Census-Farm Payment Issues
Andrew Martin reported in yesterday’s New York Times that, “Ever thought of chucking it all and moving to the country? According to the Agriculture Department, an increasing number of Americans are doing just that, by embracing a ‘Green Acres’ lifestyle. But few of them are making a living at it: more often than not, their work in the fields is subsidized by an off-the-farm job.” (See this related graph for all farms, and this related graph by farm typology).
“The Agriculture Department came out with its Census of Agriculture last week, and the headline was that the number of farms increased by 4 percent from 2002 to 2007, with most of the new farms being small, part-time operations.”
Mr. Martin added that, “A closer look at the numbers shows that American farming is becoming a story of extremes: of really big farms and really small ones. Consider that about 900,000 of the nation’s 2.2 million farms generated $2,500 or less in sales in 2007.
“By contrast, 5 percent of total farms, about 125,000 operations, accounted for 75 percent of agricultural production.”
“The new agriculture secretary, Tom Vilsack, has acknowledged the problem and vowed to do something about it. As a former governor of Iowa, he knows firsthand that farmers with a few hundred acres are being outbid for land by farmers with a few thousand. That consolidation is fueled by farm payments that tend to benefit the largest farms.”
(Note: “Federal farm programs do not explicitly target payments to farms of a certain size or net income level, although caps may apply to the size of the program payment a farm or an individual farmer can receive. Nevertheless, large farms are more likely to receive farm program payments and, as a group, they receive the bulk of payments simply because most payments are paid per acre.” (Robert Hoppe. “The Importance of Farm Program Payments to Farm Households.” Amber Waves. June 2007)).
The Times article indicated that, “The question is: What, if anything, can he do about it?
“In an interview on Friday, Mr. Vilsack said the agency would encourage income opportunities — like energy production, carbon sequestration, conservation and ecotourism — that go beyond just crops and livestock. ‘You have to take a holistic approach and create the understanding that the whole thing is diversification,’ he said.”
With respect to federal farm payments, an update posted on Friday at the National Association of Wheat Growers homepage indicated that, “USDA released a more than 300-page guidance booklet to county Farm Service Agencies [FSA] late this week.
“The booklet is meant to clarify how new farm bill payment eligibility, payment limit and adjusted gross income rules will be implemented.” The FSA guidance handbook is available by clicking here.
In other Farm Bill news, a brief article on the new ACRE program (Average Crop Revenue Election), which was written recently by University of Illinois Agricultural Economist Gary Schnitkey, stated that, “The 2008 Farm Bill gives a choice on how Federal commodity payments can be received. Payments can continue in the traditional manner through direct, marketing loan, and counter-cyclical programs. Alternatively, an Average Crop Revenue Election (ACRE) alternative can be selected. ACRE makes three changes relative to the traditional alternative: 1) direct payments are lowered by 20 percent, 2) loan rates are lowered by 30 percent, and 3) ACRE payments are received rather than counter-cyclical payments.”
The article pointed out that, “ACRE is a state revenue program for corn, soybeans, wheat, and other program corps. It has two eligibility requirements: one for farm revenue and the other for state revenue. ACRE payments are based on the difference between state revenue and a state guarantee. The state guarantee will adjust up or down based on a recent history of state yields and national season average prices. Because the ACRE guarantee adjusts based on recent history, ACRE has a higher chance of making payments than the counter-cyclical program. Using history as a guide, ACRE will pay for corn in 32 percent of the years and average $17 per planted acre. For soybeans, ACRE will pay in 16 percent of the years and average $6.50 per planted acre. These average payments will vary across farms based on the farm’s average yield relative to the state’s average yield.
“Only direct payments are likely to be received under the traditional alternative. Under ACRE, there is a good chance of receiving ACRE payments but direct payments will be 20% lower than under the traditional alternative. ACRE payments could be substantial and will provide risk protection. A Microsoft Excel spreadsheet called the ACRE Comparison Tool allows users to analyze situations in which ACRE will make payments.” To download this Excel spreadsheet, just click here.
Meanwhile, the “Washington Insider” section of DTN reported on Friday (link requires subscription) that, “House Agriculture Committee Chairman Collin Peterson, D-Minn., now says his plans to reorganize USDA most likely won’t be taken up until 2010. Earlier, Peterson said reorganization was among his highest priorities for 2009, but it now appears that events beyond agriculture are pushing a wide range of issues off the 2009 congressional agenda.
“Peterson has indicated he likely will continue his campaign to upgrade USDA’s computer system. One of the problems the department has had over the past few decades is that it did not have a computer system. Rather, its various agencies each had its own computer systems, with each operating quite independently from the others. The department is working to change that, and the IT people there certainly could use the infusion of new cash that Peterson has discussed to push the process along.”
Shailagh Murray and Lori Montgomery reported in Saturday’s Washington Post that, “Against a backdrop of rising unemployment, Senate Democrats struck a hard-won deal yesterday with a handful of Republican moderates to scale back spending in a massive economic stimulus bill, virtually guaranteeing Senate passage of the legislation but also ensuring arduous final negotiations with the House.”
“The bipartisan deal was cut after two days of talks and would cut more than $100 billion from the $920 billion bill, dropping its cost to about $820 billion, if amendments added on the Senate floor are retained,” the Post article said.
David M. Herszenhorn reported in yesterday’s New York Times that, “The Senate plan, reached in an agreement late Friday between Democrats and three moderate Republicans, focuses somewhat more heavily on tax cuts, provides far less generous health care subsidies for the unemployed and lowers a proposed increase in food stamps.”
“In some cases, the cuts to the Senate bill brought it closer to the House proposal. For instance, the senators reduced financing to expand broadband data networks in rural and underserved areas to $7 billion from $9 billion. The House has proposed $6 billion,” the Times article noted.
In a related article on broadband, Reuters news reported on Friday (article posted at DTN, link requires subscription) that, “Large increases in tax credits to extend high-speed Internet to rural and other unserved areas are being proposed as part of the nearly $900-billion stimulus plan winding its way through Congress, according to a document obtained on Friday.
“Sen. John Rockefeller, a West Virginia Democrat and chairman of the Senate Commerce Committee, will offer an amendment boosting an earlier proposed tax credit to 30 percent, up from 10 percent, to encourage spending on broadband at current speeds in rural and other unserved areas.”
The Reuters article stated that, “Spending to provide super-fast speed broadband would be eligible for a 40 percent tax credit under the plan, up from an earlier 20 percent.
“A Senate aide said the $9 billion in grants for building broadband in the current proposal could be trimmed, as the tax credits are beefed up.”
Meanwhile, Greg Hitt reported in today’s Wall Street Journal that, “Senate Democrats are confident they can push for a final vote on a revamped, $827 billion economic-stimulus package early this week, setting the stage for fresh battles as Democratic congressional leaders and the White House try to meld competing House and Senate bills.
“After cutting deals Friday with three moderate Republicans to pare the cost of the package, Senate Democrats, who control the chamber with a 58-41 majority, are confident of attracting the 60 votes needed to close off debate Monday. If approved as expected, the package would go to a vote Tuesday.”
More specifically with respect to farm related issues in the stimulus package, DTN Ag Policy Editor Chris Clayton reported on Friday morning (link requires subscription) that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, said Friday that $345 million set aside in the stimulus bill to upgrade USDA’s computers for farm programs is an important element to implementing the farm bill and Harkin was surprised to learn another Democratic member on his committee would criticize that spending.
“‘In order to get the farm bill implemented we are going to have to get those updated,’ Harkin said in a conference call Friday to Iowa reporters. ‘It’s an efficiency issue.’”
Mr. Clayton explained that, “Sen. Ben Nelson, D-Neb., a member of the Agriculture Committee, called the funding for USDA’s computers a ‘sacred cow’ in a news release criticizing some of the government spending in the bill. Nelson and Sen. Susan Collins, R-Maine, have spearheaded efforts in the Senate to try to cut spending in the stimulus bill.
“Harkin was surprised at Nelson’s criticism, but Harkin said he had not heard or seen any real push to strip the USDA computer funding out of the bill. Harkin is a member of the Senate Appropriations Committee and will be included in the conference talks on the stimulus bill that could occur next week.”
Friday’s DTN article also indicated that, “Secretary of Agriculture Tom Vilsack said at a news conference that he has ‘pressed very heavily’ for inclusion of a new computer system for the USDA Farm Service Agency in the stimulus package.”
In a separate item regarding the U.S. agricultural economy, a news release issued on Friday by the National Farmers Union (NFU) stated that, “National Farmers Union is urging the U.S. House and Senate Agriculture Committees to hold hearings both across the country and in Washington to examine the impact the current economic crisis has had on the rural economy and seek solutions.”
The release indicated that, “[NFU President Tom Buis] said congressional hearings would provide committee members a necessary perspective. ‘Many agriculture critics believe last year’s short-lived high prices and farm bill passage should be enough to sustain the rural economy. What they fail to recognize is the rapidly changed economy, the challenge of writing farm legislation during periods of higher prices and the unique challenges agricultural producers face on an annual basis. All of agriculture needs to come together to find solutions to the current economic crisis.’”
Russell Grantham reported in yesterday’s Atlanta Journal Constitution that, “Georgia’s peanut farmers, processors and manufacturers — the biggest collection of peanut-related businesses in the nation — were already facing a bleak year when the recent recall of salmonella-tainted products made a bad situation worse.
“Last year brought a bumper crop with record prices. This year, companies that buy peanuts — brokers, shellers and food and snack manufacturers such as Mars and J.M. Smucker Co. — already have warehouses full of last year’s crop.”
The article noted that, “Mix in the dismal economy, which has driven down prices of alternative crops such as cotton, corn and soybeans, and the recipe was there for a very bad year in Georgia’s farming regions.
“Now the peanut industry is worried that consumer fears over the salmonella outbreak linked to a South Georgia peanut processing plant will put to rest any hopes of a quick turnaround. The outbreak has sickened more than 500 people in the United States and Canada, and it is suspected of causing eight deaths.”
Mr. Grantham explained that, “Indeed, the fallout from the salmonella outbreak seems to have sharpened a looming recession for Georgia’s agricultural industry. While prices for this year’s expected crop were already plunging because of the oversupply of peanuts, the salmonella scare threatens to drive down demand for an extended period.”
“Consumer jitters threaten one of Georgia’s largest agricultural industries, which helps employ roughly 30,000 people involved in growing, transporting, processing or making products from peanuts. The challenges likewise threaten the economic underpinnings of many rural communities in South Georgia,” the AJC article said.
Thomas H. Maugh II and Mary Engel reported in Saturday’s Los Angeles Times that, “At a hearing Thursday of the Senate Agriculture Committee, Chairman Tom Harkin (D-Iowa) called for a complete overhaul of government oversight of food safety and suggested creating a stand-alone agency to monitor food safety.
“President Obama has urged a ‘complete review’ of the FDA to determine why it didn’t contain the problem earlier.”
The Associated Press reported on Friday that, “The peanut recall offers a prime opportunity to merge all federal food safety oversight into one agency, Agriculture Secretary Tom Vilsack said Friday.
“Right now, the Food and Drug Administration and the Department of Agriculture share oversight responsibilities, along with other government agencies, dividing authority along lines that don’t always make sense. For example, the FDA oversees eggs in the shell, while the Agriculture Department is responsible for processed egg products.”
The AP article added that, “‘You can’t have two systems and be able to reassure people you’ve got the job covered,’ Vilsack said. ‘This is a grand opportunity for us to take a step back and rethink our approach.’
“A salmonella outbreak blamed on Peanut Corp. of America has sickened at least 575 people in 43 states. At least eight have died. More than 1,300 foods that used ingredients from the company’s processing plant in Blakely, Ga., have been recalled. While the outbreak appears to be slowing down, new illnesses are still being reported.”
And Michael Moss reported in today’s New York Times that, “An examination of the Blakely case reveals a badly frayed food safety net. Interviews and government records show that state and federal inspectors do not require the peanut industry to inform the public — or even the government — of salmonella contamination in its plants. And industry giants like Kellogg used processed peanuts in a variety of products but relied on the factory to perform safety testing and divulge any problems.
“At the same time, processed peanuts have been finding their way into more and more foods as a low-cost yet tasty additive, making tainted products harder to track.”
Global Ag Issues
Joshua Partlow reported in today’s Washington Post that, “Argentina is suffering its worst drought in decades and the cattle are dying by the barnload. Since October, the drought has taken down 1.5 million of the animals, according to an estimate by the Argentine Rural Society, in a country that last year sent 13.5 million to slaughter. The cattle for the most part are dying of hunger, as the dry skies have shriveled up their pastures, along with huge swaths of Argentina’s important soy, corn and wheat fields.
“‘The drought has affected practically the entire country, the cattle-ranching sector, agriculture. It is the most intense, prolonged and expensive drought in the past 50 years,’ Hugo Luis Biolcati, the president of the Argentine Rural Society, said in the organization’s offices in Buenos Aires. ‘I think we are facing a very bad year.’”
The Associated Press reported yesterday that, “Skeletons of livestock are piling up in the scorching sun of the Southern Hemisphere’s summer as the worst drought in a generation turns much of Argentina’s breadbasket into a dust bowl.
“The nation’s farm sector stands to lose $5 billion this year alone — a huge blow to the economy of Argentina, a top world exporter of soy, corn, wheat and beef — as well as to the government of President Cristina Fernandez, which faces billions of dollars in debt payments this year.
“Wheat fields that once supplied flour for pasta-loving Argentines now resemble deserts, and spiny thistles are all that survive on cattle ranches in southern Buenos Aires province.”
And Reuters news reported on Friday that, “China’s main wheat crop may yet emerge mostly unscathed from a dire drought as Beijing moves to fund last-minute irrigation, reviving crops that might otherwise have been left to die by farmers struggling with low prices and oversupply.
“A domestic media outcry and public hand-wringing about the severity of the drought triggered some speculation that the world’s biggest wheat producer [related graph] might resort to imports, but experts say fears over the impact of the drought — which officials have called the worst in half a century — are misplaced and overblown.”