FarmPolicy

August 17, 2019

Farm Bill Issues; Competition; Climate Issues; Biofuels; Trade; and Financial Regulation

Farm Bill Issues

Bloomberg writer Alan Bjerga reported yesterday that, “Growers of corn, cotton and other crops may have to accept reduced subsidies in the next farm bill as budget-cutting becomes necessary to contain record deficits, House Agriculture Committee Chairman Collin Peterson said.

“‘We’re not going to have any new money; we’ll probably have less money,’ the Minnesota Democrat said today at a hearing in Washington of the House Agriculture subcommittee that oversees commodity programs. ‘We’re going to have to make it work,’ he said.

“The hearing was called to solicit opinion from farmers on U.S. agriculture policy as Congress begins to craft legislation to replace the current farm bill. That measure, passed in 2008, authorized $289 billion over five years for all Department of Agriculture programs, including food stamps for the poor and farm subsidies.”

(FarmPolicy.com Note: To listen to Chairman Peterson’s comments from yesterday in their entirety, just click here (MP3-3:34)).

Mr. Bjerga explained that, “At today’s hearing, Illinois Farm Bureau President Philip Nelson said the structure of the 2008 bill should be maintained even if overall funding is reduced.

“‘We do understand the constraints of this farm bill, but we have real concerns when we start shifting resources from one area to another,’ said Nelson, speaking on behalf of the American Farm Bureau Federation, the largest U.S. farmer group.

“Some adjustments may be necessary, said Gary Murphy, the board chairman of the Houston-based US Rice Producers Association. ‘Rice farmers are certainly not seeing any windfalls’ from farm programs, said Murphy, who grows about 7,000 acres of rice, cotton, corn and soybeans in Missouri. ‘Neither are our brethren who produce other crops.’”

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “The fixed annual payments that grain, soybean and cotton farmers have been getting since 1996 are surfacing as a major issue facing lawmakers as they move toward writing the next farm bill. The payments [related graph], which total about $5 billion a year, including $500 million sent to Iowa, offer one of the only significant pots of cash that lawmakers could tap into if they’re going to overhaul commodity programs without any new source of money, which is highly unlikely given the budget deficit. The payments date back to the 1996 Freedom to Farm law, which was supposed to wean farmers off of government support by providing declining amounts of direct payments that would eventually end, which never happened.

“Craig Lang, the president of the Iowa Farm Bureau Federation, told me in May that the payments are hard to defend. Today, a representative of the National Farmers Union echoed that concern in testimony to the House Agriculture Committee. Kent Peppler said the payments are particularly hard to defend in years when commodity prices are relatively high. Rob Joslin, an Ohio farmer who is president of the American Soybean Association, said the money winds up in the pockets of landowners because the payments are factored into land rents.”

Mr. Brasher added that, “However, groups such as the National Cotton Council and the National Association of Wheat Growers signaled strong support for the payments. Minnesota farmer Erik Younggren said the payments provide a ‘reliable cash flow tool’ that enables farmers to obtain operating loans.

The National Corn Growers Association was silent on the issue in its prepared testimony.”

In an article regarding the Average Crop Revenue Election (ACRE) program, DTN Executive Editor Marcia Zarley Taylor reported yesterday at the DTN Minding Ag’s Business Blog that, “Low signup for the Average Crop Revenue Election program–ACRE for short–has disappointed policymakers: Only about 129,000 farms enrolled in the program after the first two signups, while 1.54 million stuck with traditional countercyclical programs. Yet by most economic analysis, ACRE offers soybean, corn, wheat and sorghum growers better financial protection in periods of low prices than the standard loan rate program would. In fact, USDA expects to pay out $300 million to wheat growers and $65 million for 2009 crops this October, while traditional farm programs paid nothing but direct payments. What gives?”

The DTN item pointed out that, “Last week DTN polled more than 500 corn farmers who had not enrolled in ACRE on any of the land they farmed, and the results explain some of the holdouts:

“Some 28 percent don’t understand the program themselves or find it too hard to explain to landlords;

“Another 17 percent don’t want to give up direct payments or partial use of the loan program;

“State yield triggers don’t seem to correlate well with county data for 16 percent of growers;

Too much paperwork was cited by 10 percent of non-enrollees;

“Finally, 25 percent didn’t think ACRE was likely to trigger a payment, given what a grower knew at signup.”

In related news, an update posted yesterday at the Illinois Farm Bureau Online reported that, “Even a new, improved ACRE can’t replace current producer crop insurance protections, former USDA chief economist Keith Collins told FarmWeek.

“National Crop Insurance Services (NCIS) President Bob Parkerson noted speculation cutbacks in federal crop insurance spending may be directed in part at promoting revenue-based farm payments as an eventual substitute for private insurance. ‘There is some major concern,’ he said.”

Yesterday’s item stated that, “One focus of early 2012 farm bill discussions is possible retooling of ACRE (the average crop revenue election program) to provide greater individual protection. ACRE guarantees are based on national prices and state yields; lawmakers are eyeing proposals to move to county yields.”

The economist insists ACRE and crop insurance are ‘fundamentally different’ options.

“‘Can ACRE substitute for crop insurance?’ Collins posed. ‘Can a ‘free’ farm program substitute for a risk management program a farmer has skin in the game with and pays for? The philosophy of turning crop insurance into a farm program is something Congress really needs to think about.

“‘A second issue is, how do you pay for this? The ACRE program doesn’t cost too much, because nobody participates in it. You have 8 percent and 13 percent (respectively) of the farmers and the acres in the program. If you were to scale that up and make it appealing nationwide, so there’d be heavy participation, there would be a substantial cost.’”

The Illinois Farm Bureau news item added that, “Lawmakers also have floated the idea of developing ACRE into more of a whole-farm program, covering a variety of enterprises. Embracing currently non-ACRE-guaranteed crops under the program rather than through expanded insurance policies would further boost federal costs, Collins said.

Even if Congress incorporated a county-based yield trigger into ACRE, he argued the program would remain of questionable value to growers whose yields on average are ‘not highly correlated’ with their county yields.”

Crop Insurance, the Standard Reinsurance Agreement (SRA) and budget related concerns were key topics of discussion at yesterday’s House Subcommittee hearing.

To listen to some remarks on crop insurance and the SRA from Subcommittee Chairman Leonard Boswell, D-Iowa, just click here (MP3-1:49).

Subcommittee Ranking Member Jerry Moran, R-Kansas, followed up the comments from Chairman Boswell and developed the crop insurance issue and the latest SRA proposal further by highlighting related Farm Bill baseline issues.

To listen to comments on these issues from Rep. Moran yesterday, as well as additional remarks from Chairman Boswell, just click here (MP3-6:38).

Rep. Jim Marshall, D-Georgia, also asked panel participants yesterday more generally about crop insurance and the overall safety net; to listen to this discussion, just click here (MP3-6:33).

Also yesterday, the WTO Brazil Cotton Case was touched upon in both testimony from Eddie Smith, Chairman, National Cotton Council, and in a question from Rep. Larry Kissell, D-NC. To listen to related audio on this issue from yesterday, click here (MP3-1:53).

Meanwhile, a recent article by Mikkel Pates noted that, “Rep. Collin Peterson, D-Minn., says he’s in favor of shifting current direct farm payment funding into an expanded crop insurance plan, and then getting rid of payment limitations in the 2012 farm bill.

“The Minnesota Democrat told attendees of a National Farm Business Management Conference June 14 in Fargo, N.D., that he needed their help in more big policy shifts for the new farm bill. He talked about the need to make sure the safety net for agriculture should ‘fall on production,’ rather than trying to pick winners or losers on the basis of farm size.

“Peterson, chairman of the House Agriculture Committee, earlier had discussed the possibility of getting rid of payment limitations in remarks to local media at a Texas hearing in May. There was little reaction back home, even though some organizations, particularly the state and national Farmers Union, have favored ‘targeting’ payments to smaller, ‘family farmers.’”

In other policy related news, the AP reported today that, “Craig Chancellor tried everything he could, but last November he finally closed the Turkey General Store, leaving the small Texas Panhandle town without a grocery.

Researchers said Chancellor’s story is being repeated across the country as rural stores struggle to survive amid competition from distant supercenters and relatively high operating costs. The grocery industry and government don’t keep statistics on rural store closures, but experts said a long-running trend seems to be picking up speed. A survey by Kansas State University backed up that belief, finding that more than 38 percent of the 213 groceries in Kansas towns of less than 2,500 closed between 2006 and 2009.

“It isn’t just a store that goes when groceries close, said David Proctor, who studies rural communities at Kansas State. Such closures rob towns of their vitality, with the loss of gathering places and sales tax revenue to fund local governments.”

Competition

The AP reported yesterday that, “Dairy farmers frustrated with ever-eroding profit margins and possible antitrust violations in the industry will get a chance Friday to voice their concerns to federal regulators in ‘America’s Dairyland.

“U.S. Agriculture Secretary Tom Vilsack and Assistant Attorney General Christine Varney, the department’s chief antitrust investigator, were scheduled to host the roundtable discussion in Madison, Wis., a state where dairy is a $26 billion a year industry.”

The article added that, “Dairy farmers, other elected officials, experts in the field, lobbyists and others were scheduled to participate in the hearing that could help determine how the Obama administration redraws its antitrust policy.

“The hearing is the third of five planned by the departments of Justice and Agriculture. Previous ones focused on crops, hogs and poultry.”

Climate Issues

Coral Davenport and Darren Samuelsohn reported yesterday at Politico that, “Senate Majority Leader Harry Reid (D-Nev.) is planning a high-risk, high-stakes strategy for bringing climate and energy legislation to the floor ahead of the August recess.

The gamble: yoking a bipartisan, fast-track measure to overhaul offshore drilling rules with a broad, contentious bill capping greenhouse gas emissions that otherwise would have almost no chance of passage on its own.

“Reid’s own Democrats are mixed on the strategy for notching 60 votes. Some argue that public perception of fossil fuels in the wake of the BP oil spill will sway enough of the party’s swing votes and open Republicans to attack if they oppose the measure as their reelection campaigns head into the homestretch.”

The Politico article added that, “Reid on Thursday offered broad-brush details of his legislative plans in remarks to reporters after an hourlong closed-door meeting with all 59 members of the Democratic Caucus. Senate sources said about 20 senators in the room spoke in favor of carbon limits. Reid afterward called the meeting ‘inspirational’ and signaled he had no plans to sidestep the controversial concept.”

The article said that, “Reid plans to build the floor package around a bill fast-tracked for approval next week in the Energy and Natural Resources Committee that would impose new safety and environmental rules and increase oversight of oil companies doing offshore exploration. Sens. Jeff Bingaman (D-N.M.) and Lisa Murkowski (R-Alaska), chairman and ranking member on the committee, respectively, introduced the legislation together on Monday, with plans to amend it next week with more oil spill ideas from Sens. [Robert] Menendez [D-NJ], Mark Udall (D-Colo.) and Scott Brown (R-Mass.). Interior Secretary Ken Salazar testified at a hearing Thursday that the underlying package was ‘a very good bill.’”

And Ben Geman reported yesterday at The Hill Online that, “Senate Democrats emerged from a caucus meeting on energy Thursday with major questions about the shape of their legislation unanswered.

“While Democrats offered the political message that they’re ready to move ahead with an energy bill, they spoke only in broad strokes and slogans about their plans days before a pivotal White House meeting next week between President Barack Obama and a bipartisan group of senators.”

Mr. Geman indicated that, “Some pieces of the bill are taking shape. Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) plans to mark up legislation next week to overhaul federal offshore drilling oversight in the wake of the Deepwater Horizon disaster.

But a key question — which the lawmakers did not address head-on after the meeting — is whether the bill will include measures that impose caps on greenhouse gas emissions from power plants and other sources.”

Washington Post writer David A. Fahrenthold reported yesterday at the Post Carbon Blog that, “While Sen. John F. Kerry (D-Mass.) and Sen. Joseph I. Lieberman (I-Conn.) struggle to build momentum for their climate and energy bill, two Republican senators on Thursday said they have offered an alternative focused on natural gas and nuclear power.

“The bill likely faces an uphill battle for Democratic votes. Sens. Saxby Chambliss (R-Ga.) and Richard Burr (R-N.C.) said they had already sought out reaction from the nuclear industry, but had not begun trying to build support from other Senators.”

The update added that, “Chambliss and Burr [noted that] their bill chucks the idea of a cap-and-trade system to regulate greenhouse-gas emissions. ‘We believe a bill that has climate as part of it probably doesn’t move in the United States Senate,’ Burr said.

“Instead, they said they want to reduce dependence on imported oil by giving truck manufacturers tax incentives to produce 18-wheelers that burn natural gas. If manufacturers switch over, the senators said, that would induce investments in the infrastructure needed to deliver natural gas to fueling stations around the country.”

Biofuels

Erica Gies reported yesterday at The New York Times Online that, “There has been hot debate about whether carbon emissions from ethanol production and use are lower than those from oil and whether the 33 percent of the U.S. corn crop diverted to ethanol drives up the price of food. Local effects of ethanol production, however, including water pollution and consumption, have received less scrutiny.”

The article noted that, “Still, corn farming is the biggest source of pollution associated with ethanol production. Corn requires vastly more fertilizer and pesticides than soybeans or other potential biofuel feedstocks, such as perennial grasses, according to a 2007 report from the National Academy of Sciences. ‘Per unit of energy gained, biodiesel from soy requires just 2 percent of the nitrogen and 8 percent of the phosphorous needed for corn ethanol,’ and the differentials in pesticide use are similar, the report said.”

Trade

A news release by USDA yesterday stated that, “Today United States Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack welcomed the announcement that the United States and Russia have reached an agreement to permit the resumption of U.S. poultry exports to Russia.

“Once the Agreement is signed, U.S. producers will be able to resume shipments of poultry to Russia. Under the agreement, the United States will publish information on USDA’s website about which disinfectants/pathogen reductions treatments are known to be approved by Russia for use on processing poultry and on food generally. The United States will provide information to Russia on the solutions that companies use on poultry shipped to Russia. In addition, the United States will give Russia an updated list of poultry processing facilities authorized to ship poultry to Russia.”

Financial Regulation

Jeremy Herb reported earlier this week at the Minneapolis Star Tribune that, “[Rep. Collin] Peterson, chairman of the House Agriculture Committee, has become an improbable broker deciding the fate of the most contentious aspects of the financial overhaul bill.

“In an election year when he may be attacked for selling farmers short, Peterson is the point person in the House on provisions in the bill important to Minnesota farmers and agriculture companies.

“Those provisions deal with derivatives, financial instruments that can reduce risk in trading crops and conducting business from Wall Street to Hollywood.”

The article stated that, “An amendment by Sen. Blanche Lincoln, D-Ark., which would force banks to spin off some lucrative derivative business, has become the biggest source of disagreement between the House and Senate.

“But for Peterson, the proposed legislation’s impact on farming is more important than how it rewrites the rules for Wall Street bankers. He wants to exempt farmers and businesses such as Minnetonka-based food commodity broker Cargill Inc. from any stringent regulations imposed on Wall Street. Farmers and farm-related companies could then continue using derivatives as a hedge against swings in crop prices.

“If Peterson is successful, it will give him a trophy for the agriculture community in his northwestern Minnesota district. Winning strong farming provisions in a high-profile bill can also help him atone for ultimately supporting the climate change bill last year that agriculture strongly opposed.”

Brady Dennis
reported in today’s Washington Post that, “Lawmakers pressed deep into the night Thursday, trying to solidify a series of political deals in an effort to get a bill that would overhaul the nation’s financial regulation to President Obama by July 4.”

But the most divisive topic remained a proposal by Sen. Blanche Lincoln (D-Ark.) that would force big banks to spin off their derivatives-dealing businesses. Her measure has been a thorny issue for Democrats for months.

“Lincoln has stayed firm, saying that her provision is essential for protecting the financial system and preventing taxpayers from having to bail out banks again. Many liberals support the amendment, but it is opposed by the Obama administration and some regulators, as well as by an influential bloc of moderate Democrats and House Democrats from New York, where much of the derivatives industry is concentrated.”

The Post article said that, “As the session continued into the early hours of Friday, over 15 hours after it began, no definitive compromise had emerged.”

Keith Good

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