FarmPolicy

October 18, 2017

Farm Bill Debate Continues, Acreage Intentions Raises Policy Considerations

David Rogers, writing today at Politico.com, reported that, “Could ‘pay-go’ mean ‘no-go’ for a new farm bill this spring?

“That’s the question that tortures rural Democrats who pressed hardest in Congress last year for the tougher anti-deficit rules but now find themselves tied in knots, trying to write a plan for producers at home.”

Mr. Rogers indicated that, “An entire winter wheat crop will soon have come and gone in the months House-Senate negotiators have dithered. Only last week was agreement reached on a rough allocation of funds in the bill. Failure to meet the next deadline, April 18, will surely increase pressure to punt past this growing season. And the next few weeks could see a desperate endgame in which each side plots to jam the other on how to pay for new spending.

“If it weren’t so embarrassing, it would be laughable: a Washington comedy of errors that stars warring Senate committees, a farm lobby stubbornly resistant to change and a set of budget baselines that seem to change all the time.”

With respect to the details of legislative funding allocations, the Politico article explained that, “Government’s whole role in agriculture begins with the notion that the very unpredictability of farming justifies some safety net to help producers manage their risks. Pay-go begins at the opposite end: demanding predictability and requiring detailed cost forecasts five or 10 years in advance from CBO.

“This task is that much harder, given the ethanol boom and huge swings in commodity prices today. From 2002 through 2006, for example, Washington actually spent about $74.9 billion for Title I commodity programs. But if this subsidy structure were to continue without change, the cost would be half that — about $36.5 billion — over the next five years, according to CBO’s latest forecast.

“By contrast, crop insurance subsidies have quadrupled from the level assumed eight years ago, as more farmers enroll, and higher prices for crops means higher premiums to insure against losses. Even if Congress were to achieve promised savings, crop insurance costs could exceed $30 billion from 2008 to 2012 — approaching the historic Title I commodity section of the bill.

“At the same time, nutrition programs, such as food stamps, under Title IV of the bill will balloon to nearly $206 billion from 2008 to 2012. That’s a 44 percent or $62.5 billion increase from the comparable 2002-2006 period. To appease urban liberals, negotiators are on course to add $9.5 billion to the same accounts, which will almost certainly equal two-thirds of the total $300 billion-plus bill,” the article said.

Mr. Rogers also noted that, “What’s not in CBO’s numbers can be as important as what’s in. Since agriculture disasters are not predictable, CBO doesn’t factor in the cost of ad hoc emergency aid programs, past or future. And this can discourage new approaches to updating the existing farm safety net, which has grown increasingly irrelevant to today’s market and production costs.”

In addition, the article added that, “The National Farmers Union and House Agriculture Committee Chairman Collin Peterson (D-Minn.) have invited more change, but since past disaster aid isn’t counted in the CBO baseline, there’s no reward for addressing this cost in the future.

“Montana’s [Max Baucus (D)], coming from a state prone to drought, has proposed a $5.1 billion, five-year trust fund that would help farmers facing repeated ‘shallow losses’ that fall outside the reach of most crop insurance. But he gets zero credit for even marginally reducing the pressure for ad hoc disaster bills in the future.”

(Note: For more background on the CBO and Farm Bill funding, see, “The Impact of Renewable Energy on the U.S. Farm Policy Debate” (May 2007)- The paper focuses on the factors that will impact the sustainability of the demand-driven surge in the market price of corn and soybeans, as well as the policy implications that higher market prices will have on the development of the 2007 Farm Bill. Congressional Budget Office projections of current programs establish the amount of money available to lawmakers for crafting agricultural policy. As projected pricetriggered budgetary outlays decrease, and Congress begins to function under pay-as-you-go spending rules, options for adding new spending will narrow. Forecasts of lower spending estimates will also limit the flexibility to alter program parameters like loan rates and target prices, or to introduce alternative programs such as revenue insurance. High market prices may also serve to focus policy on income stabilization rather than on income support.)

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Farm-bill negotiators are trying to figure out how to cut more than $800 million from the spending framework that was released last week, a congressional aide has told DTN.

“Trimming the proposal may be needed because of resistance by some key commodity groups and Republican senators to any plan that would cut direct payments for farmers.”

Mr. Hagstrom went on to explain that, “A cut in direct payments is still being considered as part of the proposal, a lobbyist told DTN. The American Farm Bureau Federation and most commodity groups would make it a top priority to resist any cuts in direct payments, the lobbyist said. The theory is that if the direct-payment program is cut as little as 1 percent, it might be ‘the camel’s nose under the tent’ of bigger cuts to come, the lobbyist said. But there does appear to be division among agricultural groups, as some advocate increasing target prices and loan rates for some crops. Others, notably the National Farmers Union, see disaster aid as the top priority.

“Senate Finance Committee ranking member Charles Grassley, R-Iowa, told Iowa reporters Tuesday that the Republican senators on the farm-bill conference committee came to the conclusion that there needed to be more ‘equitable division’ in the farm bill when it comes to taking cuts or shifts in the various titles of the farm bill. ‘Here’s the situation you are in,’ Grassley said. ‘It’s OK to take money from the commodity title and spend it on food stamps or conservation, but it’s not OK to take money from those programs and spend it on some other title of the bill. We have reacted quite negatively to money being taken away from direct payments to be reallocated elsewhere.’”

To listen to Sen. Grassley’s comments on this issue from yesterday’s news conference, just click here (MP3-1:28)

The DTN article added that, “The lobbyist also said Congress might not be able to finish the bill by April 18, the date the current extension of the 2002 farm bill expires, but predicted that the bill could be finished by May 1. The lobbyist said that though President Bush had told Congress to finish the bill by April 18 or send him an extension for at least one year, there might be support for another extension if members are very close to finishing the bill.”

Meanwhile, Tom Steever noted yesterday at Brownfield that, “Iowa Senator Charles Grassley is confident that the April 18 deadline for farm bill passage will be met. He rejected a suggestion that hope is fading for passage of the measure by that date.

“‘I would not say that. Things have been more positive in the last two weeks than ever,’ Grassley said Tuesday to reporters. ‘Remember, it’s not just a passing of Congress, it’s trying to a get a bill the President won’t veto.’”

Also with respect to funding issues, DTN writer Chris Clayton reported yesterday that, “With money tight and lawmakers looking for offsets to pay for new priorities, advocates for rural development projects are watching funds for a once-promising list of programs get whittled away.

“Rural development programs include spending on upgrades to rural water and waste systems, small-farm marketing grants, rural hospital grants, rural-government planning and infrastructure money, emergency responder grants, micro-enterprise loans, broadband access and rural economic development.

“In 2002, the farm bill authorized more than $1 billion in new spending on such initiatives. This year, new spending on rural development programs may be a big fat zero.”

Mr. Clayton noted that, “Despite a tight baseline for the farm bill, the Senate last year did manage to approve $400 million over 10 years in new spending for rural development programs. The House earlier had approved a smaller rural-development title with $150 million in new spending. But negotiations on the budget framework of the farm bill between the House and Senate first trimmed the rural-development title to $120 million in new spending. Then last week the latest proposal for the bill cut that dollar figure down to zero.”

***

In editorial opinion regarding the Farm Bill, The Sacramento Bee opined yesterday that, “When Democrats took control of Congress in 2007, they promised to restore fiscal responsibility and ‘drain the swamp’ of special interest politics.

“Apparently those promises didn’t apply to the swamp known as the farm bill.”

The opinion piece stated that, “In the Senate, Californians Barbara Boxer and Dianne Feinstein must continue to be voices of reform and stand up to fellow Democrats Max Baucus of Montana and Kent Conrad of North Dakota. Baucus and Conrad are making last-minute pushes to protect subsidies for wheat farmers, putting other programs in peril.

“In the House, Speaker Nancy Pelosi needs to demonstrate some real leadership and prevent representatives from the Midwest and South from dominating any final negotiations. If Pelosi hopes to rebuild whatever credibility she once had about draining the swamp, the farm bill would be good place to start.”

And The Seattle Post-Intelligencer editorial board noted on Monday that, “Congress could make a poor farm bill even worse. Two powerful Democratic senators would achieve that by cutting into the bill’s redeeming points and raising its already over-the-top spending on farm payments.

“Sens. Max Baucus of Montana and Kent Conrad of North Dakota want to rework negotiators’ plans by nearly doubling, to $4 billion, the expenditures for so-called permanent disaster assistance. That proposed new program would provide an assured incentive for farmers to plant in environmentally sensitive spots along rivers or in drought-prone areas such as their states.”

The editorial stated that, “We hope Bush is ready for a veto fight on the kind of farm bill he most likely will receive. Early on, he presented valuable proposals for reforming the entire farm subsidy system in ways that would comply with international trade rules, provide assistance when farmers really need it and cut out the richest recipients of aid.

“Instead, Congress has largely neglected reform and the savings that would have followed. That has drastically limited the bill’s ability to put new money toward conservation or improving U.S. diets. Even in the context of a blown opportunity for reform, however, the Baucus-Conrad spending grab would stand out as an example of poor congressional leadership.”

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In other policy developments regarding commodity and food price pressure, acreage allocation decisions and conservation, the “Washington Insider” section of DTN noted yesterday (link requires subscription) that, “Last year, U.S. producers shifted large amounts of acreage from soybeans to corn. This marketing year, soybean supplies have been much tighter than have those for corn, and are resulting in unusually high prices. As a result, all eyes have been on USDA’s planting intentions survey to get an early fix on what the next season might be like.

That report came out Monday, and it forecasts a rough ride for the next year — and, raises perhaps as many questions as it answers.”

Later, the DTN analytical piece stated that, “The question now is what the report’s new estimates mean.”

After a comment on prices and potential acreage shifts, the DTN item went on to note that, “The second question concerns policy implications, especially for the renewable fuels mandates but also for the Conservation Reserve Program. If the reduced corn acreage boosts prices sharply, pressure can be expected on the administration to waive or modify the 9-billion-gallon renewable fuel standard for ethanol for calendar 2008 — a shift that certainly would have very severe market implications for corn. At this time, the administration is attempting to radiate ‘quiet reassurance’ on this topic, but pressure for change already is coming from food processors, such as the bakers, from livestock and dairy producers and, possibly, from the Fed and other agencies nervous about potential food price increases.”

“The CRP also is in the cross-hairs of advocates who want to reduce its size. USDA Secretary Ed Schafer has said repeatedly said that changes will not be considered until summer, after USDA has had a chance to review all the data — actual crop plantings, crop progress, grain stocks reports and other aspects of the supply and demand situation. However, the possibility of reducing the size of the CRP and its operating rules likely will receive further attention later this year, especially if the possibilities of short corn supplies and chaotic prices appear to grow,” the DTN piece stated.

Along these lines, Brownfield’s Dave Russell reported yesterday that, “Speaking with reporters at the National Institute for Animal Agriculture (NIAA) annual meeting in Indianapolis, April 1, U.S. Ag Secretary Ed Schafer said he does not expect the 8 percent fewer corn acres in the March 31 Prospective Plantings report to be a long term issue.

“‘We don’t particularly see this being an effort that will require drastic actions,’ said the USDA chief.

“And that, Schafer says, includes any early release of CRP acres.

“‘I don’t think early release of CRP is an answer here, certainly export restrictions are not an answer and it is not something we are interested in at all,’ Secretary Schafer said. ‘The basic answer is, we don’t see any need for drastic action here to try and manage price.’”

The Brownfield item also included an audio clip from Sec. Schafer (MP3- 4:30).

Also on the CRP, yesterday on the AgriTalk Radio Program, Mike Adams explored issues regarding land pressure and conservation program in greater detail. Here is a brief clip from yesterday’s program regarding prices and the CRP (MP3-2:36).

And with respect to RFS mandates, Peter Shinn reported on Monday at Brownfield that, “USDA’s Prospective Plantings report out Monday morning showed a potential 8% drop in U.S. corn acres this spring. That’s got Nebraska Cattlemen worried, not just about corn prices, but corn availability.

“Of course, the potential for another sharp rise in corn prices may be worrisome enough. During a press conference at the Chicago Board of Trade following the release of Monday’s report, Hightower Report founder and analyst Terry Roggensack told Brownfield he sees corn prices well above $6 a bushel.

“‘I think in general the corn price outlook is pretty positive,’ Roggensack said. ‘$6.20 to $6.55 – those would be the next two objectives for December corn.’

“Nebraska Cattlemen Executive Vice President Michael Kelsey told Brownfield those kinds of price projections mean the time is now to discuss what circumstances might trigger a waiver of the new, expanded Renewable Fuels Standard (RFS) for corn based ethanol, which mandates the use of 15 billion gallons of ethanol from corn per year by 2015. Kelsey pointed out that corn availability has the potential to disrupt not only the beef industry, but the ethanol sector itself.”

And the RFS issue also came up yesterday in the press conference Sen. Grassley conducted. Here is a short exchange on this issue from yesterday’s briefing (MP3-0:42).

Keith Good

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