FarmPolicy

March 23, 2019

House-Senate Ag Committees, Market Prices, and ERS Livestock Industry Report

House-Senate Ag Committees

A news release issued yesterday by the House Agriculture Committee stated that, “Members of the House Agriculture Committee met today to organize the Committee and adopt the Committee’s rules for the 111th Congress.”

The committee also ratified the members and leadership of all six subcommittees. Agriculture Committee Chair Collin C. Peterson (MN) and Ranking Minority Member Frank D. Lucas (OK) serve as ex officio Members of all subcommittees.”

Yesterday’s news release indicated that, Rep. Leonard L. Boswell (D-Iowa) will chair the Subcommittee on General Farm Commodities and Risk Management- the jurisdiction of this Subcommittee includes: “Program and markets related to cotton, cottonseed, wheat, feed grains, soybeans, oilseeds, rice, dry beans, peas, lentils, the Commodity Credit Corporation, risk management including crop insurance and commodity exchanges.”

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Stimulus for Agriculture: U.S., Argentina and Canada; ACRE, and Market Prices

Stimulus for Agriculture: U.S

Greg Hitt and Elizabeth Williamson reported in today’s Wall Street Journal that, “The U.S. economic stimulus package neared $900 billion in the Senate, as President Barack Obama wooed Republicans ahead of an expected House vote Wednesday.

“The rare trip by a president to Capitol Hill revealed the urgency in Congress and the White House over a cure for the souring economy. More than 70,000 layoffs were announced this week and fresh data showed unemployment last month rose in all states.”

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Food and Commodity Prices-Market Volatility; Vilsack on the Farm Bill; Lula and Obama

Food and Commodity Prices-Market Volatility

Javier Blas, writing on Sunday at the Financial Times Online, reported that, “The world faces ‘the real risk of a food crunch’ if governments do not take immediate action to address the agricultural impact of climate change and water scarcity, according to an authoritative report out on Monday.

Chatham House, the London-based think-tank, suggests that the recent fall in food prices is only a temporary reprieve and that prices are set to resume their upward trend once the world emerges from the current downturn.

“‘There is therefore a real risk of a ‘food crunch’ at some point in the future, which would fall particularly hard on import-dependent countries and on poor people everywhere,’ the report states. ‘Food prices are poised to rise again,’ it adds.”

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“Analysis from Brussels”- by Roger Waite- CAP Health Check Deal Formalised – But Growing Concerns About Market Situation

CAP Health Check Deal Formalised – But Growing Concerns About Market Situation

By Roger WaiteRoger is editor of AGRA FACTS, the Brussels-based newsletter on EU agriculture policy, and is a Journalism Fellow at the German Marshall Fund of the United States. “Analysis from Brussels” is posted exclusively at FarmPolicy.com.

EU Agriculture Ministers have formally adopted the legislative texts of the CAP Health Check this week – 2 months after the political deal agreed under the French Presidency of the Council. These further steps towards a more market-oriented CAP come as EU markets are facing serious problems – for dairy in particular – and the Commission has even announced the reintroduction of export refunds, and the likely purchase of significant public stocks of butter, milk powder and cereals expected in the months ahead. There is also growing pressure to use the remaining available market instruments to help the pigmeat and sugar sectors. In this context, I can’t help wondering if the Health Check would have been agreed so relatively easily if the end-game was now, rather than last November. Above all, the agreed 1% increase in dairy quotas for 5 years, starting in April 2010, would have had a much bumpier ride – even if no one appears to be questioning the de facto abolition of the quota regime in 2015. It was an irony not lost on observers that this week’s Farm Council discussed these market difficulties at the same time that it looked at a Commission report on high food prices, demanded by EU leaders last July!

Anyway, with the ink now dry on the Health Check, I thought I’d try and draw a few conclusions about what was agreed.

The Health Check was never intended to be a major reform – more a completion of various issues deferred in the 2003/4 reforms, and a number of points aimed at making the CAP more defendable vis-à-vis the European taxpayer, ahead of the next reform – the really big reform – for European farm policy after 2013.

In terms of achieving more market orientation, the Health Check agreement broadly accepted the Commission approach. Compulsory set-aside, potato starch quotas and a dedicated energy crop premium (45 € per hectare) are abolished; dairy quotas are clearly on the way out – and even though the foreseen increase in quotas (5x 1%, with the full 5% in Italy from year 1) will not be fully utilised, the main point is that the quotas will no longer be a production restraint (except maybe in Italy). [Just to clarify this, Italy has always exceeded its quotas. This is because they were established in the early 1980s on the basis of official production figures at the time – but many Italian producers had always significantly under-reported their production. The quotas did very little to stop this “black milk” economy until the issue was finally re-examined and a sort of amnesty agreed in the 1992 Mac Sharry reform. Despite subsequent increases in 1999 and 2003 reforms, Italy still produces 5-6% more than its quota – and pays a heavy superlevy bill every year, as a result. The Health Check agreement for them to front load their 5% quota increase, is therefore aimed more at reducing the superlevy bill than providing any incentive to produce more.]

One Health Check issue agreed with relatively little fuss, which symbolises just how far the CAP has come in recent years, was the agreement to abandon public intervention for barley, sorghum [and rice & pigmeat], and to limit the automatic purchase of common wheat to just 3 million tonnes every year. Greater volumes can be bought in, but only via a tendering system which allows the Commission to controls volumes (& costs). (For the record, intervention for rye was abolished in 2003, and this is the last year that maize intervention will be allowed.) Curiously, Ministers didn’t even realise that they had agreed to abolishing the long-standing monthly increment to the cereals support price – an issue which was blocked by French President Jacques Chirac himself in 1999. Despite all of these changes towards fewer and simpler market instruments, Commission officials are adamant that there are sufficient tools still available to help the market in times of difficulty. It will be interesting to see if they are saying the same thing in 2-3 months time!

On direct payments, there has been a clear move to greater decoupling – albeit over a slightly longer period than proposed – but suckler cow and sheep premium payments will be the only formally coupled payments still remaining in 2013. Member States are encouraged to move their “Single Farm Payment” model towards a flat-rate hectarage payment (per region) and away from a “historically-based model” (on the basis of 2000-2002 production) – but there is no obligation to do so. Despite pressure from the “New Member States” to change the allocation of funding towards a much fairer & more transparent flat-rate payment across the EU, this more fundamental question was well & truly excluded from the Health Check negotiations. This will be one of the biggest elements in the next reform – and the “Old member States” may yet come to regret their insistence on not touching the issue this time around.

Within the debate on how Member States can spend the EU funds for direct payments available to them, the existing “Article 69” concept has been broadened, giving more flexibility to Member States on using up to 10% of their direct payment “national envelopes” for more targeted issues still within the CAP 1st Pillar (i.e. without any need for co-funding them). The new options include potentially coupled compensatory payments for sheep, dairy, beef & rice farming, and public contributions to crop insurance or mutual funds to combat animal & plant diseases. To underline that this should not be “re-coupling by the back door”, the amount of potentially non-Green Box support [as defined within the WTO] is limited to 3.5% of the national envelope.

The other big issue was the move to establish options within Rural Development programmes [i.e. in the 2nd Pillar] to address the “New Challenges” of climate change, biodiversity loss, water scarcity and renewable energies – and the need to shift more funding from the 1st Pillar in order to finance them through the so-called compulsory modulation instrument. The end deal saw agreement that the existing rate of modulation (5%) should be increased by 2% in 2009 [the 2010 budget], rising by 1% a year to +5% in 2012 [the 2013 budget]. All farmers receiving less than €5000 in direct aid (more than three-quarters of EU farms) will continue to be exempted, as are all producers in the 12 New Member States (until 2012/13) because they are having their direct payments phased in to “old Member State “ level over 10 years.

On top of this, the Council agreed to Progressive Modulation, namely that farms receiving more than €300 000 in direct support every year will face an additional 4% shift in funds from 2009 onwards. This is much less than the Commission had proposed, and a long way from the €300 000 cap on direct aid per farm that was discussed in the past – and remains a controversial issue in the USA. However, it is the first time that the EU has agreed to any sort of instrument along these lines, and Commissioner Fischer Boel was very happy in the final deal to have introduced a mechanism that can be tightened next time.

In all, the additional modulation will see nearly €500m shifted to Rural Development this year, rising to €912m in 2011 and €1159m in 2012, some €3.2bn in total – all of which will have to be co-financed by Member States (but at much lower rates than usual – +25% & +10%, rather than the usual +50% & +25%).

The “New Challenges” idea is a good way of enabling the Commission to better defend the CAP budget in future years – as even the most euro-sceptic commentators accept that these are burning issues that are maybe best addressed at EU level. Nevertheless, for complicated domestic political reasons, Germany was insistent that a 5th New Challenge should be added aimed at providing measures to accompany the phasing out of dairy quotas, i.e. a Milk Fund.

In the end-game politicking, there were obviously a number of concessions, with the most obvious lubricants from the Commission being financial. The Commission agreed that the €90m saved by abolishing the energy crop premium should be divided up among the New Member States. And for the Old Member States, it was agreed that they could have more flexibility to use “unclaimed” direct aids from their national envelopes. (For example, under current rules, if farmland is sold off, the entitlements linked to that land is returned to the national envelope, but can never be claimed because the land is no longer in production.) This additional funding can be used for the targeted payments under the new Article 68, it was agreed.

Winners & losers
As I said at the start, this was not a massive reform, and so the magnitude of gains & losses should be viewed accordingly. All Ministers will have gone home with 2-3 of their main demands having been met in order to sell it as a good deal – that is normal. Nevertheless, it’s fair to say that a few Ministers did slightly better than others. For example, German Minister Ilse Aigner (appointed just a few days before the decisive meeting) got more or less what she was after with the Milk Fund, plus various assurances over the front-loading of Italian dairy quotas. Italian Minister Luca Zaia got his front-loaded dairy quota increase, which suggests that Italy might at least once manage not to exceed it quotas (before they are abolished). French Minister Michel Barnier, who chaired the meeting and co-wrote the compromise texts, appears to have emerged with absolutely all items on his wish list – most of which were more of a technical nature. Even though the New Ministers also made gains from the original proposals – the extra €90m and more flexibility on various issues – Latvia, Estonia & Slovakia voted against the final deal, and the Czech Republic abstained. Why? They perceived [perhaps accurately] that the Old Member States did better than the New Member States, and drew the [dubious] conclusion that the Health Check had therefore widened, rather than reduced the discrepancy between “old” and “new”.

Finally, I think Commissioner Fischer Boel comes out of the deal quite successfully. Yes, the modulation figures were negotiated down – but she still got a further 5% increase [whereas most of us expected a 4% figure]. The progressive modulation concept was significantly diluted – but the mechanism is there. And on all of the other issues, she basically got what she wanted – even if it will take a little bit longer for a few of the issues.

By Roger Waite

Vilsack Addresses USDA, Economic Stimulus- Rural America, and Ag Market Issues

Vilsack Addresses USDA

Philip Brasher reported yesterday at The Des Moines Register Online that, “Agriculture Secretary Tom Vilsack says the government must get Americans to eat more healthful foods while also boosting crop production to feed a growing world population.

“The two goals have often been at odds, Vilsack said in a meeting with USDA employees in the atrium of the department’s headquarters Thursday.”

(To view Secretary Vilsack’s entire presentation from yesterday, which included a question and answer period with USDA employees, just click here. Brief audio clips on specific issues that were discussed at yesterday’s meeting are also available here).

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Vilsack Gets to Work, and Price Issues

Vilsack Gets to Work

Philip Brasher reported in today’s Des Moines Register that, “Tom Vilsack began work Wednesday as the nation’s new agriculture secretary in his office overlooking the National Mall after taking the oath of office and participating in his first White House Cabinet meeting.

“Vilsack installed a fellow Iowan as his chief of staff, John Norris, the chairman of the Iowa Utilities Board. Norris’ wife, Jackie, already had a plum job as chief of staff to first lady Michelle Obama. John Norris served as chief of staff to Vilsack during his first two years as governor of Iowa.”

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Vilsack Confirmed, and Trade

Categories: Doha / Trade /Farm Bill

Vilsack Confirmed

Reuters writer Charles Abbott reported yesterday that, “The U.S. Senate confirmed former Iowa Gov. Tom Vilsack as U.S. agriculture secretary on Tuesday, a job he plans to use to promote renewable energy including biofuels and put healthier food in America’s school meals.”

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Food- Commodity Prices, and Trade Issues

Food- Commodity Prices

New York Times writer Jack Healy reported last week that, “Consumer prices advanced at their slowest pace in 50 years in 2008, raising concerns about deflation as the weakening economy suppressed demand for cars, clothing, electronics and a host of goods and services, the government reported on Friday.

“The Bureau of Labor Statistics reported that the Consumer Price Index fell by a seasonally adjusted 0.7 percent in December, its third consecutive monthly decline, after sliding 1.7 percent in November. The so-called core rate, which excludes volatile food and energy costs, was unchanged.

“For all of 2008, consumer prices grew just 0.1 percent while the core rate rose 1.8 percent, the Labor Department reported.”

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House Ag Committee, EU Issues, and the Ag Economy

House Ag Committee

A news release issued yesterday by the House Agriculture Committee indicated that, “Agriculture Committee Chair Collin C. Peterson of Minnesota announced the Members of Congress selected to serve on the House Agriculture Committee for the 111th Congress today.

“The House Democratic Steering Committee has nominated 28 Democrats, including 11 freshmen Members and 17 returning Members, to serve on the House Agriculture Committee. The House Republican Conference has named 17 Republicans to serve on the Committee and has left one seat vacant.”

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Vilsack Hearing, and FAPRI Report (Food Prices)

Vilsack Hearing

Andrew Martin reported in today’s New York Times that, “Former Gov. Tom Vilsack of Iowa said that if he is confirmed as President-elect Barack Obama’s agriculture secretary, he would aggressively pursue new fuel sources to produce ethanol, promote locally grown fruits and vegetables and look for other ways to increase farmers’ incomes, in areas like wind power and organic farming.

“But while Mr. Vilsack acknowledged the current struggles of the corn-based ethanol industry — with Iowa at the center — he stopped short of endorsing new federal initiatives to give it a boost.

“Mr. Vilsack also said any research promoting new types of biofuels needed to benefit more than just the Corn Belt.”

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Vilsack Hearing, and Trade Issues

Vilsack Hearing

Associated Press writer Mary Clare Jalonick reported today that, “President-elect Barack Obama’s pick for agriculture secretary, former Iowa Gov. Tom Vilsack, was expected to face an agreeable group of senators as he takes questions from the Senate Agriculture Committee.

“The farm-friendly panel has had few qualms with Vilsack, who served eight years as chief executive of a state that is a leading U.S. crop producer. The Democratic chairman of the panel is Iowa Sen. Tom Harkin, one of Vilsack’s biggest supporters. His confirmation hearing was set for Wednesday.

“Vilsack did not focus heavily on agricultural issues as governor. But he headed gubernatorial groups that focused on biotechnology and ethanol.”

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Crop Estimates

Yesterday the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) released its 2008 Crop Production Summary.

In part, the report stated that, “Corn for grain production [related graph] in 2008 is estimated at 12.1 billion bushels, up 1 percent from the November forecast but 7 percent below last year’s record high. The average U.S. grain yield is estimated at 153.9 bushels per acre, up 0.1 bushel from the November forecast and 3.2 bushels above 2007. The 2008 yield is the second highest on record, behind 2004, and production is second largest, behind last year.”

The NASS report added that, “Soybean production [related graph] in 2008 totaled 2.96 billion bushels, up 1 percent from the November forecast and up 11 percent from 2007. U.S. production is the fourth largest on record. The average yield per acre is estimated at 39.6 bushels, 0.3 bushel above the November forecast but 2.1 bushels below last year’s yield. Harvested area is up 16 percent from 2007, to a record 74.6 million acres.”

A NASS news release from yesterday included this brief recap of the production results: “An economic downturn, floods in the Midwest, hurricanes in the South and drought-like conditions in various areas of the United States made 2008 one of the most volatile years in history for the agriculture industry. In spite of all the challenges U.S. farmers produced an abundant corn and soybean crop, according to the 2008 Crop Production Summary released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service.”

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Agricultural Outlook- Biofuels, Farm Bill (“Sodsaver”), and Trade Issues

Agricultural Outlook- Biofuels

Reuters writers Robert Rampton and Charles Abbott reported on Friday that, “American farmers are in a bind this year — land, fuel and seed costs are up but crop prices are down sharply after a three-year, ethanol-fueled boom, say leaders of the largest U.S. farm group.

“‘We’re looking for less net farm income … The only question is how much less,’ said Bob Stallman, president of the 6 million-member American Farm Bureau Federation, in an interview ahead of the group’s annual convention.

“About 5,000 people are expected at the convention in San Antonio, Texas, which opens on Sunday. Farmers will hear the first forecasts of U.S. harvests and farm-gate prices this year before 369 delegates vote on farm policy proposals.”

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Farm Bill- “Sodsaver” Debated, Vilsack, Ag Commodity Prices, and Executive Branch Issues

Farm Bill- “Sodsaver” Debated

Thom Gabrukiewicz reported yesterday at the Argus Leader Online (South Dakota) that, “As five Midwestern governors ponder whether to participate in the federal ‘Sodsaver’ program, farmers, environmentalists and others are trying to make their case for taking part or staying out of it.

“Part of the 2008 farm bill, Sodsaver would remove crop insurance coverage for five years on native grasslands that farmers plow into crop production.

“The provision seeks to protect the Prairie Pothole National Priority Area, a sweep of land from Minnesota to Montana created during the last ice age. It includes all East River counties.

“Governors in South Dakota, North Dakota, Montana, Minnesota and Iowa must decide whether to participate. They are being asked to make a decision by Feb. 15; so far, none has.”

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Ag Commodity Prices- Supply, Ethanol and Oil, and Doha

Ag Commodity Prices- Supply

Bloomberg writer Alan Bjerga reported yesterday that, “Corn prices that reached a record $7.9925 a bushel last year are headed for a decade-long slump below $4 as production in the U.S., the world’s top grower, catches up with demand, according to congressional analysts.

“The average cash price will bottom out at $3.65 in the 2012-2013 marketing year, then rise no higher than $3.94 through 2019, the analysts from the Congressional Budget Office said in a document used as part of a government-wide estimate of federal spending over the next decade. Corn futures closed today at $4.165 a bushel on the Chicago Board of Trade.”

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Production Costs and Profitability, Vilsack Hearing, and Doha

Production Costs and Profitability

Bloomberg writer Madelene Pearson reported today that, “Global prices for fertilizer and agricultural chemicals are expected to be ‘significantly’ lower in 2009 than the previous year driven by a fall in demand and the global financial crisis, Rabobank Groep NV said.

“Prices for major farm inputs such as crop nutrients have fallen between 60 percent and 75 percent from records reached in mid-2008, the bank, the world’s largest lender to farmers, said today in an e-mailed statement. Demand for farm chemicals is expected to be lower in 2009 than the previous two years, it said.”

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