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Farm Bill Policy Issues; Competition; Biofuels; and Financial Regulation

Farm Bill: 2008 Disaster Issues

Philip Brasher reported yesterday at The Des Moines Register Online that, “Iowa farmers enjoyed one of their best years in 2008, thanks to soaring corn and soybean prices.

“Now, many growers are getting a second shot of cash for that year’s crops in the form of federal disaster payments – even if they had minimal revenue losses.”

The article explained that, “All of the farmers getting money must have had at least one crop affected by the weather — heavy rains in spring 2008 delayed planting and washed out some crops. But experts say that because of quirks in how the payments are calculated, some of the income losses that the disaster aid is supposed to cover existed largely on paper.

“The money comes from a program created by the 2008 farm bill and then sweetened by the economic stimulus bill that President Barack Obama pushed through Congress last year.”

Mr. Brasher indicated that, “[F]armers can claim the disaster payments so long as the yield on at least one of their crops was down by at least 10 percent in 2008 and they live in one of the 90 Iowa eligible counties. Those counties were either declared a disaster area because of weather damage or they were adjacent to one that was.

“The other nine counties are in west and northwest Iowa, and farmers in those counties must have sustained a 50 percent crop loss to qualify.

What doesn’t matter is what price farmers may have received on their individual crops, said Chad Hart, an economist at Iowa State University.

Instead, the payments are pegged to what happened to commodity prices nationwide in the course of the year. As it turned out, those prices took a steep dive, causing potential disaster payments to balloon.”

Farm Bill: Dairy Issues

Marc Heller reported on Saturday at the Watertown Daily Times Online (New York) that, “In the next few years, dairy farmers are likely to see big changes in the safety net that protects them from crashing milk prices — including a first-ever comprehensive system to limit milk production, the chairman of the House Agriculture Committee said.

“Rep. Collin C. Peterson, D-Minn., said he believes the past year’s deep decline in milk prices will result in momentum for fundamental changes in dairy policy when Congress considers the five-year farm bill in 2012, as long as farm groups can find common ground and opposition from milk processors can be kept to a minimum.

“Mr. Peterson outlined his expectations in an interview at his Capitol Hill office.”

The article noted that, “When lawmakers map out a new safety net, it will have to include a supply management system to keep milk production in check, Mr. Peterson said.”

“‘Production management will have to be in it,’ Mr. Peterson said.”

Mr. Heller added that, “As part of the changes, Mr. Peterson said, he also expects Congress will add California to the federal milk marketing system, which sets the minimum prices farmers receive. California’s dairy industry has operated in its own marketing order but producers there have often sold milk to other states to take advantage of federal marketing orders.”

A related news release issued by USDA late last week stated that, “Agriculture Secretary Tom Vilsack today announced that the second meeting of the Dairy Industry Advisory Committee will be June 3-4 at USDA headquarters in Washington, D.C., in room 104-A of the Jamie L. Whitten Building. The meeting is open to the public.”

Farm Bill: 2012 House Ag Committee Hearings

And with respect to the House Ag Committee hearings in preparation for the 2012 Farm Bill, Robert Pore reported yesterday at the Grand Island Independent Online (Nebraska) that, “Shelton farmer Rod Gangwish testified last week at a 2012 Farm Bill hearing of the House Agriculture Committee in Sioux Falls, S.D.

“Gangwish, who raised corn and soybeans, was invited to testify by House Agriculture Committee member Rep. Adrian Smith, R-Neb.”

Mr. Pore stated that, “Nebraska is the nation’s second leading ethanol producer in the United States. With the addition of ethanol plants in Aurora and Columbus, Nebraska will have an ethanol production capacity of 2.2 billion gallons.”

The article added that, “[Gangwish] told the committee that the programs included in the energy title of the 2008 Farm Bill will ‘greatly contribute to ensuring America’s future energy security.’

“‘Congress has a significant opportunity to further advance the development of renewable bioenergy, cellulosic ethanol and other advanced biofuels technologies in the 2012 Farm Bill,’ Gangwish said.

“He said the energy title of the 2012 Farm Bill should continue to promote federal procurement of biobased products, expand loan guarantee programs for biorefineries and biofuels production facilities, increase research to better utilize ethanol co-products such as distillers grains, and continue programs to incentivize cellulosic and biomass feedstocks for ethanol production and energy production of ethanol plants.”

Note that the House Ag Subcommittee on Conservation, Credit, Energy, and Research will hold a hearing on June 9th to review the implementation of the 2008 Farm Bill energy title.

Meanwhile, in a “Report from Washington” newsletter from last week, Rep. Mike Rogers (R-Alabama) noted that, “Agriculture is the heartbeat of our economy in Alabama. Farming and the businesses it supports account for 21% of Alabama’s workforce and $43 billion of the state’s output.

“I recently took part in a series of Field Hearings with the Agriculture Committee to prepare for the 2012 Farm Bill. Hearings began in Morrow, Georgia, then over to Troy, Alabama [unofficial transcript], where Congressman Bobby Bright (AL-02) and I co-hosted the hearing.”

Rep. Rogers added that, “Some farmers raised specific concerns about the new program authorized under the 2008 Farm Bill called Average Crop Revenue Election (ACRE), which was designed to act as a possible replacement for current farm support programs. It was clear from these hearings that the ACRE program is not an effective tool in the south.”

“Most folks remember the three years of drought Alabama recently suffered, which was especially hard on Alabama’s farmers. In years past, Congress passed bills to provide relief from individual disasters in an ad hoc manner.

“In the 2008 Farm Bill we attempted to address this by creating a permanent disaster program called the Supplemental Revenue Assistance Program (SURE). Many of the producers expressed frustration with the SURE program because of its slow response and cumbersome bureaucracy,” Rep. Rogers said.

In a separate issue that came up during one of the House Farm Bill hearings with ag policy experts in Washington, D.C., David Bennett reported on Friday at the Delta Farm Press Online that, “How do U.S. farm programs affect Third World farmers?

“That topic was discussed during a May 13 House Agriculture Committee hearing [unofficial transcript] by a panel of professors and economists, who struggled to make any absolute claims.

“‘How, if at all, (do) our domestic agriculture policies affect the developing world?’ asked Georgia Rep. David Scott.”

The article noted that, “It’s undeniable that some U.S. commodity programs ‘have lowered international prices to the disadvantage of small farmers in poor countries,’ said Rob Paarlberg, political science professor at Wellesley College in Massachusetts. That ‘includes the example of cotton farmers in Africa. At least according to the dispute settlement body of the WTO, our cotton program hasn’t yet corrected all its tendencies to produce that result. So, I think there are some changes on the agenda there.’

However, Paarlberg doesn’t think ‘that poor farmers in developing countries will magically become prosperous if U.S. agricultural commodity programs (are) reformed. If the U.S. cotton program is changed, it will probably help the most productive cotton farmers in places like China, Brazil or Australia even more than it’ll help impoverished cotton farmers in Africa.

“‘That isn’t an argument against changing the program. Right now, the program is obliging our government to spend $147 million a year to subsidize the cotton industry in Brazil. … It’s complicated and there is an element of truth to the ‘injury’ argument. But it’s only a small part of the story.’”

In separate topic regarding obesity and nutrition policy from the May 13 House hearing, recall that Prof. Paarlberg stated that, “It may be time for these nutrition programs, particularly the SNAP program [food stamps], to stop subsidizing the consumption of caloric sodas. I would argue that caloric sodas should be made ineligible for purchase under the SNAP program, a little bit like tobacco and alcohol. This would not be an imposition of a tax. It would simply be the removal of a subsidy, and the total dollar value of SNAP benefits wouldn’t fall. These benefits would simply be deployed away from an obesity inducing product, which isn’t even a food product, after all.”

In a related article, Valerie Bauerlein and Betsy McKay reported in today’s Wall Street Journal that, “Makers and sellers of soda and other sweet drinks have intensified a fight against proposed taxes on their products, as a growing number of cities and states are weighing the measures to help fill depleted coffers.”

“So far, few such taxes have actually been imposed. The final federal health overhaul didn’t include a soft-drink tax. And while several state and city legislators initially expressed enthusiasm for new soda taxes, only Washington state has approved a new excise tax on soda thus far, while Colorado removed a sales-tax exemption,” the Journal article said.

USDA Program Variables and Focus: Rural Development, Nutrition, and Farm Size (Production Method)

Recall that Sec. of Ag. Tom Vilsack testified before the House Ag Comm. on Farm Bill issues back on April 21 [unofficial transcript] and his focus was generally more on variables associated with broader rural development programs, as opposed to details regarding Title I commodity payments.

The May 21 edition of The Kiplinger Agriculture Letter stated that, “Despite protests over USDA’s new initiatives, The agency will succeed on two key fronts that its chief, Tom Vilsack, is set on seeing through: Better nutrition and rural economic growth.

There’s a lot of push-back. USDA’s efforts come somewhat at the expense of a traditional focus on ag production…”

The Kiplinger letter added that, “Big ag has many friends in Washington…Republicans and Democrats on Capitol Hill, who are less tuned in to what the ag secretary sees as a new mission for the agency and more in harmony with production agriculture interests.”

Friday’s letter explained that, “Nonetheless, Vilsack will prevail in markedly recasting USDA’s mission by deploying more government resources to better the lives of all rural Americans, based on the view that farming brings in just 10% of average farm household income. Of the 58 million Americans living in rural areas, only 2.2 million are farmers.

He has strong support from the White House and from other agencies. President Obama is determined to bring new businesses and jobs to rural areas. And Vilsack’s push to expand local food networks and open more farmers’ markets meshes with First Lady Michelle Obama’s efforts to tackle childhood obesity.

A National Summit of Rural America will give a voice to new efforts to issue and guarantee more loans for biofuels, bioenergy, rural development, etc… backed by the White House, USDA, Commerce Dept. and Small Business Admin. Vilsack will host the day-long event June 3 at Jefferson College, near St. Louis.”

With respect to the upcoming National Summit, recall that on May 6 Sen. Pat Roberts (R-Kansas) along with nine other Senators, sent a letter to Pres. Obama which stated in part that, “We urge you to utilize the National Summit of Rural America to be held June 3, 2010 as a turning point for this Administration. For too long, the agenda has been dominated by policies that burden rural communities with higher energy costs, greater federal intrusion, and decreased access to the lands we cherish. This summit offers an opportunity to replace restrictive Washington mandates with policies that create jobs and promote economic growth.”

The letter added that, “The Department increasingly directs funds and policy away from conventional agricultural production that feeds the vast majority of Americans and the growing global population. Instead, the Administration focuses on urban niche markets and hobby farmers.”

In conjunction with Sec. Vilsack’s policy focus, side issues regarding farm size and program focus have emerged.

In an update posted on Friday at the DTN Editor’s Notebook Blog, DTN editor-in-chief Urban C. Lehner stated in part that, “Problem is, the divide between alternative agriculture and conventional agriculture has turned political. Conventional aggies are lambasting USDA for its ‘Know Your Farmer, Know Your Food’ program, which they see as pro-organic and anti-them — a perception USDA says is inaccurate. Conventional aggies also pan agricultural secretary Tom Vilsack’s emphasis on rural development, which they fear will vie for funding with farm payment programs.

“This zero-sum view is understandable, but it isn’t how I see the issue. I believe alternative and conventional agriculture can and should peacefully coexist. Vilsack apparently does, too. He supports organic and local, yes, but also biofuels and transgenic crops. He isn’t choosing sides; he’s for both.”

In addition, McClatchy writer David Goldstein reported on Friday that, “The Agriculture Department’s efforts reflect a growing movement toward healthier eating and fresh-from-the-farm cooking. It embraces more than just foodies who scour the farm stands for the perfect baby eggplant and devour issues of Bon Appetit.

Followers include everyone from public school officials who want to cut fats and sugar out of their cafeteria menus, to restaurateurs such as Jane Zieha, whose Blue Bird Bistro in Kansas City, Mo., has been serving farm-to-table food for a decade.”

“The local food movement has no bigger symbol than first lady Michelle Obama, who started a kitchen garden on the South Lawn of the White House and leads a campaign against childhood obesity.”

The article indicated that, “Three Republican senators have complained that a USDA effort to educate the public about where food comes from slights ‘conventional farmers who produce the vast majority of our nation’s food supply;’” and Friday’s article also quoted former Agriculture Secretary Clayton Yeutter: “If there’s to be more attention to smaller farms, [Yeutter] said, ‘How do you feed the immense number of people in the world, and the additional 3 billion likely to be here by 2050?’”

For his part, House Ag Committee Chairman Collin Peterson has made it clear that he is opposed to any kind of debate over farm size or production method. At the Alabama field hearing on May 15 [unofficial transcript] Chairman Peterson stated that, “I have been a big promoter of local foods. I had a conference in my district for the last five years promoting local foods, and I think it’s a good thing, because there’s a market and the people that get into it can make money, and that’s great, and I’m all for it. But I don’t like this idea of pitting one against the other. I don’t think it’s right and I don’t think it’s necessary. We need production agriculture and we need as much of it as we can get, and we’re going to have a heck of a time feeding not only this country, but the rest of the world going forward. So I’m for all kinds of farms.

“If you can make a living on 30 acres, God bless you, and people can do that. If it takes 5,000 acres, I’m for that. If it takes 20,000 acres, I’m for that. Whatever makes sense economically, works for the producer, I’m for it. We are not going to get into the business of deciding how big a farm should be because that’s way beyond our expertise. So I would just hope that we don’t get into any kind of conflict between organic and local and commercial agriculture because there’s no reason for it.”

Competition

DTN Ag Policy Editor Chris Clayton reported on Friday that, “Frustrated contract poultry growers on Friday laid out a long list of what they see as systemic problems with poultry vertical integrators to Obama administration officials as USDA and the Department of Justice continue examining competition challenges and fairness in agriculture.

“Attorney General Eric Holder and Agriculture Secretary Tom Vilsack jointly kicked off an all-day series of panels at Alabama A&M University examining the state of the poultry industry.

“Holder told the crowd of about 400 people that he wants to hear the stories of farmers and issues about business practices. He noted that the department has received more than 15,000 comments from farmers about competition practices in different industries.”

The DTN article noted that, “Christine Varney, assistant attorney general in charge of the Department of Justice Antitrust Division, acknowledged she doesn’t know much about the poultry industry, but she said the point of such meetings is to understand the history and how the market has evolved.

“‘We’re really here today to learn and to listen and to understand,’ Varney said.

USDA is in the final stages of rolling out new rules from the 2008 farm bill that should help poultry growers deal with issues such as companies giving some growers undue preferences over others.”

After documenting details of some farmer testimony at the hearing, Mr. Clayton pointed out that, “Dick Lobb of the National Chicken Council disputed the slant of the grower panel. He said there are roughly 30,000 poultry growers across the country. Based on a 2001 survey of those growers, about 75 percent were satisfied with their business relationships with packers at that time. So, overall, he said many of the complaints raised at the hearing may only reflect the feelings of 25 percent of the growers.

“‘I think it was kind of unbalanced,’ Lobb said. ‘The concerns that were raised have been mentioned before.’”

Biofuels

Late last week, researchers at the Food and Agricultural Policy Research Institute (FAPRI) released a report on biofuels called the “U.S. Biofuel Baseline Briefing Book.”

According to the FAPRI webpage, “This report is an addendum to the FAPRI U.S. Baseline Briefing book providing additional detail on biofuel and Renewable Identification Number (RIN) markets in the ten year baseline projections and biofuel credits and tariff expiration scenario released previously.”

Dan Piller reported on Friday at The Green Fields Blog (Des Moines Register) that, “An expected vote on the $1 per gallon biodiesel tax credit on Friday has been pushed by to Tuesday by House Speaker Nancy Pelosi.”

“The biodiesel industry has virtually shut down in Iowa and elsewhere because the tax credit lapsed on Jan. 1. Fuel blenders, uncertain whether or they would be reimbursed for mixing biodiesel with regular Number 2 diesel, have avoided using biodiesel and most plants have been forced to reduce their output to a minimum,” Mr. Piller said.

DTN writer Todd Neeley reported on Friday (link requires subscription) that, “Secretaries of agriculture in eight states have asked Congressional leaders to renew ethanol’s volumetric ethanol excise tax credit, or the 45-cent-per-gallon blenders’ credit, which is set to expire at the end of 2010.

In a letter to leaders in both the U.S. House of Representatives and the U.S. Senate, the ag secretaries said the tax credit was important to their states.”

Mr. Neeley added that, “The letter is signed by secretaries of agriculture Bill Northey of Iowa; Jon Farris of South Dakota; Robert J. Boggs of Ohio; Doug Goehring of North Dakota; Tom Jennings of Illinois; Jon Hagler of Missouri; Rod Nilsestuen of Wisconsin; and Greg Ibach of Nebraska.

“The ethanol industry is fighting to keep the credit in place, as many in the industry believe that without it they will not be profitable.

“That is what has happened to the U.S. biodiesel industry, which has virtually shut down after federal lawmakers let that industry’s $1 blenders’ tax credit expire at the end of 2009.”

Financial Regulation

Sewell Chan reported on Friday at The New York Times Online that, “Fresh off Senate approval of the overhaul of the nation’s financial regulations, the Obama administration quickly moved on Friday to shape the final version of the bill.

“In three areas, consumer protection, restricting banks from using their own money to make bets in the market, and dealing with failing institutions that threaten the financial system, administration officials suggested that they were inclined to favor provisions in the Senate version over those of the House bill, which was passed in December.”

The Times article explained that, “But the fate of a Senate provision that could require banks to spin off their lucrative derivatives trading desks is in fierce contention. The author of the provision, Senator Blanche Lincoln, Democrat of Arkansas, has so far fended off attempts to water it down, but financial institutions are preparing to lobby against it over the next several weeks. Treasury officials have privately expressed strong reservations about the provision.

“Senator Christopher J. Dodd, chairman of the Banking Committee, and Representative Barney Frank, chairman of the Financial Services Committee, who will shepherd the reconciliation process, said after meeting with President Obama at the White House that they were confident that a final bill could be delivered for his signature by Independence Day.”

Keith Good