Economic Stimulus Issues
Earlier this week, the Congressional Research Service (CRS) issued a report entitled, “Agriculture, Nutrition, and Rural Provisions in the American Recovery and Reinvestment Act (ARRA) of 2009.”
The CRS report indicated that, “The Obama Administration and many Members of Congress are calling for a new economic stimulus package to follow the Troubled Asset Relief Program (TARP) that was enacted in October 2008. The new package would boost government spending on various infrastructure programs and for certain government benefits programs. It also offers tax incentives and benefits for individuals and businesses. The House-passed bill, H.R. 1, is estimated to cost $820 billion and includes $637 billion in spending and $182 billion in tax reductions, based on Congressional Budget Office (CBO) estimates. The Senate version, S.Amdt. 98 to H.R. 1, as introduced, is an $885 billion package that includes $632 billion in spending and $253 billion in tax reductions.”
More specifically, the CRS report stated that, “Agriculture programs, including nutrition assistance, rural development, and conservation, would receive about $27.2 billion of the $820 billion House bill (about 3.3%) and $26.1 billion of the $885 billion Senate amendment (about 3%). Most of the amount for agriculture and food is nutrition assistance, at $21 billion in H.R. 1, and $17.5 billion in S.Amdt. 98. Food stamp benefits represent the largest single increase and would rise 13.6% from current benefit levels in H.R. 1.
“Rural development programs would receive $5.1 billion in H.R. 1, including $2.8 billion to deploy broadband technology in rural areas and $1.5 billion for rural water and waste disposal projects. S.Amdt. 98 would provide $6.7 billion for rural development, with $4.3 billion for rural broadband and $1.4 billion for rural water projects. A significant difference between the bills’ broadband provisions is that the smaller House bill would fund a larger loan and grant program within USDA; the Senate version revives a grant-only program administered in the Department of Commerce with a carve-out for rural areas.”
And on the issue of expenditures for USDA computer upgrades, the report explained that, “The U.S. Department of Agriculture’s (USDA’s) own infrastructure would benefit from facilities maintenance and computer improvements totaling nearly $498 million in H.R. 1, and $471 million in S.Amdt. 98. The House bill specifies facilities funding for Agricultural Research Service facilities and USDA headquarters improvements; the Senate bill gives the Secretary a slightly larger pool of facilities funding for his discretion. The ailing Farm Service Agency computer system would receive $245 million in the House bill, and $171 million in the Senate bill.”
And the report added that, “The Senate proposal has nearly $1 billion in provisions that are not in the House-passed bill regarding agricultural disasters, farm loans, and agricultural research programs. The Senate bill also would change statute to prohibit inspections of nonambulatory cattle (‘downers’), and authorize funding for the Trade Adjustment Assistance for Farmers program.”
On page two of the CRS report, the authors included a side-by-side look at the House and Senate stimulus provisions in this helpful graphical depiction.
Meanwhile, David M. Herszenhorn reported in today’s New York Times that, “A bipartisan group of senators worked furiously in backroom negotiations on Thursday to cut the cost of the more than $920 billion economic stimulus plan. Senate Democratic leaders said they would await the outcome of those talks before calling for a final vote on the measure, perhaps on Friday.
“Members of the bipartisan group, led by Senators Ben Nelson, Democrat of Nebraska, and Susan Collins, Republican of Maine, said they wanted to trim provisions that would not quickly create jobs or encourage spending by consumers and businesses. They spent much of the day scrutinizing the 736-page bill and wrangling over what to cut.
“By early evening, aides said the group had drafted a list of nearly $90 billion in cuts, including $40 billion in aid for states, more than $14 billion for various education programs, $4.1 billion to make federal buildings energy efficient and $1.5 billion for broadband Internet service in rural areas. But they remained short of a deal, and talks were expected to resume Friday morning.”
Joseph Morton reported yesterday at the Omaha World-Herald Online that, “Sen. Mike Johanns, R-Neb., applauded Nelson for his efforts to cut portions of the bill but said he expects that those changes won’t go far enough to win his support.
“Johanns said he would oppose the bill unless it changes dramatically. He said he would like to see additional tax cuts in the measure.”
Shailagh Murray, William Branigin and Paul Kane reported yesterday at the Washington Post Online that, “A large group of Senate moderates huddled in a Capitol Hill conference room today in an effort to cut tens of billions of dollars from an economic stimulus bill that now tops $900 billion, as wrangling continued over a package that President Obama called vital to prevent the nation from falling into potentially irreversible decline.”
The Post article noted that, “One senator who left the meeting this morning, Mary Landrieu of Louisiana (D), said the group was making progress, but added, ‘it’s hard.’ She described the main criterion for judging provisions as ‘what creates jobs.’”
In a related item, Julie Harker reported yesterday at Brownfield that, “National Corn Grower’s President Bob Dickey of Nebraska says he applauds Louisiana Senator Mary Landrieu for her efforts in trying to get a funding increase for the Army Corps of Engineers in the economic stimulus package. The bill under consideration by the Senate allocates 4-point-6 billion dollars for projects that include renovation of locks and dams on the upper Mississippi and Illinois Rivers. Dickey says with the $61 Billion backlog of Corps projects that impact agriculture such as navigation and flood control, that amount is, ‘woefully inadequate.’ He says, ‘We’re ready to go to work on (renovating) those locks and dams because what that does, that creates jobs. It creates over 35 thousand jobs for every billion dollars invested in navigation restoration. So, we’re hopeful and very positive that we can move forward with additional funding.’
“Dickey says projects such as construction of the seven new locks and dams as approved in the Water Resources Development Act are excluded from funding in the stimulus package because they are considered ‘new starts’ and not ‘shovel ready’ projects.”
Tim Rohwer reported today at the Omaha World-Herald Online that, “Iowa could receive more than $1.5 billion from the stimulus bill being considered by the U.S. Senate, according to the office of Sen. Tom Harkin.
“This money would create and save jobs, help with budget shortfalls to prevent cuts in health, education and law enforcement, cut taxes for working families and invest in the long-term health of the nation’s economy, Harkin’s office said.
“‘The economy is shedding an average of 17,000 jobs a day, and new foreclosures average 9,000 a day,’ Harkin said. ‘This bill will create jobs now while also laying the foundation for a stronger economy that works for all Americans in the future. We must act quickly and boldly.’”
John W. Miller reported in today’s Wall Street Journal that, “Countries grappling with global recession have enacted a wave of barriers to world commerce since early last month, scrambling to safeguard their key industries — often by damaging those of their neighbors.
“The World Trade Organization is gathering nations in a special meeting Monday to try to stem the rising tide, just two weeks after saying protectionism was largely under control. On Thursday, 10 European Union commissioners headed to Moscow for talks Friday with Prime Minister Vladimir Putin and other Russian officials, where they plan to air complaints over the pace of new Russian trade barriers.”
Mr. Miller noted that, “The U.S. is planning retaliatory tariffs on Italian water and French cheese to punish the EU for restricting imports of U.S. chicken and beef. India is proposing to increase tariffs on foreign steel at the request of its steel industry.
“The landscape is moving so fast that officials at the WTO, the world’s top trade-law enforcer, say they’re relying on news reports to keep up with the changes, as governments are often slow to report them. They are reconsidering their Jan. 23 report that concluded protectionist pressures were largely being kept at bay.”
Reuters writer Jonathan Lynn reported yesterday that, “Fears of rising protectionism are dominating negotiations at the World Trade Organisation (WTO) on new trade rules, with countries calling for measures against cheap imports and subsidies to be tightened to prevent abuse.”
Mr. Lynn indicated that, “‘Given the unprecedented economic crisis and a potential rise in protectionist sentiment, WTO members need to be aware of a possible increase in anti-dumping actions and to avoid the unwarranted use of such measures,’ Japan’s WTO ambassador, Shinichi Kitajima, told negotiators.”
A separate Reuters news article from yesterday reported that, “It is important for the United States under President Barack Obama to set up a new trade team for the Doha round of trade talks to succeed, World Trade Organization chief Pascal Lamy said on Thursday.
“Speaking to reporters in the German capital, he said he did not know how long it would take for the United States to ‘get its act together on trade policy,’ adding it was crucial for the success of the Doha round that the United States was on board.”
Global Ag Issues
Bloomberg writers Carlos Caminada and Katia Cortes reported yesterday that, “Brazil may cut this year’s corn and soybean output forecasts for a third time as it assesses damage from a drought in recent months, Agriculture Minister Reinhold Stephanes said.
“The government lowered its corn estimate to 50.3 million metric tons today for the current crop year, down from 52.3 million tons projected on Jan. 8 and from 58.7 million tons produced last year. The soybean forecast fell to 57.2 million tons from 57.8 million tons last month and 60 million tons harvested in 2008.
“Brazil and Argentina, the biggest exporters of soybeans and corn after the U.S., faced damaging dryness in major producing regions in recent months just as plants needed water to flower and mature. The damage may be bigger than losses that already have been assessed as dry conditions persist in some regions.”
In a related item, Eliana Raszewski reported yesterday at Bloomberg that, “Argentine farmers will hold a four-day strike this month to protest agriculture-export duties and government farm policies, Clarin reported.
“The country’s four biggest farm groups, which last year protested for more than four months, will meet next week to decide details of the strike, set for the week of Feb. 16, the Buenos Aires-based newspaper reported, citing unidentified farm leaders.”
Meanwhile, Bloomberg writer Aya Takada reported yesterday that, “Japan, the world’s largest grain importer, may end a four-decade program to cut rice sowing as it plans to revive agricultural production and create jobs amid a deepening recession.”
The article indicated that, “‘Agriculture can play an important role in restoring Japan’s economy as a global recession may be protracted,’ Nobuyuki Chino, president of Tokyo-based Unipac Grain Ltd., said. ‘Japan should boost its farm production and the government should stop requiring growers to cut rice planting.’
“The changes under discussion aim to lure individuals and companies into farming to boost output and increase agricultural exports, the official said. Japan has 3.35 million farmers, according to the agriculture ministry, of a total population of about 127 million people. Agriculture accounts for less than 2 percent of gross domestic product.”
Yesterday’s Bloomberg article added that, “Increased rice production would decrease prices to consumers, help stimulate new uses for the grain, mainly consumed as a staple food and in liquor and confectionery, and may drive creation of larger, more efficient farms, the official said.”
Shai Oster reported in today’s Wall Street Journal that, “China’s leaders ordered emergency measures to battle one of the country’s worst droughts in decades, which is threatening to damage nearly a fifth of China’s wheat harvest and millions of livestock.
“Underscoring the government’s concern, Chinese President Hu Jintao and Premier Wen Jiabao ordered the State Council, China’s equivalent of a cabinet, to make ‘all-out efforts to combat the severe drought,’ the official Xinhua news agency reported Thursday.”
Today’s Journal article pointed out that, “A poor harvest could mean higher food prices at a time when rising unemployment has been especially acute among migrant factory workers, many of whom are returning to the countryside after layoffs from city jobs. The government, however, says it isn’t yet worried about the effect of the drought on food supplies because of current stockpiles and because it could further subsidize the rural poor if conditions worsen.”
DTN Executive Editor Marcia Zarley Taylor reported yesterday (link requires subscription) that, “Farmer Nate Riggers knows that with a likely $6.59 per bushel wheat guarantee, pure economics should encourage his enrollment in the new Average Crop Revenue Election program.
“But after the farmer from Nez Perce, Idaho, attended an all-day farm program briefing for about 150 farmers held by Idaho’s Farm Service Agency in late January, the FSA committeeman voiced serious misgivings about the plan’s mechanics.
“‘Growers with diverse crop operations will need an executive assistant just to keep all the manual records straight,’ Riggers said in an interview with DTN. Coupled with huge new compliance tasks on payment limits, passive investors and permanent disaster packages, ‘the changes in the new farm bill will provide full employment for FSA staff, attorneys, accountants and more attorneys,’ he said.”
Yesterday’s DTN article added that, “Riggers and other growers admit ACRE offers an attractive option, but contend that academics aren’t accounting for the complexity of compliance. The counter-cyclical payments ACRE replaces ‘have been almost useless,’ Riggers acknowledged. ‘But the amount of work required to sign up for ACRE will take some thought.’
“Concerns aren’t limited to the Pacific Northwest. For example, DTN columnist Adam Erwin, a 10,000-acre corn and soybean producer, estimates that during the past four years, his crop was recorded on 500 settlement sheets, from 23 different elevators, in seven counties using 23 different storage bins. Although he has yield maps on all fields going back to 1997, he lacks crop insurance yield history on individual farm units. Like many large Midwest farmers, he has preferred countywide group-risk insurance because of its paperwork ease. ‘I don’t have an IT department to help me manage all this,’ Erwin said.
“Riggers uses a three-year crop rotation, so he’ll need farm records going back 15 years to supply the most current five years of actual yields for his ACRE benchmark, or else he’ll have to substitute his county’s much lower average yield. Adding to the burden is that Riggers must enroll by his operation’s seven FSA farm numbers, even though his crop insurance records are collected by 30 separate farm units.”
And later, the DTN article stated that, “Hudson, Iowa, farmer Alan Karkosh has begun to study his ACRE options and concluded ‘it’s going to be a record-keeping nightmare for all involved, whether it is the farmer or FSA. This is a complicated program. Pulling the documents together is a time-consuming deal.’”
DTN will offer a free webinar next week on ACRE- DTN Ag Policy Editor Chris Clayton will host this webinar, along with Wayne Myers and Todd Jennison from Kennedy and Coe accounting and consulting firm. Click here to register for this free online seminar — February 12, 2009 at 3 pm central.
Ben Meyerson reported in today’s Los Angeles Times that, “Members of a Senate panel rebuked federal health and food safety regulators Thursday for slow intervention in the nation’s peanut-borne salmonella outbreak, demanding that officials find ways to cooperate when responsibility is split among different agencies.”
The LA Times article noted that, “Sen. Patrick J. Leahy (D-Vt.), lamenting the lack of food safety enforcement authority, said he wanted to see steeper penalties than fines.
“‘I’d like to see some people go to jail,’ Leahy said. ‘You give them a fine, well, it’s just the cost of doing business. But if somebody thinks they’re going to go to jail . . . that’s an entirely different thing.’
“Federal officials are investigating a Georgia plant operated by Peanut Corp. of America in connection with an outbreak of salmonella poisoning that has sickened nearly 600 people in more than 40 states. Eight may have died because of it.”