January 19, 2020

Farm Bill – Ag Economy; and Climate Change Issues

Farm Bill- Ag Economy

The January 1 edition of The Kiplinger Agriculture Letter (link requires subscription) reported that, “Though USDA is still working to implement parts of the $300-billion-plus ’08 farm legislation, the agency and Congress are making early plans for its successor, coming in two or three years.

Capitol Hill hearings will start in March or so, giving lawmakers an idea of what farmers and other interests want in the way of policy changes, subsidies and funding for USDA’s array of programs.”

The Kiplinger Agriculture Letter added that, “The bill’s lead drafters are good farm friends: In the House…Collin Peterson (D-MN), who led the ag committee through the ’08 farm bill.

“And in the Senate…Blanche Lincoln (D-AR), tapped as ag panel chief in ’09 and a tough advocate for big farm subsidies who faces reelection in Nov.

What to expect? A switch in crop insurance will be high on the agenda leading to new legislation.

Look for a focus on whole-farm revenue, ensuring robust disaster aid and insurance coverage but some trimming of subsidies on field crops.”

In other Farm Bill developments, Reuters news reported on Thursday (article posted at DTN, link requires subscription) that, “Family-run operations will see slightly less restrictive rules for collecting farm subsidies beginning with 2010 crops, said the Agriculture Department on Thursday.

USDA also said it finalized an agreement with the Internal Revenue Service to verify that farm subsidies are not paid to the wealthiest Americans. USDA announced the initiative on March 19.

“The 2008 farm law is the first to deny payments based on income level, but there is no overall limit on how much a producer can collect.”

The Reuters article explained that, “The Obama administration began an examination of farm subsidy rules last January. There were signs a new broad-scale regulation could be announced soon.

“USDA said it was ‘streamlining’ eligibility rules to benefit family-run operations, which can include corporations, beginning with 2010 crops. The new rule allows members to collect farm subsidies if at least half of them provide significant labor and management and if total subsidies do not exceed $40,000.

“Ordinarily, people must provide land, equipment, capital or labor and management to qualify for subsidies.”

Thursday’s Reuters article reminded readers that, “Under the 2008 farm law, people with more than $500,000 adjusted gross income from off the farm are denied crop subsidies. Those with more than $750,000 AGI from agricultural sources are ineligible for the direct-payment subsidy but get price supports and counter-cyclical payments. There is a $1 million AGI limit to participate in land stewardship programs.

“Congressional auditors estimated as many as 23,506 people would be affected by the income limits set by the 2008 law.

President Barack Obama was rebuffed in early 2009 when he proposed a $250,000 overall limit on farm subsidies and a phase-out of the direct-payment subsidy to large farms.”

With respect to variables associated with the agricultural economy, O. Kay Henderson reported on Saturday at Radio Iowa Online that, “The Iowa Mediation Service — a nonprofit program that helps borrowers work with lenders to refinance loans and avoid foreclosures — expects farm foreclosures to increase in 2010. This past year, in 2009, the agency worked with about a thousand farmers hoping to avoid foreclosure.

One headache in the coming year is farmers may find it more difficult to obtain operating loans. [U.S. Secretary of Agriculture Tom Vilsack] has met with the nation’s treasury secretary to talk about the issue.

“‘I think you’ve begun to see that there’s beginning to be a bit more pressure from the treasury department and from the president on banks to basically lend the money that they have,’ Vilsack says. ‘The banks are not without resources. They actually have resources, but they are investing it in very conservative investments right now and I think they need to begin to loosen up the credit a little bit and I think we’ve brought to the attention of the treasury secretary the challenges that ag has.’”

The Radio Iowa item added that, “According to data from Iowa State University, livestock farmers have been losing money since the fourth quarter of 2007. In the past year, pork and beef exports have been down, contributing to the livestock industry’s financial woes. Vilsack says he and other negotiators have made some headway with opening China to more U.S. pork, for example.

“‘You can restructure all you want and provide refinancing, but at the end of the day what’s going to make the difference is continuing to have healthy markets,’ Vilsack says, ‘which is why we continue to reach out to some of our foreign friends, our trading friends to encourage them to reduce barriers, to eliminate barriers that are being constructed periodically.’”

In a related article, Reuters writer Roberta Rampton reported on Thursday that, “Russia will begin to block imports of U.S. poultry as of Jan 1. because of concerns about a commonly used chlorine treatment, U.S. government officials and a Russian news agency said on Thursday.

“Russia plans to proceed, over U.S. objections, with a new law prohibiting chlorine as an anti-microbial treatment in poultry production, said Katie Gorscak, a spokeswoman for the U.S. Agriculture Department.

“‘Since chlorine has been used as an anti-microbial treatment for poultry in the United States for more than 25 years, this resolution effectively blocks U.S. exports of poultry to Russia, has a devastating impact on the U.S. poultry industry and trade, and raises the costs of poultry products for Russian’s consumers,’ Gorscak said.”

In other news, Holly Henschen reported in today’s Wall Street Journal that, “Higher cotton-futures prices could lead U.S. producers to plant more acres in the spring, after three years of lower acreage.

“Frequent rains cut production and quality of the 2009 crop in the U.S., and poor weather also hurt cotton growing in China, the world’s top producer. Speculators also bought cotton futures, betting the global economic rebound would lead to an increase in demand for cotton fabric and goods. The combination of speculation in futures and reduced supply sent cotton prices higher.

While it is still early for farmers to make their final planting decisions, analysts say U.S. cotton acreage could climb by more than 10% in 2010. In addition to higher prices, there are favorable field conditions for cotton in big-producing states.”

And, as the New Year begins, a Daily Radio News update from USDA (audio report, about one-minute) indicated on Thursday that, “One expert [USDA Chief Economist Joe Glauber] says farm income could improve in 2010.”

Meanwhile, a news release issued by Rep. Lincoln Davis (D-TN) on Thursday stated that, “At the invitation of U.S. Rep. Lincoln Davis, Minnesota’s Seventh District Congressman Collin Peterson, chairman of the House Agriculture Committee, spent two days in Tennessee listening to area farmers during two roundtable discussions in the Fourth Congressional District. The first was held at the UT- Ag Extension office in Crossville and second at the main offices for the Tennessee Farm Bureau in Columbia.

The discussions focused on the pending Farm Legislation and other issues of importance to the farming community.

“Davis said he is holding these roundtable discussions on each end of the twenty-four county district to make it easier for as many farmers to attend as possible.”

In a related item regarding Chairman Peterson’s visit to Tennessee, Mike Morrow, a former staff writer at The Tennessean (Nashville) reported last week at The Examiner’s Nashville Political Buzz Online that, “U.S. Rep. Lincoln Davis, D-Tenn., said today when people ask him about climate change, he has a one-word answer.

“‘I say, ‘Huh?’’ Davis said.

“Davis knows about climate change. His point is not to debate the pros and cons of whether global warming exists but to say it would be far more effective just to focus on reforms in energy policy. And that means finding alternative fuels and renewables, he says.”

Mr. Morrow added that, “Davis was speaking to a crowd at the Tennessee Farm Bureau headquarters in a forum with Rep. Collin Peterson, D-Minn., chairman of the House Agriculture Committee. Davis is a member of the House Appropriations Subcommittee on Agriculture and Rural Development. The two appeared at a similar session Wednesday in Crossville, Tenn.

“The cap-and-trade issue in Congress is concerning to the agriculture industry, which is wrestling with the troubled economy as it is. Farmers are watching the issue because they worry they may be put at an economic disadvantage compared to other countries. Cap-and trade was the first issue raised in audience questions at today’s Columbia forum.”

Mr. Morrow also noted that, “Peterson said he thinks the brakes are going to be put on cap-and-trade in the Senate. He also said it’s difficult for him to see how cap-and-trade will work.

“‘You can’t just have the U.S. and Europe be the ones that do this and the rest of the world gets off the hook,’ Peterson said. ‘It seems what this is really about is taking a bunch of money from us and giving it to poor countries. If that’s what we’re going to do, then why go through all of this? If we’re going to give them money why don’t we just give it to them straight up, which I’m not in favor of. Why not just put a tax on carbon and make it expensive?’”

Climate Change Issues

More specifically with respect to climate change issues, Ben Geman reported at The Hill’s Energy and Environment Blog on Saturday that, “A few days ago, I noted that ClearView Energy Partners’ analyst Kevin Book doesn’t buy the conventional wisdom that the sour economy has dealt a blow to prospects for climate and energy legislation in 2010.

“The consulting and analysis firm — which Book launched with two former Bush administration officials last year — circulated a new research note Thursday that fleshes his views out further, and more generally sets the table for this year’s Democratic efforts on climate.

“ClearView expects a climate and energy bill to emerge in the second quarter of 2010 (the House passed a sweeping bill last June but the Senate hasn’t acted). The underwhelming outcome of the Copenhagen climate summit won’t sink the bill, according to ClearView.”

Mr. Geman noted that, “Back to the economy: ClearView’s basic view is that with states hurting for cash, the prospect that cap-and-trade bills will provide a revenue stream means, in a nutshell, that the bad economy creates an opening for a bill.

“That’s especially true, they argue, because new direct spending to help the economy has become less fashionable on Capitol Hill.”

And Mark Whitehouse reported yesterday at the Real Time Economics Blog (The Wall Street Journal) that, “As scientists struggle to predict exactly how global climate change will affect our environment, economists are grappling with another question: How well can humans adapt?

“Judging from the history of wheat production in North America, the answer is very well, says Paul Rhode of the University of Michigan. In a paper done together with Alan Olmstead of the University of California-Davis, which he presented Sunday at the annual meeting of the American Economic Association, Mr. Rhode looks at how wheat production fared between the mid-1800s and the late 1900s, as production moved into parts of North America with harsher climates. The conclusion: Production adapted successfully as farmers introduced new strains that grew well in the new climates.

“‘We’ve been there and done that in terms of adjusting wheat production to new climates,’ he said.”

Tom Zeller Jr. reported in today at The New York Times Online that, “The recently concluded climate talks in Copenhagen suggested to many commentators and participants that the global community, as represented by the United Nations, was incapable of broad agreement on just about anything.

“Others argued that such judgments were too swift and praised the outcome — a five-page document — as an historic first-step toward meaningful global action on the climate.

“Opinions have been as varied and discordant in the aftermath of the meeting as they were at the sessions in the Bella Center in Copenhagen, where thousands of delegates argued and postured — to uncertain ends — in the twilight of 2009.”

The article noted that, “For the past two weeks, those involved in the conference and onlookers alike have traded a variety of ‘I told you so’ denunciations of the meeting; celebrations of its perceived collapse; and mild praise for the ability of nearly 200 nations to come together and, at the very least, agree to keep talking — essentially what the Copenhagen Accord accomplished.

“With the new year just getting under way, it is likely that a good deal of finger pointing — and finger wagging — is yet to come. For now, the following reactions from a cross section of politicians, industry representatives, authors, environment advocates and others suggest that, if nothing else, the fault lines that preceded the conference are still very much in place.”

Mr. Zeller added that, “Senator James M. Inhofe, Republican of Oklahoma, wrote in an op-ed article for USA Today:

“‘The case for the U.S. entering into an international global warming treaty took a significant blow at the latest failed United Nations climate conference in Copenhagen. Not only did the conference fail to reach a meaningful agreement, but that failure will further jeopardize any action on global warming by an already skeptical U.S. Senate.’”

Meanwhile, Jim Tankersley reported on Friday at the Chicago Tribune Online that, “The White House is poised to order all federal agencies to evaluate any major actions they take, such as building highways or logging national forests, to determine how they would contribute to and be affected by climate change — a step long sought by environmentalists.

“Environmentalists say the move would provide new incentives for the government to minimize the heat-trapping gas emissions scientists blame for global warming. Republicans have opposed it as potentially inhibiting economic growth.”

Mr. Tankersley added that, “The new order would expand the scope of the National Environmental Policy Act, a landmark statute that turns 40 years old on New Year’s Day. The act already required federal agencies to consider environmental impacts such as land use, species health, and air and water quality when approving projects.

“By formalizing a requirement to consider impacts on climate — a step some agencies already take — the administration would introduce a broad new spectrum of issues to be considered. It could also open up new avenues for environmentalists to attack, delay or halt proposed government actions. The environmental impact statements originally required by NEPA have become routine battlegrounds for environmentalists, developers and others.”

And in additional developments regarding the Environmental Protection Agency, a news release issued by Growth Energy on Thursday stated that, “Noting that ethanol producers already help the nation’s environment by reducing tailpipe emissions and recycling carbon that is largely produced by fossil fuels, Growth Energy urged the Environmental Protection Agency to suspend a proposal to add an additional layer of regulation on ethanol plants until they could cooperatively design an oversight program specific to ethanol producers.

“‘Currently, the U.S. fuel ethanol industry makes a significant contribution to the nation’s environmental well-being by providing benefits for pollution reduction in the vehicle fleet and its resulting emissions. Today’s modern ethanol production facilities operate effectively within a system of environmental regulation and oversight from both federal and state government,’ wrote Growth Energy in a letter to EPA submitted Dec. 23 as public comment on the proposed rule.”

The news release indicated that, “The Greenhouse Gas Tailoring Rule, as proposed by EPA, would establish new thresholds for GHGs that define when new or existing industrial facilities – including ethanol plants – would be required to obtain or modify construction and operational air permits. As written, the proposal would essentially require every ethanol plant in the country to obtain a Title V permit. But, as Growth Energy pointed out in its comments, operating under that permit on an annual basis would be an extraordinary cost for independently-operated ethanol plants.

“‘Many facilities rely upon a qualified consultant to prepare such extensive and complex applications. Total fees for consulting, application and annual emission inventory can quickly reach over $150,000. It is one more additional financial burden these facilities may not be able to cover, especially during the current economic climate,’ Growth Energy wrote.

Growth Energy asked to work with EPA to develop a program specifically designed for oversight of the ethanol industry, pointing out that ethanol plants recycle the carbon that is produced, and overall produce far fewer emissions than other typical industrial facilities, such as utility plants.”

Keith Good

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