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SRA; Climate Issues; Taxes; Biofuels; Nutrition; Farm Bill Issues; and Trade

Standard Reinsurance Agreement (SRA)

Bloomberg writer Alan Bjerga reported yesterday that, “The crop-insurance industry will be forced to consolidate by a U.S. government plan to spend $6 billion less on subsidizing farmer policies, according to the president of the insurers trade group.

All 16 companies that provide government-subsidized policies to protect farmers from natural disasters, including Wells Fargo & Co. and Ace Ltd., have agreed to the 20 percent cut in funding over 10 years, the U.S. Department of Agriculture said today.”

Yesterday’s article explained that, “The deal, which companies had to sign to continue to receive subsidies, will drive some companies out of business within two years, said Bob Parkerson, the head of National Crop Insurance Services.

“‘Our hands were definitely tied, and we were marched against the wall’ to sign the agreement, Parkerson said in a telephone interview from the group’s headquarters in Overland Park, Kansas.

“Under the USDA’s proposal announced June 10, payments for government-subsidized administrative costs would be capped at $1.3 billion next year, with the limit rising annually to $1.37 billion in 2015. Two-thirds of the cut will go toward federal- deficit reduction, with the remainder sent to government land- conservation programs, the USDA said.”

Mr. Bjerga added that, “The consent of crop insurers ‘lays the foundation for a more sustainable crop-insurance program, reduces the federal deficit, and improves the farm safety-net,’ Agriculture Secretary Tom Vilsack said in the USDA statement.”

To hear additional comments on this development from Sec. Vilsack, just click here.

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Under the new agreement, crop insurance companies will be paid $6 billion less over 10 years than they would have been paid under the previous agreement. The Obama administration initially proposed cutting their payments by $8 billion, but the administration lowered the cut to $6 billion. RMA officials said the cut was appropriate because higher commodity prices had triggered higher premiums and, in turn, higher payments to the companies to operate the program. The agreement affects the operating payments, not the premiums.

Vilsack has already announced USDA would put two-thirds of the savings, or $4 billion, toward deficit reduction and USDA has already applied those savings. The other third, or $2 billion, will be used to improve certain risk management programs and to increase the conservation budget.

“Meanwhile, a USDA spokesman responded to questions from 17 senators about whether USDA had the legal authority to include a provision that restricts the commissions that companies can pay crop insurance agents. ‘As a regulator of the crop insurance program, RMA has the authority to take steps to ensure the viability and integrity of the crop insurance delivery system,’ spokesman Justin De Jong stated in an email. The cap on commissions, DeJong stated, will ‘ensure that insurance companies have sufficient funds to pay the other operating expenses in years in which there may be little or no underwriting gain.’”

Climate Issues

Darren Samuelsohn reported yesterday at Politico that, “Senate Democratic leaders are set to roll the dice this month on a comprehensive energy and climate bill, including a cap on greenhouse gases from power plants, even though they don’t yet have the 60 votes needed to move the controversial plan.

“Senate Majority Leader Harry Reid (D-Nev.) confirmed Tuesday that he would gamble on the high-stakes legislation — much as he undertook health care and Wall Street reform — that for now remains in the rough-draft stage but that will soon be the subject of intense negotiations.

“‘Whatever I bring to the floor, I want to get 60 votes,’ Reid told POLITICO shortly after announcing his strategy for a full Senate debate as early as the week of July 26.”

The article explained that, “Reid confirmed the bill will have four parts: an oil spill response; a clean-energy and job-creation title based on work done in the Senate Energy and Natural Resources Committee; a tax package from the Senate Finance Committee; and a section that deals with greenhouse gas emissions from the electric utility industry.”

With respect to the Sen. Energy and Natural Resources Comm. related provisions, Darren Goode reported yesterday at The Hill’s Energy Blog that, “A draft climate bill from Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) circulating on the Hill Tuesday could solve some of the policy and political puzzle Democratic leaders have grappled with ahead of the Senate’s broader energy and climate debate.

The 50-page Bingaman draft echoes several key talking points Democratic leaders and centrists in both parties have been sounding off on lately on what it will take to get 60 votes for a combined carbon pricing and energy production strategy. Its wider public exposure comes as Senate Majority Leader Reid (D-Nev.) on Tuesday signaled that the full Senate will debate energy and climate policy starting the week of July 26.

It would reduce greenhouse gas emissions from the utility and potentially other industrial sectors by 17 percent by 2020 and 42 percent by 2030.”

The Hill item added that, “Bingaman spokesman Bill Wicker said the draft bill has gone through several iterations since the one written in April after talks on and off Capitol Hill, which he declined to detail. Bingaman also still has no plans yet to actually offer a plan, Wicker said.

“But it does fall in line with what some have said is necessary to attract enough centrists in the two parties.”

And Reuters writer Richard Cowan reported today that, “The U.S. Senate’s two biggest backers of climate change legislation have scaled back ambitions for a broad attack on greenhouse gases with a new draft bill focusing on cutting pollution from electric power utilities.

“Democratic Senator John Kerry and independent Senator Joseph Lieberman have crafted a 667-page draft bill, a copy of which was obtained by Reuters, that would impose new pollution controls on utilities starting in 2013 as a first step toward battling global warming.

“But it is unclear whether there will be enough votes in the deeply divided Senate for capping electric utility pollution, which makes up about a third of U.S. carbon emissions, and whether the senators’ plan will be attached to a broader energy and environmental bill to be debated in the Senate.”

Also yesterday, Ben Geman reported at The Hill’s Energy Blog that, “Sen. Dick Durbin (D-Ill.), the chamber’s number two Democrat, said plans to bring up energy legislation before the August recess are being ‘actively discussed’ but declined to offer a firm commitment.”

A news release from yesterday by the National Sustainable Agriculture Coalition stated that, “Today, the National Sustainable Agriculture Coalition joined 76 sustainable agriculture and environmental groups from around the nation on a letter delivered to Senate leaders, urging them to pass comprehensive climate change and energy legislation in this session of Congress.”

And a National Farmers Union news release from yesterday indicated that, “National Farmers Union (NFU) President Roger Johnson addressed members of the Western Association of State Departments of Agriculture (WASDA) today at a meeting in Whitefish, Mont.

Johnson led a discussion on climate and energy policy, noting the significant impacts climate has on agricultural production. Altered precipitation patterns, reduced marketable yields, increased crop damage risks, decreased productivity and increased disease and pestilence pressure are a few of the adverse effects that have already been noted and studied, prompting the need for a solution. Johnson also outlined the potential for agriculture to play a role in providing solutions for our nation’s climate and energy needs.

“‘NFU has long supported climate and energy legislation that is beneficial to agriculture,’ said Johnson. ‘Multiple studies have found significant financial gains for U.S. farmers and ranchers, confirming that there is definitely a place for agriculture to play a vital role in the solution to this growing problem.’”

In other energy related developments, a news release issued yesterdays by Sen. Tim Johnson, D-SD, stated that, “U.S. Senator Amy Klobuchar (D-MN) introduced legislation today with [Sen. Johnson] that focuses on developing and deploying safe, reliable domestically grown and produced energy. The Securing America’s Future with Energy and Sustainable Technologies Act (SAFEST) establishes strong renewable energy and energy efficiency standards, incentives for developing biofuels and biofuel infrastructure, and targets for the availability of advanced vehicle technologies.”

“The Klobuchar-Johnson legislation would develop American homegrown energy technologies by providing long-term incentives for the development of renewable fuels, renewable electricity, and increased energy efficiency.”

Taxes

Joseph Morton reported in today’s Omaha World-Herald that, “Nebraska and Iowa farmers, ranchers and small business owners could have a pile of new tax paperwork in their future.

They can thank Section 9006 of the health care bill, which greatly expands the types of business transactions covered by tax reporting requirements.”

The article noted that, “For example, businesses are to report to the Internal Revenue Service any time they purchase more than $600 worth of goods in a year from one vendor.

“‘This will be an administrative nightmare for small businesses to implement,’ said Mike McFarlin, an Omaha certified public accountant.”

Mr. Morton pointed out that, “The new requirements take effect in 2012, but lawmakers on Capitol Hill are already moving to soften them or eliminate them altogether.

“Sen. Mike Johanns, R-Neb., is pushing for a repeal of Section 9006 and made his case Tuesday during a speech on the Senate floor. The new requirements create a ‘perverse incentive for companies to consolidate suppliers,’ he said.

“‘Guess who loses in those circumstances?’ Johanns said. ‘Our small businesses lose; the same small businesses that we’re counting on to create the new jobs and lift us out of this recession.’

He has filed an amendment to repeal the provision and plans to offer stand-alone legislation to do the same thing this week. Nebraska’s three House members — Lee Terry, Jeff Fortenberry and Adrian Smith, all Republicans — are co-sponsors of a House bill that would repeal the new requirements.”

For additional information on this issue and the $600 threshold, see this brief overview from the Kansas Farm Management Association.

Biofuels

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Senate Majority Leader Harry Reid, D-Nev., has promised to once again bring up a bill that contains a renewal of the biodiesel tax credit, Sen. Amy Klobuchar, D-Minn., said Tuesday.

“The tax extenders bill that includes the biodiesel tax credit has failed several times because some senators have objected to the costs of spending provisions in the bill and refused to vote for it. But Klobuchar said in a speech to the American Soybean Association board that Reid will bring up the bill again after a successor to deceased Sen. Robert Byrd, D-W.Va., joins the Senate.”

Mr. Hagstrom added that, “Sen. Mike Johanns, R-Neb., told ASA members that he also believes the Senate will pass the tax extenders bill this year. Johanns said that there may be an attempt to add the biodiesel tax credit renewal to a climate change bill, but he said such a move would cause ‘heartburn’ in the Senate among both Republicans and Democrats who do not favor cap and trade legislation.”

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “Unless more ethanol is allowed to be added to conventional gasoline, prices for the corn product are likely to fall because of the saturated market, the Energy Department says.

“The department says that ethanol was blended into 9.2 percent of the total gasoline supply during April and that number could reach 10 percent in the first quarter of next year.”

Nutrition

A news release issued yesterday by Sen. Ag. Comm. Chairman Blanche Lincoln, D-Ark., stated that, “[Sen. Lincoln] and Congressman George Miller (D-Calif.), Chairman of the House Committee on Education and Labor today sent a letter to President Barack Obama urging him to make child nutrition reauthorization a top legislative priority before current programs expire on September 30 of this year.

“Lincoln delivered the letter to the President during a meeting at the White House where she was joined by other Senate leaders to discuss legislative priorities before the August recess. Lincoln’s ‘Healthy Hunger-Free Kids Act’ passed the Senate Agriculture Committee unanimously in March and now awaits consideration by the full Senate. The House Education and Labor Committee will hold a mark up on its version of child nutrition reauthorization legislation – the ‘Improving Nutrition for America’s Children Act’ – tomorrow, July 14.”

Jane Black reported in today’s Washington Post that, “Uncle Sam wants you to eat better. And frankly, he has a point. In 38 states, more than 25 percent of the adult population is obese. One in three American children is considered overweight or obese. Last year, obesity-related diseases cost the United States about $150 billion.

But change, the old saying goes, begins at home. And so the federal government is trying to soup up the food served to its workers, including the approximately 600,000 here in Washington. This spring, the General Services Administration rewrote the specs for its cafeteria contracts to encourage the use of healthful food and organic and locally sourced ingredients.”

Meanwhile, Ms. Black rated the USDA South Café, and indicated that it garnered a “Grade D.”

Farm Bill Issues

Emmeline Zhao reported yesterday at The Real Time Economics Blog (Wall Street Journal) that, “More — but smaller — farms across the country generated greater national net income in times of drastically less government support.

National net farm income in 2008 was $87.3 billion, up from $50.7 billion in 2000, the Census Bureau said last week. Net income was greatest in California, Iowa, Minnesota and Illinois.

“Meanwhile, government payments to farmers in 2008 totaled $12.2 billion, down about 50% from nearly $24.4 billion in 2005. The decrease in funding results from an approximately 90% drop in payments that depend on market prices, including countercyclical payments, according to data from the U.S. Department of Agriculture. Other payments — including those from disaster relief programs and peanut and tobacco buyout programs — decreased about 40%. Agricultural government payments were highest in 2005 in the 10 years between 1998 and 2008.”

Yesterday’s update added that, “The latest agriculture census data also reveals a greater number of farms in the U.S. — just over 2.2 million in 2007, up from more than 2.1 million in 2002 — and about a 52% increase in overall property value, but the average size of farms has fallen to 418 acres from 441 acres over the same period.

About 59.8% of farms sold less than $10,000 worth of agricultural products in 2007, and only 16.2% sold more than $100,000. That same year, agriculture was one of the largest contributors to GDP growth, alongside construction, professional and business services and real estate, rental and leasing, according to the U.S. Department of Commerce.”

Trade

Yeganeh June Torbati reported in today’s New York Times that, “Billy Bob Brown, a farmer in Panhandle, Tex., grows enthusiastic when he discusses his 2008 trip to Cuba, where he and three partners showed off Texas sausages, cakes and frozen desserts to Cuban tourism executives.

“Mr. Brown, who is on the board of directors of the Texas Farm Bureau, has fond memories of the Cubans’ industriousness and kindness toward his group, and of their interest in importing American products. ‘I’d look forward to going back as an opportunity to bring Texas agricultural goods back to Cuba,’ said Mr. Brown, 71, who grows wheat, corn, cotton and grain sorghum on his 3,000-acre farm.

“He could get that chance if a coalition of interests including the Texas Farm Bureau persuades Congress to lift some export restrictions to Cuba and remove a travel ban that has lasted decades. The House Agriculture Committee approved a bill to accomplish that last month, and the full House could vote on the bill before the end of the summer.”

The article noted that, “To a large extent, the success of the pro-export lobby — which includes the United States Chamber of Commerce, the National Farmers Union and state farm groups — will depend on its ability to reframe the debate over Cuba in terms of American national interest, rather than the stickier issues related to human rights concerns, opposition to Communism or the government of Raúl Castro.”

Andrew Stiles reported yesterday at The Hill Online that, “Free trade advocates are ramping up efforts to win support for deals negotiated by the George W. Bush administration that have been stalled for years.

The Emergency Committee for American Trade (ECAT) will hold a press conference on the Senate steps Wednesday to release a letter from ECAT Chairman Harold McGraw III urging the approval of free trade agreements with South Korea, Colombia and Panama.

“Sen. Chuck Grassley (R-Iowa) and Reps. Adam Smith (D-Wash.) and Dave Reichert (R-Wash.) are scheduled to attend, along with Ambassador Han Duk-soo of South Korea and Ambassador Carolina Blanco of Colombia.”

And Reuters writer Doug Palmer reported yesterday that, “The U.S. trade deficit widened unexpectedly in May, led by a big jump in imports from China that helped overpower the best month for U.S. exports since September 2008, a government report showed on Tuesday.

“The rise in imports shown by the Commerce Department report suggested domestic demand was holding up better than some had feared. But with more of that demand being sated by overseas products, the widening trade deficit is expected to weigh on U.S. gross domestic product.

Keith Good