FarmPolicy

December 22, 2014

Crop Insurance (SRA); Climate Issues; Food Prices (FAO Report); Biofuels; USDA; and Financial Regulation

Crop Insurance- USDA-SRA

Yesterday, the American Association of Crop Insurers issued a statement on the release of the final draft of the 2011 Standard Reinsurance Agreement (SRA); in part, the statement indicated that, “The draft of the 2011 Standard Reinsurance Agreement (SRA) as released by the Risk Management Agency (RMA) of USDA on Friday, June 10, is said to be the final version and, if implemented as is, it will be a serious blow to the continued effectiveness of the Federal crop insurance program. Despite repeated pleas from across the agriculture sector, this latest proposal from RMA would cut an additional $6 billion from the crop insurance program over the next 10 years. As a result, many farmers who depend on crop insurance to help manage the risks associated with their farming enterprises could suffer a loss of service as companies and agencies contract or consolidate.”

These additional $6 billion in cuts are being imposed by the Administration before the full implementation of the more than $6 billion in cuts imposed by the 2008 Farm Bill. Furthermore, this second $6 billion in cuts will be imposed in a period of time when RMA is implementing major administrative changes to the management of the program. The RMA should have completed these administrative changes and fully implemented the cuts mandated by the 2008 Farm Bill before placing additional financial and regulatory pressure on the delivery system. Instead, the Administration is abandoning caution and moving ahead with a second round of huge reductions in financial support and implementation of concepts not provided for review in the months and months of negotiations on the 2011 SRA.”

After additional analysis, the statement noted that, “Furthermore, we insist that the current pattern of using the crop insurance program as a bank to fund other programs, as demonstrated in the 2008 farm bill cuts of $6 billion or cutting an additional $6 billion by the Administration to cut the deficit and meet other USDA priorities cannot continue. If it does, it means the destruction of the primary risk protection program for commercial American farmers. This would be sad in light of the recent hearings for the 2012 farm bill, which have demonstrated nationwide dependence upon the program and the need to make it work well for all crops around the nation. It would be ironic indeed if our government were to destroy a successful crop insurance program at the very moment that other nations all over the world are trying to replicate it.

The continuation of the policies reflected in these massive cuts in the crop insurance program will have the end result of destabilizing the economy of rural America by destroying thousands of farms and jobs in rural America, while undermining the stable supply of low cost food for all of the nation’s consumers.”

Climate Issues- Pres. Obama

Scott Wilson and Anne E. Kornblut reported in today’s Washington Post that, “President Obama urged the nation Tuesday to rally behind legislation that would begin changing the way the country consumes and generates energy, saying the expanding oil spill in the Gulf of Mexico is ‘the most painful and powerful reminder yet that the time to embrace a clean energy future is now.’

“In his first Oval Office address, Obama compared the need to end the country’s ‘addiction to fossil fuels’ to its emergency preparations for World War II and the mission to the moon. Hours after the government sharply increased its estimate of how much oil is flowing into the gulf, the president warned that risks will continue to rise because ‘we’re running out of places to drill on land and in shallow water.’ He called for fast Senate action on an energy bill that has already passed the House.”

The Post article noted that, “Even before the president addressed a prime-time television audience, congressional Republican leaders warned him not to use what he described as ‘the worst environmental disaster America has ever faced’ to further his political agenda. But beyond the urgency of his appeal, his remarks were largely an 18-minute compilation of what he has said about the spill over the past several weeks.”

Jonathan Weisman reported in today’s Wall Street Journal that, “Mr. Obama faces substantial challenges in securing the resources from BP and realizing his energy agenda. Legal and corporate finance specialists are debating whether he has the authority to demand a restitution fund, whether BP can afford his demands and what company shareholders might require in return.

Republicans accused him of exploiting the crisis to promote an unwanted energy policy that, in prior proposals from the president, would cap the emission of greenhouse gases and force polluters to buy and trade emissions credits.

“‘The White House may view this oil spill as an opportunity to push its agenda in Washington, but Americans are more concerned about what it plans to do to solve the crisis at hand,’ said Senate Minority Leader Mitch McConnell (R, Ky.).”

House Ag Committee Ranking Member Frank Lucas (R-Ok.) noted in a statement from last night that, “I am disappointed, though not surprised, that President Obama is trying to use the Gulf oil spill crisis to push his disastrous cap and tax policy…Punishing those who live and work in rural America with a cap and tax policy that will result in lost jobs, higher energy costs and higher food prices does nothing to address the shortcomings of the administration’s response to this crisis.”

Darren Samuelsohn reported last night at Politico that, “President Barack Obama pleaded Tuesday night for Congress to pass comprehensive energy and climate legislation, but he may have put the dagger into his long-sought plans for a cap on greenhouse gas emissions by opening the door for alternatives.

“In the first Oval Office speech of his presidency, Obama connected the Gulf of Mexico oil spill to his longer-term vision to wean the country off of fossil fuels. Still, when he turned to the policies he’d like lawmakers to consider, the president stopped well short of calling for carbon caps of any kind.”

Mr. Samuelsohn added that, “He didn’t call on the Senate to adopt a similar cap-and-trade plan; instead, he gave primetime props to Senate proposals along the lines of a bill from Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) that sets up a nationwide renewable electricity standard and a more recent measure crafted by Sen. Richard Lugar (R-Ind.) that promotes energy efficiency in buildings and new cars and trucks.”

And Glenn Thrush indicated today at Politico that, “Missing from the speech was any specific commitment to a bill regulating carbon emissions, which many environmentalists and some Senate Democrats wanted. Nor did he articulate a strategy for jump-starting the moribund Kerry-Lieberman climate bill, an omission that earned him instant criticism on the left, including a roasting by MSNBC’s Keith Olbermann and Chris Matthews.”

Specifically in his speech, Pres. Obama stated that, “When I was a candidate for this office, I laid out a set of principles that would move our country towards energy independence. Last year, the House of Representatives acted on these principles by passing a strong and comprehensive energy and climate bill –- a bill that finally makes clean energy the profitable kind of energy for America’s businesses.

“Now, there are costs associated with this transition. And there are some who believe that we can’t afford those costs right now. I say we can’t afford not to change how we produce and use energy -– because the long-term costs to our economy, our national security, and our environment are far greater.

So I’m happy to look at other ideas and approaches from either party -– as long they seriously tackle our addiction to fossil fuels. Some have suggested raising efficiency standards in our buildings like we did in our cars and trucks. Some believe we should set standards to ensure that more of our electricity comes from wind and solar power. Others wonder why the energy industry only spends a fraction of what the high-tech industry does on research and development -– and want to rapidly boost our investments in such research and development.

All of these approaches have merit, and deserve a fair hearing in the months ahead. But the one approach I will not accept is inaction.”

Climate Issues- American Power Act, EPA Analysis

With respect to the Kerry-Lieberman climate bill, Darren Samuelsohn reported yesterday at Politico that, “Senate authors of a controversial climate change bill heralded EPA modeling results unveiled Tuesday as proof that their plan would have a limited pinch on Americans’ pocketbooks.

“Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) found many reasons to gloat after getting the 74-page study that showed the overall costs from their legislation’s major global warming provisions would cost an average household between $80 to $150 per year.”

The AP reported yesterday that, “Kerry and Lieberman hailed the 74-page analysis and said it bolstered their case that Obama should make an all-out push for a comprehensive bill that addresses climate change, rather than a more modest measure focused on the spill, as some lawmakers have advocated.

“‘The dimensions of the tragedy in the Gulf demand that the president and Congress act boldly to pass legislation that will place a price on carbon which is the only path to reduce our dependence on oil and also create desperately needed clean-energy jobs,’ Lieberman said.

“The climate bill’s cost is far outweighed by its benefits, Kerry and Lieberman said.”

Reuters writers Timothy Gardner and Richard Cowan reported yesterday that, “U.S. environmental regulators said on Tuesday the climate and energy bill in the Senate would only add slightly to average household costs, but the finding was not expected to boost chances for the legislation that would cap greenhouse gas emissions.”

The Reuters article noted that, “One analyst said the lack of a big change from last year’s estimate limited how much the new analysis will boost support for the long-delayed Senate bill.

“‘The bottom line is the EPA analysis was not much different than last year’s and the moderate result won’t do much to change the calculus in the Senate,’ said Divya Reddy, an analyst at the Eurasia Group in Washington. ‘Many lawmakers from coal and manufacturing states still have reservations.’”

Darren Goode reported yesterday at the NationalJournal Online that, “It is unclear whether EPA’s analysis will have much of an impact on breaking a logjam within the Senate Democratic caucus on what is the most viable scope for addressing climate and energy issues this year.”

Bloomberg Simon Lomax writer reported yesterday that, “Senate Democrats are scheduled to meet June 17 to discuss what should be added to next month’s energy legislation besides measures that respond to the immediate impacts of the Gulf oil spill, the result of an April 20 explosion aboard a rig leased by BP Plc.

The Democrats will consider plans to directly regulate carbon dioxide emissions, such as Kerry and Lieberman’s bill, and legislation that ramps up electricity production from pollution-free sources like wind farms and solar panels without imposing a limit on greenhouse gases, according to three congressional aides who asked not to be identified discussing the closed meeting.”

Michael O’Brien reported yesterday at The Hill’s Energy Blog that, “One of two sponsors of a Senate proposal to rein in climate change said he hoped the proposal would be brought to the floor, regardless of whether or not it has the votes.

“Sen. Joe Lieberman (I-Conn.), the co-author of the American Power Act alongside Sen. John Kerry (D-Mass.), encouraged Majority Leader Harry Reid (D-Nev.) to move forward with their legislation, regardless of whether it has the ostensible 60 votes needed to pass.”

Meanwhile, the Washington Insider section of DTN indicated yesterday (link requires subscription) that, “Following last week’s defeat of a resolution offered by Sen. Lisa Murkowski, R-Alaska, aimed at blocking the Environmental Protection Agency from regulating greenhouse gas emissions, a group of senators is promoting an alternative measure that would delay EPA’s regulation of emissions from power plants, factories and other stationary sources for two years.

“The proposal for the two-year delay is sponsored by Sen. Jay Rockefeller, D-W.Va., one of only six Democrats who voted in favor of the Murkowski resolution. The main effect of Rockefeller’s bill would be to allow EPA to regulate emissions from motor vehicles, but leave stationary sources unregulated, at least for a relatively short time.”

The DTN item added that, “There is no indication when the Rockefeller proposal will be brought to the floor for a vote, but the betting is that it will happen before the July 4 congressional recess.”

Climate Issues- Speaker Pelosi

Carolyn Lochhead reported yesterday at the San Francisco Chronicle’s Politics Blog that, “Here’s what the latest missive from the Speaker’s office recommends: ‘The Gulf Coast catastrophe underscores the need for comprehensive energy and climate reform to rein in Big Oil and reduce our reliance on dirty and foreign fuels.’

House Dems are peeved that the Senate has for a year failed to act on the climate change legislation they passed at great political effort.”

Climate Issues- Agriculture

An update posted yesterday at the Corn Commentary Blog stated that, “A new peer-reviewed study from Stanford University demonstrates how modern agriculture has slowed the pace of global warming. Given the incessant string of baseless criticism lobbed at agriculture over the past few years, it is refreshing to see a major university recognize the incredible role modern agriculture plays in feeding and sustaining our planet.”

Food Prices (FAO Report)

Financial Times writer Javier Blas reported yesterday that, “Food commodity prices will increase more than previously expected in the next decade because of rising energy prices and developing countries’ rapid growth, two leading organisations said on Tuesday, worsening the outlook for global food security.

“‘A return to higher global economic growth…together with continuing population gains, are expected to increase demand and trade and underpin prices,’ the United Nations’ Food and Agriculture Organisation and the Organisation for Economic Co-operation and Development said in their annual agricultural outlook.”

Yesterday’s FT article added that, “For the next 10 years the FAO and OECD forecast that significant food prices, with the exception of pork, would remain above the 1996-2007 average, in both nominal and real terms – adjusted for inflation. Although prices were unlikely to surge back to the record levels of early 2008, they warned that ‘if history is any guide, further episodes of strong price fluctuations…cannot be ruled out, nor can future short-lived crises’”.

The forecast of high prices is likely to exacerbate concerns about global food security. Since the food crisis, and the number of chronically hungry people surging above the 1bn mark last year, agriculture has drawn more attention from policymakers – particularly in the US. The OECD earlier this year organised its first ministerial meeting on agriculture for 12 years,” the FT article said.

Bloomberg news indicated yesterday that, “Global food production has to rise 70 percent by 2050 as the world population expands to 9.1 billion people from about 6.8 billion people now, the FAO has said. Farm-output growth remains on track to meet that goal, OECD and FAO said in today’s agricultural outlook for 2010-2019.”

The AP reported yesterday that, “The rising economies of Brazil, China, and India will see strong growth in their agricultural sectors in the next decade as output remains stagnant among big importers in Western Europe, international experts forecast Tuesday.

Russia and Ukraine will also make big gains while high prices, which had caused riots over the cost of staples like rice and bread in some developing countries in 2008, will likely ease somewhat, according to a report by the U.N. Food and Agriculture Organization and Organization for Economic Co-operation and Development.”

Biofuels

A news release from yesterday by the Renewable Fuels Association stated that, “The American Coalition for Ethanol (ACE), Growth Energy, the National Corn Growers Association (NCGA), and the Renewable Fuels Association (RFA) today countered the tired claims of the Environmental Working Group (EWG) that American ethanol is not a sound investment.

“Criticizing the tax incentive provided for the use of ethanol is a misleading exercise if proper context is not provided. A recent International Energy Agency report concluded the world spent $550 billion in subsidies for fossil fuels in 2008 alone. The approximately $4.5 billion spent to increase America’s use of domestically- produced ethanol in 2008 is a bargain by comparison.

“Equally misleading is a discussion of tax incentives without appropriately attributing increases in economic activity resulting from those incentives. In 2009 alone, U.S. ethanol production helped nearly 400,000 Americans keep their jobs or find a new one, added more than $15 billion to federal, state and local government tax revenues, and displaced more than 360 million barrels of imported oil.”

USDA- Nutrition

Eliza Gray reported in today’s Wall Street Journal that, “A federal nutrition panel wants to change the way Americans eat.

“The Dietary Guidelines Advisory Committee, composed of 13 nutrition experts, is charged with coming up with recommendations that will figure in the government’s planned update of the iconic food pyramid. Its findings: People should consume more vegetables and whole grains, and less fatty meats, salt and sugar. The report aims to tackle what is widely seen as a national epidemic of obesity.”

The Journal article added that, “The panel’s recommendations are to be considered when the Department of Agriculture and the Department of Health and Human Services develop new national dietary guidelines to be released this year. Congress mandates that the guidelines be revised every five years.

The guidelines in turn will form the basis of the USDA’s updated food pyramid, scheduled to be released in spring 2011. They also determine the nutrition standards for all federal nutrition programs, including the National School Lunch Program, which feeds more than 30 million children a day.”

USDA- Chicken Purchases

Reuters news reported yesterday that, “The U.S. Agriculture Department plans to buy as much as $14 million worth of dark meat chicken products to help producers facing a glut in stocks and decreasing prices, Agriculture Secretary Tom Vilsack said on Tuesday.

“The U.S. chicken industry lost its top export market for dark chicken meat in January when Russia blocked imports due to concerns about a routine chlorine wash used by U.S. processors.

“The idea to buy the chicken for U.S. food programs arose during discussions between the USDA and the National Chicken Council (NCC) about the Russia situation, the NCC said.”

USDA- Conservation

AP writer Steve Karnowski reported yesterday that, “Farmers in the Upper Mississippi River basin have made significant progress in reducing sediment, fertilizer and pesticide runoff but need to do more to cut pollution to acceptable levels, a major U.S. Department of Agriculture study says.

“Agriculture Secretary Tom Vilsack said Tuesday that the study establishes that good conservation practices do indeed work. It’s the first among several studies the USDA plans to release evaluating the effectiveness of conservation practices on major watersheds.”

The AP article added that, “The Upper Mississippi basin covers about 190,000 square miles, including large swaths of Minnesota, Wisconsin, Iowa, Illinois and Missouri, as well as smaller parts of South Dakota, Michigan and Indiana. It accounts for more than 40 percent of the U.S. corn harvest and more than a third of the U.S. soybean crop.

“‘This kind of study allows us to reaffirm to taxpayers that investment in conservation are wise and appropriate uses of their dollars,’ he said.”

The AP item noted that, “The report will be released Wednesday by the USDA Natural Resources Conservation Service.”

Financial Regulation

Reuters writer Charles Abbott reported yesterday that, “The Wall Street reform law being written by House and Senate negotiators will include some splitting off of swaps desks from banks, a key House negotiator told Reuters on Tuesday.

Collin Peterson, the House Agriculture Committee chairman and a lead House negotiator on the derivatives portion of the bill, had given little sign until now of his views about limits on bank activity in the $615 trillion swaps market. The limits look increasingly likely to become part of the final bill.

“Peterson said he sympathized with Senate Agriculture Committee Chairman Blanche Lincoln and her proposal to require banks to spin off lucrative swaps-dealing desks blamed for exacerbating the 2007-2009 financial crisis. Clarifications about the scope of those limits were floated on Monday.”

Keith Good

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