DTN writer Chris Clayton reported yesterday (link requires subscription) that, “Traditional commodity programs would remain comparable to the current farm bill under the proposal that will be considered by the Senate Agriculture Committee Wednesday. [The proposal can be viewed at the Committee’s webpage].
“The chairman’s mark released Tuesday showed minor tweaks in commodity target prices [view old versus new here] and loan rates [view old versus new here], but also adjustments in how farm payments are calculated.
“Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, had planned to unveil himself his chairman’s mark, called the ‘Food and Energy Security Act of 2007.’ But Harkin had to cancel a scheduled news conference on the proposal Tuesday because he was still tied up with floor debate on the funding bill for Labor, Health and Human Services programs. Harkin expected to wrap up that bill late Tuesday so mark-up on the farm bill can begin Wednesday morning.” [The Committee’s webpage indicates that, the 2007 Farm Bill markup is currently scheduled for Wednesday, October 24, at 10:00 a.m. EDT in 328A Russell Senate Office Building- coverage available here].
With respect to the proposed Average Crop Revenue Program (ACR), the DTN article indicated that, “[T]he ACR takes away the loan deficiency payment and makes the marketing loan a recourse loan, meaning farmers would have to pay back any difference between the loan amount and what they received for their crop. That is one of the sticking points causing the American Farm Bureau Federation to complain about the program.”
As a reminder, in the Economic Research Service (ERS) 2002 Farm Bill Glossary, the Recourse loan program is defined as, “A provision allowing farmers or processors participating in Government commodity programs to pledge a quantity of a commodity as collateral and obtain a loan from the Commodity Credit Corporation (CCC), subject to the condition that the borrower must repay the loan with interest within a specified period. This provision is unlike the condition with nonrecourse loans whereby producers may settle their loans by giving the collateral to the CCC.”
More specifically, the “Nonrecourse loan program- Provides commodity-secured loans to producers for a specified period of time (typically 9 months), after which producers may either repay the loan and accrued interest or transfer ownership of the commodity pledged as collateral to the Commodity Credit Corporation (CCC) as full settlement of the loan, without penalty…[P]articipants in commodity loan programs agree to store and maintain a certain quantity of a commodity as loan collateral, for which they receive loan funds from the CCC based on the announced commodity-specific, per-unit loan rate. The loans are called nonrecourse because, at the producer’s option, the CCC has no recourse but to accept the commodity as full settlement of the loan. For those commodities eligible for marketing loan benefits, producers may repay the loan at the world price (rice and upland cotton) or posted county price (wheat, feed grains, and oilseeds). Some commodity loans are recourse loans, meaning producers must pay back the loans in cash.”
In addition to the Farm Bureau, the American Soybean Association (ASA) has also expressed concern about the recourse, non-recourse loan issue in the ACR proposal. An ASA press release from yesterday stated in part that, “A second concern is with the introduction of the recourse loan in farm policy under the proposed Average Crop Revenue (ACR) program.
“‘ASA does not believe whatever benefit the recourse loan may provide as a financing tool outweighs the very negative precedent its introduction would represent as an alternative to the marketing loan program,’ [ASA President John Hoffman] said. ‘ASA recommends that the recourse loan provision in the ACR program option be eliminated.’”
Mr. Clayton also explained in his DTN article from yesterday that, “Under the Senate proposal, producers who stick with the current commodity programs would be eligible for unlimited marketing loan gains. That piece was also part of the House farm bill passed in July;” however, “The Senate proposal also would change loan deficiency payments so the Agriculture Secretary could ‘determine the amount of the LDP to the producer using the payment rate in effect as soon as practical on the date after which the producer loses beneficial interest.’”
A graphic illustration of the importance of the LDP payment issue and why the current law might be changed is available here; while a more detailed explanation of this issue with additional analysis is available here.
Recall that the administration (pages 12-13) has also proposed some changes with respect to LDP payments and the posted county price.
(For more technical explanation and background on “marketing loan gains” and LDP payments, see this ERS webpage.)
Congressional Quarterly writer Catharine Richert also highlighted aspects of the Average Crop Revenue Program (ACR) in an article she wrote yesterday.
Specifically, Ms. Richert indicated that, “At issue is a proposed subsidy that would kick in when crop prices fall below state revenue targets. Opposition by the produce industry and the American Farm Bureau Federation has threatened to derail a potentially easy markup.
“But Harkin said the so-called Average Crop Revenue plan would give farmers an option that would better cover their risk in a given region.”
And, the CQ article added that, “Produce growers, for example, said the initiative would hurt their industry. Currently, no fruits or vegetables can be grown by farmers who are collecting government payments for commodities such as corn and wheat. That limits competition among produce growers and keeps prices relatively high.
“Harkin wanted to lift this ban for acres enrolled in his new program, but a last-minute lobbying blitz by fruit and vegetable growers changed his mind. To avoid losing support from committee members such as Democrat Debbie Stabenow of Michigan, Harkin agreed to leave the planting prohibition in place on Average Crop Revenue plan acres.”
Mr. Clayton, in his DTN article, also reported that, “Under the Senate bill, farmers collecting direct payments under commodity crops would still be banned from planting fruits and vegetables on that ground. Harkin had said last week that there would be changes for planting flexibility for farmers that choose the ‘Average Crop Revenue’ program option, but that language is not in the bill. The draft keeps the same House-approved 10,000-acre pilot project to allow tomatoes to be raised on soybean acres in Indiana.”
And Michael Doyle noted in today’s Sacramento Bee (“Farm bill boosts specialty crops”) that, “Specialty crop growers also dislike some Senate proposals. Some senators, for instance, want farmers who receive traditional subsidies for crops like rice and cotton to be able to plant fruits and vegetables on certain land. Specialty crop farmers consider this unfair competition and are resisting.”
With respect to alternative Farm Bill proposals, Philip Brasher reported yesterday at the Des Moines Register’s Cash Crops Blog, that, “Sen. Richard Lugar, R-Ind., is back with his plan to phase out traditional crop subsidies. Several northeastern senators, most of them Democrats, are co-sponsors.
“It’s known as the FRESH Act, as in Farm, Ranch, Equity, Stewardship and Health Act.
“The $16 billion in savings from cutting grain and cotton would be put into food stamps, programs for fruit and vegetable growers, land-conservation payments and bioenergy.”
More specifically, a press release issued yesterday by Sen. Lugar stated that, “U.S. Sens. Dick Lugar (R-IN) and Frank Lautenberg (D-NJ) today introduced the Farm, Ranch, Equity, Stewardship and Health (FRESH) Act. The comprehensive farm bill reform would end depression era federal crops subsidies that benefit only a few farmers, of a few crops, in a few states. The new safety net would be an insurance program available to all American farmers.”
The release added that, “The bill would expand popular revenue insurance tools, and for the first time, with no out of pocket cost for farmers. Unlike current programs, this safety net would protect against unforeseen risks, but would not provide automatic payments to farmers when unneeded, and would not continue to distort domestic and foreign agricultural markets.
“The FRESH Act would create reforms to commodity programs and crop insurance that would serve a greater number of farmers more fairly and be responsive to regional and national crises that endanger the continuing success of America’s farmers, the sponsors argue. Over five years, these reforms would create more than $16 billion in additional savings that would be available to invest in other farm and food priorities.”
For more information on the FRESH Act, as well as audio and video of the yesterday’s press conference with Sens. Lugar and Lautenberg, just click here.
Jim Snyder, writing this morning at The Hill Online, indicated that, “To a group of doctors, the massive farm bill pushed by powerful agribusinesses is the worst kind of congressional pork.”
The article added that, “The food chain contributes to a dangerous obesity epidemic among American children, as well as to diet-related diseases like heart disease, diabetes and cancer, says Neal Barnard, president of the Physicians Committee for Responsible Medicine (PCRM).”
“The PCRM is lobbying this week in support of the FRESH Act, a bill introduced on Tuesday by Sens. Richard Lugar (R-Ind.) and Frank Lautenberg (D-N.J.) that would direct more subsidies now targeted at grain, sugar and tobacco farmers to fruit and vegetable growers. It would compete with a measure Sen. Tom Harkin (D-Iowa), the chairman of the Senate Agriculture Committee, unveiled on Tuesday that provides more traditional subsidy support.
“The participation of doctors in the debate is another example of how this year’s farm bill is attracting a variety of interests that are not traditional players in agriculture issues. Others include Oxfam America, the charitable group based in Great Britain, and U.S. unions, which have pushed for more funding for the conservation of hunting and fishing lands,” The Hill article said.
Meanwhile, Associated Press writer Mary Clare Jalonick reported yesterday that, “Farm-state senators have crafted a tentative compromise on a $288 billion farm bill, but they already face bipartisan criticism that the bill doesn’t do enough to cut government subsidies.
“Critics say the legislation is too heavy on subsidies for wealthy farmers and should spend more money on conservation programs designed to protect the land and on food programs for the poor.”
Along these lines, The San Francisco Chronicle editorial board stated yesterday that, “This week the Senate is due to put its stamp on the $286 billion package following a dismally weak House package this summer.
“California, the nation’s biggest farm state, deserves better. Famed for innovation and risk-taking, this region may be handed a retread bill that doles out subsidies to big rice and cotton operations. Designed to prop up sagging agriculture 70 years ago, the system has become a check-printing exercise for major growers.
“Ignored are the real entrepreneurs – the small crop experimenters and organic operations – who typify a nimble side of the sector that is changing the look of supermarket aisles and dining tables. These growers, who are pressing for research and marketing help but not subsidies, are getting left out.”
The editorial stated that, “Though the House fell in line with farm state leaders – with an assist from Speaker Nancy Pelosi – the battle isn’t over in the Senate. An alternative bill to slash subsidies could challenge another five years of poor farm policies.
“California’s two senators, Barbara Boxer and Dianne Feinstein, have yet to be heard on the subject. They would be doing this state – and the nation – a favor by breaking with convention and voting to overhaul farm policy to reduce these wasteful subsidies.”
And The Des Moines Register editorial board stated yesterday that, “International experts on agriculture, science and nutrition worry that bioenergy crops will make it even harder to feed the world’s hungry and may wreak environmental havoc by encouraging farmers to fell forests or plow up prairie.
“Other experts counter that such fears are overblown. They contend that increasing yields will allow both feeding the world and helping fuel it, too. Biofuels crops such as perennial grasses could actually lessen erosion, they say.
“There’s truth in both arguments. What’s clear is that development of the bioenergy industry must be done right, with attention to environmental stewardship and impacts on rural communities and the poor.
“The United States, with its prowess in agriculture and technology, should show the world how it can be done. Unfortunately, the House version of the farm bill and outlines of the Senate bill released so far would not do enough to address this revolutionary change in agriculture.
“A prime example: Lawmakers would continue to funnel billions of dollars into crop subsidies to the biggest, wealthiest operations without reasonable payment limits. The House version contains the laughable ‘limit’ of restricting payments to those with $1 million or more in adjusted gross income. Negotiators for the Senate Ag Committee were still working on payment-limits language as of late Monday afternoon. If the committee’s limits aren’t tough enough, Iowa Sen. Charles Grassley should press on the Senate floor for adoption of much tighter limits, as he has pledged to do.”
The Register concluded by noting that, “After weeks of delay, action could be rapid-fire now. Amid the flurry of votes, let’s hope lawmakers address the fundamental changes transforming agriculture rather than perpetuating a status quo that serves the past, not the future.”
New York Times writer David M. Herszenhorn provided an interesting recap to the Senate Farm Bill debate in today’s paper.
The Times article stated that, “Few Americans know as much about the farm bill as Senator Tom Harkin, Democrat of Iowa, the chairman of the Senate Agriculture Committee. So it was not trivial, with the bill up for renewal this year, when Mr. Harkin spoke forcefully about the need to overhaul federal farm subsidies.
“‘We have to consider new ideas,’ he said in a conference call with reporters in June. ‘We should not cling to a system that channels ever larger commodity payments to a relatively few, with two-thirds of American farmers getting none at all.’
“Even at a time of sky-high grain prices and soaring demand for ethanol, those were bold remarks for a lawmaker from a state at the heart of corn country and that ranks second only to Texas in the farm subsidies collected over 10 years.
“But as the Agriculture Committee prepares to put the final touches on the farm bill on Wednesday, Mr. Harkin has come up mostly empty-handed. A near-final draft bill, unveiled on Tuesday, leaves the subsidy programs largely unchanged.”
Later, the article indicated that, “On the Senate side, Mr. Harkin’s push for big change was blocked not only by Senator Saxby Chambliss of Georgia, the ranking Republican on the committee, but also by two powerful Democrats from major wheat-growing and cattle-ranching states, Senator Kent Conrad of North Dakota and Senator Max Baucus of Montana.
“Mr. Baucus also used his authority as chairman of the Senate Finance Committee to leverage the creation of a $5 billion disaster fund for farmers and ranchers who suffer losses from natural disasters, which critics say effectively creates a large increase in subsidies at a time when market conditions call for cuts.
“The fund certainly will benefit the Dakotas and Montana, which have suffered severe droughts. But other than the $5 billion for disaster relief, the Finance Committee added just $3 billion for other programs in the farm bill.”
The article added that, “Opponents of the existing farm policies are now pinning their hopes in two places — an alternative bill by Senator Frank Lautenberg, Democrat of New Jersey, and Senator Richard G. Lugar, Republican of Indiana, which has little chance of being approved, and the possibility that President Bush makes good on his threat to veto the farm bill because of its cost and the absence of substantive changes.”
Concluding, the Times reported that, “Mr. Lugar, who owns a farm in Indiana, said he expected the Agriculture Committee would approve a bill on Wednesday without many changes.
“‘Having counted votes around the table for the last 31 years, I suspect that will be the result,’ he said. ‘But the floor is a different story. That involves all senators, all states, all Americans, not specific states and specific crops. And that representation, I hope, will come to a different result.’”
As the Senate Ag. Comm. sets to work on the Farm Bill draft today, Frances Williams reported yesterday at the Financial Times Online that, “High world food prices helped cut subsidy payments to farmers in industrialised countries last year, but government support still accounted for over a quarter of farm incomes, the Organisation for Economic Co-operation and Development said yesterday. [The OECD report is available here].
“In its latest report on agricultural policies in the 30 OECD member nations, the Paris-based organisation puts the value of farm subsidies in 2006 at nearly $268bn (€189bn, £132bn), equivalent to 27 per cent of total farm receipts. This compares with $281bn (29 per cent) in 2005.
“Stefan Tangermann, the OECD’s director of trade and agriculture, said producer prices in the OECD area were 25 per cent above world levels due to various kinds of subsidies, equivalent to a 25 per cent levy on all agricultural products.”
The FT article added that, “Although governments have reduced overall farm subsidies over the past two decades, from 39 per cent of receipts in the mid-1980s, the report says most are still the highly trade-distorting kind that reward agricultural output.”
And Jenny Wiggins and Javier Blas reported yesterday at the FT Online that, “When the United Nations held its annual World Food Day last week to publicise the plight of the 854m malnourished people around the world, its warning that there ‘are still too many hungry people’ was a little more anxious than usual.
“Finding food to feed the hungry is becoming an increasingly difficult task as growing demand for staples such as wheat, corn and rice brings higher prices. That is leading all nations – rich and poor – to compete for food supplies.
“Food security is not a new concern for countries that have battled political instability, droughts or wars. But for the first time since the early 1970s, when there were global food shortages, it is starting to concern more stable nations as well. ‘The whole global picture is flagging up signals that we’re moving out of a period of abundant food supply into a period in which food is going to be in much shorter supply,’ says Henry Fell, chairman of Britain’s Commercial Farmers Group.”
The FT article noted that, “‘The world is gradually losing the buffer that it used to have to protect against big swings [in the market],’ says Abdolreza Abbassian, secretary of the grains trading group at the UN’s Food and Agriculture Organisation. ‘There is a sense of panic.’
“Some of the price rises are the result of temporary problems, such as drought in Australia, and diseases, such as blue-ear in Chinese pigs. But there is a more permanent increase in demand from Asia, as richer populations in China and India demand more protein, and from the biofuel industry, which is on course to consume about 30 per cent of the US corn crop in 2010 – developments that will underpin prices for the medium term.
“The FAO estimates that those structural new trends will help to push the cost of agricultural commodities in the next decade between 20 and 50 per cent above their last 10-year average.”