FarmPolicy

September 20, 2014

Senate Farm Bill Plan Emerges

Categories: Doha / Trade /EU /Farm Bill

Brownfield writer Peter Shinn reported yesterday that, “Senate Agriculture Committee Chairman Tom Harkin of Iowa said Wednesday he had reached a deal with Budget Committee Chairman Kent Conrad of North Dakota and ranking Agriculture Committee Republican Saxby Chambliss of Georgia on the Senate version of the farm bill. That means the Senate Ag Committee will mark-up its version of the farm bill next week.

“According to Harkin, highlights of the measure include an extra $4.2 billion for nutrition, an additional $1.3 billion for cellulosic ethanol research and development, and a $4 billion increase in conservation generally plus $1.2 billion for the Conservation Stewardship Program, currently known as the Conservation Security Program (CSP). That additional funding, Harkin said, would allow him to meet his previously stated goal of getting 80 million acres enrolled in CSP by the end of the next farm bill.”

The Brownfield article also included an audio link to Chairman Harkin’s complete press conference from yesterday, to listen, just click here (MP3 – about 20 minutes).

Reuters writer Charles Abbott reported yesterday that, “Grain, cotton and soybean growers could protect their income from crop failures as well as poor prices — a signal change in the federal safety net — under a plan unveiled by Senate farm leaders on Wednesday.”

Mr. Abbott went on to explain that, “While the Senate framework would continue traditional crop supports, it would give farmers the option, beginning in 2010, of enrolling in an ‘average crop revenue’ program. It would release payments when statewide income from a crop was below a target set by law, responding to crop and yield woes.

“Traditional supports are based on prices alone, an approach critics say does not help when growers lose a crop and have nothing to market.

“Growers who opt for revenue protection would be allowed to plant fruits and vegetables on land eligible for crop supports. Those crops now are banned.

“The revenue protection plan would give farmers a payment of $15 an acre annually, lower than the ‘direct’ payments now offered on corn, cotton and rice.”

In addition, the Reuters article pointed out that, “The House of Representatives included a revenue protection option in its farm bill, passed on July 27. It uses a nationwide trigger on crop revenue and would not let growers opt in and out annually as the Senate plan does.

“Just as the 2002 farm law was the first to boost biofuels, the new feature this time will be ‘a big section’ for fruit, vegetable, nut and nursery crop growers, Harkin said.

“Along with putting money into improved food stamp benefits, Harkin said, the framework would spend $1 billion over five years to make fresh fruits and vegetables available as a school snack to 4.5 million poor children each year.”

A Congressional Quarterly item from yesterday indicated that, “One potentially contentious provision is a proposal to change ‘counter-cyclical’ farm payments, proposed by Majority Whip Richard J. Durbin, D-Ill., and Democrat Sherrod Brown of Ohio.

“Counter-cyclical payments kick in when the price of a crop falls below a government-set national target. If there are significant regional differences in price, some farmers who need the payments do not get them.

“Under the Durbin-Brown plan, farmers could either remain in the current system or opt for counter-cyclical payments linked to an average state price for a given crop. Supporters say that would help pockets of farmers whose harvests are ruined by drought, fire or flood.

“The Congressional Budget Office says the Durbin-Brown plan for counter-cyclical payments would reduce the overall cost of those subsidies by $3.5 billion. Harkin said that money will go to other portions of the bill, including conservation programs that are popular in his home state.”

DTN writer Chris Clayton provided additional analysis of this issue in an article from yesterday (link requires subscription), where he noted that, “The proposal creates the ‘Average Crop Revenue Program’ for farmers. Under this package, farmers would choose to stick with the current safety net of direct payments, loan-deficiency payments and counter-cyclical payments or take the ACRP. Harkin said a farmer can keep the current direct payments and ‘roll the dice’ with the current farm programs or get less annual payment and better protection when commodity prices fall.”

Mr. Clayton added that, “If a farmer takes the ACRP, direct payments would be converted into a $15-per-acre fixed payment based on the lesser of the base acres for all covered commodities on the farm or the average of acres planted to the covered commodities over the last six years no matter where they are in the country and what they have grown. Those farmers would then have a revenue protection plan that would engage when state revenue falls below a certain level. The ACRP is based on a proposal crafted by Sen. Dick Durbin, D-Ill., and Sen. Sherrod Brown, D-Ohio.

“Another difference for farmers who take the ACRP is that they would not be restricted on what they grow on their acres. Those farmers would be allowed to receive the lower fixed payments and grow both fruits and vegetables, which are now prohibited under the direct-payment program.

“Such a change ensures that there would be no overall cut in direct payments, but policy wonks project a high percentage of commodity producers would take the ACRP. Harkin said repeated budget projections by the Congressional Budget Office show the Average Crop Revenue Program would save as much as $3.5 billion over five years.”

Meanwhile, Carolyn Lochhead, writing in today’s San Francisco Chronicle, added that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, said he has broad support on his committee, a bastion of traditional farm interests, and plans a vote as early as next Wednesday. The deal fended off powerful opposition from subsidy supporters in both parties from the South and Midwest who threatened to thwart any compromise that reduced their subsidies.

“Harkin conceded that the agreement was not a big break with the past.

“‘Farm programs don’t take sharp turns, but we do try to bend the rails a little bit,’ Harkin said.”

At the end of the Chronicle article, Ms. Lochhead explained that, “But there may be a big sticking point with California produce growers: Grain and cotton farmers who opt for the new program would be allowed to plant fruits and vegetables on their land.

“Currently, farmers in the Midwest or South who get federal money are not allowed to switch to specialty crops because California farmers contend that would give those farmers an unfair advantage.

“Fruits, nuts and vegetables are not eligible for federal subsidies.

“Tom Nassif, head of the Western Growers Association, said the $3 billion that budget estimators think the new program would save the government on crop subsidies is about what California produce growers would suffer in losses if subsidized farmers start competing with them by growing fruits and vegetables.

“The federal aid those farmers receive ‘makes it much easier for them to grow more crops and have more production without increasing demand, and that lowers market prices,’ Nassif said. ‘A subsidy is a subsidy. We are very much opposed to it and have been from the beginning.’

“California’s produce industry has had an on-off alliance with environmental, religious and other groups opposing the farm bill. They broke off to support the House measure after they secured $1.6 billion for research and marketing, angering reform groups who continued to oppose the subsidies for commodity crops.

“California also grows heavily subsidized cotton and rice. Most of these growers want to continue those programs.”

With respect to payment limits, DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “The Senate Agriculture Committee farm-bill proposal released Wednesday would cap adjusted gross income at $750,000 for ‘non-farmers’ collecting payments, but senators are still negotiating an appropriate cap for farmers, a key senator said.

“Sen. Kent Conrad, D-N.D., said the committee bill would contain a payment-limitations provision that would lower the income cap for non-farmers who receive payments to $750,000; the income cap for farmers would be lowered from $2.5 million, though the amount is still under negotiation.”

On Tuesday of this week, Philadelphia Inquirer reporter Steve Goldstein provided a look at a Farm Bill reform proposal stemming from Sens. Richard Lugar (R-Indiana) and Frank Lautenberg (D- New Jersey).

In part, the article stated that, “Abbott Lee’s family has been growing cranberries in a patch of the New Jersey Pinelands for nearly 140 years. To him, it seems almost that long since specialty farmers received any substantial support from Washington.

“A small group of lawmakers, led by Sens. Richard G. Lugar (R., Ind.) and Frank Lautenberg (D., N.J.), is trying to change that view and upend the farm wagon – in this case, the renewal of a policy born in the Great Depression to buoy struggling farmers that has evolved into a cash cow for growers of such commodities as corn, wheat, rice and cotton.”

Mr. Goldstein noted that, “Under this alternative bill, the direct payment system would be replaced by an expansion of existing county-based crop insurance programs at no cost to the farmer. Unlike current programs, this safety net protects against unforeseen risks but does not provide automatic payments to farmers when they don’t need them.”

The article indicated that, “As outlined by Lautenberg’s staff, the alternative legislation would extend a safety net to all farmers, regardless of what they grow or where they live. Thus, small farmers in New Jersey and Pennsylvania who grow fruit and vegetable specialty crops would be major beneficiaries.

“The Farm Ranch Equity Stewardship and Health (FRESH) Act would provide new transportation grants, specialty-crop block grants, dedicated research funding, and pest detection and response programs to small growers. Savings from an overhaul of the subsidy system would be channeled into new investments to assist farmers with conservation practices, develop renewable energy, expand access to healthier foods for children, and improve food-stamp and other hunger-relief programs.

“Lautenberg called the current farm bill ‘an antiquated system of giant payments to a handful of farms that ignores the needs of most American farmers.’”

And, Financial Times writer Alan Beattie (“US farm bill unlikely to aid good nutrition”) reported yesterday that, “As the rewriting of the ‘farm bill’ – the five-year agricultural subsidy programme – nears its endgame in the US Senate, proponents of reform have tried to highlight the effect of the subsidies on American health. Their efforts seem likely to have little impact.”

Mr. Beattie noted that, “Lorelei DiSogra, vice-president for nutrition and health at United Fresh, which represents fruit and vegetable growers, says rising concern about childhood obesity has got them into many lawmakers’ offices on Capitol Hill to lobby for federal support for fruit and vegetable purchases in schools. But she adds: ‘It is very hard to shift nutrition programmes even towards following federal nutritional guidelines. It would be a two-year campaign, not a two-week one.’”

The FT article concluded by stating that, “‘I would like to see a significant amount of help given to farmers who decide to switch from chemical to organic farming,’ [Brian Gardiner, a retired farmer from San Jose] says. Currently, it takes three years for land to make the transition from conventional to organic, and he says it takes another couple for the nutrients in the soil to adjust properly. ‘In the farm bill there is a small bit of money set aside for research into organics,’ he says. ‘But we need more than that.’

“But those in charge of farm policy largely disagree, and their view is almost certain to prevail. Collin Peterson, chairman of the House of Representatives agricultural committee, says the farm sector that raises organic produce and grass-fed beef for local consumers needs little federal help. ‘It is growing, and it has nothing to do with the government, and that is good,’ he told the FT. ‘For whatever reason, people are willing to pay two or three times as much for something that says ‘organic’ or ‘local’. Far be it from me to understand what that’s about, but that’s reality. And if people are dumb enough to pay that much then hallelujah.’”

B-99 Trade Dispute

Reuters news reported earlier this week that, “European biodiesel makers said on Tuesday they may take a legal action against what they see as unfair subsidies for U.S. biofuel which threaten their business.

“Biodiesel makers in many European Union countries have come under pressure from growing sales of cheap U.S. biodiesel made with the help of subsidies, the industry association European Biodiesel Board (EBB) said in a statement [available here].

“Price competition has eroded margins for EU producers, forcing some out of business and would lead to stagnation or even decline in EU biodiesel output this year, the EBB said.”

A recent Associated Press article added that, “European biodiesel producers threatened Tuesday to file European Union and World Trade Organization trade complaints against U.S. subsidies that they say will allow U.S. biodiesel imports to climb nearly tenfold this year.

“Biodiesel made from vegetable oil is mixed with petroleum-derived diesel to create a less polluting fuel. Some European countries charge lower tax on biodiesel to encourage people to reduce carbon dioxide emissions from their cars.

“But the European Biodiesel Board – which represents 80% of E.U. producers – said ‘massive exports of unfair subsidized U.S. biodiesel’ may break trade rules by undercutting European businesses and discouraging new output.

“It called on U.S. Congress to immediately end a program that gives U.S. producers around EUR200 a metric ton for B99 biodiesel that sometimes is sold below the cost price of European raw materials for the fuel.”

Doha

Dow Jones News writer Tom Murphy reported yesterday that, “In a telephone conversation, Brazilian President Luiz Inacio Lula da Silva urged U.S. President George W. Bush to lower U.S. agricultural subsidies as part of the Doha Round of trade talks, Brazil’s Estado news agency said Wednesday.

“The agency quoted Brazilian government sources, who said Lula and Bush discussed the stalled Doha Round of talks in a telephone conversation Tuesday night. Lula spoke with Bush during the Brazilian president’s week-long visit to Africa.

“According to the Estado agency, Lula told Bush that emerging market countries like Brazil are looking for deep cuts in agricultural subsidies by the U.S. and the European Union in exchange for lower worldwide tariffs on industrial products. The agency said the two presidents talked for 30 minutes.”

Meanwhile, the Associated Press reported recently that, “Leaders of Brazil, India and South Africa said the struggling global trade talks were at a critical stage and should not be held hostage by ‘disproportionate’ demands of richer nations.

“In a declaration signed at the end of a summit, the three regional powerhouses, who form a powerful developing country bloc in world trade negotiations, reaffirmed their commitment to the Doha round of WTO talks.”

The article added that, “Silva, who was the most outspoken of the leaders on the issue, said the E.U. and the U.S. were demanding more from the developing countries in terms of opening up their agricultural, industrial and service markets through tariff reductions in comparison to the concessions they were prepared to make.

“‘The rich countries can’t strangle the possibility of industrial development of the poor countries,’ he said, through a translator.”

Later, the article noted that, “Silva also addressed cracks that are beginning to appear in the unity of the three countries, with reports that India is beginning to weaken under pressure from the U.S. and the EU.

“‘India and Brazil have sufficient maturity to know how to address their divergence,’ he said.”

Reuters writer Paul Simao reported today that, “In Washington, Brazil’s ambassador to the United States, Antonio Patriota, told the U.S.-Brazil Business Council: ‘I think on the Doha round, we are extremely close to an agreement.’”

Concluding, the Reuters article stated that, “The Pretoria summit’s closing statement called for the removal of restrictions in international agricultural trade.

“‘The leaders underlined that agriculture remains the key to the conclusion of the round,’ it said.

“Lula suggested rich countries had been dominating trade talks and keeping developing nations on the sidelines.

“‘We want to eat the main course, the duck and have dessert and coffee afterwards if possible,’ he said.”

And Alan Beattie reported yesterday at the Financial Times Online that, “The European Union and the US, which have spent a good deal of time sniping at each other over the past few years, have reduced the crossfire, at least in public.

“Although Peter Mandelson, the EU trade commissioner, continues to argue that the US needs to do more to reduce its farm subsidies to make a deal happen, he has also broadened his field of fire to include the emerging market countries that have been dragging their feet on cutting industrial goods tariffs.

“The US, for its part, in the person of trade representative Susan Schwab, said recently that the EU had done its part in reducing its farm tariffs sufficiently to get a deal, and that the holdouts in the agricultural talks were some other rich countries that wanted to continue to featherbed their farmers.

“Whether the US could actually deliver on its promises is another matter.

“Congress has blithely gone ahead and written a ‘farm bill’, which sets agricultural subsidies in the US for the next five years, without paying much attention at all to the fact that it might have to be compatible with a Doha deal that could cut US farm subsidies radically.

“Collin Peterson, the chairman of the House agricultural committee who steered through a more generous version of the bill even than the lavish 2002 version, told the Financial Times last month: ‘My sense of this Doha thing is it isn’t going to happen, despite all the happy talk.’”

Keith Good

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