FarmPolicy

August 21, 2019

Chairman Peterson and Sec. Conner on Farm Bill

Categories: Farm Bill

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “House Agriculture Committee Chairman Collin Peterson has taken charge of the initial farm bill conference negotiations with the Bush administration, meeting five times since Christmas with Acting Agriculture Secretary Chuck Conner, the Minnesota Democrat said in an interview.

“‘We needed to get at this sooner rather than later,’ Peterson said. He added that Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, ‘seemed to be comfortable with me working on this.’”

Mr. Hagstrom added that, “Peterson said the ‘tenor’ of the negotiations has been very good. ‘Conner has been at every meeting,’ Peterson said. ‘I think Chuck and I are being very frank with each other. The administration obviously wants to get a bill they can sign; we want a bill they can sign. We want to avoid a veto. It might mean we would not get a bill.’”

More specifically with respect to payment issues, the DTN article went on to explain that, “Under current law, farmers and landowners with adjusted gross incomes over $2.5 million per year are not supposed to get farm subsidies. The House and Senate bills would lower those eligibility levels, but critics say both bills contain many loopholes. The administration’s insistence on lowering the adjusted gross income levels further ‘has the Southerners stirred up,’ Peterson said. ‘They thought they had won the payment limit battle. I don’t think there is any way you can override a veto on payment limits.’

“But Peterson said he believes there are ways to restrict payments without damaging the interests of active farmers. He said he and Conner and his staff have discussed changing the definition of a farm and harmonizing the income restrictions on production subsidies and conservation payments. Peterson said they also plan to address the issue that some individuals are claiming to be ‘actively engaged’ in farming, but also claiming that farm subsidies are rental payments rather than earned income and avoiding paying self-employment taxes on the subsidies.

“Tougher payment limits, Peterson said, are mostly going to affect people who are not farmers. While the administration has noted that lowering the adjusted gross income limit for farm subsidies to $200,000 would affect 38,000 individuals, Peterson said 23,000 of the 38,000 are individuals whose $200,000-or-higher adjusted gross incomes come from non-farm sources. That means only 15,000 active farmers, who get most of their income from farming, would be affected by the $200,000 cap.”

(For related graphical depictions regarding farm and non-farm sources of income, and farm size, just click here. For a more general look at farm and non-farm income sources for farmers, see this graph. For a more detailed breakdown of income and source by farm type, click here.)

Additional perspective on payment issues appeared in a letter to the editor, which was penned by Senator Kent Conrad (D-ND) and posted at The Fourm (North Dakota) on Sunday.

In part, Sen. Conrad stated that, “I write in response to a letter by Chuck Hassebrook of Nebraska, criticizing the bipartisan farm bill that was overwhelmingly approved by the Senate. Hassebrook’s letter of Dec. 30, (‘Center for Rural Affairs supports farm programs’) is unfortunately typical of an out-of-state organization that completely lacks a North Dakota perspective.

“Hassebrook specifically criticizes me for voting against an amendment to further limit farm payments. To clarify one important point: this amendment would have saved $100 million a year in a bill that costs $57 billion a year. And it would have cost us the votes necessary to get the supermajority needed to pass the bill in the Senate and to be in a position to overcome the president’s threatened veto.”

Sen. Conrad went on to explain that, “When you are in a position of responsibility to get legislation passed, you have to make choices. I made the choice to get final passage of a farm bill that is critically important to North Dakota – where one of every five North Dakotans derives their income directly from agriculture. Most objective observers would say this farm bill is an extraordinarily good outcome for North Dakota, by strengthening the safety net and putting the nation on a path toward reducing our dependence on foreign oil.

“But to get that, I had to have the agreement of other senators. The biggest bloc of other senators was the Southern senators, who represent states with an agricultural economy that is different than ours and is strongly opposed to further payment reductions.

“Despite the opposition, we did get important new reform in this farm bill, including ending the three-entity rule, requiring direct attribution of farm payments, and reducing the income test of non-farmers from $2.5 million to $750,000.

“That is not all the reform we would have hoped for, but let’s keep it in perspective: that additional reform would have saved only $100 million annually in a bill that costs $57 billion a year. That is less than 1/5 of 1 percent savings. The cost would have been the votes necessary to pass the bill,” Sen. Conrad said.

Yesterday, Chuck Hassebrook criticized another lawmaker for their vote on the payment issue in an opinion item that was posted at the Rocky Mountain News Online (Colorado).

Mr. Hassebrook noted that, “Colorado Sen. Ken Salazar helped killed the one Farm Bill amendment with the greatest potential to revitalize family farms and rural Colorado, all to deliver a lavish Christmas present to the nation’s wealthiest megafarms.

“He blocked a bipartisan amendment by Sens. Byron Dorgan, D-N.D., and Chuck Grassley, R-Iowa, to cap megafarm subsidies at $250,000 and invest the savings in the future of rural America.

“The amendment did exactly what Salazar promised to do when he ran for office.

“It would have saved more than $1 billion over the next decade and reinvested it in rural small business development, helping beginning farmers, rewarding ranchers who preserve critical grasslands, protecting farmland from development and feeding poor families. Colorado Sen. Wayne Allard split with Salazar to support the reform.

“It was the most pivotal vote and starkest choice in the 2007 Farm Bill: Invest in the future of rural America or subsidize the destruction of family farming.

“Without effective limits, megafarms use their big federal checks to drive smaller operations out of business by bidding land away from them. And any Farm Bill that so squanders taxpayer dollars won’t have money left to invest in the future of rural America,” the item said.

Meanwhile, Reuters news reported yesterday (via DTN) that, “U.S. crop subsidies should go to active farmers and not to ‘passive investors,’ said acting Agriculture Secretary Chuck Conner on Wednesday in discussing reform of farm subsidies costing $10 billion a year.

“In an interview with Reuters, Conner urged Congress to deny payments to anyone with an adjusted gross income above $200,000 a year. He said tighter rules were needed so investors and absentee landlords do not receive supports aimed at working farmers.”

The Reuters article noted that, “‘I think we need a tighter definition’ of who is eligible for payments, Conner said. Under current law, recipients must provide land, capital, equipment, labor or management. There has been repeated criticism that it is easy to manipulate the rules and collect more money.

“‘While there may be many different forms of a truly active farmer out there, the clear and simple fact is we have a lot of people — a lot of people — getting farm program benefits that are by any measure passive investors in the process,’ Conner said.

“He said passive investors and landowners with a distant connection to active agriculture should not receive benefits.”

With respect to other Farm Bill issues, the Reuters article later noted that, “Nor should lawmakers cut the so-called direct payments of $5.2 billion a year to farmers, [Sec. Conner] he said. ‘It’s become a critical part of the safety net.’”

Recall that in the administration’s Farm Bill proposal addressed direct payments (pages 14-15); the proposal included this recommendation: “Increase overall direct payments and to provide additional income support in the 2010-2012 crop years. Continue direct payment acres at 85 percent of base acres, and do not update program payment bases and yields. This proposal would pay farmers an additional $5.5 billion over ten years.”

(For a graphical depiction of direct payment levels for various commodities, click here).

Direct payments have also arisen as an issue with respect to Farm Bill funding.

Recall that back in May 2007, as the Farm Bill debate was getting underway, Dan Morgan noted at FarmPolicy.com that, “[House Agriculture Committee Chairman Collin Peterson (D-Minn.)] needs to put enough money in the bill to satisfy a host of interests: fruit and vegetable growers, environmentalists, and advocates for nutrition programs, rural development and biofuels research. If these groups can’t live with the bill his committee writes they could try to rewrite it on the House floor. That would be a ‘recipe for chaos,’ the chairman told reporters last week.

“But where can he find the dollars to stave off an embarrassing challenge to his leadership? The congressional budget committees give him a fixed pot to work with, based on what they estimate is needed to continue existing programs. That leaves Peterson playing a zero sum game: Under new budget rules imposed by the Democrats, if he wants to add money one place he has to take it from somewhere else.

“That’s why the chairman, along with some other influential groups, are eying a potential pot of gold: the more than $5 billion a year in automatic, annual allowances that goes to farmers on land growing staple crops.”

Interestingly, just yesterday, the “Washington Insider” section of DTN (link requires subscription) indicated that, “Capitol Hill sources say that once the farm bill reaches the upcoming House-Senate conference committee, the $5.2-billion pot of money represented by direct payments will remain a tempting source of funds for other farm bill priorities.

“Eligible farmers receive direct payments regardless of crop prices, and even supporters in Congress are finding it difficult to defend the direct program now that prices for most crops are high by historic levels and give no sign of weakening for several years.”

In other Farm Bill conference news, an item posted on Tuesday at the Mid-South Farmer Online stated that, “Senate Minority Leader Mitch McConnell, R-Ky., thinks the much publicized threat of a Presidential veto of the farm bill is a negotiation tactic.

“‘I think the veto threats are related to leverage in conference,’ McConnell says. ‘Administrations who have problems with bills huff and puff and they have leverage because it takes a Presidential signature to make a law, and the back and forth will go on between the administration and conferees.’

“McConnell is confident that an agreement will be reached on the farm bill.

“‘I do think we can resolve the differences between the House and Senate farm bills,’ McConnell says. ‘And I think we can get a Presidential signature. It’ll be a negotiated process like it always is, but I think we’ve got a good chance of getting a farm bill. I’m optimistic, and we’ll see whether I’m right or not.’”

Prices / Acreage

The Associated Press reported yesterday that, “Wheat for March delivery fell 18 cents to $8.895 a bushel; March corn shed 1.5 cents to $4.7725 a bushel; March oats lost 5 cents to $3.275 a bushel; January soybeans slipped 4.5 cents to $12.625 a bushel.”

Although prices were down slightly, by historic standards, corn, soybeans and wheat remain at very robust levels.

High relative prices will likely have an impact on spring acreage allocation decisions.

Dow Jones writer Holly Henschen reported yesterday that, “U.S. cotton area in 2008-09 will decline, but the extent could be limited by last year’s dramatic shift, an official with the National Cotton Council said Wednesday.”

The item noted that, “In 2007, the Southeast and Midsouth already saw a marked use of cotton acres to grow other crops, said Gary Adams, NCC vice president of economics and policy analysis, during a presentation at the annual Beltwide Cotton Conferences.

“U.S. cotton acreage dropped to 10.847 million acres in 2007 from 15.274 million the previous year as farmers switched to more profitable crops like corn and soybeans.

“The area diverted from cotton in 2007 could in turn be planted with wheat and soybeans in 2008-09, Adams said.”

Ms. Henschen added that, “The U.S. Department of Agriculture’s winter wheat seedings data, to be released with Friday’s U.S. crop production and supply and demand reports, will hold an indication of the state of acreage for 2008-09, Adams told the Beltwide attendees.

“The USDA will issue its first estimate of 2008-09 cotton area in its March prospective plantings report, but private analytical firm Informa Economics recently said acreage would fall to 9.18 million.”

And Dow Jones writer Tom Polansek reported yesterday that, “The U.S. Department of Agriculture is expected to report Friday that producers responded to all-time highs in wheat futures a year earlier by significantly expanding 2008 winter wheat seedings, analysts said.

“Analysts also generally expect the USDA to drop its estimate for 2007-08 U.S. wheat carryout from last month and to lower its estimate for quarterly grain stocks from a year earlier, according to surveys by Dow Jones Newswires. The USDA’s projections are slated to be released at 8:30 a.m. EST Friday as part of the USDA’s January crop reports.

“The average of analysts’ estimates for 2008 winter wheat seedings is 48.657 million acres, up from 44.987 million a year earlier, according to a survey of 14 analysts. The range of estimates was 46.6 million to 51.436 million.”

For an excellent one-minute preview of the importance of tomorrow’s USDA reports, see this USDA audio segment (MP3), which was posted yesterday.

Meanwhile, an item posted yesterday from Agencia Brasil noted that, “Brazilian agricultural producers should have their largest harvest ever in the 2007/2008 grain crop, with a 3.1% increase in production compared with the previous crop. A total of 135.8 million tonnes of grain should be harvested.

“The forecast was made by the minister of Agriculture, Livestock and Supply, Reinhold Stephanes, who disclosed yesterday (8th) the fourth survey on agricultural production, conducted last month by technicians at the National Food Supply Company (Conab) and the Brazilian Institute for Geography and Statistics (IBGE).”

The item noted that, “The minister stated that soy remains the leading grain, with an estimated production of 58.2 million tonnes, followed by forecasts for 53.4 million tonnes of maize and 11.9 million tonnes of rice. Percentage-wise, the greatest increase in comparison with the previous crop should be that of the wheat crop, which should rise from 2.233 million to 3.831 million tonnes, the equivalent of a 71.5% growth.

“The planted area for grain rose 0.3% to reach 46.4 million hectares. The survey was conducted between December 11th and 18th among cooperatives, public and private institutions in the centre-south Brazilian states, plus the states of Piauí (NE), Maranhão (NE), Rondônia (N), Tocantins (N) and Bahia (NE).”

And Peter Shinn reported yesterday at Brownfield that, “July 2008 soybeans hit an all-time high Tuesday. And while that contract retreated slightly Wednesday, the stratospheric price levels for corn, soybeans and other commodities makes some farmers nervous as they consider the boom-and-bust history of U.S. ag markets.”

Later in the update, Mr. Shinn indicated that, “But with soybean prices high due to strong demand from the export market and the biofuels industry, what could possibly go wrong this time? The answer, according to Terry Barr, is that export demand could weaken and government support for biofuels could waver. Barr is chief economist for the National Council of Farmer Cooperatives. He addressed the Iowa Soybean Association Board Tuesday night.”

The Brownfield item stated that, “But the worst thing that could happen to U.S. agriculture, Barr cautioned, is a short U.S. corn crop. That might cause a short-term price spike but could jeopardize public support for renewable fuels, effectively killing the goose that’s laying the golden egg.

“‘There’s volatility in both directions here that can play out, maybe positive in the short term, but be negative for the longer term in terms of sustaining industries to consume your product,’ Barr said.

“Barr emphasized his belief that 2008 will be a good year for ag producers. The question, he said, is how much money they’ll leave on the table through their production and marketing choices. And Barr pointed out those ever-increasing input costs will make maximizing this year’s high crop prices a particular challenge.

“‘What this ’08 is going to have is a lot of opportunities,’ Barr predicted. ‘But they’re going to have to sharpen that pencil a lot better than they have in the past.’”

Keith Good

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