Farm Bill Factors: Deficit
DTN Editor-in-Chief Urban C. Lehner observed on Friday at the Editor’s Notebook Blog that, “Every five years or so Congress passes a new farm bill, and in the run-up to every farm-bill debate, pundits predict that this time the bill will slash farm-program payments. For the 2007 bill, they said the federal debt, which had grown by $5 trillion under President George W. Bush, would force Congress to cut.
“Instead, when the bill finally passed in 2008, Agriculture Secretary Ed Shafer denounced it as ‘reckless spending.’ True, some programs were trimmed to fund increases in others, but overall, Congress moved money around between programs and years. President Bush vetoed the bill as a budget-buster. Congress overrode the veto.
“Now we hear rumblings that with the debt expected to grow an additional $10 trillion through 2016, the 2012 bill will slash farm subsidies. The American Farm Bureau Federation heard this the other day from Charlie Stenholm, a former Texas Congressman who spent six years as ranking Democrat on the House Agriculture Committee.”
Mr. Lehner indicated that, “With all respect to Stenholm, where’s the evidence that the farm lobby has lost its clout? That an extra $10 trillion will matter more to our legislators than did an extra $5 trillion? That Congress plans to do more than pay lip service to the deficit? To quote an old saw, the janitors sweep that much off the House floor every night.
“Yet, actually, I do think it might be different this time: The government’s red ink may have reached the point where it will affect farmers. Not through deep cuts in the farm program — cuts there may be, but the farm lobby, working its coalition with nutrition and environmental groups, will keep them modest. Where farmers will feel the impact is in rising taxes.”
Friday’s update noted that, “It won’t all happen immediately. With unemployment still high, 2010 will be another year of massive government spending with little change in tax rates. But by 2011, Stenholm predicted, Congress will finally have to start tackling the deficit.”
With respect to the federal deficit, Washington Post writer Lori Montgomery reported on Saturday that, “After weeks of talks, Democrats in Congress and the White House remain at loggerheads over how to design a special commission to help rein in skyrocketing budget deficits, and the dispute threatens to derail efforts to significantly increase the nation’s legal debt limit.
“The Senate is scheduled to open debate next week on the debt limit, which is currently set at about $12.4 trillion, with the goal of increasing the ceiling for borrowing by more than $1 trillion — enough to see the Treasury through this fall’s congressional elections.
“But a small band of fiscal hawks in the Senate is refusing to back such a large increase unless Congress or the White House agrees to create a powerful bipartisan commission to craft a plan to raise taxes and cut spending on big programs such as Social Security and Medicare — and then require Congress to vote on the commission’s recommendations.”
The Post article noted that, “‘We’re not going to agree to any long-term extension of the debt without a credible commission,’ said the group’s leader, Senate Budget Committee Chairman Kent Conrad (D-N.D.).
“The dispute centers on whether the commission would be created by law or appointed by the president. A presidential commission would lack the legal authority to force a vote in Congress.”
(For more on this issue, see this C-SPAN interview with Sen. Conrad from December 20.)
Farm Bill Factors: Program Impacts and Coverage
Associated Press writer David Mercer reported on Saturday that, “[F]armers and agricultural economists argue the [federal cotton] subsidies have cushioned cotton country — even in the Mississippi Delta, where poverty is a constant — against the ravages of the recession.”
The article stated that, “‘Those programs provided that stability out here that other parts of the country might not have experienced,’ said Darren Hudson, an economist and director of the Cotton Economics Research Institute at Texas Tech University. ‘That stability provided by the programs helped buffer the region, helped buffer agriculture, which helped soften the blow to the overall region.’
“The Associated Press Economic Stress Index, a monthly analysis of the economic state of more than 3,100 U.S. counties, indicates that they’re right.
“The top 50 cotton-growing counties, which are among the country’s poorest, have endured economic stress that’s essentially the same as the country as a whole.”
Mr. Mercer pointed out that, “Given the amount of money invested, there certainly should be economic benefit for the broader economy, said Ken Cook, the president of the Environmental Working Group. But Cook said subsidies don’t produce enough jobs or economic well-being outside of the farmers who receive the payments.
“He would rather the government offer smaller subsidies and spend more on other programs, such as improving healthcare in agricultural areas. Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University, argues that much of what farmers spend goes to fertilizer and pesticide makers outside the area.”
In a separate article that analyzed the impact of some farm programs, DTN Ag Policy Editor Chris Clayton reported on Friday that, “Southern farmers found out the hard way in 2009 that minimal crop-insurance coverage leads to little or no risk protection.
“Though a large chunk of Arkansas is declared an agricultural disaster, farmers are getting relatively little indemnity out of crop insurance. That’s because commodity producers in some Southern states were more likely to have catastrophic (CAT) coverage rather than more expensive lines of coverage, according to statistics posted on the Risk Management Agency website.”
“Now farmers are backing efforts by Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., for an ad-hoc disaster bill she wants Congress to take up as quickly as possible. Lincoln reiterated in a news release Thursday the urgency for a bill after USDA declared more counties in her state as disaster areas,” Mr. Clayton said.
The DTN article added that, “Farmers in Arkansas, Sen. Lincoln’s home state, were enrolled heavily in CAT insurance for their major crops in 2009. In general, Arkansas producers were willing to take more risks with the crop and spend less on better crop-insurance coverage.
“Pine Bluff, Ark., area farmer Benny Fratesi said farmers in the Mississippi Delta area are often caught in a catch-22 when it comes to crop insurance because CAT coverage offers little protection, but farmers can’t afford to buy higher levels of protection.”
Friday’s article noted that, “Southern lawmakers are pushing for an ad-hoc disaster bill, even though the 2008 farm bill created a permanent disaster trust fund. The proposed bill, co-sponsored by Sen. Thad Cochran and Sen. Roger Wicker, both Republicans from Mississippi, would provide $1.3 billion for direct payments to farmers in USDA-designated disaster counties.
“A staffer on the Senate Agriculture Committee, speaking on background, said the committee has been polishing the Lincoln-Cochran bill since it was introduced in November to address policy issues regarding crop insurance and disaster aid to minimize the impact on the crop-insurance program, though the staffer did not have details on the language.”
And with respect to the new Supplemental Revenue Assistance Payments Program (SURE), Mr. Clayton explained that, “And the high percentage of CAT coverage among Southern farmers also means slim chances of a disaster payment under USDA’s new disaster program, the Supplemental Revenue Assistance Payments Program, or SURE. In USDA’s fact sheet for SURE, it states, ‘For insured crops, the SURE guarantee is based on the level of coverage the producer has elected. Higher levels of coverage will result in higher crop guarantees.’”
In other news regarding farm programs, Chris Torres reported on Friday at Lancaster Farming Online (Pennsylvania) that, “Pennsylvania’s senior U.S. Senator Arlen Specter is confident that a dairy bill that would overhaul the way milk is priced will eventually pass. But only if it’s included in other congressional funding.
“Specter, a Democrat, sat down for a pre-Farm Show talk last Friday with members of the ag press at the headquarters of the Pennsylvania Farm Bureau. The ‘Federal Milk Marketing Improvement Act of 2009’ has a ‘pretty good chance’ of eventually getting passed, he said.
“But not by itself. He said if the bill is eventually passed, it will probably be part of the next ag appropriations bill. The current fiscal year 2010 bill was passed at the end of September. The bill included $350 million in help for dairy farmers, including $290 million in direct payments to farmers.”
The article noted that, “[Specter] warned, however, that a tough budget battle is brewing that could put the measure in jeopardy.”
And in news regarding another white commodity, sugar, Mike Hughlett reported on Saturday at the Chicago Tribune Online that, “But keeping that sugar flowing is an increasingly expensive proposition for Primrose and the entire candy industry: Sugar prices are hovering at 29-year highs. Low U.S. sugar stocks and soaring global sugar prices appear to be the culprit, and consumers are feeling the effect as candy makers pass along their rising ingredient costs.”
The Tribune article noted that, “U.S. sugar stocks, relative to sugar demand, are this year less than half of what they were a year ago, according to a recent report by Promar. ‘We have sort of a structural deficit,’ [Tom Earley, a sweeteners analyst at food consultant Promar International] said. With that deficit, U.S. raw sugar prices in recent months hit a 29-year high, and the price in November was 61 percent higher than a year earlier, according to USDA data.
“Mark Puch, Primrose Candy’s president, has felt the pain. And it only hurts more that U.S. sugar prices are normally considerably higher than world sugar prices, due to U.S. import restrictions. The candy industry claims the cost gap with foreign sugar has driven candy production out of the United States.”
Farm Bill Factors: Voices For Change
Matthew Weaver reported yesterday at The Capital Press Online that, “Michael Pollan believes farmers may eventually solve three of the world’s biggest problems — the crises centered on energy, health care and climate change.
“The author of ‘The Omnivore’s Dilemma’ outlined his ‘sun food agenda,’ advocating a return to a diversified agricultural system, during his lecture at Washington State University on Wednesday, Jan. 13.”
The Capital Press article indicated that, “To bring about change, Pollan suggested decentralizing the national food system in favor of regional ‘food sheds,’ creating a food system more resilient to shocks like disease outbreaks or high input costs. He did not specify how that would work or how to make that happen.
“In his newest book, ‘Food Rules,’ Pollan proposes consumers eat ‘foods their great-grandmother would recognize,’ shop at farmers’ markets and on the edges of supermarkets instead of the aisles in the center to avoid ‘edible food-like substances.’
“As a result, he said Americans would pay more and eat less.”
And an update posted on Friday at the AgMag Blog (The Environmental Working Group) called for “More Churchill, Less Chamberlain” in the ag policy debate and stated that, “The farm bill left the the taxpayer-funded subsidy spigot wide open for commodity crop production while Big Ag eluded even the faintest whiff of reform.”
(Recall that just last week, American Farm Bureau President Bob Stallman “issued a call to action to Farm Bureau members and a stern warning to critics that farmers and ranchers will no longer tolerate opponents’ efforts to change the landscape of American agriculture.”)
San Francisco Chronicle writer Carolyn Lochhead noted in a Blog update on Saturday that, “Perhaps the Haitian tragedy will also provide an opportunity for [House Speaker Nancy Pelosi] and other members of Congress who overrode a Bush veto of the 2008 farm bill to revisit U.S. rice subsidies. Haiti was once self-sufficient in rice, but forced to remove barriers to subsidized U.S. rice saw its local farming decimated, the migration of country-dwellers to Port-au-Prince. ‘Hatiains, unable to grow their own food, have sunk deeper into poverty, locked in a cycle of dependency,’ [Smith College professor Kevin Rozario] said.”
The Food and Agriculture Organization of the UN has called for “$23 million to step-up farming in Haiti.”
Meanwhile, with respect to the farm subsidy debate in the EU, a recent AFP article reported that, “Europe’s incoming farming commissioner vowed on Friday to fight in defence of high subsidies and the retention of agriculture’s dominant place in the European Union’s budget.”
In news regarding the Doha Round of WTO trade talks, Xinhua News reported on Friday that, “Dacian Ciolos, the incoming commissioner for agriculture and rural development of the European Union (EU said on Friday that the EU would not make any further concessions in the Doha round trade negotiations, claiming the bloc had made enough concessions.
“‘I will be tough in this area, where we have already made significant concessions and we cannot go further,’ Ciolos told lawmakers at the confirmation hearing of his designation at the European Parliament.”
Reuters writer Roberta Rampton reported on Friday that, “New Russian inspection rules could trim U.S. beef exports to the market as of February 1, two influential U.S. senators said in a letter to President Barack Obama on Friday, urging action on bilateral meat trade issues.
“Russia’s veterinary service has asked the U.S. Agriculture Department to reinspect U.S. beef plants exporting to Russia by February 1, and bar any not meeting Russian requirements from shipping meat, a spokeswoman for the U.S. Trade Representative said.”
The article noted that, “If the Russian standards are put into place, that would significantly affect U.S. beef exports, said Blanche Lincoln, chairman of the Senate agriculture committee, and Saxby Chambliss, the ranking Republican on the committee.”
Biofuels- Economic Variables
Edward Welsch reported in Saturday’s Wall Street Journal that, “Crude-oil prices fell 1.8% Friday [at $78 a barrel], weakening for the fifth day in a row as the latest collection of U.S. economic data failed to provide a convincing picture that economic recovery would come fast enough to ramp up energy demand.
“Government reports this week unexpectedly showed December retail sales declined and jobless claims rose, while the U.S. Labor Department reported a tame inflation rate Friday, suggesting the pace of economic recovery has slowed. Energy stockpiles also rose, in defiance of expectations that a wave of frigid weather hitting many parts of the world in the past few weeks would cause supplies to dwindle as customers burned more fuel to stay warm.”
Roger Buddenberg reported in Saturday’s Omaha World Herald that, “Regular unleaded was selling for an average of $2.76 a gallon nationwide Friday, according to the AAA auto club. A month ago it averaged $2.59. A year ago: $1.80.”
A news release issued by Growth Energy on Saturday stated that, “Domestic, renewable ethanol can be a major contributor to job creation as well as cutting greenhouse gas emissions and reducing dependence on foreign oil, Growth Energy CEO Tom Buis told a summit of agricultural legislative leaders.
“‘We are poised to create as many as 136,000 jobs in the United States with one regulatory move – EPA agreeing to raise the blend wall to 15 percent, as we’ve petitioned them to do. We could create many more with the construction of ethanol pipelines and blender pumps, to distribute this renewable, low-carbon fuel to the consumer,’ Buis told the 2010 Legislative Agricultural Chairs Conference in Orlando, Fla.”
Meanwhile, Philip Brasher reported on Saturday at The Des Moines Register Online that, “Ethanol production and wind-turbine manufacturing have been two of the biggest sources of new green jobs in Iowa, but the state’s biggest growth opportunity may be in research and development, an economist said.
“David Swenson, an economic development specialist at Iowa State University, said that ethanol production is leveling off and that there is stiff competition among states for manufacturing of wind turbine parts. Meanwhile, wind farms make little dent in employment because they require relatively few people for maintenance.”
Mr. Brasher added that, “Iowa had 1,308 jobs in ethanol production in 2008, up from 141 in 2003, according to a study coordinated by Iowa Workforce Development. The turbine manufacturing sector grew from 136 in 2003 to 1,101 in 2008. By comparison, 82 people were listed as working in alternative power generation, including wind, in 2008. That’s even though the state ranked No. 2 in its wind-generation capacity, which grew nearly six-fold from 2003 to 2008.
“‘It’s important to think in terms of green jobs, but green jobs are not a big part, nor do they promise to be a big part, of the Iowa economy,’ Swenson said. ‘We need to keep our wits about us as regards to the prospects.’”
Climate Change Issues
Lisa Lerer reported on Friday at Politico that, “Sen. Chuck Schumer (D-N.Y.) is heading for a collision with Sen. John Kerry (D-Mass.) over whose pet issue will get top billing in the Senate later this year.”
The article noted that, “Schumer is taking a lead role in immigration — and is pushing Democrats to prioritize a potentially toxic issue leading up to the November elections. Kerry is a lead negotiator on climate change and is demanding that a climate bill get pushed to the front of the line.
“Kerry and Schumer — who have a history of competitive tensions — are maneuvering behind the scenes to get White House and Senate leadership to promise to give their respective issues time this spring.”
Ben Geman reported on Friday The Hill’s Energy and Environment Blog that, “Energy Secretary Steven Chu said Friday that he remains hopeful Congress will approve legislation this year that caps greenhouse gas emissions and that creating a cost for emitting carbon dioxide is vital to deploying low-emissions energy projects.”
And Darren Samuelsohn of ClimateWire reported on Friday at The New York Times Online that, “Sen. Lisa Murkowski has built a reputation in her eight years in Washington as a moderate Republican willing to engage with Democrats and environmentalists in the climate change debate.
“But Murkowski, who last year took on a much higher profile in the GOP leadership, is now at the center of a storm by pushing to strip U.S. EPA of its ability to regulate for greenhouse gas emissions.
“Murkowski insists that her efforts — which could come to a head on the Senate floor as early as Wednesday — are a check on unwieldy and costly rules that could hamstring the recovering economy. And while she is concerned about the effects that climate change is having back home in Alaska, she criticizes the Obama administration and Democrats for using the threat of EPA regulations to bully lawmakers into voting for a much broader global warming bill.”
The ClimateWire article added that, “Senate Majority Leader Harry Reid (D-Nev.) yesterday warned that a vote on Murkowski’s amendment could end up hamstringing his own attempt to pass a comprehensive energy and climate bill in the spring. For that, experts say Reid will need help from moderate Republicans like Murkowski.”