FarmPolicy

April 23, 2019

Farm Bill; Crop Progress / Production; Doha

Farm Bill

Jim Snyder reported yesterday at The Hill Online that, “The long-overdue farm bill has set up a crucial election-year face-off that will have consequences for farm-state members up for reelection, and has kept busy an army of lobbyists who represent everything from chick pea growers to ethanol refiners.

“After bill negotiators announced the outlines of an agreement last week, the Bush administration vowed to veto it.

“The measure is scheduled for a floor vote in the House as early as Wednesday, although as of press time the bill had yet to be officially filed and lobbyists said a vote could slip to Thursday or later.”

The Hill article added that, “Perhaps the biggest change the bill proposes is capping eligibility for direct subsidy payments to farm income that does not exceed $750,000 and non-farm income above $500,000.

“It took lawmakers weeks of backroom negotiations to arrive at those figures, but White House Press Secretary Dana Perino said on Monday that the reforms still fell short of White House hopes.”

Mr. Snyder pointed out that, “Another potential complication emerged over the weekend with a score that showed a budget shortfall during the first five years of the program. Senate aides said the gap would be fixed by shifting certain corporate tax revenues forward. Although that issue was not expected to present a major threat to the bill’s passage, it may delay debate.”

In addition, The Hill article noted that, “Ag lobbyists said they were confident they had the votes in the Senate to override a veto. They were less sure where things stood in the House, where House Minority Leader John Boehner (R-Ohio) has already said he would vote no.”

With respect to the “potential complication” on budget scoring, Mary Kay Thatcher, the Director of Public Policy at the American Farm Bureau Federation, appeared on yesterday’s AgriTalk Radio Program with Mike Adams and provided more detail on this issue.

During the course of the conversation on the Farm Bill, Ms. Thatcher stated that, “Now we have one little new piece of evidence that dropped into the ballgame this morning and that is that we find that the Congressional Budget Office [CBO] did finally come back with their scores very late last night and we are about $5 billion short on funding- about $4 billion, trouble in the tax section; and about $400 million in the ag section.”

Ms. Thatcher added that, “So, I don’t think we will be filing that [Farm Bill Conference Committee] report today, I think it is going to take them most of the day to figure out how do we come up with that funding, etc. So that may indeed delay the ability to actually even have the vote.”

Ms. Thatcher went on to explain that, “With CBO scoring, when you make a change to one program, you and I Mike wouldn’t think it would effect a different program, but it does. So every time you make one slight change it goes somewhere else and increases that score and that’s kind of what happened here. So everybody is really moving quickly on the Hill right now to find out what the major problem is, what we can do about it. We are going to have to put on some real pressure today because obviously if you think about money and you think about that pot of money in direct payments, its out there, that would be an easy place for them to get it and so we will be spending most of our day again making sure that if we do have to come up the $400 million, it doesn’t come out of the commodity title and it doesn’t come out of direct spending.”

To listen to the entire exchange with Mike Adams and Mary Kay Thatcher from yesterday’s AgriTalk Radio Program, just click here (MP3-6:33).

Deputy Agriculture Secretary Chuck Conner also appeared on yesterday’s AgriTalk program with Mike Adams. Dep. Sec. Conner offered more detail and perspective on the administration’s view on the Farm Bill- to listen to the discussion with Mike Adams and Dep. Sec. Conner from yesterday’s AgriTalk show, just click here (MP3-11:29).

And Peter Shinn reported yesterday at Brownfield that, “Deputy U.S. Ag Secretary Chuck Conner is continuing to hammer home the Bush administration’s opposition to the farm bill Congress is likely to vote on this week. According to Conner, an extension of the 2002 farm law is preferable to the House-Senate Farm Bill Conference Report published over the weekend.

“In an interview with Brownfield Monday, Conner rejected the claims of farm bill supporters in Congress that the measure spends just $10 billion dollars over the Congressional Budget Office (CBO) baseline for farm programs. Instead, Conner insisted the new farm bill really spends about twice that amount.

“‘The bill is about $20 billion more in spending than what the current farm bill would cost – the so-called baseline,’ Conner said. “Those numbers, as well, are confirmed by CBO.’

“But Conner emphasized the Bush administration’s biggest problem with the new farm bill is that it does little to tighten farm program payment limits. The new farm bill would move the cut-off for farm payments from an adjusted gross income (AGI) means test of $2.5 million dollars a year to a more modest $500,000 per year. But according to Conner, that still means very wealthy people will be getting farm payments.”

The Brownfield link also contains an audio copy of the interview between Peter Shinn and Dep. Sec. Conner.

Crop Progress / Production

DTN Wire Editor Anthony Greder reported yesterday that, “Corn planting finally surpassed the halfway mark, according to USDA’s crop progress report released Monday afternoon. Fifty-one percent of the crop had been planted by May 11 compared to a five-year average of 77 percent.”

“Even states lagging far behind their five-year average planting paces, such as Missouri with 34 percent planted compared to an 83 percent average and Iowa with 46 percent of its acres planted vs. the average of 82 percent, made significant progress during the past week,” the article said.

A news release issued yesterday by the American Farm Bureau Federation (AFBF) stated that, “Tight supplies and strong demand mean prices for corn and soybeans are likely to remain high for the foreseeable future, according to American Farm Bureau Federation economic analysis of two recent government reports.

“‘The degree to which soybean supplies are tight is probably the biggest surprise in this report,’ Terry Francl, American Farm Bureau Federation senior economist, said. The Agriculture Department’s World Agricultural Supply and Demand Estimates (WASDE) report for May projects 2008/09 soybean ending stocks of just 185 million bushels, some 85 million bushels less than the average pre-report estimate. A crop production report also was released Friday.”

With respect to corn, the AFBF release indicated that, “The report, released Friday, also showed a slight reduction – of a bushel an acre – in corn yield estimates for the current crop year compared to a report published in February. The latest estimate predicts corn yields of 153.9 bushels an acre.

“‘The corn yield projection was probably the most watched-for number in this report,’ Francl said. ‘However, given the slow plantings to date and the likelihood of further delays based on weather forecasts, many observers had thought that number should be reduced by 3 bushels an acre or perhaps more.’”

Associated Press writer Stevenson Jacobs reported yesterday that, “Corn prices sank Monday as investors took profits from last week’s record-setting rally and bet that forecasts for dry weather in the Midwest will allow farmers to speed planting.

“Other commodities traded mostly lower, with crude oil retreating after hitting a new record above $126 and gold also falling.

“The outlook for warm, drier weather after weeks of heavy rain in the U.S. corn belt is expected to ease planting delays that have driven up corn prices to unprecedented levels. Wet weather in Midwestern states had left fields too soggy for planting, putting farmers far behind schedule.”

The AP article added that, “Corn for July delivery dropped 14.5 cents to settle at $6.1475 a bushel on the Chicago Board of Trade, after earlier falling as low as $6.1375. Prices surged to a new trading record of $6.39 last week, and analysts said a correction was expected.”

“Other agriculture commodities traded mostly lower. July soybeans dropped 15.5 cents to settle at $13.425 on the CBOT, while U.S. rice futures lost 23.5 cents to settle at $22.74 per 100 pounds.

“July wheat futures, meanwhile, added 1 cent to settle at $8.055 a bushel,” the article said.

In more specific commodity news, the Food and Agriculture Organization of the United Nations indicated yesterday (“Strong signs of record rice production”) that, “Rice production in Asia, Africa and Latin America is forecast to reach a new record level in 2008, FAO said today, warning that world rice prices could remain high in the short term, as much of the 2008 crops will only be harvested by the end of the year.

“‘World paddy production 2008 could grow by about 2.3 percent reaching a new record level of 666 million tonnes, according to our preliminary forecasts,’ said FAO rice expert Concepcion Calpe.

“Production growth could even be higher if recent appeals and incentives to grow more rice lead to a larger expansion of plantings, according to the Rice Market Monitor. ‘But the cyclone disaster in Myanmar could well worsen our forecast,’ she added.

Also yesterday, USDA’s Economic Research Service released the “Oil Crops Outlook,” report, which noted in part that, “USDA forecasts a record high average soybean price for 2008/09 at $10.50-$12.00 per bushel, up from $10.00 in 2007/08.”

University of Illinois Agricultural Economist Darrel Good noted yesterday (“Crop Supply and Demand: Still Lots of Questions”) that, “Since it is still very early in the 2008-09 growing season and since U.S. corn planting has been generally slow, a lot of uncertainty surrounds the USDA projections for the upcoming marketing year. This uncertainty is revealed in the futures market where prices for the 2008 crops of wheat, soybeans, and corn all exceed the price implied by the upper end of the average farm price projected by the USDA. Most of the uncertainty lies on the supply side of the projections, but there are also numerous issues surrounding demand prospects.”

Yesterday’s article also pointed out that, “The most uncertainty may surround the corn market, and much of that is associated with the U.S. situation. Late corn planting suggests that planted acreage may not significantly exceed producer intentions of only 86 million acres. Based on an analysis of trend yields since 1990, and adjusting for 2008 planting progress, the USDA forecasts the 2008 yield at 153.9 bushels. That projection is above those based on a longer trend and appears a little optimistic. Stocks of U.S. corn at the end of the 2008-09 marketing year are projected at only 763 million bushels, or 6 percent of projected use. On the demand side, the biggest question may be about likely feed and residual use of corn. Use during the 2008-09 marketing year is projected at 5.3 billion bushels, 850 million less than projected for the current year, but only 298 million less than used in 2006-07. The wide swing in use the past two years means there is some uncertainty about the size of the feed demand base. How much reduction is really required and how much livestock liquidation has already started? Price behavior following the release of the report suggests that the market believes that much of the needed rationing of use is already underway.”

Meanwhile, Jerry Hirsch reported in today’s Los Angeles Times (“Farmers unable to cash in on soaring food prices”) that, “The price of the diesel fuel that is used to run combines and tractors has jumped by half from a year ago, according to the USDA. Seed prices have risen more than 25% from last year, the USDA said.

“Farmers are also dealing with higher rents, as landowners demand their slice of increased food prices.”

The L.A. Times article also included this graphical depiction of some agricultural production costs.

***

In an article regarding corn prices and biofuels, Cindy Skrzycki reported in today’s Washington Post that, “Taking corn from the mouths of chickens to put into the gas tanks of U.S. cars and trucks is causing feathers to fly in Washington.

“The $40 billion chicken industry, along with livestock producers, oil interests, grocers and some environmental and anti-hunger groups are hoping to put up a regulatory blockade to stop the diversion of corn stocks into the brewing of billions of gallons of ethanol for vehicles this year.”

Ms. Skrzycki noted that, “During the past few weeks, groups hurt by the food-vs.-fuel war over the price of corn have sought waivers — including the first official petition from the governor of Texas — from the ethanol mandates that Congress passed as part of last year’s energy bill. The exercise illustrates how a victory for one interest group, the corn farmers and ethanol producers, can trigger counter-lobbying by others.

“The new law requires the production of 36 billion gallons of renewable fuel — 15 billion gallons of it derived from corn — by 2022. It also gave the Environmental Protection Agency the authority to waive or alter the mandates if they cause severe harm to the economy.”

The Post article explained that, “Members of Congress on both sides of the issue have added their voices to the dispute. On May 2, 24 senators, led by Kay Bailey Hutchison (R-Tex.) and including John McCain (Ariz.), the presumptive Republican presidential nominee, wrote the EPA. They asked the agency to reset the ethanol targets, taking into consideration the inflation in food prices.

“‘We need to assess the corn-based ethanol mandate and its unintended effects on food prices for American consumers,’ Hutchison said in a separate statement. She said she will introduce legislation this week to cap ethanol production at the 2008 level of 9 billion gallons.

“In a May 7 letter to the EPA, two ethanol supporters, Sens. Charles E. Grassley (R-Iowa) and Tim Johnson (D-S.D.), said ethanol accounts for a fraction of the increase in global and domestic food prices.

“At a May 6 House subcommittee hearing on the renewable-fuel standard, Robert J. Meyers, the EPA’s principal deputy assistant administrator for the office of air and radiation, said the agency would seek public comment on the waiver request.”

(Note: a FarmPolicy.com audio summary of the May 6 subcommittee hearing is available here (MP3-13:27)).

Doha

Reuters news reported yesterday that, “U.S. Trade Representative Susan Schwab will meet Brazilian Foreign Minister Celso Amorim in Rome to discuss global trade talks, which negotiators hope to push toward a conclusion in the next several weeks.

“The officials from two of the Doha round’s leading players will hold talks in the Italian capital after Schwab attends a U.S.-European trade meeting in Brussels on Tuesday, Schwab’s office said on Monday.

“The meeting will center on the World Trade Organization talks, according to Gretchen Hamel, a Schwab spokeswoman.”

A separate Reuters news article from today stated that, “It is still possible to reach a deal on long-delayed world trade negotiations before the end of the year, the head of the World Trade Organisation said in an interview published on Tuesday.

“‘There are the political and technical conditions to wrap things up in 2008,’ the WTO’s Pascal Lamy told the Les Echos newspaper, adding that the accord needed to be struck this month or next to give time for the final texts to be prepared.”

The article added that, “Without a deal soon, the changeover of administrations in Washington and Brussels in 2009 risk causing several more years of delay, adding to concerns that support for free trade is giving way to protectionism as economic growth slows.

“Talks have intensified in recent weeks but there has not been enough progress for the WTO to summon ministers to Geneva for a push for the long-elusive breakthrough in the round.”

Keith Good

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