December 13, 2019

Farm Bill Developments

Reuters writer George Obulutsa reported on Monday that, “World Trade Organisation chief Pascal Lamy said on Monday he expected completion of the Doha Trade Round in 2008 after reaching deals by the end of 2007 on difficult issues including agriculture tariffs and subsidies…Negotiators have been working with two draft proposals published in July that were aimed at reaching a deal to rebalance world trade rules. Agricultural tariffs and subsidies, and industrial tariffs, have been the most controversial areas.”

I. Farm Bill
II. Food Aid
III. Food Costs / Biofuels
IV. Doha

I. Farm Bill

Brownfield writer Peter Shin reported yesterday that, “The Senate Agriculture Committee may mark-up its version of the farm bill as soon as Thursday. That’s according to Committee Chairman Tom Harkin of Iowa, who told reporters Tuesday the Senate Finance Committee is nearly finished with a tax package to increase farm bill funding by some $9 billion.

“But over half of that total appears to be spoken for already. Harkin said Finance Committee Chairman Max Baucus of Montana plans to earmark between $4 and $5 billion for a permanent ag disaster aid program. That, Harkin said, would leave ‘$3 to $4’ [billion dollars] ‘for other purposes.’”

Mr. Shin added that, “An additional $3 to $4 billion dollars above the farm bill budget baseline would appear to be insufficient to meet Harkin’s previously articulated farm bill agenda, which included increased funding for specialty crops, rural development, biofuels, and especially conservation. Indeed, Harkin on Tuesday renewed his pledge to dramatically expand the Conservation Security Program (CSP).

“‘My goal is to get 80 million more acres into CSP by the end of this farm bill,’ Harkin declared. ‘80 million acres – and we’re going to do it.’

“Harkin conceded that ‘the forces are at work to cut out conservation,’ but said ‘that’s just not going to happen on my watch.’ Harkin also repeated earlier promises to include an optional revenue-based countercyclical program in the next farm bill.”

The Brownfield item included a link containing an audio copy of Chairman Harkin’s complete press conference, to listen, just click here (MP3-about 13 minutes).

Meanwhile according to the Senate Finance Committee webpage, an “open Executive Session to consider favorably reporting an original bill entitled, ‘The Heartland, Habitat, Harvest, and Horticulture Act of 2007’” has been scheduled for Thursday, October 4, 2007, at 3:30 p.m., in 215 Dirksen Senate Office Building. The Finance Committee tax package can be downloaded by clicking here, “The Heartland, Habitat, Harvest, and Horticulture Act of 2007.”

DTN writer Chris Clayton flushed out several key details from the Finance Committee tax proposal in an article from yesterday (link requires subscription) where he stated that; “The blenders tax credit would be cut 5 cents, but cellulosic ethanol producers would receive new, potentially lucrative credits as part of the agricultural tax package the Senate Finance Committee will consider later this week.”

Mr. Clayton reported that, “Under the plan, the ethanol blenders credit would be cut from 51 cents a gallon to 46 cents a gallon under the proposal on the year after the U.S. reaches the 7.5 billion gallon renewable fuels standard, which many people believe ethanol producers will hit by the end of this year.”

The DTN article added that, “The Finance Committee was expected to find up to $9 billion to help pay for the farm bill, though the disaster program was taking the lion’s share of those funding offsets. Senate Finance Committee Ranking Member Charles Grassley, R-Iowa, said most of the money for the Finance Committee package comes from tariffs and ‘economic substance,’ which translates into preventing people from claiming tax credits when that is their sole purpose in the economic activity.

“Leading off the package, Baucus creates the Agriculture Disaster Relief Trust Fund to pay farmers and ranchers for losses they suffer in areas declared to be disasters by USDA. Under the program, farmers would be capped at receiving up to $100,000 annual permanent disaster assistance.”

In addition, Mr. Clayton indicated that, “The trust fund would be funded by money received from duties, or tariffs, collected from imports. The trust fund also would make payments under four new disaster assistance programs protecting crops, livestock, honey bees and farm-raised fish. There also would be a new pest and disease management and prevention program. Besides the funding, the program also would be allowed to borrow from the federal treasury and pay back with interest advance sums necessary to fund the programs.

“To be eligible for the crop disaster program, a farmer would have to be enrolled in crop insurance and cover at least 50 percent of a crop’s expected yield at 55 percent of the price. The Agriculture Secretary may waive this requirement under certain circumstances. The program also has a provision that encourages farmers to buy higher levels of crop insurance.

“Baucus’ package also includes a series of conservation tax credits as well as a long list of tax credits for a variety of biofuel programs.”

And Congressional Quarterly writer Catharine Richert reported yesterday that, “Baucus’ approach has drawn criticism from Agriculture Committee members. For example, a provision in the tax-credit bill would allow farmers with land enrolled in conservation programs to take a tax credit instead of receiving a government payment. Baucus argued that this would free up money traditionally spent on conservation payments to be used to boost other programs in the larger reauthorization bill. Until this week, Harkin had expressed skepticism that Baucus’ approach would work.

“At the same time, Republicans have warned against tax increases that they contend would be necessary to pay for the tax credits and disaster fund. Baucus would offset the funding by changing a provision in the tax code that allows capital gains taxes to be deferred on some property transfers and by limiting the losses that farmers can claim when they report their income to the IRS.

“Saxby Chambliss of Georgia, the ranking Republican on the Agriculture panel, said he hoped Baucus had abandoned some of the offsets he’d been eyeing.

“‘We can’t count the votes on the Agriculture Committee until we have a chance to look at the Finance bill,’ Chambliss said, indicating that some Republicans will object to tax increases.”

Other news coverage regarding Chairman Harkin’s comments to reporters yesterday included additional details on with respect to direct payments.

Along these lines, Reuters writer Charles Abbott reported yesterday that, “Senators will try to cut the $5.2 billion in subsidies guaranteed annually to U.S. grain, cotton and soybean growers when they debate the new farm bill, Agriculture Committee chairman Tom Harkin said on Tuesday.

“Harkin said his committee probably would try to draft the bill on Thursday, the same day the Finance Committee was to meet on an ag tax bill that would pay for some farm bill programs, chiefly disaster relief and land preservation.”

Mr. Abbott indicated that, “‘You can anticipate there is going to be a number of amendments on the Senate floor to revise the direct payments,’ Harkin, Iowa Democrat, told reporters, referring to the guaranteed subsidies.

“Created in 1996, the payments are based on a farm’s record of crop production. Critics say the payments are not justified now that corn, wheat and soybean prices are at record highs and money is needed for other Agriculture Department work.

“Harkin said Agriculture Committee members might agree to a small cut in direct payments as part of some across-the-board cuts. Based on discussions with committee members, he said, ‘we are beginning to rally around’ a farm-bill outline that includes more money for specialty crops, land stewardship, renewable energy and rural economic development.”

And DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “His [Chairman Harkin’s] proposal to cut the program of direct payments to farmers by $4.5 billion over five years has gone down to a $1 billion to $2 billion cut, said Harkin. But he added there might also be floor amendments to make a bigger cut in the direct payments, which have been criticized because farmers get them even in times of high commodity prices.”

Philip Brasher
, writing yesterday at The Des Moines Register’s Cash Crops Blog, noted that, “Iowa’s senators are split on the idea of cutting the $5.2 billion a year in fixed direct payments to farmers. (Iowa gets about $500 million a year, more than any other state.)
Democratic Sen. Tom Harkin is pushing ahead with plans to trim those payments in part to create a revenue-protection option for countercyclical payments, a top priority of U.S. corn growers.

“Republican Sen. Charles Grassley, however, wants direct payments left alone, but adds:
‘Would I compromise some? I wouldn’t say I wouldn’t compromise.’

“Grassley hasn’t indicated much enthusiasm for the revenue-protection idea either, which could hit Iowa’s crop insurance industry.”

Dow Jones writer Bill Tomson reported yesterday that, “The Senate Finance Committee will provide $9 billion through a ‘tax package’ while reductions in some traditional farm subsidies will produce more funds, Harkin said. Direct farm subsidies will likely be slashed by $1 to $2 billion, he said.

“The Senate committee’s farm bill, unlike the version that has already been approved by the U.S. House of Representatives, will contain a $4 billion to $5 billion disaster assistance fund, Harkin said.”

With respect to disaster assistance, a news release issued yesterday by the Environmental Working Group (EWG) stated that, “A bid to establish a dedicated trust fund to compensate farmers and ranchers who suffer weather damage to crops and livestock would direct most of the funds to a handful of states where agricultural disaster ‘emergencies’ are in fact routine, virtually annual occurrences, primarily because of low rainfall.

“These same states are among the biggest recipients of crop subsidies, conservation aid, and federally subsidized crop insurance claims, according to a new analysis of disaster aid payments released today from the Environmental Working Group.”

The release added that, “EWG examined the history of disaster aid payments to the 20 states currently represented on the Senate Finance Committee and found that over the past 21 years, those states have collected some $9 billion in ad hoc disaster payments, roughly one-third of the $26 billion total paid nationwide. However, just four states on the committee collected 55 percent of that $9 billion (North Dakota, Kansas, Iowa and Montana). Future disaster aid is expected to follow the same pattern.

“‘Our analysis raises the question of whether it is fair to designate such a large portion of revenues to a single purpose that mostly benefits just a few states on the committee,’ said EWG president Ken Cook. ‘Other states represented on Senate Finance have higher priority agriculture-related needs for such funds, including conservation, rural development, or specialty crop agriculture,’ Cook added.”

The full EWG disaster aid report, “A Disaster Waiting To Happen…Forever,” can be downloaded by clicking here.

The report included a copy of a map (click here to view), which visually captured the concentration of past disaster payments. Each dot on the map represents one recipient.

With respect to food safety and the Farm Bill, Associated Press writer Mary Clare Jalonick reported yesterday that, “Safety of the nation’s food supply has become a point of contention as Congress considers a new farm bill, as a massive recall of beef highlights doubts about the government’s attempt to change the rules governing federal meat inspections.

“Sen. Barbara Boxer, D-Calif., said she will block the Senate bill if it includes a House-passed provision that would allow some smaller meat processing plants to opt out of federal meat inspections in favor of state inspections. The bill hasn’t even emerged from committee yet.”

The AP article added that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, said Tuesday that he will not attempt to change the inspection standards in the bill he is expected to introduce this week. But the House provision has some supporters on the agriculture panel who are heavily involved with farm bill negotiations, including Democratic Sens. Kent Conrad of North Dakota and Max Baucus of Montana.

“Sen. Richard Durbin, D-Ill., also wants food safety to be a focus of the farm bill. He said last week that he will offer an amendment that would phase out all of the government’s food safety oversight within two years so Congress can find a better way to ensure the country’s food is safe.”

II. Food Aid

Celia W. Dugger reported in today’s New York Times that, “As escalating food and shipping costs have slashed the amount of food the United States can buy to feed the world’s hungry, aid agencies and charitable groups are deeply divided over how best to use what is available.

“Officials representing more than a dozen aid groups, including Catholic Relief Services and Food for the Hungry, testified Tuesday at a Congressional hearing that Congress should increase the food aid budget and use a larger share of it for long-term antipoverty programs.

“They told a House appropriations subcommittee that Congress should mandate that one million metric tons of food, instead of the current 750,000 metric tons, go to long-term programs, which could help people facing chronic hunger feed themselves and escape dependency on food aid. The government should be prohibited from raiding the money in this ‘safe box’ to cope with food emergencies, they said. ‘This is robbing Peter to pay Paul,’ said Sean Callahan, executive vice president of overseas operations for Catholic Relief Services.

“But officials from the United States Agency for International Development and the United Nations World Food Program warned that such a spending mandate would severely reduce the flexibility the United States government needs to quickly deliver sufficient food in emergencies.”

III. Food Costs / Biofuels

Julie Jargon and Lauren Etter reported in today’s Wall Street Journal that, “High commodity prices have soured the outlook for Dean Foods Co.’s earnings — again.

“Yesterday, the Dallas dairy giant lowered its profit forecast for the second time this year as consumers began turning to cheaper private-label milk rather than accept price increases on Dean’s branded milk.

“Dean isn’t the only food company struggling to pass along high raw-materials costs to consumers. Makers of everything from chewing gum to baked goods are feeling some resistance from shoppers as the companies angle to keep high prices for grain and other ingredients, as well as steeper energy and packaging costs, from eating up their profit margins.”

The Journal article added that, “Several factors are driving up ingredient costs. A growing middle class in Latin America and Asia can afford more meat and milk, driving up demand for grain to feed cattle and hogs. Demand for grain-derived ethanol, driven by government incentives, has helped push up corn and soybean prices. And a drought in Australia last year reduced the supply of milk available to Asia.”

On the issue of biofuels, Secretary of Agriculture Chuck Conner indicated yesterday in a speech to the Renewable Fuels Association that, “One thing their statistics reveal pretty clearly is the pace of change that is transforming this industry. In all of 2006, 1 billion gallons of ethanol production capacity and 15 new plants came on-line in the U.S. in all of 2006. But just since March of this year the industry has more than matched that – 1.2 billion gallons of production capacity and, again, another 15 new plants.

“So you haven’t just picked up the pace from last year; you’ve more than doubled it. And that’s a pretty good growth curve in any business sector. A little more than two years ago in the Energy Policy Act, Congress and the President set a renewable fuels standard for the nation. It called for 7.5 billion gallons of renewable fuels to be part of our overall fuel production by the year 2012. Today, again, thanks to exceeded expectations, faster than expected production in both production capacity and demand, your industry is on track to pass that goal, we believe, this year, five years ahead of schedule.”

Sec. Conner added that, “There is also a running discussion in the media, and of course a lot of other public forums, about whether our expanding production of ethanol is to blame for higher-than-normal food price inflation, which we have seen this year. Ladies and gentlemen, clearly ethanol demand is having some impact. I don’t think that’s something we can deny at this point. But the data that has been presented to me shows that it has been assigned far more than its fair share of blame for what is happening in our grocery store aisles.”

IV. Doha

Reuters writer George Obulutsa reported on Monday that, “World Trade Organisation chief Pascal Lamy said on Monday he expected completion of the Doha Trade Round in 2008 after reaching deals by the end of 2007 on difficult issues including agriculture tariffs and subsidies.

“Negotiators have been working with two draft proposals published in July that were aimed at reaching a deal to rebalance world trade rules. Agricultural tariffs and subsidies, and industrial tariffs, have been the most controversial areas.

“‘The game plan as WTO members see it is let’s try and get convergence on these three main issues before the end of the year, and then if we will get there it will open the way for a conclusion of the round sometime next year,’ Lamy said on the sidelines of a regional trade forum in Tanzania.”

Keith Good

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