February 25, 2020

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).

Mr. Brasher indicated that, “Vilsack hasn’t spelled out specific policy ideas, but he promised at his Senate confirmation hearing to increase the production and consumption of fruits and vegetables.

“He also warned the employees to brace for budgetary belt tightening once the economic stimulus package has passed, but he gave no hints as to where the administration might trim spending.

“The government should not ‘shoulder the next generation and future generations in this country with enormous debt which then burdens their future and makes it difficult for them to prosper,’ Vilsack said.”

Chris Clayton pointed out yesterday at the DTN Ag Policy Blog that, “Secretary of Agriculture Tom Vilsack said Thursday one of his very first key meetings with staff at USDA that morning focused on getting up to speed on civil rights claims against the department.

“‘There are thousands of people who have made claims,’ Vilsack said. ‘They need to be completed and we need to create systems to ensure we don’t continue to have claims at the number and magnitude that we have had in the past because it takes time, it takes money and it takes energy away from the other important programs that the department has, and it doesn’t have to be.’

“USDA’s handling of civil rights claims came up at Vilsack’s confirmation hearing earlier this month and Vilsack made it clear at the time that one of his early goals would be to resolve some of the outstanding issues with discrimination regarding programs at USDA.”

And more specifically on the issue of filling other key positions at USDA, DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Speculation on nominations for U.S. Department of Agriculture subcabinet posts is intensifying on Capitol Hill and among lobbyists, but Agriculture Secretary Tom Vilsack said after being sworn in Wednesday that he would not discuss any personnel matters until they are announced.

“After being sworn in by Vice President Joe Biden, Vilsack told reporters in his office at the Agriculture Department that he and his staff ‘are going to take our time’ in selecting appointees. Vilsack said he thinks ‘it’s unfortunate there are those who would speculate on (who is going to hold) positions.’”

Mr. Hagstrom noted that, “Meanwhile, a member of the House Agriculture Committee and a key Senate aide said they believe Chuck Hassebrook, executive director of the Nebraska-based Center for Rural Affairs, is a top candidate for deputy secretary. But Hill sources said a Hassebrook nomination would be highly controversial and might not make it out of the Senate Agriculture Committee because he has been such a strong critic of farm programs. Hassebrook is an advocate of strict farm-program payment limits and favors more spending on rural development programs. Hassebrook urged members of Congress to vote against the 2008 farm bill.

“Hassebrook said in an interview Thursday that he has ‘talked to folks’ within the Obama administration about the position, but said he didn’t know what the possibility would be for him to be named to one of USDA’s top posts.”

Economic Stimulus- Rural America

Dow Jones News writer Fawn Johnson reported yesterday that, “The House Energy and Commerce Committee on Thursday approved rules for billions in government funds to spur high-speed Internet networks in unserved and underserved areas.

“House Democrats have proposed $6 billion in Internet investments as part of a sweeping economic stimulus bill that the full House is expected to vote on next week.

“The Internet funding portion of the stimulus bill — a potential huge boon to phone, cable, and wireless companies — bears the stamp of President Obama, who wants to blanket the country with high-speed connections. The $6 billion is considered a down payment on efforts Obama will make in this area over the next several years.”

The article added that, “The Internet grants will be doled out by the Commerce Department and the U.S. Department of Agriculture.”

Bloomberg writer Molly Peterson reported yesterday that, “A U.S. House panel approved more than $2.8 billion in economic-stimulus grants to expand access to high-speed Internet service in rural and underserved areas.

“The proposal, approved today by the House Energy and Commerce Committee, would create a new broadband-deployment grant program at the Commerce Department’s National Telecommunications and Information Administration. The plan is part of an $825 billion economic-stimulus package sought by President Barack Obama.”

A news release issued yesterday by the American Farm Bureau Federation stated that, “An economic stimulus bill up for consideration by lawmakers must include investment in programs that will strengthen American agriculture and rural life, the American Farm Bureau Federation said today.

“‘America’s farmers, ranchers and rural communities are vital to our nation’s economic future,’ AFBF President Bob Stallman wrote in a letter to members of the Senate and House appropriations committees.

“‘It is crucial to the future of rural communities that broadband deployment be approached in a manner that produces long-term economic growth,’ Stallman said. He urged the inclusion of $6 billion in the American Recovery and Reinvestment Bill of 2009 to build a reliable rural broadband network that is affordable, moves data quickly and securely, and can be adapted as telecommunications technology changes.’”

Ag Market Issues

David B. Schweikhardt, a Professor in the Department of Agricultural, Food, and Resource Economics at Michigan State University, penned an item that was published last week at the Michigan Farm Bureau’s webpage entitled, “The Credit Crisis and Agriculture: Too much happy talk?

In part, Dr. Schweikhardt noted that, “The impact of the credit crisis on the state of Michigan is in the news daily. Much of this attention has focused on non-agricultural industries in Michigan, especially the automobile industry.

“As the credit crisis has unfolded in recent months, virtually everyone in the agricultural sector – from the Secretary of Agriculture on down – has maintained that agriculture will not be affected by the crisis. In many cases, this ‘happy talk’ can be summarized as follows: ‘Agriculture will be not affected by the credit crisis because we had record net farm income last year, there were record exports, the farm sector’s balance sheet is strong, and the credit crisis involves irresponsible sub-prime borrowers, not farmers.’

“While this view – that the agriculture sector has such financial strength that it can withstand a financial crisis that is affecting every other sector of the economy – may prove to be true, it is time to recognize that the credit crisis could affect agriculture through several different economic channels.”

The piece stated that, “First, when considering the availability of credit for the 2009 crop year, farmers should expect lenders to demand more information on repayment ability. This is likely to require additional information on worst-case scenarios, collateral availability, and liquidity. Increased information standards and higher underwriting requirements are increasingly demanded from other commercial borrowers. There is no reason to believe that farmers can escape this trend because of last year’s farm economy.”

Second, if the credit crisis results in a worldwide recession, as is now expected, the impact on export demand is likely to be felt in commodity markets. For example, during 2005-2007, export demand remained strong, even in the face of higher commodity prices. At least some of this strength was explained by the increased demand for protein (meat) that is caused by rising income levels in countries such as China and India. But the reverse also applies – if income growth in those countries is reduced by a worldwide recession, those countries are likely to witness a decrease in the demand for protein, thereby limiting U.S. export demand and putting downward pressure on commodity prices,” the article said.

And Dr. Schweikhardt indicated that, “Third, a worldwide recession is also likely to affect the price of oil. If income growth slows, demand growth for oil is likely to slow, reducing oil prices. Because corn prices are now tied to oil prices through the ethanol market, declines in oil prices are also likely to put downward pressure on corn and other commodity prices.”

In market news from yesterday, Bloomberg writer Sungwoo Park reported today that, “Corn and soybeans both dropped for a second day on speculation the worsening global recession will curb demand for the crops from the U.S., the world’s biggest exporter of the grains.

“China’s economic slowdown, already the deepest in seven years, is set to worsen as the global recession pummels its exports, a Bloomberg survey of economists showed. Corn has declined 52 percent from a record in June and soybeans are down 38 percent from the all-time high in July as demand has slowed.”

However, Dow Jones News writer Shane Romig reported yesterday that, “Images of sun-baked cattle skeletons and shriveled crops have replaced the ocean of green leaves usually carpeting Argentina’s Pampas at this time of year, as the country suffers from what farmers are calling the worst drought ever seen in this agricultural powerhouse.

“Day after day of searing heat and cloudless skies are stoking fears of a sharp drop in rural income and nationwide tax collection, and have set off an international price rally due to doubts over whether Argentina will be able to deliver its expected share of grain to world markets this year.

“Argentina is the world’s third largest exporter of corn and soybeans and leads shipments of soymeal and oil.

The seriousness of the drought became clear Wednesday, when the Agriculture Secretariat cut its forecast for soybean area by more than 7% as farmers didn’t bother to plant late crops into the parched soil.”

Yesterday’s article added that, “In addition to a likely conflict with farm groups, the drought is expected to have a serious effect on government coffers and the broader economy. Soybeans are Argentina’s leading export.

“The damage comes at a terrible time, with economic growth slowing at an alarming pace due to the international financial crisis.

“Many economists expect the country to dip into a recession during the first half of this year.”

With respect to oil prices, an update posted yesterday by Keith Johnson at the Environmental Capital Blog (The Wall Street Journal) stated that, “So much for the idea of an economic turnaround that could send oil prices higher, as they have done in recent days. Dismal U.S. crude oil inventory data released this morning sent crude futures down more than 6%, scurrying toward $40 a barrel.

The inventory data showed a huge increase in U.S. crude stockpiles for the second consecutive week—a 6.1 million barrel increase compared to market expectations of a 1.4 million barrel inventory build. That’s a pretty clear sign that a recovery in U.S. oil demand is still on walkabout. Add that to equally grim U.S. housing numbers released earlier Thursday, and oil bears were unleashed.”

Nonetheless, Brian Baskin reported in today’s Wall Street Journal that, “Crude-oil futures rose slightly as hope for an economic-stimulus package in the U.S. erased losses stemming from a large increase in oil inventories.

“Light, sweet crude for March delivery rose 12 cents, or 0.3%, to $43.67 a barrel on the New York Mercantile Exchange. Crude is up four consecutive trading days, but still down 2.1% this year.

“Oil prices staged a rally in the final hour of trading before settlement as an economic-stimulus plan began to work its way through the House of Representatives, with the White House urging swift action. The chance of quick passage of a stimulus bill sparked a broad turnaround in U.S. equities and commodities markets, which had spent most of the day down.”

Today’s Journal article indicated that, “The deteriorating U.S. economy has played a central role in pulling oil prices down from above $145 a barrel in July to below $50 a barrel at the start of 2009.

“Crude futures had been battered earlier Thursday by a larger-than-expected increase in U.S. oil and refined-product inventories in weekly data from the Energy Information Administration. Oil inventories rose 6.1 million barrels nationwide, including a 200,000 build at Cushing, Okla., the Nymex contract’s delivery point, where stocks already were at a record level.”

More specifically with respect to trade, an update posted yesterday at the WTO Online stated that, “Director-General Pascal Lamy, in remarks at the United Kingdom’s Department for International Development on 22 January 2009, said that the WTO will soon issue periodic reports on global trade trends to facilitate members’ discussions on coping with the economic crisis, and would be organizing further meetings on trade finance. He commended the Department for being ‘a global leader in promoting trade as an engine for growth and development’”.

And Reuters News reported today that, “The World Trade Organisation hopes that trade powers will renew efforts to reach a deal in the long-running Doha talks to free up global commerce this year, WTO Director-General Pascal Lamy said on Thursday.

“Lamy, speaking at the U.K. Department for International Development, said developing countries were particularly at risk from the slowdown in trade caused by the global crisis.

“‘Today it is clear that trade is one of the casualties of this economic crisis and that we run the risk that one of the engines of growth — in fact, one that is very important for many developing countries — stalls,’ he said, according to a text of his remarks issued by the WTO.”

Lastly today, Stephen Castle reported in today’s New York Times that, “Two years after it was supposed to have gone away for good, Europe’s ‘butter mountain’ is back.

“Faced with a drastic drop in the price of dairy goods, the European Union will buy 30,000 tons of unsold butter — reviving one of the abiding symbols of Europe’s generous farm subsidy system.

“While the butter sits in cold storage, more than three times that amount in skimmed milk powder will accumulate in warehouses on the European Union’s expense.

“The collapse in the price of dairy products has also prompted officials to announce that they will resume subsidies for the export of a range of goods. Officials argue that, by historical standards, the purchase is insignificant. In 1986, the European Union bought 1.23 million tons of butter.”

Keith Good

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