FarmPolicy

September 2, 2014

Farm Bill: Congress Moves Closer to Completion, Executive Branch States Priorities; Biofuels; Post Series On C-SPAN

Farm Bill

DTN writer Chris Clayton reported yesterday (link requires subscription) that, “Conferees on the farm bill agreed late Thursday night and early Friday morning to cut direct payments approximately 2 percent and also eliminate commodity payments for farmers with fewer than 10 program acres.”

Mr. Clayton explained that, “Lawmakers resolved several controversial provisions during conference talks on the farm bill that carried into the early morning hours. The conference talks were also broadcast live over the internet.

“Despite burning the midnight oil, conferees did not complete their work. They closed their meeting about 1 a.m. Friday morning without resolving a handful of issues, most notably payment limits and income eligibility for commodity payments.

“Still, conferees completed work on several major sections of the farm bill and said they believe they can wrap up the final provisions early next week.”

More specifically on direct payments, the DTN article indicated that, “Among the key debates Thursday evening and early Friday morning was a cut in direct payments. The principal negotiators of the farm bill proposed a $313 million cut in direct payments in the next five years, out of a projected $26 billion in direct payments over that time. Rep. Jerry Moran, R-Kan., failed in an effort to restore that $313 million by reducing a proposed $1.2 billion boost in counter-cyclical target prices and loan rates for some commodities…[S]en. Pat Roberts, R-Kan., further expounded on Moran’s proposal, saying the counter-cyclical program hasn’t worked on the High Plains and the direct payment was the only consistent safety net for many farmers throughout the 2002 farm bill.”

Mr. Clayton also included this perspective on direct payments from Chairman Peterson, “House Agriculture Committee Chairman Collin Peterson, D-Minn., said he strongly opposed taking money from loan rates and target prices to re-establish direct payments. Peterson said if he had his way, there would not be any direct payments.

“‘It may be that this is the safety net, but it is a damned, poor, stupid safety net,’ Peterson said.

“Peterson said loan rates and target prices should be raised despite objections by the World Trade Organization. If commodity prices drop dramatically, which Peterson believes may happen, the $50,000 to $100,000 in maximum direct payments ‘is not going to save these guys,’ Peterson said.”

Peter Shinn reported yesterday at Brownfield that, “Congress finally made a lot of progress on the next farm bill after a six-hour meeting Thursday night that stretched into Friday morning. There are now just nine farm bill policy issues that are unresolved and congressional staffers are expected to work those out over the weekend.

“Highlights of the bill include a big increase in nutrition and food aid spending. More than two-thirds of the roughly $290 billion the farm bill will spend over the next five years will go to feed America’s school children and the needy.

“The new farm bill does have some new safety net provisions for ag producers, including a $3.7 billion permanent ag disaster aid program, an optional revenue-based counter-cyclical pilot program beginning in 2010 and an increase in target rates and loan rates for various commodities.

“The new farm bill does cut direct payments to farmers by around $313 million over the life of the legislation, despite two separate attempts by Texas GOP Representative Randy Neugebauer and Kansas GOP Congressman Jerry Moran to restore that funding. And House Ag Committee Chairman Collin Peterson, using characteristically blunt language, said those who see direct payments as the best safety net for farmers have definitely got it all wrong.”

In a separate DTN article from yesterday (“CSP Wins Big in Conservation Title”- link requires subscription), Chris Clayton pointed out that, “A key development in the conservation title of the farm bill is the expansion of [Senate Ag Committee Chairman Tom Harkin's] revamped Conservation Security Program, which also includes a name change to the Conservation Stewardship Program. The CSP gets $5 billion over the next five years, bumping up to $12 billion over the next decade. That should allow USDA to enroll up to 13 million acres of working farmland every year in the program. The CSP could easily expand to more than 100 million acres, which would make it by far the largest conservation program in the country. The CSP pays farmers on a tiered scale based upon scored environmental stewardship practices and also includes a cost-share program for projects on farms and ranches.”

A Congressional Quarterly item from yesterday noted that, “After last night’s meeting on the farm bill spilled into Friday morning, House and Senate negotiators decided to put off further talks until next week.

“The conferees approved every ‘title,’ or section, of the bill — including changes to crop insurance, livestock programs and land conservation initiatives — but left the most controversial issues on the table.

“The White House continued to press them to meet President Bush’s demands for a sharp reduction in taxpayer subsidies for agriculture.”

More specifically with respect to executive branch perspective on the Farm Bill, Reuters writers Christopher Doering and Charles Abbott reported yesterday that, “The Bush administration’s top priorities for the new U.S. farm law include tighter crop subsidy limits and so-called local purchase of emergency food aid, Agriculture Secretary Ed Schafer said on Friday.

“Also on the list are possible realignment of the ethanol import tariff and a less intrusive sugar program, said Schafer. But he added, ‘We have a spending issue’ over the cost of the farm bill, estimated at more than $285 billion for five years.”

The Reuters article added that, “‘Some things they are asking are problematic,’ said House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat, during a teleconference. He said farm-bill writers tried to accommodate the White House where possible.”

Doering and Abbott also noted that, “‘I think it is the balance of reform that we are looking for,’ Schafer told Reuters. ‘In that conversation, we have a handful of items that we think are of utmost importance.’

“He named the sugar program, language to prevent abuse of so-called loan deficiency payments, a cap on subsidy payments, local purchase of food aid and, ‘How are we going to deal with these subsidies on ethanol and the tariffs on ethanol?’

“The farm bill would cut the excise tax credit for ethanol by 12 percent, to 45 cents a gallon, but not change the import tariff of 54 cents. Energy Secretary Sam Bodman suggested in January the tariff is no longer needed.”

DTN Political Correspondent Jerry Hagstrom indicated yesterday that, “Senate Budget Committee Chairman Kent Conrad, D-N.D., said Republicans told him the administration’s top issues are restricting farmers’ ‘beneficial interest’ in grain after they receive farm subsidies, keeping out of the bill a measure to stop states from using private firms for initial screening of food stamp applicants, allowing the U.S. government to spend up to 25 percent of food aid money on purchases from other countries and placing a cap on the adjusted gross income of farmers and non-farmers who can receive farm subsidies.”

Dow Jones writer Bill Tomson reported yesterday that, “Even if the Senate-House panel does manage to finish work on the farm bill and both the Senate and House approve the finished product in separate floor votes, Bush administration officials have threatened a veto.”

Philip Brasher noted yesterday at The Des Moines Register Online that, “The 2002 farm bill was due to expire last fall but has been temporarily extended repeatedly. The House and Senate agreed Thursday to continue programs through May 16. Bush agreed to sign the extension.

“Bush has problems with a number of items in the bill lawmakers are writing, including a two-year extension of the 54-cent-per-gallon tariff on imported fuel ethanol, according to lawmakers.

“But the administration has directed most of its rhetorical fire on the bill’s subsidy eligibility rules.”

Meanwhile, Dan Looker reported yesterday at AgricultureOnline that, “After a long day Thursday that ended at 3:00 a.m. Friday morning, Peterson was taking questions from reporters back home by telephone Friday morning, along with Representative Earl Pomeroy, a Democrat from North Dakota. [Note: audio posted at the House Ag Committee Online] Pomeroy is the only Ag Committee member who serves on the House Ways and Means Committee, so he was involved in the high level farm bill negotiations behind the scenes this week, along with Peterson, his committee’s ranking Republican, Representative Bob Goodlatte, and leaders of the Senate Agriculture and Finance Committees.

“Both Peterson and Pomeroy expressed frustration that the White House has taken strong positions on the farm bill but won’t negotiate. Peterson said he was pleased that Agriculture Secretary Ed Schafer and Deputy Secretary Chuck Conner met with farm bill leaders after President Bush criticized the farm bill in his press conference last Tuesday.

“‘Ed Schafer’s been very good,’ Peterson said. ‘He’s in a difficult situation.

“‘He gets it. He knows what needs to be done, but he is not a free agent,’ Peterson said. ‘There seem to be about four different factions in the White House on the farm bill and some of the President’s advisors may have wanted a veto from the beginning.’”

Mr. Looker added that, “Pomeroy said if Congress adopted all of the Bush administration’s recommendations for the farm bill, he didn’t think the bill would pass.

“‘If the President does veto this bill, I think we’ll have the strongest prospects of overriding any bill he’s vetoed thus far,’ Pomeroy said.”

Biofuels

Siobhan Hughes, Ian Talley and Anjali Cordeiro reported in today’s Wall Street Journal that, “Rising food prices are prodding lawmakers in Washington to rethink support for corn ethanol.

“Two dozen Republican senators on Friday — including Republican presidential candidate John McCain (R., Ariz.) — asked the Environmental Protection Agency to ease requirements mandated by Congress in 2007 to blend more ethanol and other renewable fuels into the gasoline supply.

“The lawmakers said the mandates are contributing to a sharp increase in food prices. Sen. McCain has been a critic of ethanol subsidies.”

The Journal article added that, “President Bush also reiterated his support for corn ethanol on Friday. While acknowledging that ethanol is ‘part of” the reason for high food prices, he disputed the notion that it has been ‘the main cost driver’ for recent food-price increases. ‘I’d much rather be paying our farmers when we go to the gas pump than paying some nation that may not like us,’ Mr. Bush said in a speech Friday.

“But there are signs that doubts about the wisdom of current U.S. biofuels policy are mounting.”

The Journal reporters stated that, “A sweeping farm bill under debate in the Senate also seeks to accelerate the U.S. shift away from corn-based ethanol, by proposing to reduce the current 51-cents-a-gallon credit to 45 cents. Another provision of the bill would create a new credit for so-called cellulosic ethanol — which is made from wood chips, switch grass and other nonfood stocks — of $1.01 a gallon.

“Cellulosic ethanol has yet to be proven on a commercial level, and many analysts don’t expect a full-scale production facility to come online for years.”

Also on this issue, James Gerstenzang reported in today’s Los Angeles Times that, “President Bush on Friday defended his emphasis on ethanol to help the nation meet its energy needs even though increased production of the corn-based biofuel has been blamed for contributing to sharp increases in food prices.

“‘As you know, I’m a ethanol person,’ he said, explaining his belief that it can help reduce U.S. dependence on oil. ‘It makes sense for America to be growing energy.’

“The president made his comments during a 20-minute speech and a rare, lengthy question-and-answer session with employees of a high-tech manufacturer.”

The L.A. Times article added that, “Critics have focused on the new demand for corn as a factor in driving up food prices.

“Bush acknowledged that ethanol has contributed to higher food prices, but said it was not the main reason. He also listed increased energy costs, which affect transportation and fertilizer prices; drought and other weather-related problems; and increased demand stemming from greater prosperity in once-poor nations. He noted that the middle class in India has grown to 350 million — more than the population of the United States.”

More specifically, according to a White House transcript, Pres. Bush stated yesterday that, “As you know, ethanol is beginning to take off, and I’m convinced we’re going to be able to make ethanol out of something other than corn here relatively quickly, like wood chips, or grasses grown in the desert, which will be very exciting for the American people.”

Later, Pres. Bush stated that, “Secondly, I think we ought to change our food policy in Africa and other developing countries. I think we ought to be buying food directly from farmers, as opposed to giving people food. I think we ought to be saying, why don’t we help you be able to deal with scarcity by encouraging your farmers to grow and be efficient growers. Otherwise we’re going to be in this cycle forever.

“Now let me talk about price. As you know, I’m a ethanol person. I believe, as I told you, the interim step to getting away from oil and gas is to go to ethanol and battery technologies for your automobiles. I think it makes sense for America to be growing energy. I’d much rather be paying our farmers when we go to the gas pump than paying some nation that may not like us.

“And so — but most of ethanol now — or nearly all of ethanol now — is produced as a result of corn. And the price of corn is real high now. And so people say, well, it’s your renewable fuels policy that is causing the price of food to go up. I’ve looked at this issue a lot. Actually, the reason why food prices are high now is because, one, energy costs are high. And if you’re a farmer, you’re going to pass on your cost of energy in the product you sell; otherwise you go broke. And when you’re paying more for your diesel, paying more for your fertilizer because it’s got a lot of natural gas in it — in other words, when your basic costs are going up, so does the cost of food.

“Worldwide there is increasing demand. There turns out to be prosperity in developing world, which is good. It’s going to be good for you because you’ll be selling products into countries — big countries perhaps — and it’s hard to sell products into countries that aren’t prosperous. In other words, the more prosperous the world is, the more opportunity there is.

“It also, however, increases demand. So, for example, just as an interesting thought for you, there are 350 million people in India who are classified as middle class. That’s bigger than America. Their middle class is larger than our entire population. And when you start getting wealth, you start demanding better nutrition and better food. And so demand is high, and that causes the price to go up.

“And finally, there’s been weather-related problems. Some of the major producers of food have had drought. That’s what happens. Weather patterns change. And so there’s a lot of reasons why the price of food is high. And no question that ethanol has had a part of it, but I simply do not subscribe to the notion that it is the main cost-driver for your food going up.”

Dan Morgan on C-SPAN’s “Washington Journal”- Post Series

Dan Morgan, who is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States, appeared yesterday on C-SPAN’s “Washington Journal” public affairs program. Dan also writes an exclusive column at FarmPolicy.com entitled, “‘Analysis from Washington’, by Dan Morgan.”

On yesterday’s program, (May 2), Dan discussed the “Global Food Crisis” Series, which was published recently in The Washington Post.

To listen to a portion of Friday’s broad-based discussion on food price issues with Dan Morgan, go to this FarmPolicy.com audio podcast (MP3-9:00).

Keith Good

Comments are closed.