FarmPolicy

August 21, 2019

Farm Bill: Payment Limits

Categories: Doha / Trade /Farm Bill

Reuters writer Charles Abbott reported yesterday that, “Thanks to a White House veto threat, Congress is on the path to an overall tightening of farm subsidy rules, said a staunch Senate advocate of payment limit reform on Tuesday.

“Sen. Charles Grassley said he believed Congress would close loopholes that allow excessive payments and may lower the ceiling on payments per farm, now set at $360,000 a year, as part of an overhaul of U.S. farm law.

“Those steps go beyond the White House goal of no subsidies to the top 2 percent of Americans. The White House says it will veto the farm bill if it raises taxes or allows payments to people with an adjusted gross income over $200,000.”

The article added that, “The House and Senate agreed in their bills to three reforms — tracking payments to individuals, no longer allowing farmers to collect payments directly and through two affiliated operations and abolishing ‘commodity certificates’ that can be used to evade the $360,000 limit.

“The bills also revise payment limits but did not reduce them to the $250,000 ‘hard’ cap proposed by Grassley and do not go as far as the administration to exclude high-income people from the farm program.”

“Senators voted 56-43 in December for the $250,000 cap and other reforms proposed by Grassley and Dorgan but their package was not included in the Senate farm bill,” the article said.

(Note: A Related FarmPolicy.com update on the Grassley-Dorgan amendment is available here. The update also includes audio excerpts from the Senate floor debate on the payment limit amendment).

Mr. Abbott also noted that, “Earlier on Tuesday, Grassley sent a letter to the leaders of the House and Senate Agriculture committees, saying more reform was needed on payment limits.

“He said landlords could evade income tests, such as the administration’s $200,000 cut-off, by renting their land for cash, rather than for a share of the crop, by reorganizing operations to spread payments among more recipients or manipulating their income, such as buying land.”

Peter Shinn reported yesterday at Brownfield that, “Iowa’s Chuck Grassley, the ranking Republican on the Senate Finance Committee, was named Monday night to the House-Senate Conference Committee on the farm bill. During a teleconference with reporters Tuesday morning, Grassley said an analysis conducted by his staff of the so-called payment limit reforms included the House and Senate farm bills showed both would be largely ineffective, with loopholes ‘large enough to drive a tractor through.’

“And Grassley said the payment limits issue literally threatens the future of farm support programs. That’s why Grassley emphasized that his number one priority as a farm bill conferee is tightening farm program payment limits.

“‘Unless we begin making some serious reforms through payment limitations, we’re going to lose support for even a basic safety net from urban people who control the House of Representatives,’ Grassley warned.”

Mr. Shinn also explained that, “And, in something of a new development, Grassley suggested he would be open to negotiation on the payment limits issue. He noted that two of the Senate farm bill conferees, Democrat Blanche Lincoln of Arkansas and Saxby Chambliss of Georgia, the Ag Committee’s ranking Republican, have both insisted higher farm program payments are required in the South because of the higher costs of growing cotton and rice. According to Grassley, he would consider establishing higher payment limits for cotton and rice growers than for growers of other program crops.

“‘We’re going to work on some compromises that maybe will give some accommodation to points that they’ve made that I’m not convinced of, but I’m open to being convinced, that it costs more to put in cotton and rice,’ Grassley declared. ‘And if we can get like a FAPRI-type analysis – that’s intellectually honest – that what’s the cost of raising corn, soybeans, wheat versus cotton and rice and we’re comparing apples and apples, you know, I might be willing to make some adjustment for things that would make a payment limitation equal among crops.’”

DTN writer Chris Clayton also reported on Senator Grassley’s payment limitation views yesterday (link requires subscription), and noted in part that, “Grassley said the so-called reforms in income caps that are being touted by House Agriculture Committee Chairman Collin Peterson, D-Minn., and some members of the Senate Agriculture Committee are ‘not real reforms.’

“Grassley-Dorgan received 56 votes in the Senate during debate in December, four short of what was needed to pass and avoid a debate filibuster. Southern senators, notably Agriculture Committee Ranking Member Saxby Chambliss, R-Ga., and Sen. Blanche Lincoln, D-Ark., fought hard in opposition of Grassley-Dorgan. Both also are now on the conference committee, meaning it will be an ‘uphill battle,’ Grassley said.

“‘There’s plenty of trouble with our conference,’ he said.”

Mr. Clayton also explained that, “Right now, the House farm bill would cap payments for farmers with a $500,000 adjusted gross income, averaged over three years, unless two-thirds of the farmer’s income comes from agriculture. Then the House established a $1 million ‘hard cap’ that cuts off commodity payments to everyone with that income. The House bill also established a $125,000 payment cap for direct and counter-cyclical payments, but there would be no cap on marketing-loan gains such as loan-deficiency payments.

“The Senate bill establishes a $750,000 cap on income eligibility, but exempts producers who draw at least two-thirds of their income from agriculture. The Senate bill has a $100,000 payment cap on direct and counter-cyclical payments but, like the House bill, would lift any caps on LDPs.

“As others have noted, Grassley said most of the limits established in the House and Senate bills would simply cause more high-income landlords to shift from share-cropping to cash rents.”

***

Meanwhile, commodity markets remain strong, at least for some key program crops, decreasing the likelihood that price-triggered federal subsidy payments will be allocated in the near-term.

Associated Press writer Stevenson Jacobs reported yesterday that, “Wheat prices soared near their highest levels ever Tuesday on concerns that growing demand in Asia coupled with dwindling stockpiles could lead to a grain shortage in the United States.”

The article noted that, “Wheat for March deliver surged the daily limit on the Chicago Board of Trade, jumping 30 cents to fetch $10.03 a bushel. Wheat was just shy of its all-time high of $10.095 a bushel.

“Dry weather in India, the world’s second largest wheat producer, has contributed to global supply tightness. India’s grain-belt has been stricken with long periods of drought since December, threatening roughly half the country’s 2.8 billion bushel crop.”

And the AP article stated that, “Unprecedented demand for agricultural products from fast-growing countries including China and India has exacerbated the supply crunch. In the market panics of previous years, prices would rise to a level that developing countries couldn’t afford. But as the economies of some development countries strengthen, high prices have not slowed their buying of major food commodities.

“Other agriculture futures traded lower Tuesday. Corn for March delivery lost 1.25 cents to settle at $5.0925 a bushel on the CBOT, while March soybeans slipped 3 cents to settle at $13.23 a bushel.”

Tom Polansek reported in today’s Wall Street Journal that, “The Minneapolis Grain Exchange, often overshadowed by the larger-volume Chicago Board of Trade and Kansas City Board of Trade, saw its nearby March contract rise to the exchange-imposed daily limit of 30 cents to $14.63. That is the highest price for any wheat contract traded at a U.S. exchange. Beginning Feb. 12, the MGE price limit will be 40 cents.”

The Journal article added that, “Statistics Canada, the statistical branch of the Canadian government, also boosted prices higher by cutting its estimate for all-wheat ending stocks below analysts’ expectations. Ending stocks are what is left after taking into consideration supply and demand.

“Egypt, meanwhile, said after trading ended that it will tender today to buy wheat. Although the tender was not for spring wheat, the news was seen as bullish because Egypt often buys on price breaks, traders said.

“The MGE’s current rally dates from mid-January when a report from the U.S. Department of Agriculture showed winter-wheat acreage in the southern Plains was less than expected, even with record wheat prices. Winter-wheat is planted in the fall and harvested in the spring. The smaller winter-wheat acreage meant spring-planted wheat in the Northern Plains would need to make up the shortfall, but its land will compete with corn and soybean planting.”

Doha

Reuters news reported yesterday that, “Negotiators working on a new global trade deal need to decide whether to limit a key meeting to agriculture and industry or broaden it to areas such as services, officials and diplomats said on Tuesday.

“Trade ministers have agreed to try and meet around Easter at the World Trade Organisation (WTO) in Geneva to clinch an outline deal in the long-running Doha round.”

The article stated that, “A meeting around Easter — which diplomats say is more likely to take place in April than in March — is the latest realistic date if there is to be enough time to conclude a full deal by the end of this year.

“Negotiators in Geneva agree the Doha round should be completed this year before a new U.S. administration takes office, which would distract from the trade talks.

“But they differ about what should be discussed at the Easter meeting, a vital issue because it is there that the key trade-offs allowing a deal will take place.”

Reuters writer Missy Ryan reported yesterday that, “U.S. trade negotiators will focus on tariff cuts this week when new negotiating papers are released in world trade talks, seeking to block developing nations from protecting the very goods the U.S. believes could be their meal ticket in years to come.

“Lead negotiators in the World Trade Organization’s Doha round, hoping to finally reach a breakthrough in the long-troubled talks, are expected to release the latest agriculture draft this week, which free-traders hope will set the stage for a meeting of leader negotiators this spring.

“Gregg Young, an Agriculture Department official closely involved in the negotiations in Geneva, said that so-called special products would be a top concern in the draft.”

Ms. Ryan indicated that, “Special products have emerged as one of the most contentious issues in the round, which has been mired in discord over agriculture issues since they began in 2001.

“They have produced a stalemate between the United States and countries like India, a voice for developing countries in the talks, as poorer countries seek to secure a larger share of foods they can protect from the tariff reductions that U.S. exporters believe will boost their bottom line.

“The set-asides are designed to help governments shield the farmers, often their most vulnerable citizens, from a tide of cheaper imports once a global trade deal is secured.

“U.S. farm exports have been setting records in recent years and are expected to hit $91 billion in fiscal 2008.”

Later, the Reuters article noted that, “Crawford Falconer, who chairs the Doha agriculture negotiations. is expected to release the new negotiating papers as early as Wednesday.

“If that draft is well received, trade ministers could gather in Geneva as early as late March to strike last-minute bargains and, theoretically, make a new world trade deal a reality.”

And an update posted yesterday at the World Trade Organization webpage noted that, “Director-General Pascal Lamy, in his report to the General Council on 5 February 2008, said ‘we are on the last lap and we have now started the final sprint towards establishing modalities’. ‘I think we have a broad agreement on the urgency of what we are doing, and on the basic steps we need to take to reach a deal,’ he added.”

Keith Good

Comments are closed.