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Farm Bill Issues; Food Costs

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “House Agriculture Committee Chairman Collin Peterson, D-Minn., said this week he wants the new farm bill to raise the dollar value in sales a farmer needs to be included in the Census of Agriculture, and he wants to save money by ending crop subsidies to landowners and farmers with fewer than 20 acres that qualify for government payments.

“Peterson noted that the proposal would not eliminate eligibility for conservation programs, but small-farm advocates and critics immediately denounced the proposals.”

Mr. Hagstrom explained that, “Under current law, the Census of Agriculture counts all farms with sales of $1,000 or more. Using that definition, the 2005 census counted 2.1 million farms. Peterson said farm bill critics have used that number to calculate that only a small percentage of farmers get subsidies. Peterson said he would propose that the Census count farms with only $50,000 in sales, but said he realized that other members and senators are unlikely to agree and that he would be willing to compromise on a $10,000 in sales standard.”

And Philip Brasher noted in today’s Des Moines Register that, “Iowa’s senators are at odds over a plan to allow landowners to get federal conservation benefits in tax credits rather than direct payments.

“The plan, which would affect the land-idling Conservation Reserve Program, would benefit high-income landowners because the tax credits would reduce their federal tax liability each year. Under existing rules, landowners who enroll acreage in the program can only receive taxable annual payments.

“The dispute is one of the reasons lawmakers have been unable to agree on a final version of the farm bill.”

Mr. Brasher went on to explain that, “The plan would have the effect of giving the congressional tax-writing panels, including the Senate Finance Committee, some say over the conservation program for the first time. Sen. Charles Grassley, R-Ia., is the finance committee’s top Republican.

“The program is normally under the sole control of the House and Senate agriculture committees. Sen. Tom Harkin, D-Ia., is the Senate committee’s chairman.

“‘We don’t know where the money would go, how it would operate,’ said Harkin, expressing frustration with the tax-credit idea this week. ‘This is just bizarre. It makes no sense.’

“His House counterpart, Minnesota Democrat Collin Peterson, said the availability of tax credits could wind up concentrating more rural land in the hands of the wealthy.”

Meanwhile, Jake Thompson reported in today’s Omaha World-Herald that, “Another attempt to limit farm subsidy payments is working its way through Congress, this time seeking to cap payments at $250,000 per individual per year.

“The plan’s author, Sen. Chuck Grassley, R-Iowa, says it would save taxpayers $1.4 billion over the next decade.

“‘This is about good government. This is about responsibility to the taxpayers,’ Grassley said during Senate debate. ‘And most importantly, this is about protecting the livelihoods of America’s small and midsize farmers.’”

Mr. Thompson noted that, “Under current law, subsidies are capped at $360,000 per individual. But loopholes have allowed some farmers to receive much more.

“Grassley for years has tried to curb the biggest subsidies.

“Opposition remains strong from major crop groups and some farm organizations, even though prices today for the main subsidized crops – corn, wheat, soybeans and rice – are robust.

“If enacted, the impact of Grassley’s plan on Nebraska and Iowa farmers wouldn’t appear to be widespread.”

The World-Herald article also provided different perspectives on Grassley’s payment cap ideas: “Despite that challenge, supporters have praised Grassley and his co-sponsor, Sen. Byron Dorgan, D-N.D., for keeping a spotlight on the issue.

“‘In these increasingly tough economic times, Senator Grassley understands the pressing need to stem the flow of billions of taxpayer dollars to large profitable farm businesses, wealthy and absentee landowners,’ said Sandra Schubert, the Environmental Working Group’s director of government affairs.

“The Nebraska Farm Bureau, like the national Farm Bureau Federation, doesn’t back Grassley’s plan.

“Rob Robertson of the Nebraska group, who was lobbying members of Congress on farm issues this week, called Grassley’s plan mainly ‘a gesture of political sentiment.’”

For more on Sen. Grassley’s proposals, see this FarmPolicy.com audio podcast from Tuesday (MP3- 6:00).

Dan Looker, writing on Friday at Agriculure.com, provided additional context with respect to executive branch perspective on the Farm Bill.

Mr. Looker noted that, “Although President Bush said yesterday that he favors extending the current farm law if Congress can’t finish a farm bill in the next month, Agriculture Secretary Ed Schafer said Friday that the administration still hopes for new legislation.

“‘None of us want to see an extension of the current farm bill,’ Shafter told Agriculture Online in an exclusive interview.”

The article stated that, “Without a new farm bill, ‘you leave on the table a lot of things,’ he said. That includes more money for conservation, more support for the fruit and vegetable sectors of agriculture, and more money for nutrition programs, he said.

“Right now, not increasing funds for nutrition programs, which include food stamps, would be difficult, he said.”

Food Inflation

With respect to food costs, Andrew Martin and Michael M. Grynbaum reported in today’s New York Times that, “The government announced Friday that the cost of food had gone up yet again. This came as no revelation to Bruce Newton, a single father of two children.

“As he wheeled a cart full of groceries out of a Stop & Shop supermarket in Bloomfield, N.J., on Thursday night, Mr. Newton complained that the price of chicken had become ‘outrageous,’ and eggs were so costly his mother sent him from store to store hunting for the cheapest ones. Essential breakfast items like milk, cereal and orange juice have become ‘so expensive, but what are you going to do?’”

(Note: To view Consumer Price Index – Average Price Data from the U.S. Department of Labor, Bureau of Labor Statistics Online, see this charts for white bread, ground chuck, fresh chicken, and grade A eggs.)

The Times article added that, “Mr. Newton’s pain is being felt in grocery checkout aisles across the country. Government figures released Friday showed that grocery costs had jumped 5.1 percent in 12 months, the latest in a string of increases. In fact, the nation is undergoing its worst grocery inflation since the early 1990s.”

The article also noted that, “With a few exceptions, nearly every grocery category measured by the Labor Department, which compiles the official inflation numbers, has increased in the last year. Milk is up 17 percent, as are dried beans, peas and lentils. Cheese is up 15 percent, rice and pasta 13 percent, and bread 12 percent.

“No food product has gone up as much as eggs, jumping 25 percent since February 2007 and 62 percent in the last two years.”

“While food costs increased, overall inflation held steady in February as the cost of gasoline declined that month, according to the latest Consumer Price Index, which the Labor Department updates monthly. That was an unexpected dose of good economic news that opens the door for more aggressive interest-rate cuts by the Federal Reserve, which is trying to head off a recession,” the article said.

And the Times article also indicated that, “But Ephraim Leibtag, who tracks food prices for the Department of Agriculture’s Economic Research Service, said that with farm prices remaining near record levels, he was not optimistic that food prices would moderate in 2008. Instead, he predicted that food inflation would be at least as high as in 2007, perhaps higher.

“Mr. Leibtag predicted that cereal and baking products would continue to increase because of steep prices for wheat; in fact, the price of cereal and bakery products increased 1.8 percent in February, the largest monthly gain since January 1975. Economists say higher food costs are being caused by rising energy prices, a weak dollar that encourages exports of American crops and food products, and soaring prices for farm commodities like milk, corn and wheat.”

Also today, John Horn reported in today’s Los Angles Times that, “As a consequence of the booming demand for alternative fuels — with farmers replanting acres of popcorn with more profitable crops that can be converted into ethanol and other biofuels — the sellers of the nation’s favorite movie snack say the salty tub will soon take a bigger bite out of your wallet when you’re at the multiplex.”

The L.A. Times added that, “‘The consumer will probably see an increase in popcorn prices pretty soon,’ said Carlton Smith, the chairman of Iowa’s Jolly Time popcorn brand.

“While the price hike will likely be modest, perhaps no more than 15 cents a serving, the rise is inevitable and necessary, according to the popcorn providers and theater owners gathered here for ShoWest, the annual convention of the National Assn. of Theater Owners, which ended Thursday.”


With respect to commodity futures prices, Dow Jones writer Tom Polansek reported yesterday that, “U.S. grain and soy futures tumbled Friday as traders booked profits amid jitters about the economy, analysts said.

“Most-active Chicago Board of Trade May corn, soybeans, soyoil and rice temporarily dropped their daily, exchange-imposed limits. U.S. wheat futures fell deep into negative territory.”

And the Associated Press noted yesterday that, “Wheat for May delivery dropped 52.5 cents to $11.915 a bushel; May corn lost 10.25 cents to $5.5925 a bushel; May soybeans declined 50 cents to $13.5275 a bushel.”

Keith Good