August 21, 2019

House Ag Committee Activity; Senate Appropriations Hearing (EPA-Climate Issues); and Trade Issues

House Ag Committee- Budget

Reuters writer Charles Abbott reported yesterday that, “The House Agriculture Committee on Wednesday rejected President Barack Obama’s proposals to reduce crop subsidies to higher-income farmers and federal support for crop insurance.

“There was little discussion as the committee refused farm cuts requested by the president for the second year in a row. With elections in November, the committee approved a letter saying benefits ‘should be maintained’ at current levels.

“‘We are united and I think we have over-whelming support in the House not to open up the farm bill’ enacted in 2008, said Agriculture chairman Collin Peterson, a Democrat.”

The Reuters article explained that, “The 2008 farm law is the first to deny benefits to the wealthiest Americans. It says crop subsidies will go to people with no more than than $500,000 a year in adjusted gross income (AGI) from off-farm sources or $750,000 on-farm AGI.

“The administration wanted to lower the income cut-off over three years to $250,000 off-farm AGI and $500,000 on-farm AGI. Some 30,000 people would be affected. The White House also proposed a $30,000 cap on the annual direct-payment subsidy, down from the current $40,000, and cuts in federal subsidies to the privately run crop insurance system.”

A news release issued yesterday by the House Ag Committee indicated that, “The budget views and estimates letter approved today reflects the House Agriculture Committee’s position that the nutrition, farm, conservation, energy and rural development programs under the Committee’s jurisdiction are providing an essential safety net during a time of continuing economic difficulty.”

In part, the views and estimates letter stated that, “USDA forecasts of net farm income and asset values for 2010 demonstrate the need to maintain the farm income safety net. In real terms (adjusted for inflation), 2010 net farm income is estimated to be the third lowest since 1999. While press reports have indicated a rise in net farm income from 2009, those reports often neglect to mention that 2009 net farm income was not only at the lowest nominal dollar level since 2002 but also was down from 2008’s near record for net farm income of $87.0 billion” [related graph].

In recent news regarding the agricultural economy, the Federal Reserve Bank of Chicago recently released its AgLetter publication, which noted that, “The annual change in farmland values was positive at 2 percent in 2009 for the Seventh Federal Reserve District, though 2009’s first three quarters had negative year-over-year comparisons. The quarterly increase in the value of ‘good’ agricultural land was 2 percent as well, based on 214 surveys from agricultural bankers. Over 80 percent of respondents expected farmland values to stay unchanged from January through March of 2010 in their respective areas” [see related graph].

The Seventh District’s agricultural credit conditions were mixed in the fourth quarter of 2009 because of greater financial stress relative to a year ago. Non-real-estate loan demand was almost the same in October through December of 2009 compared with the same period of the previous year. Funds availability also improved again in the fourth quarter of 2009. However, farm loan repayment rates in the final quarter of 2009 were below the level of a year ago, and rates of loan renewals and extensions were higher than a year earlier.”

The AgLetter added that, “The value of crop production in the U.S. declined 9.1 percent in 2009, to $166 billion, from its 2008 level, according to USDA data. The USDA predicted that the value of crop production would slip again to $162 billion in 2010.”

In addition, the Federal Reserve Board released its March “Beige Book” report yesterday, which included the following agricultural highlights:

Seventh District- Chicago– “Hog and cattle prices moved up during the reporting period, although dairy prices flattened out. Feed costs declined with corn and soybean prices, and financial pressures on livestock producers lessened from those experienced during a challenging 2009. Still, contacts reported that refinancing agricultural loans was more difficult than in recent years.”

Ninth District- Minneapolis-“The Minneapolis Fed’s fourth-quarter (January) survey of agricultural credit conditions indicated that lenders expect overall agricultural income and spending to decrease in the first quarter.”

Tenth District- Kansas City-“[C]ropland values strengthened following the bumper fall harvest. Ranchland values, however, remained below year-ago levels amid weak demand for pasture ground. Stronger farm incomes led to a rise in loan repayment rates and fewer reports of loan renewals and extensions. District contacts reported ample funds were available for farm loans at historically low interest rates.”

Eleventh District- Dallas– “Heavy rains and snowfall have boosted crop and pasture conditions. There is excellent subsoil moisture going into the spring planting season, which has improved the crop outlook for 2010. Though heavy precipitation has been beneficial, it has resulted in some crop losses and could delay spring planting if fields do not dry out in time.”

And Conor Dougherty reported earlier this week at the Real Time Economics Blog (The Wall Street Journal) that, “The Midwestern economy is emerging from the recession, diminishing the chances of a return to recession but increasing the likelihood that inflation in the region may soon pick up, according to the February Business Conditions Index for the Mid-America region released by Creighton University.

“The survey of supply managers across a nine-state region that includes Minnesota and Oklahoma rose to 61.0 in February from 54.7 in January and 50.3 in December. Like the Institute for Supply Management and J.P. Morgan surveys of purchasing managers (written about in the Journal), the Mid-America index is a diffusion index where readings above 50.0 indicate growth and anything below is contraction.”

The Journal update added that, “[Creighton University Economics Professor Ernie Goss] said he worried that despite the region’s improving outlook he had some concerns about future growth: ‘I am concerned that the economic problems in Europe, which are pushing the value of the dollar higher, will negatively influence regional growth. This part of the nation depends heavily on agriculture, which likewise suffers from a ‘too strong’ dollar. However, the likelihood of the regional economy dipping back into recessionary territory has diminished significantly according to our surveys of supply managers. While I expect the overall regional economy to expand in the months ahead, I continue to expect job growth to be subdued, especially for rural areas of the nine-state region.’”

On Tuesday, the Farm Foundation held a forum in Washington, D.C. titled, “Finance and Credit Issues in Agriculture and Food Industries: What’s Ahead for 2010.”

Presenters at the event included, Paul Ellinger of the University of Illinois [related slides from presentation], 
Joe Brasher of First State Bank, Sharon, Tenn.,
Bob Frazee of Mid-Atlantic Farm Credit,
Cornelius Gallagher, Bank of America Merrill Lynch [related slides from presentation], and 
Jeff Conrad, Hancock Agricultural Investment Group. 

An audio replay of the Farm Foundation event is available here.

House Ag Committee- CFTC Hearing

Reuters writers Charles Abbott and Roberta Rampton reported yesterday that, “A central Congressional player in financial reform legislation on Wednesday said he is willing to close a potential loophole that might allow big derivatives traders to avoid public scrutiny of their deals.

“‘I don’t want to let the financial guys off the hook,’ House Agriculture Committee Chairman Collin Peterson told reporters, acknowledging that the House version of the reform bill passed in December may be too lax.”

The article noted that, “It brought his position closer to that of Commodity Futures Trading Commission Chairman Gary Gensler, who has pushed lawmakers to weave a tighter regulatory net around the unregulated over-the-counter U.S. derivatives market that he has estimated at $300 trillion.

“Gensler, testifying before a House agriculture subcommittee on Wednesday, said the House financial reform bill is strong, but might still let some large institutional traders escape a requirement to trade standardized derivatives on exchanges and clear those trades.”

EPA Administrator Lisa Jackson Testifies at Senate Appropriations Subcommittee Hearing

Jim Snyder reported yesterday at The Hill Online that, “The head of the Environmental Protection Agency (EPA) said Wednesday that an effort in Congress to stop the agency from regulating pollution linked to climate change would be an ‘enormous step backward for science’ if successful.

Testifying before a Senate Appropriations panel, Lisa Jackson defended EPA’s finding that carbon dioxide and other so-called greenhouse gases endanger human health and welfare by contributing to global warming.

“That ‘endangerment’ finding requires EPA to regulate emissions under the U.S. Supreme Court decision in Massachusetts v. EPA, Jackson said.”

The article noted that, “Some members in Congress believe EPA erred in its endangerment finding, and are moving to either stall the greenhouse gas rule or stop it altogether.”

Mr. Snyder explained that, “All the efforts rely on the Congressional Review Act to nullify the EPA’s endangerment finding. The act allows Congress to block agency regulatory efforts, but has been used successfully only once, in the 1990s when lawmakers stopped an ergonomics standard proposed by the Occupational Safety and Health Administration.

The hearing on Wednesday gave [Sen. Lisa Murkowski (R-Alaska)], a member of the spending panel, the chance to ask Jackson directly about the effects of the EPA rulemaking.”

To listen a portion of the discussion between Sen. Murkowski and Administrator Jackson from yesterday’s hearing, just click here (MP3-7:27)- the clip includes additional detail and analysis regarding the potential regulation of greenhouse gases by EPA.

Recall that the EPA “endangerment finding” is based on an April 2, 2007 U.S. Supreme Court case, Massachusetts v. EPA, 549 U.S. 497 (2007).

In her opening remarks at yesterday’s hearing, Subcommittee Chairman Dianne Feinstein (D-California) expressed her opinion regarding the Supreme Court case and EPA regulatory authority, which differed somewhat from Sen. Murkowski’s.

To listen to Sen. Feinstein’s analysis of the case and EPA regulatory authority, just click here (MP3-5:20).

Reuters writer Timothy Gardner reported yesterday that, “The Obama administration will give small businesses a break on coming carbon dioxide emissions rules but big emitters like coal-fired power plants will face a crack-down, U.S. Environmental Protection Agency Administrator Lisa Jackson said on Wednesday.”

Yesterday’s article explained that, “The EPA said late last year it would require polluters that emit more than 25,000 tons a year of greenhouse gases to obtain permits demonstrating they were using the best available technology to reduce emissions.

Jackson raised that threshold on Wednesday, saying the regulations would exempt factories emitting under 75,000 tons of carbon annually in 2011 and 2012.

“‘If you’re smaller than 75,000 tons, you will not need a permit for the next two years,’ Jackson told reporters after a Senate hearing.”

Mr. Gardner added that, “EPA’s Jackson said the agency is still weighing the threshold for regulating long-term carbon emissions from smaller factories.

“In February, Jackson wrote a letter to Democratic senators from coal-producing states, saying the EPA would not put regulations on smaller plants before 2016.

The definition of ‘smaller’ plants had been ambiguous, leaving even tiny businesses wondering if their emissions would eventually be regulated. But on Wednesday Jackson said such a long-term threshold would be higher than 25,000 tons per year.”

Philip Brasher, writing yesterday at the Green Fields Blog (The Des Moines Register), reported that, “The Environmental Protection Agency is on track to say by late this summer whether high rates of ethanol can be blended into gasoline, according to Administrator Lisa Jackson. The current ethanol limit for conventional cars is 10 percent. The ethanol industry asked the EPA to raise that to 15 percent. The agency has been considering allowing the higher limit for newer cars and trucks.”

“‘As of December only two of 19 tests were completed. That didn’t seem to be enough information on which to make’ the decision, [Administrator Jackson] said in response to a question from Sen. Ben Nelson, D-Neb.”

To listen to the exchange on the E15 issue between Sen. Nelson and Administrator Jackson, just click here (MP3-3:19).

In other climate related developments, Reuters writer Richard Cowan reported yesterday that, “Senate Republicans could withhold support of key legislation such as a climate-change bill if Democrats ram a healthcare reform bill through the Senate using fast-track procedures, Senator Joseph Lieberman said on Wednesday.

“‘What worries me,’ Lieberman said, ‘is Republican colleagues I’ve talked to, some of them usually trying to work with Democrats on individual pieces of legislation, have said to me if healthcare reform is forced through by reconciliation, nothing bipartisan is going to happen this year.’

“Lieberman, a Connecticut independent, is working with Democratic Senator John Kerry and Republican Senator Lindsey Graham to forge a compromise, bipartisan climate-change bill forcing U.S. reductions in greenhouse gas emissions blamed for global warming.”

Trade Issues

David M. Dickson reported in today’s Washington Times that, “While saying organized labor will not wield veto power over pending George W. Bush-era free-trade agreements, U.S. Trade Representative Ron Kirk would hold out only a heavily conditional hope that Congress might consider the trade pacts by the end of the year.

“When testifying about U.S. trade policy before the Senate Finance Committee on Wednesday, Mr. Kirk received bipartisan pressure to speed up the deals with Panama, Colombia and South Korea from the panel’s two top members – Chairman Max Baucus [related news release] and ranking member Charles E. Grassley [opening statement at hearing].”

The Washington Times article added that, “The two senators reminded Mr. Kirk that South Korea already had inked a trade deal with the European Union, while Colombia had signed agreements with Canada and the European Union.”

A news release issued yesterday by Senate Ag Committee Chairman Blanche Lincoln (D-Arkansas) indicated that, “U.S. Senator Blanche Lincoln, D-Ark., today said opening more markets for agricultural producers will help Arkansas farmers and rural communities who have felt the devastating effects of the current economic climate. Lincoln’s comments came during a Senate Finance Committee hearing with U.S. Trade Representative Ron Kirk who outlined the administration’s 2010 trade policy agenda.

“‘Agriculture is one of the only domestic industries where we enjoy a trade surplus,’ Lincoln said. ‘Production of a safe and affordable food supply creates American jobs and is something we should not take for granted. Our producers have a quality product to offer the rest of the world. It is our job to give them the open markets to do so.’”

In other trade news, Reuters writer Raymond Colitt reported yesterday that, “Brazil will retaliate against U.S. cotton subsidies in April unless both sides reach a negotiated solution to the long-standing trade dispute, Brazil’s foreign minister said on Wednesday.

“The South American agricultural giant will present a list next week of U.S. products on which tariffs would be imposed, Foreign Minister Celso Amorim told a news conference after meeting with U.S. Secretary of State Hillary Clinton.”

Keith Good

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