FarmPolicy

August 21, 2019

Crop Production Report Anticipated, Farm Bill Issues and Doha

Crop Production

Scott Kilman reported in today’s Wall Street Journal that, “In its most anticipated monthly crop report of the year, the U.S. Agriculture Department is expected Tuesday to show that June flooding didn’t damage Midwest farm fields nearly as much as originally feared.

“According to a survey of commodity brokerage firms last week by Dow Jones Newswires, grain analysts expect the USDA to forecast that U.S. farmers will harvest 11.94 billion bushels of corn this year, down from the record 13.07 billion bushels harvested last year.”

The Journal article noted that, “During the height of the flooding, which swamped parts of Iowa, Illinois, Wisconsin and Missouri, some analysts figured corn farmers might be able to produce only about 11 billion bushels. Corn futures prices soared to about $7 a bushel as traders contemplated that a harvest that size wouldn’t meet demand.

“Corn prices have since eased about $2 a bushel because weather conditions turned nearly ideal for plant growth after the June deluge ended. Yet corn prices remain twice as high as what they were for much of the decade, amid booming demand from ethanol fuel manufacturers. Before the flooding, many analysts had expected corn farmers to produce more than 12.2 billion bushels.”

With respect to soybeans, the article stated that, “Analysts expect the USDA to predict that farmers will harvest nearly three billion bushels of soybeans compared with the 2.59 billion bushels harvested last year. U.S. farmers planted soybeans on more acres this year in hopes of capitalizing on rising prices.”

The Agricultural Statistics Board of the U.S. Department of Agriculture- National Agricultural Statistics Service provided additional information about tomorrow’s Crop Production report in a release from Friday, which stated that, “The Aug. 12 Crop Production report will contain the National Agricultural Statistics Service’s (NASS) first estimates of 2008 corn and soybean yield and production. To help ensure that these estimates are based on the best information available, NASS supplemented its standard data collection activities in order to account for the impact of the flooding that occurred in the Midwest in June.

NASS personnel re-interviewed approximately 9,000 farmers in flood-affected areas who had previously reported their planted acreage to the agency in early June, prior to the majority of the flooding. These re-interviews were conducted in mid-July, allowing time for flooded fields to dry and for farmers to fully assess their 2008 cropping options. Additionally, NASS increased the number of corn and soybean fields selected for objective field measurements in the flood-affected areas. The agency also increased the sample size for the Agricultural Yield Survey, through which farmers report expected crop yields.”

The Associated Press reported last week that some commodity prices fell on Friday “after a sharp jump in the dollar once again lessened the appeal of commodities as a hedge against the weakening currency.”

More specifically, the AP article stated that, “For agriculture prices in particular, the rising dollar means that U.S. grain exports to regions such as China and Europe, which have seen healthy crops of their own, will likely slow down.

“Wheat for September delivery dropped 57 cents, to settle at $7.65 a bushel on the Chicago Board of Trade. Corn for December delivery fell 23.75 cents, to $5.18, and November soybeans fell 58.5 cents, to $11.80 a bushel.

For the week, wheat fell 3.6 percent, corn dropped 11.4 percent, and soybeans tumbled 13.5 percent.”

Farm Bill- Conservation

Chris Clayton penned an article that was posted at The Progressive Farmer Online entitled, “Getting Paid for How You Farm,” which provided an interesting look at some of the conservation aspects of the recently passed Farm Bill. Market prices were mentioned as a factor in the development of new law.

Mr. Clayton indicated that, “High grain prices caused by burgeoning world demand forced lawmakers to make a major change in farm legislation. Using adjustments in the conservation provisions, the 2008 bill encourages farmers to produce more crops and keep fewer acres idle.

The farm bill reflects a shift to spend more money directly on working lands. And, it places less emphasis on set-aside programs such as the farm bill’s traditional conservation anchor program, the Conservation Reserve Program.”

The article explained that, “A large part of the push for stewardship payments comes from philosophy and trade. Europe, for instance, pays farmers much more than the U.S., but doesn’t draw as much criticism because the European Union’s farm program is based on stewardship and conservation practices on the land.

“Trading partners view most U.S. commodity programs as trade-distorting, but those arguments can’t be made with conservation payments.

“Throughout the farm bill debate, Sen. Tom Harkin (D-Iowa) constantly commented that farm payments should not be based on what farmers grow, but how they grow.”

Mr. Clayton stated that, “Under the new law, annual contract payments under the Conservation Security Program (CSP) and the cost-share aspects of the Environmental Quality Incentives Program (EQIP) dovetail to provide more incentives to farmers and ranchers to use the best environmental practices on their working land. ‘They will use EQIP for one-time structures, more or less, and CSP is continuous,’ Harkin says.

“Criticized for being too complicated, the CSP was retooled and renamed the Conservation Stewardship Program. It expanded to help more farmers who are conscious stewards of their working lands. Over the life of the new farm bill, the CSP will become USDA’s largest conservation program on a per-acre basis. The program, which had roughly 15.5 million acres entering this summer, will grow by more than 60 million acres through 2013.”

Meanwhile, a more specific look at the conservation provisions contained in the new Farm Bill were nicely outlined in a recent Congressional Research Service (CRS) report by Tadlock Cowan and Renée Johnson, which was published early last month.

The report noted that, “The 2008 enacted farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246) reauthorizes almost all existing conservation programs, modifies several programs, and creates various new conservation programs. A new Conservation Stewardship program replaces the existing Conservation Security Program and a new Agricultural Water Enhancement Program under the Environmental Quality Incentives Program is also authorized with mandatory funding. Other new programs include the Chesapeake Bay Watershed Program and a ‘Sodsaver’ provision to help preserve native sod, including virgin prairie in the Prairie Pothole National Priority Area. Significant modifications to existing programs include a reduction of the maximum enrolled acreage under the Conservation Reserve Program to 32 million acres and an increase in the cap for the Wetlands Reserve Program to over 3 million acres.”

And with respect to spending, the CRS report indicated that, “Estimated new spending on the conservation title — not including estimated conservation-related revenue and cost-offset provisions in the bill — is projected to increase by $2.7 billion over 5 years and $4.0 billion over 10 years. Total mandatory spending for the conservation title is projected at $24.3 billion over 5 years (FY2008- FY2012) and $55.2 billion over 10 years (FY2008-FY2017).”

The authors also provided this general background regarding conservation and the Farm Bill, “Agricultural conservation became a significant and visible policy focus in the Food Security Act of 1985. Since then, questions and concerns about conservation program funding, policy objectives, individual program effectiveness, comparative geographic emphasis, and the structure of federal assistance have been recurring issues in the debate shaping each successive omnibus farm bill. The 2008 farm bill is no exception. These long-standing issues arguably became even more apparent in this farm bill as they found their way into many individual program changes. This result may be a continuation of the more active profile taken by many conservation groups and their supporters in the 2002 farm bill. Unlike commodity programs, conservation program participation tends to be well represented by small and mid-size farming operations, according to the United States Department of Agriculture’s (USDA) Economic Research Service. The programs also enjoy wider public support. In an environment of pronounced domestic budget constraint, however, conservation groups and producers found themselves competing with other farming interests for the necessary resources to expand and continue many conservation programs. Budget concerns aside, several other issues emerged in the debate leading to enactment of the 2008 farm bill: funding priorities and payment structure, geographic targeting, program complexity, the importance of large-scale conservation efforts, and measurement of costs and effectiveness. These general policy issues — in various forms — raised questions central to the deliberations and outcomes in the enacted conservation title of the farm bill.”

The Conservation Security Program was discussed in more detail on page eight of the CRS report where the authors explained in part that, “The new CSP, beginning in 2009, will continue to encourage conservation practices on working lands, but will be different from the former program. It eliminates the three-tier approach, establishes 5-year rather than 10-year contracts, and requires direct attribution of payments, among other changes, thus requiring that USDA promulgate new rules for the program. More than $2 billion in funding is made available for existing contracts under the former CSP program.

“Rather than the three-tier payment system, payments for new CSP contracts will be based on meeting or exceeding a stewardship threshold — the level of resource conservation and environmental management required to improve and conserve the quality and condition of at least one resource concern. The stewardship threshold also must be met for at least one priority resource concern identified at the state level as a priority for a particular watershed or area of the state. Payments are based on the actual costs of installing conservation measures, any foregone income, and the value of the expected environmental outcomes. The CSP reserves 5% of the funds each for beginning farmers and ranchers and disadvantaged farmers and ranchers (Sec. 2704). Monitoring and evaluation of the stewardship plan to assess the environmental effectiveness is also an element of the new CSP.

The bill sets a target of enrolling 12.8 million acres annually under the new CSP. Individual producer payments are limited to $200,000 in any 5-year period per entity. Rather than annual sign-ups for the program, CSP enrollment will be contracted on a continuous basis. The type of eligible lands is expanded to include priority resource concerns, as identified by states; certain private agricultural and forested lands; and also some nonindustrial private forest lands (limited to not more than 10% of total annual acres under the program). Technical assistance will also be provided to specialty crop and organic producers, along with a pilot testing of producers who engage in innovative new technologies or participate in on-site conservation research. Producers may also receive supplemental payments for resource-conserving crop rotations that provide specific environmental benefits such as improving soil fertility, thus reducing the need for irrigation. Program payments may not be used for the design, construction, or maintenance of animal waste storage or treatment facilities or associated waste transport or transfer devices.”

Farm Bill- Base Acre Minimum

In other Farm Bill news, Dave Lefever noted on Friday at the Lancaster Farming Online that, “A little-publicized part of the new Farm Bill could potentially cut off government payments to thousands of farmers with small base acreages.

“But opponents of the measure, including the Pennsylvania Farm Bureau (PFB), believe its full implementation would be the result of a flawed reading of the Farm Bill on the way small plots are allowed to be combined.”

The item stated that, “The new provision in the Farm Bill prohibits direct payments, counter-cyclical payments, or average crop revenue election payments if the sum of the base acres on the farm is 10 acres or less.”

“In Pennsylvania alone, about 11,300 farms enrolled last year had 10 or less base acres — 31 percent of enrolled farms in the state —according to Richard Pallman, head of the USDA Farm Service Agency in Pennsylvania.

“Pallman said that the new Farm Bill measure will hurt farmers in Pennsylvania. But he also said that the total amount of payments to farms with 10 or fewer base acres is a fraction of total payments.”

Later, the article indicated that, “According to PFB President Carl Shaffer, the issue goes beyond farms of 10 acres or less. The new rule would also apply to farms that are larger, but have 10 or fewer base crop acres as defined by USDA. And some farmers, including Shaffer himself, grow crops on numerous farms, many of which fall under the 10 base acre limit.

“A common situation in Pennsylvania is farmers planting multiple plots with fewer than 10 base acres each. Pallman said he made a rough estimate that the hardest hit of these farmers would lose about $1,500 in annual payments under the new law.

PFB believes that the original intent of the measure was to allow farms with 10 or fewer base acres to be aggregated or combined with any farm or farms with base acres — whether owned or rented — to exceed 10 acres.

“But according to Pallman, the law is clear that the only way farm base acreages can be consolidated is through land purchase.”

DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “The Bush administration is prohibiting small farmers from combining their farm acreages so that they have the total of 11 acres required to qualify for farm subsidies under the new farm bill even though Congress specifically included such aggregations in the bill, according to the American Farm Bureau Federation and congressional farm leaders.”

The DTN article added that, “Aides to House Agriculture Chairman Collin Peterson, D-Minn., Senate Agriculture Chairman Tom Harkin, D-Iowa, and Senate Finance ranking member Charles Grassley, R-Iowa, confirmed today that producers have been complaining to members’ offices that USDA is not permitting any reorganizations.”

Doha

In an update posted at her blog on Friday, EU Commissioner for Agriculture and Rural Development Mariann Fischer Boel stated that, “The collapse of the recent ministerial meeting in the Doha Round of world trade talks was one of those occasions when most politicians want to keep out of the headlines. But the low profile of the EU in the blast of news coverage which followed the breakdown is particularly significant: it marks a sea change in international trade politics.

“The failure of the meeting was a serious defeat for trade and for international development. Nevertheless, I feel encouraged by the role which the EU has played in the agricultural discussions. If I did not take a large share of the headlines, this was not thanks to a political vanishing act. It was because, in marked contrast to previous trade rounds, no one was laying the collapse of the talks at the door of the EU. More than that: the EU had energetically urged the talks forwards.

This transformation of the EU’s role in World Trade Organisation (WTO) negotiations is due in large measure to reforms of the Common Agricultural Policy (CAP).”

The blog update added that, “The CAP has now moved on – dramatically. Following successive reforms, the vast majority of support paid to EU farmers now comes in the form of direct payments which are ‘decoupled’ from production.

“Decoupled payments leave farmers free to base production decisions on the market, and therefore do not distort trade under WTO rules. By shifting the emphasis of the CAP away from market management and towards decoupled payments, the EU has given itself room to accept much tighter WTO disciplines on its farm sector.”

Concluding, Commissioner Fischer Boel indicated that, “As we decide the best way forward, the EU will continue its domestic work of forging the CAP into a policy tool for the 21st century: one which addresses public concerns about a safe and secure food supply, competitive farming, care for the environment, and vibrant rural areas. This autumn, we expect agreement on the next stage of the process – the so-called CAP Health Check.

“Whatever the next decade may hold for the CAP, I am confident of this: the days are over in which the CAP acted as a brake on international trade talks. As it showed last month in Geneva, the EU now has its foot firmly on the accelerator.”

The editorial board at the Chicago Tribune noted on Saturday that, “It’s a safe bet most of the 6 billion people around the world are going about their business today oblivious to the fact that the World Trade Organization’s Doha round of free trade talks died last week. ‘The what?’ they’d respond in befuddlement, if asked.

“Even people involved daily in ongoing international trade aren’t reacting much differently. They’re buying and selling goods across borders and oceans, dealing with the logistical complications of high oil prices, currency fluctuations, the price of labor, unit cost, quality control and the like.

“This doesn’t mean that a successful completion of the Doha talks wouldn’t have mattered. It’s a big deal that for the first time in half a century, global trade talks have failed. The Doha talks—seven years in negotiation—would have slashed farm subsidies and further opened markets for manufactured goods and services.”

Keith Good

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