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Crop Insurance; Farm Bill; Ag – Rural Economy; Water Issues; Climate Issues; Biofuels; and USDA

Crop Insurance: Standard Reinsurance Agreement

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Crop insurers are upset that USDA officials are not yielding on contract negotiations that would reduce payments to insurers by $6 billion over 10 years, but the leader of a trade association for crop-insurance companies appears resigned to the fact payment cuts are coming.

“Bob Parkerson, president of the National Crop Insurance Services [NCIS], said USDA officials have informed insurers that the new standard reinsurance agreement is USDA’s final offer.

“‘I’m going to have to tell you at this point I believe this is the contract we are going to have to accept,’ Parkerson said, ‘or not accept, up to the individual company.’”

Mr. Clayton added that, “Companies and NCIS are still going through various elements of the contract proposal, which Parkerson said has several provisions that will place more demands on companies, such as new insurance products that require computer upgrades and training costs.

“‘This is going to take a pretty good amount of analysis to figure out what this is going to cost us,’ Parkerson said.

“Insurers will have to sign a contract with USDA to sell crop insurance in 2011. NCIS will meet with officials from USDA’s Risk Management Agency on Friday in Overland Park, Kan., to discuss the latest contract draft and the technical demands such as training, claims adjustment and verification that USDA expects from the companies. Parkerson said companies hope to talk with USDA officials about the overall cuts being proposed as well.”

Bloomberg writer Alan Bjerga reported yesterday that, “The president of the largest U.S. crop-insurance trade group said a government proposal to spend $6 billion less to subsidize farmer policies over 10 years ‘creates new financial risks’ and undermines the industry.

“‘Our concerns for the financial stability of this 30-year program were not adequately addressed’ by the U.S. Department of Agriculture plan unveiled last week, Bob Parkerson, the head of National Crop Insurance Services, an Overland Park, Kansas- based representative of more than 60 insurers, said in an e- mailed statement. The department, which subsidizes industry costs, is meeting with companies in Overland Park, Kansas, on June 18.”

Yesterday’s NCIS press release added that, “The [crop insurance] industry is still experiencing the $6.4 billion cuts that came out of the 2008 Farm Bill and will soon face nine months of no income as part of these cuts.

“‘Now we have to figure out how an additional $6 billion decrease will not seriously undermine the industry’s ability to effectively deliver this program,’ said Parkerson. ‘Unfortunately, USDA seems to have lost sight that this program is in place to provide a sound financial risk management tool for America’s farmers and ranchers.’

“Some of USDA’s proposed financial terms are far more complex than would appear from its side-by-side comparison released June 10th and will take some time to analyze.

The industry is also disappointed that USDA used a ‘final’ draft to introduce significant terms that did not appear in the first and second drafts, which apparently USDA plans to implement without full industry review and negotiation.”

Farm Bill: Nutrition

A news release issued yesterday by the National Farmers Union stated in part that, “National Farmers Union (NFU) President Roger Johnson made the following statement in response to the ‘Improving Nutrition for America’s Children Act of 2010’ unveiled last week by House Education and Labor Committee Chairman George Miller (D-Calif.):

“This draft legislation addresses some of the financial, structural and bureaucratic barriers schools face when providing children with nutritious, safe food by funding competitive grants for farm-to-school programs and school breakfast programs, establishing nutrition standards for foods sold outside of the cafeteria, providing year-round meals for children in low-income rural areas, using existing income data to directly certify children who qualify for free and reduced meals, and increasing the federal reimbursement rate for school meals.

“As congressional leaders continue to work to identify offsets for increases in child nutrition funding, I encourage them to retain all current farm safety net funding to ensure that America’s farmers can continue to provide our nation’s children with the safest, most abundant food supply in the world.”

Farm Bill: Dairy

A statement issued recently by the International Dairy Foods Association President and CEO, Connie Tipton, noted in part that, “On behalf of the members of the International Dairy Foods Association, I commend the board of directors of the National Milk Producers Federation for its commitment to long-term dairy policy change as outlined in its ‘Foundation for the Future‘ plan approved yesterday. Many of the elements of the plan are forward-looking and recognize the need to change existing dairy policies.”

The statement added that, “Unfortunately, not all of the elements of the plan are forward-looking. The plan’s Dairy Market Stabilization Program, which is intended to increase prices and limit growth, will have dire consequences for our industry and consumers. Supply management will decrease demand for dairy products and dairy ingredients, and will drive low-cost non-dairy substitutions in foods and restaurants across the country. Supply management will limit industry growth at a time when demand for U.S. dairy exports is growing, and we have a unique opportunity to innovate and expand to serve global markets.

“As an industry we are much more effective when we work together, and IDFA is pleased that there are many areas where we can work together with NMPF in this plan. We look forward to continued collaboration that will eliminate the programs that prevent our markets from working, provide a better safety net for producers and make sure everyone in the milk market has the risk management tools needed to manage price volatility.”

Farm Bill: Trade

Dow Jones writer Todd Martinez reported yesterday that, “U.S. officials are optimistic they can reach an agreement with Brazil’s government in a dispute over cotton subsidies by a June 22 deadline and avoid trade retaliation.

“‘Negotiations are going well, thanks to the good faith efforts demonstrated by both countries,’ said Thomas Shannon, the U.S. ambassador to Brazil, on the sidelines of a foreign policy conference in Sao Paulo.”

The article explained that, “The U.S. has already offered $147 million in assistance to Brazil’s cotton industry, a reduction in export loans for U.S. farm goods and recognition that beef from southern Brazil is free from foot-and-mouth disease.

Contacted by Dow Jones Newswires, a Brazilian Foreign Ministry spokesman declined comment on the cotton talks, saying only that negotiations were ‘ongoing.’

“Shannon emphasized that the dispute did not reflect any worsening of U.S.-Brazil ties, calling it ‘a complex intersection of international obligations and domestic realities.’”

Yesterday’s article pointed out that, “On Thursday, the Brazilian Senate stood its ground on the issue, approving a resolution enabling Brazil to renege on intellectual property agreements, pending the outcome of the negotiations. That cleared the way for the government to impose the $238 million in eventual patent and services penalties against the U.S.

Jon Hueneman, a former official in the U.S. Trade Representative’s Office, urged pragmatism by both countries, advising the U.S. to respect the WTO ruling and Brazil to understand political realities within the U.S. ‘Brazil will not get everything it wants on this issue and will forgo a valuable opportunity for a more constructive trade relationship [if it proceeds with retaliation],’ he said.

“The cotton dispute has emerged as a crucial episode that could shape the future of the U.S.-Brazil relationship, said Hueneman. ‘A solution would establish a working relationship and get [Brazil and the U.S.] on a better footing to overcome broader obstacles in trade negotiations, especially in agriculture,’ he said.”

Farm Bill: Conservation

An update posted yesterday at the National Sustainable Agriculture Coalition (NSAC) Online stated that, “NSAC has issued a new five page fact sheet on the Conservation Stewardship Program (CSP). The fact sheet reflects changes to the program made under the final rule issued on June 3, 2010 by USDA as well as other administrative changes affecting the current sign up now under way. Farmers and ranchers wanting to enroll in the Conservation Stewardship Program have until June 25th to file a simple application form with their local NRCS office.”

Ag – Rural Economy

John Perkins reported yesterday at Brownfield that, “As of Sunday, USDA reports 91% of the [soybean] crop is planted, up 7% from last week, 5% above last year and 1% ahead of the five year average. However, 7 of the 18 largest production states are at or behind average including Indiana, Iowa, Missouri and Nebraska.

Eighty percent of the crop has emerged, compared to 70% a year ago and the five year average of 79%. Seventy-three percent of the crop is in good to excellent condition, down 2% from last week.

Ninety-eight percent of the corn crop has emerged, compared to 94% a year ago and 97% on average. Seventy-seven percent of corn is in good to excellent shape, up 1% on the week.”

Meanwhile, University of Illinois Agricultural Economist Darrel Good indicated yesterday (“Record Corn and Soybean Yields are Barely Enough”) that, “The 2009 U.S. corn and soybean yields were record large, at 164.7 bushels and 44 bushels, respectively. Harvested acreage of corn for grain was 1.02 million more than harvested in 2008, although well below the record acreage of 2007. Harvested acreage of soybeans was a record 76.37 million, 1.7 million more than harvested in 2008.

As a result of record yields and large acreage, production of both crops was record large in 2009. Corn production was estimated at 13.11 billion bushels, 72 million larger than the previous record of 2007. Soybean production was at 3.359 billion bushels, 162 million above the previous record of 2006.

Based on the USDA’s forecasts released on June 10, consumption of U.S. corn during the current marketing year will exceed production in 2009. Consumption for all purposes is projected at 13.19 billion bushels, 1.134 billion above consumption of a year ago and 453 million above the previous record of 2007-08. The year-over-year increase in consumption is led by an expected 873 million bushel increase in the amount of corn used for ethanol production. Year ending stocks are projected at 1.603 billion bushels, 70 million smaller than stocks at the beginning of the year.”

After additional detailed analysis of corn and soybean indicators, yesterday’s update noted that, “The bottom line is that another record U.S. corn crop will be required in 2010 to accommodate growing consumption. There may be a little more breathing room for soybeans, but a rain delayed end to planting in the Midwest and hot, dry conditions in the Delta are of concern.”

An update posted recently at the Federal Reserve Bank of Kansas City Online (“Rural America’s Fiscal Challenge,” by Alison Felix and Jason Henderson) indicated that, “Fiscal challenges at state and local governments are a potential threat to the economic recovery in rural America. Rural communities depend heavily on intergovernmental transfers from the states to provide local services. Many people in rural communities rely on the state or local government for their jobs and on Medicaid as a part of their income. Thus, rural economies are highly susceptible to state budget shortfalls. As state governments cut spending in response to looming budget deficits in coming years, rural America’s fiscal problems may also deepen.”

The KC Fed update also noted that, “Over the next few years, rural governments may be forced to make changes in service delivery in response to fiscal pressures. Rural government authorities can choose to raise revenues, cut services, or improve efficiency of service delivery through consolidation, cooperation, or privatization. These decisions will be difficult. Tough times present tough choices, but carefully crafted solutions may not only alleviate current fiscal strains but also create a more efficient service delivery system for rural America.”

Water Issues

A press release issued yesterday by Rep. Earl Pomeroy (D-ND) stated that, “Congressman Earl Pomeroy and Senators Kent Conrad and Byron Dorgan today announced that the White House is forming an interagency working group to tackle both the short-term and long-term challenges posed by the rising waters of Devils Lake.

“‘The communities around Devils Lake face an urgent threat. We need immediate action to begin moving water off Devils Lake now. We need everybody on board and working together. We now have engagement at the highest levels of the White House working to get relief for Devils Lake,’ the delegation said in a joint statement.”

The AP reported yesterday that, “Late-season storms that provided a robust snowpack and improved pumping conditions have prompted the federal government to increase water supplies to San Joaquin Valley farmers.

“U.S. Interior Secretary Ken Salazar announced Monday that the Bureau of Reclamation would boost water deliveries to its agricultural water contractors south of the Sacramento-San Joaquin Delta.

Contractors will receive 45 percent of their requested allotment, up from the 40 percent they were scheduled to receive last month.”

Kristen Daum reported in today’s Inforum Online (North Dakota) that, “Minnesota Rep. Collin Peterson wants a provision in the next federal farm bill that would set aside $50 million a year to fund retention projects in the Red River Valley.

“‘If we can get this done – and I don’t see any reason why we can’t – it would give us the money we need to get the retention in place by the time the diversion gets built,’ said Peterson, a Democrat who represents Minnesota’s 7th District, which includes Clay County.”

Climate Issues

Mike Allen reported yesterday at Politico that, “President Barack Obama and his Democratic allies plan a major new push for a broad global warming bill, fueled in part by public outrage over the BP disaster, according to top aides.

“Joel Benenson, a pollster for the Democratic National Committee and Obama’s presidential campaign, argues in a new briefing for top Capitol Hill officials that a comprehensive energy bill ‘could give Democrats a potent weapon to wield against Republicans in the fall.’”

Mr. Allen added that, “Obama plans to include a call for an energy bill in his Oval Office address about the Gulf on Tuesday night. And the Obama administration has told key senators that ‘an energy deal must include some serious effort to price carbon as a way to slow climate change,’ according to a Senate Democratic leadership aide.

“‘No traditional ‘energy only’ bill [without climate-change provisions] meets their sense of what’s credible as a response to BP, or the president’s own 2008 rhetoric,’ the aide said.”

Ben Geman reported yesterday at The Hill’s Energy Blog that, “Senate Majority Leader Harry Reid’s (D-Nev.) pledge to bring energy legislation to the floor this summer is intensifying political jockeying among senators for their favorite plans — and spurring a furious push by climate advocates to keep carbon limits in play.”

Mr. Geman explained that, “The Gulf of Mexico oil spill has given energy legislation a prized spot on the crowded election-year agenda. Reid has tasked several committee chairmen with crafting provisions in coming weeks on industry liability, drilling safety and other matters that will be folded into a broader energy package.

But huge questions remain about what will or won’t make the cut.”

The Hill update added that, “Other members are preparing new energy plans, too. Sources on and off Capitol Hill say Sen. Amy Klobuchar (D-Minn.) is readying legislation on renewable electricity and biofuels.”

Meanwhile, the Washington Insider section of DTN noted in part yesterday (link requires subscription) that, “Late on Thursday, Majority Leader Harry Reid, D-Nev., met with senators — including the six chairmen with jurisdiction over climate change and energy legislation — to try to find a strategy to move legislation next month that would meet the president’s objectives. Additional talks on the topic are scheduled to continue this week when Reid plans to caucus with Democrats on how accomplish this goal.

Thus, the climate change fight in Congress appears to be far from dead as the national political mood swings against high-risk energy production and in favor of greater supports for environmental protection. The economic argument against carbon taxes of any kind is still very powerful, but the growing concern about environmental damage from off-shore drilling is a new political force, very hard to evaluate.

“Sen. Dick Durbin, D-Ill., told the press after Thursday’s vote that ‘the Senate is likely to consider legislation much different than the House’ cap-and-trade bill and that the energy bill being prepared for consideration now will ‘deal with energy and clean-energy jobs.’ In his comments, Reid observed that the new energy legislation, ‘won’t be branded as ‘cap-and-trade.’ We don’t use the words cap-and-trade; that’s something that’s been deleted from my dictionary. Carbon pricing is something we’re talking about,’ he said.”

A news release issued yesterday by Sen. James Inhofe (R-OK) stated that, “[Sen. Inhofe], Ranking Member of the Senate Committee on Environment and Public Works, today delivered a Senate floor speech urging President Obama to focus on addressing the largest environmental disaster in U.S. history instead of pursuing his cap-and-trade agenda.”

Amy Harder reported yesterday at NationalJournal Online that, “The EPA today delivered its economic analysis of the climate and energy legislation sponsored by Sens. John Kerry, D-Mass., and Joe Lieberman, I/D-Conn., to the two senators, an agency official said.

A Lieberman spokesman said the senators plan to hold a press conference Tuesday to release the analysis to the public. When they do, EPA will post the analysis online at this website.”

And Darren Samuelsohn reported yesterday at Politico that, “Senate Majority Leader Harry Reid (D-Nev.) has scheduled floor time next month for ‘comprehensive clean energy’ legislation — even though he doesn’t know where the votes are for the various proposals floating around the Senate.”

But several key Senate Democrats fear the politics of the climate issue, and they’re urging Reid to stay clear of the debate — at least until he’s sure he can win.”

The article added that, “Agriculture Committee Chairwoman Blanche Lincoln, facing a tough reelection fight in Arkansas, said that there’s no need to hold a floor debate on any cap-and-trade proposal — even as an amendment to a Sen. Jeff Bingaman-sponsored bill that was approved last June.”

Also yesterday, an update posted at the National Corn Growers Association (NCGA) Online by the organization’s president, Darrin Ihnen, stated that, “The [NCGA] was singled out for praise last month by a business writer for Slate.com, a prominent online journal, for not taking advantage of the oil disaster in the Gulf of Mexico to promote ethanol.”

“While the writer mentioned above gave us ‘props’ for not taking advantage of this, another writer for Slate on Thursday said that talking about ethanol in this particular crisis was the ‘most disgusting aspect of the blowout.’”

Yesterday’s update added that, “We will never say that expanding ethanol will do away with the need for oil, but if we can reduce the need for more oil, then it’s a good thing.”


In related news regarding biofuels, a news release issued today by the Environmental Working Group stated that, “Between 2005 and 2009, U.S. taxpayers spent a whopping $17 billion to subsidize corn ethanol blends in gasoline. What did they get in return? A reduction in overall oil consumption equal to an unimpressive 1.1 mile-per-gallon increase in fleet-wide fuel economy. Worse, ethanol’s much ballyhooed contribution to reducing America’s dependence on imported oil looks even smaller – the equivalent to a measly six tenths of a mile per gallon fleet-wide.

“That’s the conclusion of Driving Under the Influence: Corn-Ethanol and Energy Security, a new report from the Environmental Working Group (EWG) that exposes the truth about the wildly exaggerated claims being made about ethanol’s contribution to America’s security and energy independence.

“‘Sadly, the degree of energy independence derived from the American taxpayer’s massive investment in corn ethanol could have been accomplished for free by proper tire inflation and using the right grade of motor oil, driving sensibly, or better enforcement of speed limits,’ said Craig Cox, EWG senior vice-president and co-author of the report. Cox manages EWG’s agriculture programs from the organization’s Ames, Iowa office.”


A news release from USDA yesterday stated that, “Agriculture Secretary Tom Vilsack announced that the Farm Service Agency (FSA) will hold a public meeting in Washington later this month to kick off its effort to improve customer service through the use of updated technology. The project, known as ‘Modernize and Innovate the Delivery of Agricultural Systems’ (MIDAS) is an effort to update the farm program delivery system and provide better service to farmers and ranchers through Web-based technologies.”

Keith Good