FarmPolicy

December 21, 2014

Climate Change; Biofuels; WASDE Report: Commodity- Food Prices; School Lunch Program; Ag Economy; and Food Safety

Climate Change

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Secretary of Agriculture Tom Vilsack will face a skeptical House Agriculture Committee as the secretary seeks to provide some details Thursday on how farmers and livestock producers could benefit from climate-change legislation.

“In the months leading up to debate on the climate bill, Vilsack had been a key advocate in discussing potential ‘green payments’ for farmers. Late last month, Vilsack was quoted at a forum in Kentucky saying USDA ‘will be advocating forcefully’ to ensure there are carbon credits for agriculture and forestry added to the climate bill and that USDA has authority over those areas.

“But leaders on the House Agriculture Committee have become some of the most vocal opponents of the bill. Chairman Collin Peterson, D-Minn., has made it clear on several occasions that he does not trust the legislation and the authority the bill gives to the Environmental Protection Agency.”

Mr. Clayton added that, “Peterson has been upset with the EPA ever since the agency began looking into measuring indirect land use changes as a way to measuring carbon emissions of biofuels. Peterson wants to prevent the EPA from using such measurements before he would consider backing any kind of climate bill.

On Wednesday, Peterson said that he doesn’t trust the EPA. Peterson issued an ominous warning of what could be ahead.

“‘You’re going to have to get permission from the EPA to grow what you want to grow,’ Peterson stated in a Dow Jones Newswires article. ‘I don’t really trust what they’re up to. It’s like they’re on an ideological vendetta.’”

Jared Allen reported last night at The Hill Online that, “More and more Democrats are ready to vote against Speaker Nancy Pelosi’s climate change bill, according to a congressional committee chairman who opposes his leader.

The House Agriculture Committee Chairman Collin Peterson (D-Minn.) said Wednesday that he’s at an impasse with the lead sponsor of a climate change bill strongly backed by Pelosi (D-Calif.), and that his list of Democratic members who would join him in voting against the measure is growing rather than shrinking.

“‘We’re stuck,’ Peterson said regarding a clash he’s had with House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) over a number of issues in the bill. ‘And there’s a lot of issues that haven’t even come up yet.’”

Mr. Allen noted that, “And while the Agriculture chairman said he’s working to resolve those differences and not intentionally trying to torpedo the legislation, he noted that skepticism toward the bill is growing, not shrinking.

“‘I’m just estimating the number of votes that will be against this,’ Peterson said. ‘I suspect that the list has grown as more members have gotten a chance to look at this. I mean, my list has grown.’

“Waxman, who said negotiations were still a work in progress, viewed the situation more optimistically.

“‘There are a lot of things on the table and we’re moving in his direction on certain things,’ Waxman said. Like Peterson, though, Waxman declined to specify those issues that are still dividing the two chairmen.”

The “Washington Insider” section of DTN analyzed issues associated with the Waxman climate bill yesterday, and noted in part (link requires subscription) that, “[T]he extent to which agricultural offsets –conservation and land use practices — will be rewarded is yet to be clarified. Farm groups want credit for conservation and land uses already adopted, as well as those adopted in response to the new programs. Others disagree, so defining and valuing offsets will be a brutal, highly contentious debate.

“In addition, farm groups and others are very suspicious of EPA and would like to limit its role in program oversight — yet another issue to be resolved at some point in the bill’s long trek toward implementation.

“So, the Waxman bill appears to be moving toward a House floor debate this summer, with strong leadership support. Still, there are many, many hurdles remaining before these massive programs move into place, debates that will be vitally important to producers and should be watched very carefully as they evolve, Washington Insider believes.”

Meanwhile, a news release issued yesterday by the House Agriculture Committee Republicans stated that, “The Heritage Foundation’s Center for Data Analysis released an economic study on Tuesday regarding the impact a cap-and-trade system would have on the agriculture community. The study maintains that cap-and-trade is ‘an energy tax in disguise’ that will cause farm income to drop dramatically because of higher operating costs. It further argues that people living on fixed incomes and struggling in tough economic times can expect higher food prices as the result of this policy.

“Highlights of the study include:

“- Farm income (after paying all expenses) is expected to drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28%, 60%, and 94%, respectively [view related graph here].

“- The average net income lost over the 2010-2035 timeline is $23 billion, which is a 57% decrease from the baseline.

“- Construction costs of farm buildings will go up from the baseline by 5.5% in 2025 and 10% by 2034 [view related graph here]. 
By 2035, gasoline and diesel costs are expected to be 58% higher and electric rates 90% higher” [view related graph here].

House Agriculture Committee Ranking Member Frank Lucas (R-Oklahoma) addressed issues associated with the Waxman-Markey climate bill on the floor of the House of Representatives yesterday- to view his remarks, just click here (one-minute).

Biofuels

Recall that yesterday’s FarmPolicy.com update referenced a recent report on the issue of ethanol blends and future allocations of corn acreage.

A news release issued this week by Growth Energy referenced this report and highlighted this comment from Tom Buis, CEO of Growth Energy: “Here we go again. The same people who spent millions last year in a well-organized, well-orchestrated campaign to shift the blame from themselves to hard-working American farmers and renewable fuel producers are at it again. Their claims are directly contradicted by the comprehensive research conducted by the widely-respected Food and Agricultural Policy Research Institute (FAPRI). In the study released by FAPRI last week, it showed that increasing the amount of ethanol in our fuel supply to 15 percent would result in a ZERO percent change in consumer food expenditures and minimal changes in land use.”

WASDE Report: Commodity- Food Prices

Yesterday, the World Agricultural Outlook Board (WAOB) released its monthly World Agricultural Supply and Demand Estimates (WASDE).

With respect to corn, yesterday’s report stated that, “U.S. feed grains supplies for 2009/10 are projected lower with reduced prospects for corn yields and production. Corn production for 2009/10 is projected at 11.9 billion bushels, down 155 million from last month’s projection. The national average yield is projected at 153.4 bushels per acre, 2 bushels lower as continued planting delays through late May reduce yield prospects, especially for the eastern Corn Belt…The 2009/10 marketing-year average farm price is projected at $3.90 to $4.70 per bushel, up 20 cents on both ends of the range. This compares with $4.10 to $4.30 per bushel for 2008/09.”

An overview of key corn related statistics from page 12 of the report can be viewed by clicking here.

The WAOB also noted in yesterday’s report that, “U.S. wheat supplies for 2009/10 are lowered this month reflecting a 10-million-bushel reduction in forecast winter wheat production…The 2009/10 marketing-year average farm price is projected at $4.90 to $5.90 per bushel, up 20 cents on both ends of the range as higher feed grain and soybean prices support domestic wheat value.”

And for soybeans, the WASDE summary indicated that, “Soybean ending stocks for 2008/09 are projected at 110 million bushels, down 20 million from last month. Ending stocks for 2009/10 are also reduced 20 million bushels to 210 million…The U.S. season-average soybean price for 2009/10 is projected at $9.00 to $11.00 per bushel, up 55 cents on both ends of the range.”

Reuters writer Charles Abbott reported yesterday that, “U.S. livestock feeders, exporters and food makers will have less than a two-week supply of soybeans, barely enough to keep running, when the fall harvest begins, the government forecast on Wednesday.

“Analysts said the corn market faces a similar squeeze in 2010, a ripple effect of a rainy spring that delayed planting and will reduce this year’s corn harvest. The corn stockpile would drop to a four-week supply.”

The Reuters article noted that, “In seven of the past 10 years, the soybean stockpile actually was larger than forecast, said Darrel Good, a University of Illinois agricultural economist. He said high prices will help ensure America ‘will not run out of soybeans prior to harvest of the 2009 crop.’”

In related news coverage of the WASDE report, the AP reported yesterday that, “Crop prices have been steadily rising this spring after collapsing after last fall’s financial crisis, when global demand sank along with the economy. Still, prices haven’t come close to last summer’s all-time highs.

“Higher grain prices could hurt already battered food companies like General Mills Inc. and Tyson Foods Inc. They’ve had to pay more for ingredients as prices for corn, wheat and soybeans have risen. Prices at the grocery store could climb, too, as food producers pass on their higher costs to consumers.

“Both companies have said they expect crop prices to go higher this year, though below last summer’s peak.”

Another variable impacting the price of food is the price of energy, and Madalina Iacob reported today at The Wall Street Journal Online that, “Crude-oil prices continued to rally past $70 a barrel after official data showed U.S. supplies unexpectedly dropping and demand picking up.

“Gasoline futures also traded above $2 a gallon for the first time since October.”

School Lunch Program

Peter Eisler and Elizabeth Weise reported today at the USA Today Online that, “Nearly 20 million children now receive free or reduced-price lunches in the nation’s schools, an all-time high, federal data show, and many school districts are struggling to cover their share of the meals’ rising costs.

“Through February, nationwide enrollment in free school lunch programs was up 6.3% over the same time last year, to 16.5 million students, based on data from the U.S. Food and Nutrition Service (FNS), which subsidizes the programs. Participation in reduced-price lunch programs rose to 3.2 million students, the data show.”

Ag Economy

The Federal Reserve Bank released an updated version of its “Beige Book” yesterday- a summary of commentary on current U.S. economic conditions.

With respect to agriculture, the Chicago District indicated that, “Lower milk, cattle, and hog prices and higher costs for feed worsened the income prospects for livestock producers. Hog farmers had an especially difficult spring due to the large drop in hog prices after the H1N1virus (swine flu) scare.”

And the Kansas City District stated that, “With high feed costs and weak meat demand triggering losses, livestock producers have significantly reduced herds. Farmland values held steady and remained above year-ago levels. Lower farm income expectations slowed capital spending and eased non-real estate loan demand, despite further reductions in agricultural interest rates.”

And Liam Denning reported today at The Wall Street Journal Online that, “Your average hog farmer is no stranger to a trough. But this one really stinks.

The H1N1 swine-flu scare is only the most obvious setback this year. Front-month lean hog prices have dropped by a fifth, to about 59 cents a pound, since early April.

“It isn’t just hogs under pressure, though. Cattle prices also have drifted lower, as careful consumers rein in their spending, and appetites.”

Food Safety

Jane Zhang reported yesterday at The Wall Street Journal Online that, “The House took the first step toward passing legislation aimed at plugging holes in the nation’s food-safety system, after lawmakers reached a compromise over user fees and other requirements.

“The legislation would boost the authority and funding of the Food and Drug Administration. It would impose a $500 annual registration fee on every food facility to increase funds for the FDA’s food-safety operations, and would require the food industry to make it easier for the FDA to track tainted products.

“The measure cleared the Energy and Commerce Committee’s health subcommittee Wednesday on a unanimous voice vote. Energy and Commerce Committee Chairman Henry Waxman (D., Calif.) said the full committee will likely vote on it next Wednesday.”

Philip Brasher reported yesterday at The Des Moines Register Online that, “Food processors would be charged a yearly fee and face tighter government scrutiny under legislation approved by a House subcommittee today.

“Every processing facility, including 354 in Iowa, would be assessed $500 a year to help fund the Food and Drug Administration.

Leaders of the House Energy and Commerce Committee had originally proposed a fee of $1,000 per facility but agreed to cut that in half.

Mr. Brasher added that, “The committee’s chairman, California Democrat Henry Waxman, called the fee a ‘critical breakthrough.’ The money ‘will provide FDA with a much-needed infusion of resources to keep the food supply safe,’ Waxman said.”

Yesterday’s Register article explained that, “The FDA regulates 80 percent of the nation’s food supply but has less authority and a smaller food-safety budget than the Agriculture Department, which regulates only meat and poultry.

“In Iowa, the rules would affect everyone from mom-and-pop businesses to huge corn mills and cereal operations owned by multinational firms such as Cargill and General Mills.”

“The National Farmers Union said in a letter to the committee that a ‘punitive approach for traceability, penalties, inspections’ and other measures could hurt growers without improving food safety.”

Keith Good

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