FarmPolicy

August 21, 2014

Sec. Vilsack; Energy Bill (Cap and Trade); Budget; Crop Insurance; Cuba; and Prospective Plantings

Sec. Vilsack

The U.S. Department of Agriculture issued a news release yesterday which stated that, “Secretary of Agriculture Tom Vilsack testified before the House Appropriations Subcommittee on Agriculture today [statement, video replay] Secretary Vilsack outlined the Administration’s plans to bring reform to USDA and discussed how the President’s budget will revitalize rural America.”

In part, Sec. Vilsack stated that, “Today, I would like to make three announcements in the area of the farm safety net that should help producers struggling with the recent downturn in commodity prices. First, in the dairy sector, in addition to last week’s announcement of USDA’s utilization of 200 million pounds of non-fat dry milk for school feeding programs and the TEFAP program, I would also like to announce that this week USDA will be making Milk Income Loss Contract payments (MILC).

Secondly, I am announcing today that USDA is making bonus commodity purchases to aid struggling parts of the farm sector through USDA Section 32 authority. These purchases are in the amounts of $30 million for walnuts, $25 million for pork, $60 million for turkey, and $2 million for lamb.

Lastly, in response to concerns I have heard from producers worried about the upcoming June deadline for farm program sign-up, I am announcing today that USDA will be extending the sign-up deadline to August 14. This action should provide producers with sufficient time to learn about the new ACRE Program and to make informed decisions about their sign-up options.”

Sec. Vilsack also noted at yesterday’s hearing that, “USDA believes that the agriculture and forestry sectors hold the potential to deliver substantial emissions reductions, including carbon sequestration, under a national climate change policy. As a result of this potential, new economic opportunities may be created for farmers and foresters. This vision is shared with a wide variety of renewable energy, conservation, and agricultural organizations.

At my direction, USDA will support developing markets that reward producers for sequestering carbon and limiting greenhouse gas emissions. Through the authority provided under the 2008 Farm Bill, USDA will develop the metrics and certifications associated with the environmental services of conservation and certain land management activities to facilitate the participation of farmers, ranchers, and forest landowners in the emerging environmental services markets. USDA will also increase its research and analytical capabilities and conduct Government-wide coordination activities to encourage the establishment of markets for these ecosystem services.

These ecosystem services markets, along with conservation and renewable energy programs, offer farmers and ranchers new sources of revenue that also create public benefits for all Americans, such as clean water, clean air, and wildlife habitat.”

Energy Bill (Cap and Trade)

John W. Broder reported in today’s New York Times that, “The debate on global warming and energy policy accelerated on Tuesday as two senior House Democrats unveiled a far-reaching bill to cap heat-trapping gases and quicken the country’s move away from dependence on coal and oil.

“But the bill leaves critical questions unanswered and has no Republican support. It is thus the beginning, not the end, of the debate in Congress on how to deal with two of President Obama’s priorities, climate change and energy.

“The draft measure [text, summary], written by Representatives Henry A. Waxman of California and Edward J. Markey of Massachusetts, sets a slightly more ambitious goal for capping heat-trapping gases than Mr. Obama’s proposal. The bill requires that emissions be reduced 20 percent from 2005 levels by 2020, while Mr. Obama’s plan calls for a 14 percent reduction by 2020. Both would reduce emissions of carbon dioxide, methane and other greenhouse gases by roughly 80 percent by 2050.”

Mr. Broder added that, “The Waxman-Markey bill, the American Clean Energy and Security Act, emerges at a time when many Americans, and their representatives in Congress, are wary of wide-ranging environmental legislation that could raise energy costs and potentially cripple industry. The bill, a version of a so-called cap-and-trade plan, also comes as the Environmental Protection Agency is about to exert regulatory authority over heat-trapping gases under the Clean Air Act.”

Juliet Eilperin reported in today’s Washington Post that, “‘I think this bill is a game-changer that takes the best of industry’s and environmentalists’ ideas,’ Markey said in an interview. ‘Because of that, there is a newfound sense of possibility.’

The draft, however, represents the beginning of climate negotiations on the Hill, not the end: House Speaker Nancy Pelosi (D-Calif.) called it ‘a strong starting point.’ Rep. Mike Doyle (D-Pa.), a key swing vote on Markey’s subcommittee, said that he welcomed some of the concessions to carbon-dependent regions such as his own district but that he has not decided whether to back the bill.

“‘It’s come a long way. We’ve got a long way to go,’ Doyle said in an interview. ‘The devil’s always in the details.’

Moreover, many Democrats emphasized that they face a greater challenge in the Senate. ‘We don’t have 60 votes,’ said Sen. Richard J. Durbin (Ill.), the majority whip in charge of counting votes.”

The article added that, “In the current environment, Durbin said, there is little hope of passing a climate bill anytime soon, and legislative momentum among Democrats has shifted toward moving health-care reform legislation before a climate plan. ‘We still have a long way to go [on climate legislation], but we hope we can get to it,’ said Durbin, who supports the bill.

Republican leaders have made it clear that they will attack Democrats for seeking a cap-and-trade system for greenhouse gases. Yesterday, House Minority Leader John A. Boehner (Ohio) issued a statement suggesting that the bill would force American manufacturers to move overseas, saying, ‘The Democrats’ plan to raise energy taxes in the midst of a serious recession is the wrong thing to do and the worst possible time to do it.’”

Jim Snyder reported yesterday at The Hill Online that, “Advocates and critics alike agreed that the energy measure was a bold stroke that charted a new direction on energy policy. But some also saw elements of compromise included in the bill and the acknowledgment from its authors of the need to attract centrists from industrial states that have expressed wariness about passing a climate bill during an economic crisis.”

Mr. Snyder indicated that, “The bill is also notable for what it left out, advocates said. It avoids, for example, dictating how emission allowances would be distributed to stakeholders — that is, how many would be given away for free and how many would be sold at auction — as well as how revenues from the sale would be spent.”

“Given the big questions yet to be answered, however, the release Tuesday of the bill marks the starting point in the debate, not the end,” the Hill article said.

The AP added yesterday that, “Separately, the Senate on Tuesday embraced the idea that emission allowances under a cap-and-trade program should be auctioned and not given out for free. The endorsement of such a plan as part of a budget document reflects the views of a majority of the Senate, although it is not binding since Congress must first enact a cap-and-trade program.”

Meanwhile, a news release issued yesterday by the House Committee on Science and Technology Republican Caucus indicated that, “Today in a hearing of the Subcommittee on Technology and Innovation examining research to mitigate the environmental impacts of transportation infrastructure, Ranking Member Adrian Smith (R-NE) raised concerns over the costs of President Obama’s proposal to institute a ‘cap and trade’ regulatory regime to limit nationwide energy use.

“Smith expressed his support for the ‘good business’ aspects of reducing transportation-related carbon dioxide emissions, noting that it often makes economic sense to take aggressive action to improve energy efficiency and reduce traffic congestion. However, he emphasized his concerns with the President’s regulatory-focused approach. ‘While the costs of cap and trade to our economy are clear, any environmental benefits in the form of reduced temperature growth are highly uncertain, and may be immeasurable, especially when one considers that China and India alone are expected to add 300 million vehicles to the roads in the next 20 years,’ Smith said.”

In a related issue regarding the regulation of a carbon market, Bloomberg writer Tina Seeley reported recently that, “U.S. Representative Edward Markey says his committee should be in charge. No, says fellow Democrat Collin Peterson, this one should fall under my panel.

Markey and Peterson are jockeying for control of the biggest regulatory plum to hit Washington in years: a proposed system for trading carbon-dioxide permits that would be one of the world’s largest derivatives markets.

“Depending on which lawmaker prevails, the market would be monitored by the Federal Energy Regulatory Commission, which is overseen by a subcommittee headed by Markey, or the Commodity Futures Trading Commission under the supervision of the Peterson-led House Agriculture Committee.”

The article noted that, “The maneuvering is under way even as President Barack Obama’s climate-change goals await congressional action. The proposal, part of his projected $3.6 trillion budget for 2010, would create a cap-and-trade program to limit greenhouse gas emissions. Polluters would buy and sell government-issued emissions permits on a market.”

The article added that, “‘The CFTC is already regulating markets where carbon trading is occurring and, as such, has the most experience with these markets,’ Peterson said in an e-mailed statement. ‘I would prefer an experienced cop over a rookie any day.’”

Budget

Cynthia Dizikes reported yesterday at MinnPost.com that, “As lawmakers duke it out this week over the 2010 budget, a key difference between the House and Senate versions could have a major impact on future heath care, energy and education legislation — not to mention larger implications for Congressional Democrats as a whole.

The matter — an arcane legislative procedure called reconciliation — would allow the Senate to pass certain legislation with a simple majority instead of the standard 60 votes needed to avoid a filibuster.

“At the urging of the Obama administration, the House Democrats wrote reconciliation measures into their version that passed the House Budget Committee last week. Meanwhile, some key Senate Democrats, including the chairman of the Senate Budget Committee, have vocally opposed the approach.”

Walter Alarkon and Jared Allen reported yesterday at The Hill Online that, “Democratic senators don’t plan to include reconciliation instructions in the budget plan that’s moving through the upper chamber this week. Senators expect the fate of reconciliation instructions — which call on lawmakers to ‘reconcile’ policy goals with spending bills — to come down to the 10 members of a Senate-House conference.”

Crop Insurance

In a tele-news conference with reporters yesterday, Sen. Charles Grassley (R-Iowa) was asked about Senate Budget Committee Chairman Kent Conrad’s (D-ND) amendment that was passed last week in the Budget Committee markup of the bill.

As FarmPolicy.com noted yesterday, the Conrad Amendment was adopted assuming $70 million in savings per year in crop insurance over the next five years. The amendment dedicated $175 million for child nutrition and $175 million for deficit reduction. Besides these changes, the Committee-reported resolution leaves all other nutrition, conservation, renewable energy, and farm safety net improvements included in the 2008 Farm Bill unchanged.

By a 14-9 vote, the Committee agreed to the amendment to provide additional funds for child nutrition and deficit reduction through savings in crop insurance programs.

A reporter asked Sen. Grassley specifically about this crop insurance provision- to listen to Sen. Grassley’s response on this issue, just click here (MP3-1:35). The complete news conference can be heard in its entirety at this link.

Cuba

William E. Gibson reported in today’s Los Angeles Times that, “A bipartisan group of senators predicted Tuesday that Congress was ready to pass legislation to allow all Americans to travel to Cuba.”

The article explained that, “On one side of the debate in Congress are liberal Democrats, Republican free-traders and farm-state members of both parties who seek a wider market for food sales.

Unfettered travel would make it easier to sell more products, they contend. They are backed by the American Farm Bureau Federation and the U.S. Chamber of Commerce.”

Sean Lengell added in today’s Washington Times that, “Increased travel to Cuba will further the cause of democracy, advance human rights, and benefit U.S. agriculture and businesses, the lawmakers said Tuesday while introducing legislation to open the island nation for tourism.”

Prospective Plantings

A news release issued yesterday by USDA’s National Agricultural Statistics Service stated that, “The U.S. Department of Agriculture expects that the total area planted to corn and soybeans nationwide will hold steady in 2009 but that the area planted to principal crops will decline by nearly 7.8 million acres, according to the Prospective Plantings report released today by the National Agricultural Statistics Service (NASS).

Farmers indicated their intention to plant 76 million acres to soybeans in 2009. If realized, this would be the largest planted area on record, just ahead of the 75.5 million acres planted last year. Increases of 100,000 acres or more are expected in Arkansas, Iowa, Kansas, Mississippi, Nebraska, North Carolina and North Dakota. The largest decreases in soybean acres are expected in Missouri and South Dakota, both down 150,000 acres from 2008.

Growers plan to plant 85 million acres of corn, down 1 percent from last year and down 9 percent from 2007. While lower corn prices and unstable input costs may have slowed corn planting somewhat, this would be the third-largest acreage since 1949, behind 2007 and 2008.

Wheat acreage is expected to decline 7 percent, to 58.6 million acres. Cotton plantings are also expected to be down 7 percent, to 8.8 million acres – the smallest area since 1983.”

NASS also released its quarterly Grain Stocks report yesterday.

An article from yesterday (“Friendly Reports,” by Darrel Good, University of Illinois) provided detailed analysis with respect to the two updated NASS reports.

In part, yesterday’s article stated that, “Corn planting intentions of 84.986 million acres point to acreage harvested for grain of 77.786 million. The long term trend yield of 152.8 bushels per acre, then, points to a 2009 harvest of 11.862 billion bushels, 239 million smaller than the 2008 harvest. A crop of that size would likely result in a sharp decline in stocks by the end of the 2009-10 marketing year as both exports and ethanol use of corn are expected to increase during the year ahead.”

And after additional analysis, the article indicated that, “Taken together, the USDA reports of planting intentions and March 1 stocks are supportive for corn, soybean, and wheat prices. Acreage intended for all crops in 2009 is less than expected and intended acreage of both soybeans and wheat is less than expected. Intended corn acreage is a bit higher than the average pre-report guess, but the large decline in intended acreage of barley and sorghum probably exceeds expectations. March 1 stocks of all three crops were slightly smaller than the average pre-report guesses.

Prices may show a modest response to these reports, but the market will also begin to anticipate how actual plantings may differ from intentions. In addition, financial, currency, and energy markets will continue to have an influence on crop prices as those markets influence over all demand prospects.”

For additional analysis on yesterday’s reports, see this report from Brownfield, which includes an audio interview with University of Illinois Extension Economist Darrel Good.

Scott Kilman reported in today’s Wall Street Journal that, “Many U.S. crop farmers had the most profitable years of their careers in 2007 and 2008. But they are retrenching because of soaring costs of fertilizer and seed as well as signs that the recession is slowing demand for their crops and land.”

And Reuters news reported yesterday that, “U.S. farmers may cut peanut plantings by 27 percent this year after buyers slashed contracts following a recent food poisoning scare linked to peanut products, the U.S. Agriculture Department said on Tuesday.

Growers intend to plant 1.12 million acres of peanuts in 2009, down from a record 1.534 million in 2008, the USDA said.

“‘Concerns about future demand as a result of the salmonella outbreak have limited the number of contracts being offered to producers for the upcoming season, the USDA said.”

Yesterday’s article added that, “Growers in Alabama, Florida, Georgia, Mississippi, and South Carolina intend to plant 855,000 acres in 2009, compared with 1.13 million acres planted in 2008, the USDA said. In Georgia, the largest peanut-producing State, planted acreage is expected to decline 28 percent from last year.

“Growers in New Mexico, Oklahoma, and Texas intend to plant 182,000 acres, down 36 percent from the previous year, the USDA said.

“Plantings in the Virginia-North Carolina region are expected to total 87,000 acres, down 29 percent from 2008. Acreage in Virginia is expected to decline 50 percent from 2008, the USDA said.”

For more detail on peanut prospective plantings, see this USDA Radio Newsline item from yesterday (audio summary, about one minute).

Keith Good

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