FarmPolicy

October 1, 2014

Climate Legislation; Crop Estimates; Farm Bill (ACRE); and the Ag Economy (Eggs, Sugar, Pork)

Climate Legislation

Lauren Etter reported in today’s Wall Street Journal that, “Some of the nation’s biggest food and agriculture companies are planning to release a flurry of studies in coming weeks that scrutinize the potential impact of climate-change legislation, warning that it could lead to higher food prices.

“A group of agriculture giants including Cargill Inc., along with meat company Tyson Foods Inc. and food maker General Mills Inc., is concerned the companies might bear a disproportionate share of the costs of such legislation, according to a memo reviewed by The Wall Street Journal.”

Ms. Etter explained that, “The group also is worried that a House bill passed in [June] doesn’t provide sufficient incentives for food and agricultural companies to receive and generate carbon credits to offset their carbon emissions.”

Today’s Journal article indicated that, “Other members of the food coalition include the Grocery Manufacturers Association, the National Turkey Federation, the American Meat Institute and the American Frozen Food Institute.

The coalition, which formed informally about two months ago, is becoming more active after concluding that member companies didn’t win enough concessions in the House climate legislation, industry lobbyists said. The Senate is expected to take up its own climate bill when senators return from recess next month.”

In a related development, The Washington Wire Blog (The Wall Street Journal) reported earlier this week that, “Taking a cue from angry protests against the Obama Administration’s health care restructuring, the oil industry is helping organize anti-climate bill rallies around the nation.

“The American Petroleum Institute, along with other organizations such as the National Association of Manufacturers opposed to the climate legislation Congress will consider again in the fall, is funding rallies across 20 states over the August recess.”

Yesterday’s Journal item pointed out that, “In template fliers for rallies produced by the API-founded alliance, EnergyCitizens, the public is warned that, ‘Climate change legislation being considered in Washington will cause huge economic pain and produce little environmental gain.’

“Other members of the alliance include the National Association of Manufacturers and the America Farm Bureau.”

O. Kay Henderson reported yesterday at Radio Iowa Online that, “U.S. Ag Secretary Tom Vilsack will host a town-hall-style forum at this year’s Iowa State Fair, although staff from the U.S.D.A. and the White House are not releasing the details yet — such as the date or time for the event.

“‘I’m coming back to Iowa, an opportunity to do an outreach effort at the State Fair and I’m sure that there’ll be questions ranging from health care to energy policy to farm policy, so I’m looking forward to a good discussion with folks back home,’ Vilsack said this week during an interview with Radio Iowa.”

In news regarding the potential economic implications of climate legislation, Jim Snyder reported yesterday at The Hill Online that, “The National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) released a study Wednesday that found under a high-cost scenario the House global warming bill could reduce economic growth by 2.4 percent and cost 2 million jobs by 2030.

Environmentalists were quick to criticize the study for underselling the development of climate-friendly sources of power and not releasing other assumptions NAM and ACCF fed into the computer model to get their economic forecast, which takes more of a glass-half-empty view than recent governmental reports.

But the business groups’ figures will likely provide opponents of capping carbon more ammunition and could add to the angst of senators from industrial states. One key finding is that the climate bill will hurt the manufacturing sector particularly hard. As much as 66 percent of the total job loss from the climate bill could come from manufacturers, the report notes.”

Mr. Snyder noted that, “Analyses by the EIA, Environmental Protection Agency and Congressional Budget Office can be found here, here and here.”

An update posted earlier this week at The Foundry Blog (The Heritage Foundation) stated that, “The Heritage Foundation recently released its economic analysis of the Waxman-Markey cap and trade bill, and unsurprisingly, found devastating results. The goal of cap and trade is to force energy prices to rise so high that people use less of it. And boy do they. Even under the most generous assumptions the Heritage analysis found: Gas prices will rise 58 percent. Gas prices are expected to increase in the future even without cap and trade. Waxman-Markey would add an additional $1.38 to that increase. Electricity prices will rise 90 percent. In total, a family of four can expect per-year energy costs to rise $1,241 by 2035.”

A news release issued yesterday by the National Farmers Union noted that, “National Farmers Union President Roger Johnson provided the keynote address entitled ‘Food and Climate Change in a Global Economy,’ at the conference of the Association of Farmers Organizations in Scandinavia in Reykjavik, Iceland today.

“Johnson told the group that farmers and ranchers can be key players in combating global climate change and lead the transition to a clean, renewable energy economy. He said that while critics have pointed to increased costs as a reason for their opposition, it is time to fully look at the cost of inaction.

“‘We know that input costs will increase under a cap and trade system. However, a robust and flexible agricultural offset program will allow producers to mitigate some of these inputs and, according to the U.S. Department of Agriculture, allow them to economically benefit in the long run. When coupled with aggressive renewable energy initiatives, rural America stands to significantly benefit,’ Johnson said.”

Meanwhile, Jon Hilsenrath reported in today’s Wall Street Journal that, “In the 1960s, a University of Wisconsin graduate student named Thomas Crocker came up with a novel solution for environmental problems: cap emissions of pollutants and then let firms trade permits that allow them to pollute within those limits.

“Now legislation using cap-and-trade to limit greenhouse gases is working its way through Congress and could become the law of the land. But Mr. Crocker and other pioneers of the concept are doubtful about its chances of success. They aren’t abandoning efforts to curb emissions. But they are tiptoeing away from an idea they devised decades ago, doubting it can work on the grand scale now envisioned.

“‘I’m skeptical that cap-and-trade is the most effective way to go about regulating carbon,’ says Mr. Crocker, 73 years old, a retired economist in Centennial, Wyo. He says he prefers an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem.”

In a different look at the general climate change issue, Cornelia Dean reported in today’s New York Times that, “Since the mid-1990s, hurricanes and tropical storms have struck the Atlantic Ocean with unusual frequency — or have they? Two new studies suggest that the situation may not be so clear.

One, by researchers at the National Oceanic and Atmospheric Administration, suggests that the high number of storms reported these days may reflect improved observation and analysis techniques, not a meteorological change for the worse. The second, by researchers at Pennsylvania State University and elsewhere, suggests that there were as many storms a thousand years ago, when Atlantic Ocean waters were unusually warm, as today.

“The work does not suggest that people should stop worrying about whether global warming increases the threat of bad weather on the Atlantic Coast. But it offers new evidence that predicting what lies ahead may be difficult.”

Crop Estimates

A news release issued yesterday by USDA’s National Agricultural Statistics Service indicated that, “U.S. farmers successfully battled soggy July weather and remain on target for producing the largest soybean crop in history, according to the Crop Production report, released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS).

Soybean production is forecast at a record-high, 3.2 billion bushels, up 8 percent from last year. Yield is expected to average 41.7 bushels per acre, up 2.1 bushels per acre from 2008. If realized, this will be the fourth largest soybean yield on record.

Corn production is forecast at 12.8 billion bushels, up 5 percent from last year, but down 2 percent from the 2007 record. Based on conditions as of August 1, yields are expected to average 159.5 bushels per acre, up 5.6 bushels from last year. If realized, this will be the second highest yield on record. Growers are expected to harvest 80 million acres of corn for grain, down 100,000 acres from June, but up 2 percent from last year.”

The World Agricultural Outlook Board (WAOB) released its monthly World Agricultural Supply and Demand Estimates (WASDE) yesterday, which incorporated the latest NASS projections.

In part, the WASDE report stated that, “Despite reduced prospects for livestock production, feed and residual use is raised 100 million bushels with the higher yield and production expected to add to residual loss. Food, seed, and industrial use is raised 100 million bushels with higher expected use for ethanol supported by favorable ethanol producer returns and strong incentives for ethanol blending.”

The report added that, “The 2009/10 marketing-year average farm price [for corn] is projected at $3.10 to $3.90 per bushel, down 25 cents on both ends of the range.”

With respect to soybeans the WAOB noted that, “The U.S. season-average soybean price for 2009/10 is projected at $8.40 to $10.40, up 10 cents on both ends of the range;” and for wheat, yesterday’s report indicated that, “The 2009/10 marketing-year average farm price is projected at $4.70 to $5.70 per bushel, down 10 cents on both ends of the range.”

A news release issued yesterday by Growth Energy indicated that, “Tom Buis, CEO of Growth Energy, released the following statement on the crop report released today by the U.S. Department of Agriculture (USDA) that estimates record breaking harvests of both corn and soybeans; data that contradicts the theory of indirect land use change. Based on the USDA report, American farmers are expected to produce more than 12.7 billion bushels of corn –the second largest yield in U.S. history – and more than 3.1 billion bushels of soybeans – the largest in U.S. history. The corn estimate is 400 million more bushels than was estimated in last month’s report, which also included carryover from last year.

“‘Today’s record breaking estimates of this year’s corn and soybean harvest are proof of what the ethanol industry has been saying from the start: the theory of indirect land use change is flawed and not based on the facts. Based on these reports, it’s silly to still think that the demand for corn in the U.S. to make ethanol would displace land used to plant soybeans and in turn cause deforestation in other parts of the world.’”

Farm Bill (ACRE)

Dan Looker reported yesterday at Agriculture Online that, “The agony of procrastination can be intense, especially if you live in Iowa and the USDA projects a yield of 185 bushels an acre for the 2009 corn crop — just two days before the deadline to sign up for the new Average Crop Revenue Election (ACRE) program.

“‘Based on today’s report, Iowa wouldn’t trigger a payment, but Illinois, Minnesota and Missouri would,’ Iowa State University Extension farm management specialist Steve Johnson told Agriculture Online.”

Mr. Looker added that, “Of course, no one really knows if ACRE payments will be triggered anywhere, but the odds went down a bit with the higher yield estimate. Payments will be calculated based on the average cash price for the marketing year that starts next month, times a state’s yield. If that calculation of revenue falls 10% below a benchmark based on the 2007 and 2008 prices and average yields (and your own farm has a drop in revenue), then payments would be made, probably in late 2010.

“USDA’s projection for prices paid this year for 2008 for corn and soybeans didn’t change, so the benchmark, or revenue guarantee, remains the same. It’s calculated with a 2008 crop marketing year average price of $4.05 a bushel for corn and $10 a bushel for soybeans.”

DTN Markets Editor Pat Hill reported yesterday that, “Adjustments in USDA’s expected corn and soybean yields and price projections could affect some last-minute decisions about enrolling in the new Average Crop Revenue Election program, said two economists who have been studying the program closely for months.”

“Ag economists Art Barnaby of Kansas State University and Carl Zulauf of Ohio State University both revised their ACRE outlooks following the release of the new data,” the DTN article said.

Dave Russell reported yesterday at Brownfield (link includes audio report) that, “With yield and price projections available from the August report, [Indiana] FSA program specialist Carl Schweikhardt tells Brownfield that producers can do the necessary calculations to decide whether or not ACRE fits their farming operation.

“‘Producers are going to have to take these numbers, yields and prices, and run the numbers in our calculators and see how they work out,’ Schweikhardt said.”

And Leslie Reed reported in today’s Omaha World Herald that, “Farm Service Agency offices across Nebraska and the nation are seeing a late surge of farmers signing up for a new government safety net that bases farm payments on price and production.

In Hamilton County, Neb., only about 50 farmers had signed up for the Average Crop Revenue Election (ACRE) program at the start of the week.

But at least 250 more showed up by the close of business Wednesday, and still more were expected before Friday’s deadline.”

Ag Economy: Eggs

The AP reported yesterday that, “New federal legislation designed to reduce the risk of salmonella in eggs will cost the industry $81 million, the United Egg producers trade group estimates.”

The AP article added that, “Consumers may see a 1-cent increase in the price for a dozen eggs, United Egg Producers estimates. But the FDA estimates those costs will translate into $1.4 billion in yearly public health benefits.

“Gene Gregory, president of the Atlanta-based UEP, says he’s pleased with the new regulations.

“‘Most everything that’s in the guidelines, the industry has been doing it for at least 10 years,’ Gregory said.

“Those include establishing control programs for rodents and other pests as well as refrigerating eggs during storage and transportation at 45 degrees Fahrenheit no later than 36 hours after they’re laid.”

Sugar

Scott Kilman, Carolyn Cui and Ilan Brat reported in today’s Wall Street Journal that, “Some of America’s biggest food companies say the U.S. could ‘virtually run out of sugar’ if the Obama administration doesn’t ease import restrictions amid soaring prices for the key commodity.

In a letter to Agriculture Secretary Thomas Vilsack, the big brands — including Kraft Foods Inc., General Mills Inc., Hershey Co. and Mars Inc. — bluntly raised the prospect of a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products.

The companies threatened to jack up consumer prices and lay off workers if the Agriculture Department doesn’t allow them to import more tariff-free sugar. Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil.”

Bloomberg writer Shruti Date Singh reported yesterday that, “Sugar extended its rally to the highest price since 1981 as below-average rainfall during the monsoon season in India threatens to reduce the cane crop and force the world’s largest consumer to boost imports.

“Sugar prices in India jumped to a record on concern that crops are getting the least moisture in five years. While showers will improve conditions for cane fields this month, ‘the deficiency in rain will surely affect the yield this year,’ according to the sugar-mills association in Uttar Pradesh state, the second-largest producer after Maharashtra.”

Pork

A news release issued yesterday by the National Pork Producers Council stated that, “The National Pork Producers Council today hailed the Republic of Korea’s decision to inspect only a sample of U.S. pork exports rather than 100 percent of them and to lift a ban on live hog imports from the United States. The restrictions were put in place in the wake of the H1N1 flu outbreak.

“‘South Korea’s decision is good news for U.S. pork producers,’ said NPPC President Don Butler. ‘NPPC has been working closely with U.S. and foreign government officials to terminate all remaining H1N1 restrictions on U.S. hog and pork exports. Korea is a top market for U.S. pork exports and an important destination for swine breeding stock. Our producers are enduring very difficult financial times, and the removal of these restrictions by Korea is appreciated.’”

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And lastly today, Jim McElhatton reported in today’s Washington Times that, “President Obama’s nominee for surgeon general, whose job it is to help encourage Americans to get thinner and healthier, has been working part time as a scientific adviser to the fast-food giant that sells sandwiches like the Whopper and BK Triple Stacker.

Dr. Regina Benjamin, hailed by Mr. Obama for her efforts in running a health clinic in hurricane-ravaged rural Alabama, has been paid $10,000 since last year for serving on a scientific advisory board for Burger King, according to newly filed public financial disclosures.”

Keith Good

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