FarmPolicy

January 22, 2020

Congressional Agenda; Trade; Climate Issues; Biofuels; NAIS; and Ag Economy

Congressional Agenda

Lori Montgomery reported in today’s Washington Post that, “Congress agreed Thursday to revive the pay-as-you-go budget rules that helped wipe out massive deficits and balance the budget during the Clinton administration, although the new version includes a long list of exceptions that would permit Democrats to add at least $1.5 trillion to the nation’s tab over the next decade.

“The House voted 233 to 187 to approve the rules, known in congressional shorthand as paygo. The rules were adopted last month by the Senate and now go to President Obama for his signature.

The return to paygo comes as record deficits push the government more deeply into debt than at any time since the 1950s. Democrats attached the new rules to a must-pass measure that raises the legal limit on government borrowing by a record $1.9 trillion. With the public debt expected to hit the current cap by next week, the increase — which was approved on a separate vote, 217 to 212 — authorizes the Treasury Department to continue borrowing to cover the nation’s bills through early next year.”

The Post article added that, “Obama praised the legislation’s passage. ‘PAYGO would hold us to a simple but bedrock principle: Congress can only spend a dollar if it saves a dollar elsewhere,’ he said in a statement. ‘Mandatory spending increases and tax cuts must be paid for; they’re not free, and borrowing to finance them is not a sustainable long-term policy.’

The revival of paygo is part of a three-step strategy for tackling the nation’s budget problems. Obama has also pledged to freeze non-security spending for three years and to create a bipartisan commission to come up with a plan for reducing projected budget deficits.”

An update posted yesterday at CQPolitics.com reported that, “Senate Democratic leaders said Thursday they will try to move jobs-focused legislation to the floor next week that would likely include business tax breaks and the extension of numerous economic stimulus measures that are set to expire.”

Alexander Bolton reported yesterday at The Hill Online that, “But [Sen. Majority Leader Harry Reid (D-Nev.)] and other leaders declined to discuss key details, such as how much the package would cost, how many jobs it would create and how it would be paid for. Reid had yet to secure a Republican co-sponsor for the package.”

With respect to the jobs issue, Rebecca Smith reported yesterday at The Wall Street Journal Online that, “The U.S. could add hundreds of thousands of jobs if Congress requires that part of the nation’s electricity be derived from renewable sources, according to a study released Thursday.

“The study, by Navigant Consulting, said a renewable-energy standard requiring utilities to produce between 20% and 25% of their energy from wind, solar and other renewable sources would create between 191,000 and 274,000 jobs.

“More than half would be high-value manufacturing jobs that could help the U.S. boost exports and develop an advantage in technological innovation, said Navigant, a business consultancy that conducted the study for the RES Alliance for Jobs, a consortium of renewable-energy companies.”

Trade

Helene Cooper reported in today’s New York Times that, “The administration on Thursday unveiled its new strategy to make good on President Obama’s promise to double American exports in the next five years. The approach included pledges to pursue more trade agreements, increase pressure on trading partners to open markets and the creation of an export promotion cabinet.

“But in announcing the new strategy [transcript, video], the commerce secretary, Gary Locke, did not say when the administration might send Congress three completed free-trade accords — with Colombia, Panama and South Korea. Many trade specialists say that is essential to prod other countries to negotiate with the United States. But the move is likely to cause a rift with Mr. Obama’s liberal supporters in the Democratic Party, as well as free-trade opponents in the Republican Party.

Still, many trade specialists nonetheless welcomed the new strategy, particularly, they said, because it was the first time that the Obama administration had embraced trade liberalization vigorously.”

The Times article added that, “Treasury Secretary Timothy F. Geithner told a House budget hearing on Wednesday that the administration ‘absolutely’ planned to make passage of the three trade pacts part of the new export strategy this year. ‘It’s not just that,’ Mr. Geithner said. ‘We want to be in the game in Asia as they move to negotiate new agreements there.’”

Darrell A. Hughes reported yesterday at The Wall Street Journal Online that, “U.S. President Barack Obama wants the Export-Import Bank to increase export financing for small- and mid-sized businesses and is proposing that the amount of credit available be increased to $6 billion in the next year, Commerce Secretary Gary Locke said Thursday.

The proposed increase from $4 billion is part of Obama’s plan to double exports over the next five years, an effort being organized by the Commerce Department.”

And Philip Brasher pointed out yesterday at the Green Fields Blog (The Des Moines Register) that, “Locke offered little new as far as agricultural exports specifically. He noted that the president’s budget proposes an additional $54 million for export promotion. The department wants to hire more staff overseas to talk up U.S. products.

At the same time, however, the budget would slash the Market Access Program that subsidizes private promotional programs. The program is especially popular with fruit and vegetable producers and has subsidized marketing campaigns for everything from asparagus to wine. (The Wine Institute is getting $7 million this year.) The White House budget office questions whether the program is really effective, but Congress rejected Obama’s attempt to cut the program last year.

By the way, Agriculture Secretary Tom Vilsack emphasized earlier this week at a budget briefing with reporters that the president was not promising to double agricultural exports, which totaled nearly $97 billion last year.”

The Los Angeles Times editorial board indicated today that, “It has taken the loss of 4 million jobs in one year and a nationwide unemployment rate of 10% for President Obama to finally take a firm stand on the economic benefits of free trade.”

The LA Times opinion piece added that, “Of course, doubling annual exports to between $2 trillion and $3 trillion in such short order is a tall order, and it is almost impossible to see how the goal can be met without action on the three pending free-trade agreements. Ratification would add an estimated $15 billion annually in exports, and the deal with South Korea is particularly important for California agriculture; exports of dairy, almonds, walnuts, pistachios and pomegranate juice could hit the $1-billion mark in the next few years. Continued inaction, by contrast, would endanger several hundred thousand jobs, according to the U.S. Chamber of Commerce. Also, the president seemed to contradict himself by being both populist and pro-trade, urging taxation of companies that move jobs overseas — that threat is a favorite, but those companies also account for 44% of the nation’s exports. It’s unclear how penalizing them will help meet the president’s goal.

“Still, Obama’s positive tone is welcome.”

In other trade news, Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “U.S. and Brazilian officials have begun talks to try to settle a trade dispute at the World Trade Organization over U.S. cotton subsidies, the U.S. ambassador to Brazil said on Thursday.

“The South American agriculture giant was expected to present a definitive list of U.S. targets for retaliation in coming days.

“Until last month, Brazilian authorities said they had seen no signs from their U.S. counterparts that the United States wanted to negotiate a settlement.”

Yesterday’s Reuters article stated that, “Total sanctions could be worth $829 million based on 2008 data for the export credit guarantee program, Brazil’s foreign trade ministry said in December.

Brazil had already identified more than 200 possible U.S. targets for trade retaliation, ranging from foodstuffs to textiles to pharmaceuticals.”

And a news release issued earlier this week by Rep. Adrian Smith (R-Neb.) stated that, “[Rep. Smith (R-NE)] today joined with a number of his House colleagues in signing a letter to Taiwan’s Representative to the United States Jason Yuan expressing their disappointment with the recent unilateral decision by Taiwan to bar the import of certain beef and beef products and urging a reversal of the policy.

“Nebraska has the top three beef cow counties in the U.S., and produces more beef per square mile than any other state. Nebraska ranks first in the country in live animal and meat exports ($1.1 billion) and number one in cattle harvest (seven million head).”

“‘Export markets are critically important to Nebraska’s beef industry. America has the safest food supply in the world and I am disappointed Taiwan took this action, which is in direct violation of a bilateral agreement concluded by our nations just two months ago. Taiwan should honor its commitments to provide full market access to U.S. beef and beef products,’ Smith said.”

Climate Issues

The Los Angeles Times editorial board indicated today that, “If changes in the public mood and the party alignment of the U.S. Senate have stalled healthcare legislation, they may have thrown the highly anticipated climate bill under a bus.

“Even before Republican Scott Brown’s stunning election to the Senate in traditionally Democratic Massachusetts last month, it was proving hard to corral moderate Democrats to support a bill capping greenhouse gas emissions. Now they’re afraid to back anything that could be perceived as harmful to the economy. ‘Realistically, the cap-and-trade bills in the House and the Senate are going nowhere,’ Sen. Lindsey Graham (R-S.C.) told the New York Times. That’s a distressing comment coming from one of the three senators supposedly crafting a compromise climate bill that’s capable of achieving a filibuster-proof majority in the Senate.

President Obama has backed down too. On Tuesday, he signaled that cap-and-trade could go the way of healthcare reform’s ‘public option,’ saying it could be removed from the climate bill. That would eliminate the market mechanism for pricing greenhouse gas pollution — and without setting such a carbon price, other measures under consideration, such as a national renewable energy standard, won’t go far enough to significantly slow global warming.”

However, Christa Marshall of ClimateWire reported yesterday at The New York Times Online that, “The Obama administration’s top climate adviser strongly defended a cap on emissions a day after the president suggested Congress might move an energy bill without such a cap in place.

“White House climate and energy adviser Carol Browner used the words ‘cap’ and ‘price signal’ several times yesterday in describing what the administration would be pushing for in the days ahead to spur new jobs and curb the ‘dangerous pollutants that contribute to global warming.’

“‘We need comprehensive energy and climate legislation that will not only allow us to lead the world … but also enhance our national security,’ Browner said in front of renewable energy industry representatives at the Retech Conference in Washington, D.C.”

And with respect to Senator Scott Brown (R-Mass.), Kevin Friedl and Christopher Snow Hopkins reported yesterday at the National Journal’s Energy and Environment Blog that, “Scott Brown’s unlikely victory in Massachusetts may have reinvigorated the Republican Party, but one polling company says that’s no guarantee the freshman senator will join his caucus in opposing cap-and-trade legislation.

“Joel Benenson, of the Benenson Strategy Group (D), today presented new polling data conducted on behalf of the Climate Protection Action Fund — an affiliate of Al Gore’s Alliance for Climate Protection — that shows a majority of Massachusetts independent voters support a bill that includes a mandatory cap on emissions.”

Meanwhile, Darren Samuelsohn of ClimateWire reported yesterday at The New York Times Online that, “Key senators are studying whether power plants should be the guinea pig industry for the nation’s first cap-and-trade system designed to curb greenhouse gas emissions.

“Electric utilities are responsible for about a third of the country’s annual heat-trapping pollutants, and they have been involved for about 15 years in a similar market-based mechanism that has successfully reduced acid rain.

“But the focus on just one industry also comes with perils, and it is far from certain that Senate politics would be any different if lawmakers set aside the House-passed economywide approach that goes after major energy, transportation and manufacturing companies — accounting for more than two-thirds of U.S. emissions.”

The article noted that, “Industry lobbyist Scott Segal said he doubts a power plant-only approach has much of a chance on Capitol Hill as lawmakers representing the power companies would quickly start to hear about how they are taking on too great of a burden compared with other industrial sectors.”

Mr. Samuelsohn explained that, “The power plant-only approach gains another wrinkle today when a bipartisan Senate coalition introduces legislation setting up a cap-and-trade system for three traditional air pollutants: sulfur dioxide, nitrogen oxides and mercury [related article, related news release.]

“Co-sponsors Sens. Tom Carper (D-Del.) and Lamar Alexander (R-Tenn.) previously worked together on air pollution issues during the George W. Bush administration. Back then, they also wrote a bill with carbon limits.

They are coming back for another run this time — minus the carbon — because of public health concerns associated with a lack of strong federal controls. And they also want to give the electric utility industry greater certainty as they seek to make multibillion-dollar capital investments. Currently, power companies are holding back as they wait for U.S. EPA to outline its regulatory plans following a 2008 federal court decision that struck down a Bush-era cap-and-trade approach to slash NOx and SOx emissions from power plants in the eastern United States.”

Biofuels

With respect to executive branch action regarding biofuels earlier this week, Allison Winter of Greenwire reported yesterday at The New York Times Online that, “U.S. EPA Administrator Lisa Jackson yesterday announced the new regulations for low-carbon fuels, which would implement the long-awaited renewable fuels standard that Congress included in the 2007 energy bill. The final rule is friendlier to ethanol than a proposal EPA floated last year, which incited bipartisan rage from Midwestern lawmakers, who thought the analysis was unfair to farmers and ethanol producers.”

The article added that, “But some lawmakers are not backing down in their efforts to fight the rule, despite the fact that the final rule won hesitant support from the ethanol industry and praise from environmental groups. Lawmakers in the House and Senate who have fought to block EPA’s work on the rules indicated last night that they will continue to oppose the agency’s work on the effort.

“‘Typical of most decisions made in Washington, there is some good and some bad in the renewable fuel standard final rule announced today,’ House Agriculture Chairman Collin Peterson (D-Minn.) said in a statement yesterday. ‘To think that we can credibly measure the impact of international indirect land use is completely unrealistic, and I will continue to push for legislation that prevents unreliable methods and unfair standards from burdening the biofuels industry.’

“Last year Peterson successfully tacked language on to the House-passed climate bill (H.R. 2454) that would have delayed EPA’s work on the regulations. He also cosponsored a bill earlier this week that — among other things — would stop the agency from using land-use calculations as part of its assessment of ethanol’s carbon footprint.”

Ms. Winter noted that, “Now that EPA has finalized the rules, legislative efforts to block the effort would be more complicated. But Peterson and other lawmakers could try to advance similar bills to keep EPA from expanding the regulations or issuing new regulations with different science in the future. They could also use spending bills in an effort to squelch funding for their implementation.

A stab at the agency’s appropriations could come from Rep. Jo Ann Emerson (R-Mo.), a cosponsor of the bill with Peterson who sits on the House Appropriations Committee.

Emerson offered an amendment to EPA’s 2010 spending bill that would have barred the agency from considering the effects of international land-use changes when calculating the carbon footprint of biofuels. The committee narrowly rejected that proposal, 29-30.

“Emerson’s spokesman, Jeffrey Connor, said last night that the congresswoman would continue to look for ways to fight the regulations this year — either through legislation or appropriations.”

Reuters writer Charles Abbott reported on Wednesday that, “A new U.S. program that subsidizes biomass crops for energy use may cost $263 million this year — nearly four times its expected cost — with an opening emphasis on forest and sugar scrap.

“The Obama administration cited the Biomass Crop Assistance Program (BCAP) on Wednesday in steps to encourage clean energy production. It would broaden the geographic base of a bioenergy industry now dominated by corn ethanol production mainly in the Midwest.

“BCAP went into operation last summer on an interim basis. A more permanent regulation was opened for comment by the Agriculture Department on Wednesday.”

The Reuters article added that, “Farm activists have worried for months that BCAP would be dominated by businesses that are longtime recyclers of scrap materials to power their operations, rather than newcomers.

“When BCAP was created, it was forecast to $70 million over five years. On Monday, the administration estimated the cost at $263 million this fiscal year and $479 million in fiscal 2011, which opens Oct. 1.”

See a related analysis on this issue that was posted yesterday by Chris Clayton at DTN’s Ag Policy Blog, “USDA Now Tries to Cap BCAP.”

National Animal Identification System (NAIS)

William Neuman reported in today’s New York Times that, “Faced with stiff resistance from ranchers and farmers, the Obama administration has decided to scrap a national program intended to help authorities quickly identify and track livestock in the event of an animal disease outbreak.

“In abandoning the program, called the National Animal Identification System, officials said they would start over in trying to devise a livestock tracing program that could win widespread support from the industry.

The agriculture secretary, Tom Vilsack, will announce the changes on Friday, according to officials at the Agriculture Department, who spoke on condition of anonymity because the decision had not yet been made public.”

Ag Economy: Production Costs; and Productivity

University of Illinois Agricultural Economist Gary Schnitkey noted in a paper from earlier this week (“Fertilizer Prices in 2008, 2009, and 2010”) that, “Fertilizer costs for corn in 2010 likely will average $100 per acre for corn on high-productivity farmland in Illinois. These costs will be below 2009 costs. These fertilizer costs are based on fertilizer prices reported in a new report listing average fertilizer prices in Illinois.”

Dr. Schnitkey added that, “A new report released by AMS reports average fertilizer prices in Illinois, thereby allowing farmers and others to more closely monitor fertilizer in Illinois. Prices suggest that 2010 costs for corn likely will be around $100 per acre, considerably below 2009 costs. Fertilzier costs in 2009 will vary across farms simply due to the timing of fertilizer purchases. Current Prices suggest that 2010 costs for corn likely will be around $100 per acre, considerably below 2009 costs. While below 2009 levels, 2010 costs will be historically high. Between 2000 and 2007, fertilizer costs for corn averaged $68 per acre in central Illinois on high-productivity farmland [see related table].”

Earlier this week, USDA’s Economic Research Service provided an update to a data set regarding agricultural productivity in the United States; ERS noted that, “It is widely agreed that increased productivity is the main contributor to economic growth in U.S. agriculture. This data set provides estimates of productivity growth in the U.S. farm sector for the 1948-2008 period, and estimates of the growth and relative levels of productivity across the States for the period 1960-2004 [see related graph].”

Keith Good

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