above- average corn and soybean yields were not expected to fully offset low crop prices. District contacts reported current levels of farm income that were significantly lower than last year despite some support from crop insurance and strong profits in the livestock sector. Although reduced income for crop producers had contributed to a rise in the need for short-term loans to the farm sector, agricultural bankers reported that sufficient funds were available for qualified borrowers. Following several years of very strong growth, District cropland values declined slightly in recent months and were holding just above year-ago levels.”

And the Ninth District (Minneapolis) pointed out that, “Farm incomes continued to be affected by lower crop prices; in contrast, livestock and dairy producers benefited from lower feed costs and high output prices.”

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Federal Reserve Beige Book: Observations on the Ag Economy- December 2014

Today the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included the following observations with respect to the U.S. agricultural economy:

* Fifth District- Richmond- “District agribusiness conditions were reported as stable. A grower in South Carolina completed peanut harvesting, and one in West Virginia finished wheat and cover crop harvesting. Dry weather in eastern Virginia delayed tree harvests. A North Carolina contact reported higher year-over-year orders for Christmas trees from big-box stores. Soybean harvesting was half-completed in South Carolina and in West Virginia, where yields were above average. Demand for wood pellets increased. Farmers reported lower crop prices and higher poultry, cattle, and swine prices than a year ago. Input prices rose since the previous report. Some growers planned fewer equipment purchases relative to a year ago.”

* Sixth District- Atlanta- “Large parts of Alabama and Georgia — and to a lesser extent, parts of the Florida panhandle, Louisiana, and Mississippi — experienced varying degrees of drought ranging from abnormally dry conditions to a few isolated areas of severe drought. Although heavy rain in early October delayed peanut harvesting in some parts of the District, harvests in Alabama, Florida, Georgia, and Mississippi were ahead of their 5-year average. Alabama and Georgia cotton crop harvests were ahead of their 5-year averages while recent rain in parts of Tennessee delayed some of their cotton harvesting activities.”

* Seventh District- Chicago- “The District harvest was behind a normal year’s pace even before early snows delayed progress in some parts of the District. Still, yields should set records for the District overall. Corn and soybean prices moved up during the reporting period, driven by the slow harvest, farmers storing much of the crop for later sale, and some shipping delays. Wheat prices rose as well. Milk and hog prices declined from the prior reporting period, but operations remained profitable. Cattle prices moved higher with signs of herd expansion. Weights for hogs and cattle at slaughter were very high, helping boost the supply of meat coming to market.”

* Eighth District – St. Louis- “As of early November, the harvest of District corn, rice, and sorghum crops was over 90 percent complete, and the harvest of District soybean and cotton crops was close to 80 percent complete. District farmers will see substantially larger field crop production in 2014 than in 2013. Specifically, the District corn and soybean crops will be 7.5 and 15.1 percent larger, respectively, in 2014 than in the previous year.”

* Ninth District- Minneapolis- “Overall agricultural conditions improved from the previous report. Early estimates of crop production indicated record soybean harvests and a very large corn crop in District states. However, farm incomes continued to be affected by lower crop prices; in contrast, livestock and dairy producers benefited from lower feed costs and high output prices. Relative to a year earlier, prices received by farmers in October were lower for corn, soybeans, wheat, and hay; prices were higher for cattle, hogs, poultry, and milk.”

* Tenth District- Kansas City- “Farm income expectations fell sharply since the last survey period as above- average corn and soybean yields were not expected to fully offset low crop prices. District contacts reported current levels of farm income that were significantly lower than last year despite some support from crop insurance and strong profits in the livestock sector. Although reduced income for crop producers had contributed to a rise in the need for short-term loans to the farm sector, agricultural bankers reported that sufficient funds were available for qualified borrowers. Following several years of very strong growth, District cropland values declined slightly in recent months and were holding just above year-ago levels. However, improved profitability in the livestock sector and the potential for herd rebuilding had supported demand for high-quality pasture and contributed to moderate gains in ranchland values.”

* Eleventh District- Dallas- “Recent rainfall improved soil moisture, although drought conditions remained severe in some northern parts of Texas. Harvesting wrapped up for most spring crops. Yields were generally strong and well above 10-year averages. Improved conditions for cotton allowed for more acres to be harvested this year than in the recent past, although the rains during harvest time have had an adverse effect on cotton quality. Dairy producers have had a tremendous year with good margins, but milk and dairy prices have fallen lately, reflecting shrinking exports and increased world production.”

* Twelfth District- San Francisco- “Agricultural conditions in the District were mixed during the reporting period. In general, the continuing drought in California depressed yields for crops such as raisins and almonds. However, tomato production and prices hit record highs. Washington saw very strong apple and pear harvests and an increase in agricultural exports. Idaho farmers reported an excellent potato harvest, but late-season rains damaged wheat and barley crops.”

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Ag Economy; Policy Issues; Biotech; Biofuels; Budget; and, Tax Extenders

Agricultural Economy

Jacob Bunge and Jesse Newman reported in today’s Wall Street Journal that, “Illinois farmer Darrel Gingerich harvested a huge corn crop this autumn thanks to near-flawless weather. Now, he is stashing it away.

“‘I didn’t sell any more than we had to in order to cover our costs for this year,’ the 53-year-old said.

“Mr. Gingerich is one of many Midwestern farmers who decided to hold on to their crops as they watched prices languish over the summer. Their collective strategy has since paid off, helping to fan a 15% rise in corn futures and a 10% jump in soybean futures since September that is also the result of a slow U.S. harvest and gains in other agricultural markets. Corn’s gain over the roughly two-month harvest period of October and November was its largest for that span in eight years and second largest in more than three decades, while soybeans’ climb was the biggest in five years.”

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Budget – Immigration; Tax Extenders; Ag Economy; Biotech; Biofuels; and, Regulations

Budget – Immigration

Ashley Parker reported in today’s New York Times that, “Congressional Republicans returning to Washington on Monday found themselves facing a treacherous 10 days as they try to balance their desire to fight President Obama’s executive action on immigration with the political imperative not to shut down the government.

“Congress must pass a broad spending bill before Dec. 11 to prevent a government shutdown. But Mr. Obama’s executive action last month, which could allow up to five million people now in the country illegally to live and work without threat of deportation, has inflamed Republicans and complicated their calculation over what has often been a routine spending fight.”

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