FarmPolicy

February 23, 2019

Climate Legislation; Farm Expenses-Income; Farm Bill; and SNAP (Food Stamps)

Climate Legislation

John M. Broder reported in today’s New York Times that, “Ten moderate Senate Democrats from states dependent on coal and manufacturing sent a letter to President Obama on Thursday saying they would not support any climate change bill that did not protect American industries from competition from countries that did not impose similar restraints on climate-altering gases.

“The letter warned that strong actions to limit emissions of carbon dioxide and other heat-trapping gases would add to the cost of goods like steel, cement, paper and aluminum. Unless other countries adopt similar emission limits, the senators warned, jobs will migrate overseas and foreign manufacturers will have a decided cost advantage.”

Mr. Broder indicated that, “‘As Congress considers energy and climate legislation,’ the senators wrote, ‘it is important that such a bill include provisions to maintain a level playing field for American manufacturing.’

“‘It is essential that any clean energy legislation not only address the crisis of climate change, but include strong provisions to ensure the strength and viability of domestic manufacturing,’ the letter said.

The 10 senators are seen as crucial undecided votes in the Senate debate on climate legislation. The House narrowly passed a climate bill in late June, but the Senate is moving slowly, in part because it is preoccupied with health care legislation.”

The Times article added that, “The senators represent Midwestern and coal-producing states from which many of the 44 Democrats who voted against the measure in the House come from. Without their support, it is unlikely that the Senate can pass a major climate change bill.

“The 10 senators were Evan Bayh of Indiana; Sherrod Brown of Ohio; Robert C. Byrd and John D. Rockefeller IV of West Virginia; Bob Casey and Arlen Specter of Pennsylvania; Russ Feingold of Wisconsin; Al Franken of Minnesota; and Carl Levin and Debbie Stabenow of Michigan.”

Keith Johnson, who wrote about this development yesterday at the Environmental Capital Blog (The Wall Street Journal), noted that, “This whole notion of slapping ‘dirty’ imports with a special tariff, in order to make foreign manufactures adhere to the same environmental standards as the U.S., gained traction (even with Paul Krugman) after the House included mandatory carbon tariffs in the Waxman-Markey bill.

“The problem is that the White House, the Senate leadership, the United Nations, developing countries, Europe, and—at times—the World Trade Organization have all come out against tariffs.”

Mr. Johnson stated that, “There are a couple of problems with the idea of carbon tariffs, aside from the fact that they may—or may not—be illegal under WTO rules. For starters, the latest analysis of the impact of climate legislation shows that vulnerable industries—steel, cement, paper, chemicals and the like—will be amply protected by other provisions already included in climate legislation.

The bigger problem is whether the U.S. wants to wield a stick or a carrot. Plenty of academics figure the threat of tariffs will push already recalcitrant countries such as China and India even further away from the negotiating table; India has said as much.

Yet the ten senators take the opposite approach: ‘By eliminating the competitive benefit of not acting to address this global problem, it should spur countries to reach a comprehensive accord.’

President Obama has consistently pitched his energy and climate program as an engine of job creation. Now, he’ll have to show he can both protect jobs and steer clear of protectionism.”

Meanwhile, the Senate Committee on Environment and Public Works held a hearing yesterday entitled, “Climate Change and Ensuring that America Leads the Clean Energy Transformation.”

Bloomberg writers Lorraine Woellert and Simon Lomax reported yesterday that, “Senate Environment and Public Works Committee Chairwoman Barbara Boxer is examining price controls for carbon under a system to limit greenhouse-gas emissions.

“Boxer, a California Democrat and former stockbroker, is drafting a plan to cap carbon dioxide and other emissions and create a trading system for pollution permits. Addressing concerns about the possible market volatility of such a system, she said she is considering including a price ceiling and floor on carbon.

“‘I’m looking at it,’ Boxer said at a hearing today on the proposed climate legislation. A ‘price collar’ is ‘one way to put more certainty’ on the price of carbon, she said.”

Yesterday’s article pointed out that, “Boxer said she plans to introduce Senate legislation the week of Sept. 8.”

The Wall Street Journal’s Environmental Capital Blog also provided a recap of yesterday’s Senate hearing, noting in part that, “In a surprisingly subuded hearing, the most interesting stuff came during the testimony from David Sandalow, the Assistant Secretary of Energy for Policy and International Affairs—a guy who really knows a lot about energy.

“What was especially interesting was the order of his wish list.

It starts with energy efficiency—like other witnesses, he cited the recent McKinsey report that says efficiency would save the U.S. economy $700 billion while shaving future electricity demand by 23%. Next comes renewable energy—the U.S. could, in theory, could meet all its electricity needs with just wind and solar power.

“But he didn’t give short shrift to the mainstays of the U.S. power supply. By 2035, he said, 100% of the U.S. coal fleet could employ carbon capture and storage (don’t tell the Chinese) which would eliminate one-third of current greenhouse-gas emissions.”

Philip Brasher reported yesterday at The Des Moines Register Online that, “The Senate’s chief architect of climate legislation accused MidAmerican Energy of trying to block reductions in U.S. greenhouse gas emissions.

“‘Where I see you going is for the status quo,’ Sen. Barbara Boxer told MidAmerican’s chief executive, William Fehrman, at a hearing today. ‘The problem for you is that the status quo is about to change.’”

The Register article explained that, “MidAmerican is following up on Sen. Boxer’s request to ‘work with us,’ and is trying to schedule a meeting with her.

“‘I want to make that crystal clear. We absolutely agree that we can reduce’ carbon dioxide emissions, Fehrman told Boxer.

“If Congress does enact an allowance-trading system, states should be allowed to opt out of it, while still making the reductions in emissions, Fehrman said.”

With respect to other Senate hearings on climate legislation, Chris Clayton noted yesterday at the DTN Ag Policy Blog that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, told reporters Thursday morning he has a meeting scheduled later in the afternoon with other committee members to discuss other possible hearings on climate change. Republicans have been asking for more hearings on the legislation before Senate chairmen send their recommendations on the bill to Senate leadership in late September.”

Farm Expenses-Income

The U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) released its annual Farm Production Expenditures Summary yesterday.

In part, NASS stated that, “U.S. Farm Production Expenditures totaled $307 billion in 2008 and $284 billion for the revised 2007 crop year. The 2008 Total Farm Expenditures rose 8.3 percent compared to the 2007 rise of 19.2 percent over 2006. The 2007 revised estimate is up from the preliminary estimate by $23.5 billion due to significant summary adjustments based on 2007 Census farm numbers.”

The report added that, “Rising fertilizer prices and weather were two large factors affecting farm production expenditures, during the year. Fertilizer, up 27.1 percent over previous year, was the fastest expanding non-capital expense. The increased cost of crude oil continued to drive up the cost of several production inputs in 2008. This directly translated into rising fuel cost, and influenced fertilizer products, chemicals, and transportation costs.”

More specifically, NASS pointed out that, “In 2008, the average per farm U.S. Total Farm Expenditure was $140,075 compared with $129,062, an increase of 8.5 percent over 2007. On average, U.S. farm operations spent: $21,398 on Feed, $17,337 on Farm Services, $13,550 on Labor, $12,912 on Livestock and Poultry Purchases, $10,265 on Fertilizer, Lime, and Soil Conditioners, and $10,220 on Rent. Revised estimates for 2007 indicate U.S. farms spent an average of: $19,073 on Feed, $16,752 on Farm Services, $15,022 on Livestock and Poultry Purchases, $13,019 on Labor, and $8,968 on Rent.”

The NASS update contained several very useful graphical depictions, including: “U.S. Farm Production Expenditures- 1999-2008;” “U.S. Farm Production Expenditures- By Input Items;” “U.S. Farm Production Expenditures- By Type of Farm, 1999-2008;” “U.S. Fuels Expenditures- 1999-2008;” and “U.S. Farm Production Expenditures- Selected Expenses, 3 Year Comparison.”

Also yesterday, an update posted at USDA’s Economic Research Service (ERS) Online stated that, “On August 6, 2009, ERS released the first estimate of national and State farm sector accounts for 2008 and updates to 2007 and earlier estimates. The updates incorporate revisions by the National Agricultural Statistics Service (NASS) to several key reports used in the ERS farm income accounts. The revisions stem from a comprehensive review of previously published data in light of information from the 2007 Census of Agriculture.”

The ERS update indicated that, “Net farm income was an estimated $87.3 billion in 2008, up from the $71.1 billion farmers are estimated to have earned in 2007. That is a year-to-year gain of $16.2 billion (23 percent) and places 2008 net farm income 45 percent above the 10-year average of $60 billion.

2008 was a particularly good year for corn and soybean producers. Prices for the two commodities were at levels not seen in recent years due to heightened demand for use in the production of ethanol and biofuel. The higher prices for these two key ingredients of processed food and animal feed resulted in higher prices for other crops as buyers searched for alternatives.”

With respect to gross income and production expenses, ERS included this helpful graphic, “Gross farm income, production expenses, and net farm income, 1998-2008.”

On the issue of U.S. government payments, ERS stated that, “Direct government payments were $12.2 billion in 2008, up from the $11.9 billion paid out in 2007. [See related graph, “Government payments by type, 1998-2008.”] This level was 25 percent below the 5-year average for 2003-2007. Direct payments under the Direct and Countercyclical Program (DCP) were $5.11 billion in 2008, a 1-percent increase from 2007. Direct payment rates are fixed in legislation and are not affected by the level of program crop prices. Since 2004, there has been little change in direct payments by crop year. The small fluctuations across the calendar years are the result of changes in the number of farmers receiving optional advanced payments in December, affecting the share of the payment rolled into the following calendar year.”

ERS added that, “Countercyclical payments decreased by 37 percent from $1.1 billion in 2007 to $712 million in 2008. Since 2006, only upland cotton and peanuts have received countercyclical payments. Under the Food, Conservation and Energy Act of 2008 (2008 Farm Act), the timing of countercyclical payments will change. For the crop years 2008 through 2010, producers will receive two countercyclical payments. A partial payment will be made after 180 days of the marketing year and the final payment will be made beginning the following October 1st.

Marketing loan benefits—including loan deficiency payments, marketing loan gains, and certificate exchange gains—were $316 million in 2008, down from $1.14 billion in 2007. In 2008, upland cotton producers realized 93 percent of the total marketing loan benefits. The other crops receiving marketing loan benefits were wool, mohair, and pelts. Even though commodity prices had declined from their peaks in the second half of 2008, commodity prices in 2008 were still too high to allow the remaining program crops to participate in these programs.”

Conservation programs include all those operated by USDA’s Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) that provide direct payments to producers. Estimated conservation payments of $3.16 billion in 2008 reflect programs being brought up to funding levels authorized by current legislation,” the ERS update said.

ERS also noted that, “An update to the 2009 farm income forecast will be posted on August 27, 2009.”

In a prospective look at agricultural economic variables in 2010, Marcia Zarley Taylor noted yesterday at the DTN Minding Ag’s Business Blog that, “Iowa State University’s initial 2010 budgets for the corn and soybean crops hint of a pending crash in Midwest farm profits. Although most fertilizers run half the cost of a year ago and fuel prices have plunged, ISU budget estimates released yesterday show a large disconnect between expenses and expected market prices for next season, reports DTN Special Correspondent Elizabeth Williams.

“Assuming average cash rents of $178 to $232 per acre depending on land quality, ISU pegs the state’s 2010 average cost of production on continuous corn at $4.88 to $4.47 per bu. Costs on corn following beans might run only $4.01 to $4.25. The problem is that Extension economists are currently pegging 2010 season average prices at about $3.75 (knock 10 cents off for Iowa locales).

Losses could be just as painful for soybeans. ISU estimates 2010 soy costs at $9.97 to $9.55, but 2010 U.S. season average prices running only $8.75.”

The DTN blog update also stated that, “Remember a year ago that producers were also forecasting disastrous disconnects between expenses and projected 2009 prices, but two bonuses could mean many growers will actually fare reasonably well this year. First, commodity prices have plunged so far since February 2009 that those who purchased crop revenue insurance may actually collect on the guarantees of $4.04 for corn and $8.80 for soybeans. (In 2008, the crop insurance industry paid out $8 billion largely due to the price freefall, so you can’t forget to count those proceeds in your bottom line anymore). What’s more, state universities are also projecting corn payments of $50 to $100 per acre for those who elect the Average Crop Revenue Election (ACRE) on their 2009 crops. If that happens, crop producers may find these risk management tools can make up for some mistakes in their marketing plans.”

Farm Bill

With respect to federal farm conservation programs, USDA indicated in a news release yesterday that, “Agriculture Deputy Secretary Kathleen Merrigan today announced that the U.S. Department of Agriculture (USDA) will begin continuous sign-up for the new Conservation Stewardship Program (CSP) on August 10 with the first signup period cutoff scheduled for September 30. CSP is a voluntary program that encourages agricultural and forestry producers to maintain existing conservation activities and adopt additional ones on their operations.”

Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) noted in a news release from yesterday that, “We must move to rewarding farmers not just for what they grow, but for how they grow it, and CSP does just that. In order to protect the environment and ensure productive farm land for years to come, CSP provides financial incentives to farmers and ranchers who maintain and adopt sound conservation practices. I encourage all producers to consider applying for this program.”

A news item released yesterday by the National Sustainable Agriculture Coalition explained that, “The 2008 Farm Bill authorizes a new nationwide, continuous sign-up for CSP which means farmers and ranchers anywhere in the country will be able to apply for the CSP any year and at any time of the year. Periodically during the year, USDA’s Natural Resources Conservation Service (NRCS) – the agency that administers CSP – will rank applications and then develop contracts with those farmers and ranchers with the highest rankings until funding for that ranking period is completely allocated.

The new farm bill provides sufficient funding for the program to enroll nearly 13 million acres each year. CSP acreage eligible for enrollment will be allocated to each state based primarily on the amount of agricultural land in that state relative to the national total.”

SNAP-Supplemental Nutritional Assistance Program (Food Stamps)

Reuters writer Charles Abbott reported yesterday that, “For the first time, more than 34 million Americans received food stamps in May, the government said on Thursday, another symptom of the longest and one of the deepest recessions since the Great Depression.

“Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in the latest month for which figures are available.

It was the sixth month in a row that enrollment set a record. Every state recorded a gain, and Florida had the largest increase at 4.2 percent.”

Bloomberg writer Alan Bjerga reported yesterday that, “The increase marked the sixth straight month of record participation in the Supplemental Nutrition Assistance Program. The monthly total was up 21 percent from a year earlier and 1.9 percent from April, the Department of Agriculture said today in a statement on its Web site. Spending was $4.6 billion, also the highest ever, the agency said.

“The government is boosting food aid in response to a jobless rate that probably rose to 9.6 percent last month according to the median estimate of economists surveyed by Bloomberg News before a government report tomorrow.”

Mr. Bjerga stated that, “Texas had the most recipients at 2.92 million, followed by California with 2.75 million and New York with 2.38 million.

“The average monthly benefit for an individual rose 0.3 percent from April to $133.28. For a household of four the amount rose 0.2 percent to $294.31. Both totals were records.”

The AP reported today that, “Members of the Alpha and Omega Church knew helping a federal summer feeding program for kids was risky, since sponsors often lose money.

“Just the same, program director Catherine Coleman and other church members spent the summer knocking on doors in a neighborhood pockmarked by dilapidated homes and crumbling apartment buildings to let residents know healthy, free meals were waiting for anyone under 19 — those students typically fed by reduced-price or free lunches during the school year.

“Participation in the federal Summer Meal Service program at the church grew from fewer than 20 children a day in early June to about 60 by the end of July, though organizers suspect many more in the area still aren’t getting the free food.

Nationally, the federal meals are reaching only a fraction of the nation’s children who qualify, and government officials and advocacy groups say the recession has placed millions more children at risk of going hungry.”

The article added that, “The Child Nutrition Act is up for reauthorization, the periodic review of legislation that covers the national school lunch, school breakfast and the Special Supplemental Program for Women, Infants and Children. Advocates are lobbying lawmakers to make changes they think will get free meals to more children.

“Senate Education Committee Chairman Tom Harkin, D-Iowa, said his committee will take a closer look at the summer program in considering the legislation.

“‘Ensuring that our kids have enough to eat during summer months is critically important, especially during these tough economic times,’ Harkin said in an e-mail. ‘Unfortunately, despite repeated efforts, the number of children participating in federally reimbursed summer nutrition programs in 2008 was the same as it was 15 years ago.’”

Keith Good

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