FarmPolicy

October 31, 2014

Farm Bill; Biofuels; Crop Insurance; Animal Agriculture; Food Safety; Climate Change; and Financial Regulation

Farm Bill

Dan Looker reported on Friday at Agriculture Online that, “It’s only 2010, but starting next week, the House Agriculture Committee will begin looking at possible changes to the 2012 Farm Bill.

“That’s when Agriculture Secretary Tom Vilsack will appear before the committee, followed a week later by academics and economists. Then, over a long weekend that starts on Friday, April 30, committee chairman, Representative Collin Peterson (D-MN) takes the show on the road, with hearings planned for Des Moines, Iowa; Boise, Idaho; Fresno, California and Cheyenne, Wyoming.

“Over the past winter and spring, Peterson has made it clear that he expects finding the financial resources for farm programs to be tougher by 2012, as Congress wrestles with ways to cut a ballooning federal deficit.”

Mr. Looker noted that, “On Friday, Peterson made it clear that he’s doing this, not because he has any hidden reform agenda, but ‘to get people thinking ahead of time on where we should be going in the future.’”

“Peterson looks at the complex mix of current farm programs that include direct payments, crop insurance, a permanent disaster program called SURE (SUpplemental REvenue Assistance Payments Program) and ACRE (Average Crop Revenue Election)…He’s asking farm groups, ‘Is there a more productive way of providing a safety net.’”

DTN Ag Policy Editor Chris Clayton reported on Friday (link requires subscription) that, “As the House Agriculture Committee preps for a series of hearings on the 2012 farm bill, Committee Chairman Collin Peterson stressed Friday that he isn’t pushing a particular program or agenda on farmers other than staying within the framework of his budget.

“‘My goal here is to do the best job with the money that we have to provide a safety net for the production farmers out there that are producing the bulk of the food in this country,’ said Peterson, D-Minn., in a teleconference with reporters on Friday.

“Yet, Peterson comes into the hearings that begin next week with a lot of thoughts and questions about the role of direct payments, marketing loans, revenue program and crop insurance needed to build the proper safety net.”

Mr. Clayton explained that, “In the last farm-bill debate, groups pushed for Congress to reduce or eliminate the $5.2 annual direct payment program, but lawmakers largely resisted changing the program. Peterson continues to question the role of direct payments in setting cash rents or land values. ‘One of the issues that needs to be looked at or addressed is, are these direct payments being capitalized into land values and rents? And is that making it more difficult for young farmers to get started?’

“Further, Peterson is looking at whether crop insurance can be structured in a way to help cover a farmer’s whole-farm risk rather than picking winners and losers in price protections being offered.

“‘Is it right to be doing this by commodity, or should we be doing this with whole-farm type of situation with crop insurance and revenue?’ he said. ‘I’ve gotten some curious looks from people and some push-back on that, but I’ve asked people to think about it. You know, that would be a much more market-oriented type of a approach where you could cover your own risk, but the decisions within what you do within your farm are your decisions, not some type of program you are planting towards.’”

The DTN article added that, “When lawmakers looked for $1 billion more annually in spending in the last farm bill, the legislation was held up nearly a year by other House and Senate committees as lawmakers demanded changes in exchange for increased funds. Peterson emphasized that the bill will be written within the confines of the farm bill baseline when the bill is written, but he also noted that the baseline will probably shift several times before 2012 depending on economic conditions. But he also added that the 2008 farm bill provided the biggest increases ever in the nutrition and conservation programs and that he wants to protect those as well. ‘Obviously given the economic situation and people out of work we want to make sure the feeding programs, the nutrition (programs) are there for people during this time.’ He also said farmers need more technical assistance than is currently provided to make use of the conservation programs.”

In a separate DTN article from Friday (link requires subscription), Jerry Hagstrom reported that, “House Agriculture Chairman Collin Peterson said Friday his committee is opposed to using budget authority from the Environmental Quality Incentives Program as an offset to increase spending on child nutrition programs.

“The Senate Agriculture Committee passed a child-nutrition bill that decreases EQIP spending by $2.2 billion over 10 years to provide almost half of a $4.5 billion increase in child nutrition programs that same time.

“‘There is pretty universal opposition from the committee to using EQIP money to pay for this,’ Peterson, D-Minn., said in a telephone news conference.”

Philip Brasher reported on Friday at the Green Fields Blog (The Des Moines Register) that, “One of the key issues will be what to do about the way that cotton farmers are subsidized. The committee’s chairman, Rep. Collin Peterson, D-Minn., said today that the cotton program will have to be overhauled in the wake of Brazil’s successful challenge to the subsidies at the World Trade Organization. The Obama administration agreed to change the program in a deal to avert retaliation against U.S. exports to Brazil.

Subsidies for cotton currently mirror those for corn, soybeans, wheat and other commodities, but there’s no reason why they have to be the same for each crop in the future, said Peterson. ‘In the past we’ve tried to have a one-size-fits-all approach, but maybe that’s not the case in the future. I’m willing to consider that,’ he said. ‘If we don’t address it, we may be back in the soup again with potential retaliation issues.’”

Mr. Brasher noted that, “Peterson also said today that he expects the Environmental Protection Agency to approve in August an increase in the amount of ethanol that can be blended in gasoline to 15 percent. The current limit is 10 percent. However, he said he expected the EPA to impose labeling requirements for the higher blend, known as E15, and possibly restrict its use to newer cars. EPA officials have said there isn’t going to be adequate testing on older model cars to tell whether it can be safely used in them. Critics of the approach the agency is taking say retailers will refuse to sell E15 or else a lot of motorists will fill up with the higher blend even if they’re not supposed to, assuming E15 is cheaper. EPA officials, however, agree with the ethanol industry that the limit will have to be raised to ensure that there is a growing market for the biofuel.”

As the Farm Bill debate gets set to officially begin, a report released last week by the University of Minnesota Extension Service indicated that, “Median net farm income dropped 63 percent in 2009 among more than 3,000 Minnesota farms, a new joint report by the Minnesota State Colleges and Universities system and University of Minnesota Extension shows.

The median net farm income for the combined groups of producers was $33,417 in 2009, down from $91,242 in 2008. The median means half of the producers earned more and half earned less. Net farm income is used for living expenses, income taxes, retirement and business reinvestment.”

Biofuels

Dan Piller reported yesterday at The Des Moines Register Online that, “Just when Iowa’s 39 ethanol plants had settled into regular profitability, demand for the fuel is waning and red ink is returning.”

The industry is running into the ‘blend wall’ – the theoretical limit of the amount of ethanol that can be mixed with gasoline. Most gasoline can contain a blend of no more than 10 percent ethanol.”

Mr. Piller noted that, “That saturation point has dropped ethanol prices about 30 to 40 cents per gallon, to about $1.60 per gallon, in the past month in Iowa, cutting away what had been profitable margins for ethanol producers since the middle of 2009.”

An update posted on Friday at the AgMag Blog (The Environmental Working Group) stated that, “On several counts, a recent Rochester Institute of Technology study (March 29) hailed by the corn ethanol lobby falls short of bringing reliable science to the ethanol blend debate. With a glut of ethanol on their hands, the ethanol industry hopes to increase the amount of ethanol allowed in gasoline by 50 percent. It has petitioned the Environmental Protection Agency (EPA) for a waiver to allow the blend increase. The EPA’s decision hinges on whether tests indicate that blends containing more than 10 percent ethanol (so called E10) will be safe for America’s auto fleet.”

“However, Environmental Working Group senior scientist Olga Naidenko PhD found serious flaws with the RIT researchers’ methodology and findings. Dr. Naidenko authored a report last summer that looked at the impact that increased ethanol blends would have on engine performance and tailpipe emissions.”

Meanwhile, a news release issued by USDA on Friday stated that, “Agriculture Secretary Tom Vilsack today invited public comment on several proposed rules designed to increase the production of advanced biofuels and the development of biorefineries. The programs are authorized under the Food, Conservation and Energy Act of 2008 (The Farm Bill).

“‘We view these proposed rules as part of the strategy to help meet President Obama’s goal to accelerate the commercial production of advanced biofuels and create a viable alternative fuels industry,’ Vilsack said.

The proposed rules affect the following three renewable energy programs administered by USDA Rural Development: Biorefinery Assistance Program, Repowering Assistance Payments, and Bioenergy Program for Advanced Biofuels

Crop Insurance

A Daily Radio News Service audio report from USDA on Friday noted that, “USDA’s top Risk Management official [Bill Murphy] says balancing the profit structure of the Federal Crop Insurance Program regionally is one way to improve the program overall nationwide.” To listen to this brief audio report, just click here.

Animal Agriculture

Donald Kennedy, a former commissioner of the United States Food and Drug Administration, penned an opinion item that was published in yesterday’s New York Times regarding the use of antibiotics in animal production.

In part, the editorial stated that, “More than 30 years ago, when I was commissioner of the United States Food and Drug Administration, we proposed eliminating the use of penicillin and two other antibiotics to promote growth in animals raised for food. When agribusiness interests persuaded Congress not to approve that regulation, we saw firsthand how strong politics can trump wise policy and good science.

“Even back then, this nontherapeutic use of antibiotics was being linked to the evolution of antibiotic resistance in bacteria that infect humans. To the leading microbiologists on the F.D.A.’s advisory committee, it was clearly a very bad idea to fatten animals with the same antibiotics used to treat people. But the American Meat Institute and its lobbyists in Washington blocked the F.D.A. proposal.”

After additional commentary, the opinion piece indicated that, “It’s 30 years late, but Congress should now pass the Preservation of Antibiotics for Medical Treatment Act, which would ban industrial farms from using seven classes of antibiotics that are important to human health unless animals or herds are ill, or pharmaceutical companies can prove the drugs’ use in livestock does not harm human health.

“The pharmaceutical industry and agribusiness face the difficult challenge of developing antimicrobials that work specifically against animal infections without undermining the fight against bacteria that cause disease in humans. But we don’t have the luxury of waiting any longer to protect those at risk of increasing antibiotic resistance.”

Food Safety

DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “A key congresswoman in the debate over food safety tried to reassure organic producers on Thursday that the food-safety bills moving through Congress will be good for their industry, but said she is worried the Senate is watering down the bill to sacrifice tighter safety standards for trade.

“The Senate version was expected to be considered on the Senate floor next week, but has been postponed so that the Senate can take up the financial derivatives section of the financial services reform bill.

“In what appeared to be a response to statements on the Tea Party Coalition website that the FDA food safety enhancement bill would disproportionately hurt small and organic farmers, House Agriculture Appropriations Subcommittee Chairman Rosa DeLauro, D-Conn., told the Organic Trade Council, ‘There is no death panel for small and organic producers in this legislation.’”

Climate Change

The AP reported on Friday that, “President Barack Obama wants business leaders to push Congress to pass long-stalled climate legislation awaiting action in the Senate.

“Obama made the plug during a meeting Friday with his Economic Recovery Advisory Board, which includes the heads of General Electric, Caterpillar and Oracle, along with labor leaders and economists.

“He told the group the climate bill — which would cap global warming emissions — is good for business and that members of Congress need to hear that.”

And Stephen Power reported on Saturday at The Wall Street Journal Online that, “Is the venerable Clean Air Act of 1970 up to addressing the pollution problems of the 21st century?

“Since it was implemented some 40 years ago, the law, which required the government to identify and set standards for pollutants identified as harmful to human health and the environment, has drastically curbed pollution from industry and automobiles. But as regulators use it to address a more ambitious agenda—dealing with greenhouse-gas emissions that many scientists say contribute to global warming—longstanding problems with the law are being put into focus.

“Some critics argue that an old complaint about the law—regulators don’t have to consider costs when setting pollution standards—is all the more urgent when facing a problem as broad as global warming. Even some experts who think the law is beneficial say its implementation has been overly expensive: Because the law is so rigid, they argue, innovative pollution-fighting ideas are sometimes stifled, driving up costs.”

The Journal article noted that, “The EPA hasn’t said how much it expects new controls on greenhouse-gas emissions would cost the economy. But in a recent speech, the EPA’s administrator, Lisa Jackson, noted that dire predictions about the Clean Air Act’s implementation have often been wrong. Auto makers and the U.S. Chamber of Commerce howled when the EPA mandated unleaded gasoline and catalytic converters 30 years ago, Ms. Jackson said. ‘Yet the auto industry survived,’ and later studies estimated the rule produced health benefits of $17 billion per year, she added.

“For another measure, a 2004 study by the National Research Council of the National Academies—the nation’s top scientific-advisory group—concluded that the act’s implementation ‘has had and will probably continue to have substantial net economic benefits.’”

Financial Regulation

Reuters news reported on Friday (article posted at DTN, link requires subscription) that, “Senator Blanche Lincoln on Friday unveiled a long-awaited draft bill to regulate the $450 trillion over-the-counter derivatives market, taking a tougher tack against big banks than the Senate Banking Committee or House bills on the issue.

“The bill, which would require banks to spin off swaps desks if they are protected by federal deposit insurance or access the Federal Reserve discount window, came on the same day the government leveled a major fraud charge against U.S. swaps dealer Goldman Sachs Group Inc.”

The article added that, “Last month Lincoln had outlined what observers predicted would be a lighter approach than other bills proposed by the Senate Banking Committee and passed by the U.S. House. Her committee has jurisdiction over futures markets.

But she surprised the market with a crackdown.”

“CFTC Commissioner Bart Chilton, who has spoken out in favor of boosting oversight of the financial markets, said the draft provided broader oversight for so-called dark markets and ‘gives us the tools we need to lay the hammer down on wrongdoers, if necessary.’”

Reuters writers Charles Abbott and Roberta Rampton reported on Friday that, “Senator Blanche Lincoln, a self-styled ‘farmer’s daughter’ facing a tough re-election race in Arkansas, had not been expected to become the latest Democrat to rail against the risky practices of Wall Street.

“Lincoln, chairman of the Senate Agriculture Committee, is known for working across party lines on issues, but took Washington by surprise with an aggressive draft bill unveiled on Friday that she hopes will force big banks out of the $450 trillion over-the-counter derivatives market.”

The article added that, “Saxby Chambliss, senior Republican on the Agriculture Committee, blamed the White House for collapse of negotiations with Lincoln. Chambliss is a frequent partner on Lincoln’s proposals and was expected to write a swaps bill with her.

“‘It seems the administration is more interested in trying to divert attention away from health care by changing the subject as we head into the election season,’ Chambliss said.”

Carrie Budoff Brown reported on Friday at Politico that, “President Barack Obama on Friday threatened to veto a Wall Street reform bill that fails to place tight controls on derivatives, the complex financial instruments that played a key role in the 2008 global meltdown.

“But, setting up a showdown on the legislation, Senate Republicans lined up Friday in opposition to the Democratic financial overhaul plan — even as Senate Democratic leaders want to bring the bill to the floor next week.

“Obama’s veto threat — a rare move from the president — came as Senate Agriculture Chairwoman Blanche Lincoln (D-Ark.) released a bill Friday that would force derivatives to be traded on exchanges and block major banks from trading directly in derivatives, stripping them of a key source of billions in income.

Edward Wyatt reported on Friday at The New York Times Online that, “Senator Blanche Lincoln, an Arkansas Democrat facing a tough re-election challenge who is also the committee chairwoman, will be at the forefront of a legislative fight over derivatives by virtue of her leadership of the farm panel, which deals with traditional farm issues as well as commodity futures regulation. Mrs. Lincoln’s legislation would require nearly all derivatives trading to occur on a public exchange, for greater pricing transparency, and for trades to be processed through a third party to guarantee against defaults, two measures the Obama administration also favors.

“The bill, which the Agriculture Committee plans to debate next week, is intended to be folded into the larger financial regulatory package.

“The bill has met with strong resistance from Senate Republicans, who complain that Democrats are acting unilaterally. On Friday, all 41 Republican senators signed a letter urging the majority leader, Senator Harry Reid, Democrat of Nevada, to adopt a more bipartisan approach in developing legislation to tighten regulation of the nation’s financial system, including derivatives.

“The letter signals the possibility of a filibuster that could block the reform legislation from even reaching the floor for debate.”

Keith Good

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