FarmPolicy

December 14, 2019

Policy Issues; Ag Economy; Biofuels; Biotechnology; and Climate Issues

Farm Bill

The Washington Insider section of DTN reported on Friday (link requires subscription) that, “[A] new challenge for ag policy may be emerging. Earlier this week, the White House released a report on childhood obesity with the extremely ambitious title, ‘Solving the Problem of Childhood Obesity in a Generation.’ It observes that neither children nor adults are eating fruits and vegetables at levels recommended by the 2005 Dietary Guidelines. Its solution is to increase consumption of these foods by 70 percent by 2020.

The analysis focuses mainly on supply. For example, it observes that Americans ate 643.6 pounds of fruit and vegetables per person in 2008. That may sound like a lot, but the report’s authors think it is far too little and that the key problem is to find ways to boost the supply of these foods — and they expect to boost consumption by 453 pounds per person.

“In spite of all these numbers, the report does not focus much on how these shifts would be accomplished. If the current markets are anywhere near equilibrium, economists say, new incentives would be needed across the board if a big change is to be expected.”

Friday’s updated pointed out that, “An additional concern is the lack of consideration for current stakeholders across the agricultural and food sector. Many livestock and dairy producers are still unhappy at the federal energy policies that they believe stimulated crop returns at their expense. This argues that developing new fruit and vegetable subsidy programs that are affordable, effective and equitable and which avoid ‘energy policy’ controversies would be extremely tricky business — and risks likely to end up causing severe unintended consequences. This is especially true of programs intended to subsidize consumption, which have spectacular records of failure and waste in centrally planned economies, and have been extremely controversial in the targeted programs used in the United States, as well.

Right now, the new anti-obesity report raises more questions than it answers. Anti-obesity policies certainly imply worthwhile objectives that deserve serious consideration. Still, to succeed they must be well designed, and aimed at real, central problems and are not, as the new report seems to be, excessively assumption driven. Thus, the shifts in policy implied should be fully vetted and watched carefully by producers as this discussion proceeds.”

Note that a related article and interview with White House domestic policy adviser Melody Barnes, the “policy architect of ‘Let’s Move,’” was posted this morning at Politico. Ms. Barnes was quoted as saying, “We spend about $150 billion annually on diseases that emanate out of obesity, like heart disease and diabetes. So, if we can catch this on the front end, then we can solve those problems and prevent them from occurring on the back end.”

Meanwhile, Chris Clayton reported on Friday at the DTN Ag Policy Blog that, “There was a lot of significant testimony Thursday in a House Agriculture Committee hearing on the farm bill from various academics who study the programs.

“Setting aside the debate about obesity versus hunger, and fruits and vegetables versus traditional commodities, the professors had a lot of thoughts about changing traditional commodity programs.”

Mr. Clayton added that, “Bruce Babcock, an Iowa State University professor, said the Average Crop Revenue Election program shouldn’t be an election, and it should be converted from a state-level program to a county-level program, a point that Ag Committee Chairman Collin Peterson, D-Minn., has also raised.

“Along with some of his proposed changes, Babcock suggested crop insurance should be modified to factor in a county ACRE program. He suggested such a change could save $4 billion a year.”

Friday’s update indicated that, “The National Crop Insurance Services issued a statement Friday expressing concern about some of Babcock’s proposals:

“‘Professor Babcock’s idea for a county-level ACRE plan has been around for several years and still leaves many conceptual and operational questions unanswered. One question is how to pay for the substantial additional delivery costs involved in simply giving this program to every producer. Farmers consciously make a decision to manage their risks when they choose to participate financially in crop insurance, which is in great contrast to the Professor’s suggestion. Other major issues with this area plans are that they don’t protect farmers from individual losses nor do they work well particularly for farmers who do not grow conventional field crops. Certainly, most lenders wouldn’t accept this program as adequate collateral when providing operating loans to farmers. It is also important to recognize that county-based revenue insurance (GRIP) is already available to many producers through the Federal crop insurance program. Whether an existing program, delivered through the private sector and cost-shared with producers, should become a fully subsidized program run by the government is very questionable. It is early in the 2012 Farm Bill process and this idea, like some others now surfacing, needs much more evaluation.’”

As has been the case in many of the House Ag Committee 2012 Farm Bill hearings, issues regarding crop insurance and the Title I farm safety net were farm policy variables that were discussed at Saturday’s hearing in Troy, Alabama. To listen to comments on these issues from House Ag Committee Chairman Collin Peterson from Saturday, just click here (MP3-5:04).

With respect to the ACRE program, Dan Looker reported on Friday at Agriculture Online that, “Kansas State University ag economist Art Barnaby compares USDA’s ACRE program to buying a put option on state revenue. The cost of the option is giving up 20% of your direct payment. And there’s basis risk, too. Even if revenue in your state falls the required 10% and triggers payments, your farm might not get a cent unless it, too, has at least a small drop in revenue.

Friday, Barnaby and fellow K-State economist Troy Dumler held a webinar on ACRE with the latest projections for payments on 2010 crops as well as 2009. Their handicapping comes out a little more than two weeks before the June 1 deadline to enroll in the program for 2010 through 2012. The Average Crop Revenue Election is optional, and producers will have two more years to try it if they decide to stay in the direct and counter-cyclical payment program.

Barnaby emphasized that his latest projections aren’t a prediction. Farmers still haven’t gotten any payments on 2009 crops from ACRE and won’t until this fall. Any payments on 2010 crops would be based on yields on planted acres and national marketing year average prices that will be known in the fall of 2011.”

Also reporting on Friday’s KSU ACRE webinar, Marcia Zarley Taylor reported at the DTN’s Minding Ag’s Business Blog that, “Kansas State has calculated which states and which crops are ‘in the money’ for ACRE in 2010 on their Ag Manager website. Remember this is only an educated guess on the likelihood of collecting an ACRE payment, not a promise.

At this stage, wheat in North Carolina, South Dakota, Delaware, Minnesota and Missouri have best odds of collecting. More conservative price assumptions might add more to that list, but Barnaby thinks ACRE works best if you elect it only if you see in-the-money odds for your state or if your state goes no lower than 10 to 15 percent out of the money. That nixes states like Colorado.

“‘It is a cheap option if your state is in the money,’ however, Barnaby says.”

House Ag Comm Field Hearing- Morrow, Georgia

A news release issued on Friday by the House Ag Committee stated that, “Today, House Agriculture Committee Chairman Collin C. Peterson held a field hearing in Morrow, Georgia to review U.S. agriculture policy as the Committee begins the process of writing the 2012 Farm Bill. This is the fifth in a series of hearings scheduled across the country to consider new ideas regarding Federal food and farm policy. Nine Members of Congress attended today’s hearing and heard testimony from eleven witnesses on a variety of farm policy issues.”

Due to technical limitations at the hearing site in Morrow, Georgia, the hearing was not webcast, so there are no FarmPolicy.com audio clips from this hearing.

A news release issued on Friday by the Georgia Peanut Commission indicated that, “Peanut farmers support the marketing loan program but the current program prices are set too low to be a true safety net for producers, says Armond Morris, chairman of the Georgia Peanut Commission, in testimony before Members of the U.S. House of Representatives Committee on Agriculture. Morris testified today before the House Agriculture Committee Farm Bill Hearing at the National Archives Southeast Region in Morrow, Ga.”

The release added that, “According to data, presented by Morris, from the University of Georgia’s National Center for Peanut Competitiveness, the peanut variable costs have increased 52 percent per acre since 2002. U.S. farmers are also competing with other countries like Argentina, China and India where environmental costs, other regulations and labor rates are much less than U.S. input costs, Morris explains.

“Morris continues by stating, the loan repayment rate for peanuts has not functioned appropriately since the 2002 Farm Bill and the committee included language in the 2008 Farm Bill that has not been adhered to. When setting the loan repayment rate, USDA has not taken into account the world market prices, Morris says. Thus, the USDA posted price for peanuts set every Tuesday afternoon is too high.”

Another important aspect of the farm bill includes feeding programs at USDA. Peanut butter is a long-time participant in the school lunch program. According to Morris, the peanut industry does not have the resources to reach even a small percentage of these nutrition programs illustrating the nutritional value, low cost and long shelf life of peanut butter,” the news release added.

And Ronnie Lee, a Member of the Board of Directors Southern Cotton Growers, Inc. noted in his opening statement that, “The centerpiece of the upland cotton program and traditional commodity programs has been without question, an effective marketing loan program. It provides a safety net for producers but does not harm the competitiveness of U.S. commodities. It is a program component that makes sense, that works, and that serves many critical purposes. Because it is well-understood and a fundamental part of commodity policy, the marketing loan gives rural banks the confidence they need to make critical operating loans available.”

Mr. Lee added that, “The 2012 farm bill debate, however, will take place with several new and increased points of pressure. Record budget deficits will put intense pressure on funding. The WTO Brazil Case puts cotton’s marketing loan and counter-cyclical programs under special scrutiny even though the cotton program, as revised by the 2008 bill, has never been evaluated by a WTO Panel. Ongoing negotiations in the Doha Round of trade negotiations could result in a dramatically altered landscape for domestic commodity support. If circumstances arise that make it impossible to maintain a reasonable safety net using existing delivery mechanisms, the cotton industry will look at alternatives.

“As evidenced by recent sign-ups, the ACRE program has not been a very attractive alternative for cotton farmers in our region or across the Cotton Belt.”

House Ag Comm Field Hearing- Troy, Alabama

In addition to comments about the safety net and crop insurance (noted above), House Ag Committee Chairman Collin Peterson (D-Minn.) also provided perspective and analysis on some other important policy variables during the course of Saturday’s Farm Bill hearing in Alabama; here are some highlights on particular subject matters.

Local food production versus traditional commercial agriculture (MP3-3:13).

Payment limits. (MP3-0:18).

Other topics and farm policy variables that were discussed included the following:

Cap and trade, Rep. Bob Goodlatte (R-Virginia) (MP3-5:00).

Crop insurance perspective from rice, Rep. Glenn Thompson (R-Pennsylvania) and Joe Mencer, a rice producer from Arkansas (MP3-1:37).

The entire audio replay from Saturday’s hearing can be replayed or downloaded from this link.

“Know Your Farmer…”

An update posted on Friday at the Oklahoma Farm Report Online included a recap of a visit on Thursday by Deputy Secretary Kathleen Merrigan to the state of Oklahoma. The update noted that, “she was questioned about the program ‘Know Your Farmer- Know Your Food.’”

Friday’s update explained that, “Merrigan began her day on Thursday in Oklahoma at the Pioneer Telephone Coop headquarters in Kingfisher…It was then on out of Kingfisher to the farm of Jack Stuteville- where [a] closed ‘barn door’ meeting with farm leaders was held.”

An audio link provided in Friday’s update includes “three viewpoints that came out of the meeting– the first is that of Deputy Secretary Merrigan. Then we have comments in the Podcast from Scott Dewald, Executive Director of the Oklahoma Cattlemen’s Association. Finally, we turn to Oklahoma State Secretary Terry Peach for his thoughts after spending much of the day with the Deputy.”

Immigration

The AP reported on Saturday that, “U.S. Secretary of Agriculture Tom Vilsack said Friday that immigration reform and Americans’ food prices are linked, and said citizens should urge their members of Congress to enact reform soon.

“Speaking to representatives from several farm and agriculture groups from around Florida, Vilsack echoed remarks repeatedly made by President Obama: that bipartisan immigration reform is needed.”

Competition

A news release issued on Friday by USDA stated that, “The Department of Justice and the U.S. Department of Agriculture (USDA) today announced the schedule and panelists for the second joint public workshop on competition and regulatory issues in agriculture, which will be held on May 21, 2010, in Normal, Ala., at the Ernest L. Knight Reception Center at Alabama A & M University. The workshop, the second of five, will focus on the poultry industry.”

Ag Economy

Jeff Caldwell reported on Friday at AgricultureOnline that, “Demand from farmers — not nonfarm investors — and an improving cattle market have farmland values in the nation’s center trending higher than they were a year ago, according to the latest survey from the Federal Reserve Bank of Kansas City.

Farm and ranch land in the Fed’s 10th district — from Wyoming and Colorado to Missouri — both rose in value in the first quarter of 2010 as seemingly more farmers sought land, according to Fed economist Brian Briggeman. Those factors, say most ag lenders responding to the Fed’s latest survey, added up to stability for overall farm credit conditions.”

A Daily Radio News item from USDA on Friday noted that, “An expert says the agricultural lending community continues fairly strong, but more farmers are having trouble making loan payments.” The brief one-minute audio report includes comments from University of Illinois Economist Paul Ellinger who testified at Thursday’s House Ag Committee hearing.

The AP reported yesterday that, “Hog processing giant Premium Standard Farms LLC spent $40 million over the last decade developing technology after a court ordered it to sharply reduce odors at its Missouri farms, but a looming deadline is threatening another costly lawsuit.

“A panel of experts recently approved a barn-scraper system that met goals established under a 1999 court settlement with environmental groups to develop ‘next-generation technology.’ But the deadline to implement the system is July 31, and the company – which said it had little success developing the technology until now – needs another two years to get the system in place.

“Missing the deadline would allow the state to sue, and the Missouri attorney general’s office said July 31 remains its target.”

The AP article added that, “Though experts say the U.S. pork industry is showing signs of turning around, producers have lost money in 27 of the last 29 months and their future relies heavily on the country’s shaky economic recovery.

“‘We’re making money in the hog industry again,’ said Ron Plain, an agriculture economics professor at the University of Missouri. ‘If the economy can continue to improve and generate economic growth, it is probably going to last for a while.

“‘If, on the other hand, things don’t improve in the overall general economy, we’ll probably slide back into red ink this fall.’”

In other pork related news, a news item released by the National Pork Producers Council on Friday stated that, “China today gave official notice that it is accepting shipments of U.S. pork, a move hailed by the National Pork Producers Council. Pork produced on or after May 1 now can be exported to China.”

Biofuels

On Friday, USDA’s Economic Research Service (ERS) released a report titled, “Next-Generation Biofuels: Near-Term Challenges and Implications for Agriculture.” In part, an ERS summary of the report stated that, “This report assesses the short-term outlook for production of next-generation biofuels and the near-term challenges facing the sector. Next-generation U.S. biofuel capacity should reach about 88 million gallons in 2010, thanks in large measure to one plant becoming commercially operational in 2010, using noncellulosic animal fat to product green diesel. U.S. production capacity for cellulosic biofuels is estimated to be 10 million gallons for 2010, much less than the 100 million gallons originally mandated by the 2007 Energy Independence and Security Act.

Biotechnology

Karen Kaplan reported yesterday at the Los Angeles Times Online that, “The widespread planting of a genetically engineered crop designed to withstand a menacing pest has had the unanticipated consequence of transforming benign bugs into agricultural predators, according to a new study.

“In findings that drive home the difficulty of trying to stay one step ahead of nature, scientists explain how farmers of bioengineered cotton in northern China were able to drastically reduce their insecticide use for more than a decade, only to find themselves spraying a crop that wasn’t supposed to need such measures.”

The New York Times editorial board noted in an opinion item that was posted Online yesterday that, “A vast majority of soybeans and corn planted in this country, and in much of the world, are genetically engineered, and the technology is rapidly pushing its way into many more crops.

For farmers, the benefits are real — with these seeds they can spend less time plowing and cultivating and can use more benign agricultural chemicals to kill weeds. But according to a recent report from the National Research Council, there are also signs of trouble, chief among them the appearance in various parts of the country of herbicide-resistant weeds.

“Such weeds could undermine the main purpose of genetically engineered crops: their ability to tolerate spraying with glyphosate, an environmentally benign herbicide marketed by Monsanto, one of the major producers of genetically engineered seeds, under the name Roundup. As ever, nature is finding its way around our defenses.”

Climate Issues

An update posted on Friday at the NationalJournal Online included a “roundup” of analysis on the Kerry-Lieberman Bill: “The Natural Resources Defense Council offers a ‘first read’ of the draft proposal, characterizing it as a ‘solid foundation’ for Senate legislation in spite of ‘ill-advised’ proposals to promote nuclear power and offshore drilling; Resources for the Future breaks down each of the ‘notable market-based climate change bills introduced in the 111th Congress;’ [and,] the Brookings Institution has created a table illustrating the distribution of allowance value prescribed by the bill.”

An update posted on Friday at the Green Blog (New York Times) noted that, “Many of the differences between the House and Senate climate and energy bills are so slight that you could almost call them similarities, judging from a side-by-side comparison put together by the National Commission on Energy Policy, a bipartisan advisory group.”

And Amy Harder reported on Friday at the NationalJournal Online that, “Finance Chairman Max Baucus, D-Mont., is facing pressure from interest groups to take up the climate and energy bill sponsored by Sens. Maria Cantwell, D-Wash., and Susan Collins, R-Maine. That’s despite the Senate’s current focus on the bill unveiled Wednesday by Sens. John Kerry, D-Mass., and Joe Lieberman, I/D-Conn.

“The chances of either piece of legislation coming before the panel any time soon appear slim.”

Ms. Harder added that, “Wednesday evening, Baucus deflected questions as to when or whether he would take up either the Kerry-Lieberman or Cantwell-Collins bill. ‘We need to see how much impetus it has,’ Baucus told NationalJournal.com, referring to the Kerry-Lieberman legislation, the American Power Act. ‘We need to make a judgment. There’s only so many things I can do.’

When asked whether his committee would consider the Cantwell-Collins bill, Baucus responded that he ‘doesn’t know yet.’ A requested for further comment from the committee was not returned.”

Keith Good

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