August 21, 2019

Farm Bill, Ethanol Tariff and the WTO, and the Farm Economy

Farm Bill: 10-Acre Issues

Brian Gadd reported yesterday at the Zanesville Times Recorder Online (Ohio) that, “U.S. Rep. Zack Space (Ohio) kept up a busy ‘recess’ schedule Tuesday, by hosting the first of three town hall meetings throughout the 18th Congressional District.

“Space brought along Rep. Collin Peterson, chairman of the House Committee on Agriculture, to give an update on the latest legislative information on agriculture and the Farm Bill at the Ohio University Zanesville/Zane State College Campus Center.”

Later, the article stated that, “Peterson also noted other details of the Farm Bill, including an emphasis on conservation programs, alternative energy and broadband development to help farmers and more funding for rural development.

He also mentioned a push to eliminate small farms, those with 10 acres or less, from participating in USDA programs, to help with a backlog of paperwork.

“‘If you are not a real farmer, a weekend farmer, I don’t think we should give you any money,’ Peterson explained. He cited the example of a ‘farmer’ who has 20 acres of land but only has riding horses.

“Taking the small farms off the rolls of those receiving government assistance could cull 260,000 farms from programs and cut down on the bureaucracy created to handle them.”

Dave Russell reported yesterday at Brownfield that, “From his perspective as Chairman of the House Ag Committee, implementation of the 2008 Farm Bill has gone pretty well, except for one policy that just happens to be a provision Collin Peterson himself initiated and that’s the 10-acre rule, which eliminated payments for producers with 10 or fewer acres.

“‘Our intent was to aggregate so that anyone that had an aggregation of less than 10 acres of base would be eliminated,’ Peterson said. ‘From what I understand they have now agreed to relent and do it the way we intended.’

“But Chairman Peterson also told Brownfield he’s keeping a close eye on what’s going on over at USDA.

“‘Given my experience trying to work with them and the fact that they vetoed it and opposed us, obviously I’m watching them very closely,’ said Peterson.”

The Brownfield link also included an audio interview with Chairman Peterson that lasted about two minutes.

Meanwhile, Julie Harker reported yesterday at Brownfield that, “Senator Chuck Grassley of Iowa says Congress may need to take further action on the 10-acre rule in the farm bill, ‘Secretary Schafer may be perfectly legal in the interpretation of the language that we wrote. And if he’s right from a legal standpoint then what I consider congressional intention didn’t get into the proper statutory language that got to the president.’

“Grassley and 23 other senators last week sent a letter to Schafer asking him to recognize Congress’ intention. And he ordered his staff to communicate to USDA what lawmakers discussed in farm bill conference committee, ‘I said make sure that you let the agriculture department know what the discussion was all about and so we may have to go back to introducing a bill and I think we ought to do that.’”

To listen to Sen. Grassley’s entire news briefing yesterday, just click here. His specific comments on the 10-acre rule can be heard here (MP3- about four minutes).

The “Washington Insider” section of DTN contained a more detailed discussion of the 10-acre rule today.

In part, today’s DTN update noted (link requires subscription) that, “With a stroke of its pen, [Congress] restricted eligibility for direct payments for small farms — those with fewer than ten acres. The reason was to make the program more efficient and save money, the Committee chairmen said. USDA set to work to write new rules to comply with the new law, and found that the change would affect the considerable number of 255,000 farms nationwide but would reduce direct payments relatively little, only about $24 million.

“In its draft rules, USDA attempted to avoid end-runs by limiting producers’ opportunity to consolidate to avoid the cut-off. It recently told its Farm Service Agency County Committees not to approve requests for farm combination reconstitutions of farms having base acres of 10 acres or less if the request was received after the date of enactment of the 2008 Act. An exception would be provided if one of the farms being consolidated undergoes a change in land ownership.

“This brought complaints from some producers. In response, a number of lawmakers now say that Congress intended that producer be allowed to consolidate to avoid the cutoff. In fact, Senator Grassley, R, Ia., commented to the press that the manager’s report of the farm bill specifically included such language, and that ‘the Department of Agriculture can’t just make up its own rules when implementing a law that is clearly written.’”

After more analysis, the DTN item concluded by stating that, “The ‘ten-acre’ flap likely will be sorted out quickly, on the basis of what the law really says. However, the application of extremely complex programs to farming operations that differ widely in their resources and scale and even in their economic objectives will always be a severe challenge. And, as program rules become increasingly complex, the challenge to do so equitably will become even greater, Washington Insider believes.”

Ethanol Tariff and WTO Trade Concerns

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “In a phone call with farm reporters this morning, Sen. Charles Grassley, R-Iowa, said he also will resist efforts to lower the tariff, saying that the tariff is ‘in full compliance with our World Trade Organization obligations.’ Sen. Dianne Feinstein, D-Calif., had sent a letter to the U.S. Trade Representative’s office asking whether the tariff violates the WTO.

“The tariff, however, is going to be higher than the blenders’ credit, which will drop to 45-cents a gallon in January.

Brazil has complained about the tariff and threatened WTO action. Grassley argues Brazil and other Latin American countries can send up to 7 percent of U.S. production duty free into the U.S. through the Caribbean Basin Initiative and Brazil has yet to send the full amount allowed under that agreement.

“If the U.S. is producing 9 billion gallons of ethanol, the CBI allows 630 million gallons duty free. Importers are taking in only about 70 percent of the potential under the CBI, Grassley said. That suggests there is still potential to import nearly 200 million gallons more ethanol duty free. As U.S. production increases, so do those duty-free levels as well.”

To listen to Sen. Grassley’s entire news briefing yesterday, just click here. To listen to some of his comments regarding the ethanol tariff and the WTO, just click here (MP3- about two minutes).

Farm Economy

Neil Irwin reported in today’s Washington Post that, “The trucks rumble down the main drag of this farm town [Blair, Nebraska], all day long, the ones heading east brimming with grains of No. 2 Yellow Corn, the ones going west filled with Sweet Bran, a cattle feed that looks like breakfast cereal and smells like warm beer.

That eighteen-wheeled evidence of prosperity shows why the Plains states are a bright spot in the otherwise gloomy national economic picture. Here, the housing market is holding up just fine, the banks are making plenty of loans, and employers keep adding jobs.”

The Post article noted that, “The good times in farm country show the difficulty facing policymakers grappling with the nation’s economic distress, underscored yesterday by data indicating the steepest rise in monthly wholesale prices in 27 years and a 17 year low for new housing construction.

“The numbers are gloomiest for Sun Belt states with eviscerated housing markets, and there, interest rate cuts and stimulus checks are helping ease the pain. But in the area stretching from the oilfields of Texas north to the Dakotas, where the economy is holding up fairly well, those government actions may prove unnecessary — and even contribute to new bubbles.”

Mr. Irwin added that, “The price of farmland in Nebraska has doubled in the past three years, primarily reflecting the boom in commodity prices. The increase also reflects the impact of rate cuts by the Federal Reserve that enabled buyers to bid up land with borrowed money. But if crop prices drop toward historical norms, it could mean sharp decreases in land prices that would devastate some farmers.

“Corn has risen to nearly $6 a bushel, from around $2 in 2005; earlier this summer it was as high as $7.50. For an average-sized Nebraska farm with an average yield, that means an extra $900,000 in revenue (though that has been offset significantly by higher costs for fertilizer and fuel).”

After a more detailed look at issues associated with the agricultural economy, the Post article concluded by stating that, “The strong sales environment is helping trigger new long-term investment. Wal-Mart has scaled back on its expansion plans nationally, but it is in negotiations to build a new store in Blair [Blair, Nebraska], which is about 35 miles northwest of Omaha. Several other retailers are opening nearby.

“This isn’t Blair’s first retail boom. ‘The ’70s, those were some good years,’ said Realph [Jim Realph, who worked in the farm credit system in the 1980s and is now mayor of Blair], who is also a farmer, real estate broker and seller of crop insurance. ‘Everybody was making money.’

“Then that commodities boom ended with a thud, as prices plummeted in the early-1980s. ‘We lost all our main street businesses,’ Realph said, sitting at his desk as agricultural prices on the Chicago Board of Trade flash on a flat-screen monitor up on a shelf, interspersed with weather maps. ‘We lost a lot of the people who were coming into Blair to buy things. We used to have a Penney’s, you know.’

He is proud of the new prosperity but cautious. ‘There are no straight-line graphs,’ Realph said. ‘Things just don’t go up forever. I don’t know when this will end, or whether it will be bad when it does, but this will go the other way.’”

For more on the agricultural economy and concerns about a potential downturn, see this update from August 7, 2008- “What Happens if Farm Commodity Prices Fall Substantially?

Keith Good

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