October 16, 2018

Farm Bill; Biofuels; Animal Agriculture; and Taxes

Categories: Ethanol /Farm Bill

Farm Bill: Related Developments and Overview

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Agriculture Undersecretary for Farm and Foreign Agriculture Services Jim Miller on Tuesday joined the call of House Agriculture Committee Chairman Collin Peterson, D-Minn., for a simplification of farm programs.

“In a speech to the American Soybean Association board, Miller said, ‘We may have gotten to the point that the programs are so complex we don’t get the benefits we want.’ Peterson has said that adding farm program on top of farm program over the years has made the system too complicated.”

Mr. Hagstrom added that, “Only 131,000 producers farming 34 million acres have signed up for the new Average Crop Revenue Election program known as ACRE, Miller noted. Many producers and landowners have resisted the ACRE program because it requires farmers to give up their traditional farm program benefits and sign up for the new program for the life of the 2008 farm bill. He also noted that commodity prices have been high enough that USDA does not expect to make significant ACRE payments based on the 2009 crops, while the situation for 2010 is unclear. Miller said ACRE does not seem to work in all parts of the country. ‘Is ACRE appropriate for all parts of the country? Should it be?’ Miller asked.

“The new permanent disaster program, Supplemental Revenue Assistance Payments, known as SURE, he noted, makes payments late and does not seem to work in some parts of the country. But he also noted there may be value in a permanent disaster program because passing weather-related disaster programs on an ad-hoc basis will continue to be difficult in the current fiscal environment. The last farm disaster bill took three years to pass, and after that payments were delayed.

Meanwhile, a recent Congressional Research Service report (“Farm Safety Net Programs: Issues for the Next Farm Bill,” July 9, 2010) explained that, “Historically, federal programs have primarily benefitted farmers (and landowners) of the major crops, such as wheat, corn, cotton, and sugar, with policy constructed over many decades by modifying or adding programs. As a result, programs sometimes overlap or work at cross purposes, generating criticism that they are not well integrated, cost too much, or do not provide adequate risk protection. Additional potential issues for Congress in the next farm bill debate include the extent of the current commodity coverage, program complexity and its impact on participation and effectiveness, and the effect of biofuel subsidies on agriculture.

“The current federal budget situation is likely to prevent any increase in overall spending on a 2012 farm bill. Thus, the level of funding in the Congressional Budget Office (CBO) baseline budget for agricultural programs will be of paramount importance. Combined outlays for farm safety net programs have averaged $15.7 billion per year during FY2003 to FY2010, with a high of $20.5 billion in FY2006 and a low of $12.2 billion in FY2008. CBO’s projected annual average for FY2011-FY2020 is $14.9 billion. With crop prices relatively high, counter-cyclical support has declined in recent years while crop insurance outlays (which are directly related to crop prices) have increased sharply. The pool of money for any changes to the farm safety net will likely come from the existing baseline for the commodity programs and the crop insurance program.”

The CRS report included some very helpful overview graphics, including this depiction of program allocations and interactions, as well as this overview of program spending. Perhaps most interesting is this graphic in the CRS report which illustrates federal farm spending by commodity.

The CRS report also noted that, “Several issues might shape any potential changes to farm safety net programs in the next farm bill debate.

Managing farm risk—Crop insurance has very high participation rates, a result driven in part by the high subsidization levels but also because the program in fact reduces both yield and revenue risks. Some Members of Congress and policy observers have wondered if crop insurance might be the only element of the farm safety net that remains in the distant future if farm programs are rationalized and funding is reduced.”

Biofuels subsidies—The federal government has enacted an increasing number of programs that support the use of agriculture-based biofuels, foremost of which is corn-based ethanol. In the past decade, corn use for ethanol has expanded corn demand by nearly 30%, driving corn prices higher. In 2009, biofuels subsidies totaled nearly $6 billion, and corn has not been the only beneficiary. The increased demand for corn has contributed to an expansion of corn area into non-traditional crop areas, raising prices for other major field crops. Many federal budget watchers argue that the expanding biofuels subsidies should be counted with the pool of agricultural price and income subsidies since this has been one of their major effects.”

With respect to budgetary issues, Jerry Hagstrom reported yesterday at DTN (link requires subscription) that, “Although President Barack Obama wants all cabinet secretaries to cut 5 percent of their discretionary spending, USDA officials are looking at possibly cutting mandatory spending in farm programs rather than take the entire amount out of discretionary programs, Deputy Agriculture Secretary Kathleen Merrigan said Tuesday.

“Merrigan, who manages the USDA budget process, told members of the American Soybean Association board that USDA is expected to spend $149 billion in fiscal year 2011 and that $26 billion of that is discretionary spending, but that Office of Management and Budget expects USDA to propose a $1.5 billion cut in discretionary spending.”

Yesterday’s DTN article added that, “Making cuts at USDA is especially difficult, Merrigan said, because 70 percent of the USDA budget goes for nutrition programs including food stamps, school meals and the special nutrition program for low-income women, infants and children known as WIC. Merrigan noted that WIC, which costs more than $7 billion, is part of the discretionary section of the budget, but it is treated like a mandatory program that no one wants to cut.

Merrigan also noted that no one wants to cut the Food Safety and Inspection Service, which costs more than $1 billion per year. If the cut comes totally out of discretionary spending, that would leave rural development, research, marketing and regulatory programs and some conservation programs to absorb all the cuts.

“Merrigan later told reporters that Agriculture Secretary Tom Vilsack has sent a letter to the White House Office of Management and Budget requesting ‘flexibility’ in the budget cut. She declined to discuss whether USDA intends to propose cuts in farm subsidies, but she acknowledged that the Obama administration has proposed cuts in the direct payments program and also proposed limiting payments to the biggest farms. Obama also made a campaign promise to impose stricter payment limits.”

On the issue of nutrition spending, Senate Ag. Comm. Chairman Blanche Lincoln, D-Ark., noted in an update posted yesterday at the Huffington Post that, “Hunger and obesity. It might seem odd to find these epidemics mentioned together, but they are two of the greatest threats to the health of America’s children and the future of our nation.

“And Congress is running out of time to do something about it.”

The update added that, “As Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, I have authored the Healthy, Hunger-Free Kids Act of 2010, which addresses these two threats by making strong improvements to our federal child nutrition programs. Funding authorization for these programs expires in 78 days.”

“A bipartisan majority of Senators and House members are already on record supporting reauthorization of our child nutrition programs. We must not squander this historic opportunity to make strong improvements to our child nutrition programs that will put us on a path toward ending childhood hunger and reversing the trend of childhood obesity.”

In related news, an update posted yesterday at the House Education and Labor Committee Online noted that, “On Wednesday, July 14, the House Education and Labor Committee will consider bipartisan legislation to expand access and improve the nutritional quality of meals in schools and child care. The committee examined H.R. 5504, the ‘Improving Nutrition for America’s Children Act’ earlier this month.

“The legislation would help set American children on a path of healthy eating and healthy living at a time when approximately 22 percent of the nation’s children lack access to quality food and one in three children are overweight or obese. Today, over 32 million children rely on federal child nutrition programs.

H.R. 5504 would dramatically expand access for millions of children to healthy meals year-round in schools, child care, and community based settings, and for the first time, establish nutrition standards for foods sold outside of the cafeteria.”

Chairman George Miller’s opening statement from yesterday’s markup can be viewed here, and yesterday’s update noted that, “The Committee will reconvene on Thursday, July 15, 2010, at 10:00am to consider one additional amendment and take roll call votes.”

In other Farm Bill related news, a USDA news release from yesterday stated that, “Agriculture Secretary Tom Vilsack today launched a new feature on the ‘Know Your Farmer, Know Your Food’ website to highlight local and regional food systems and the multitude of connections being made between farmers and consumers. The new online resource advances a national conversation about food and agriculture and highlights the importance of local and regional food systems – one of the fastest growing segments of agriculture – to American agriculture, the economy, and rural communities.

“‘By developing our local and regional food systems, we can spur job growth in our rural communities and ultimately strengthen American agriculture,’ said Secretary Vilsack. ‘This showcase will serve as a hub of ideas, local success stories, and USDA resources that showcase and strengthen the link between local production and local consumption that benefits producers of all sizes.’

The update added that, “USDA’s ‘Know Your Farmer, Know Your Food’ initiative seeks to create new economic opportunities, to promote local and regional food systems that help keep wealth in rural communities, and to encourage a national conversation about what we eat and where it comes from in order to benefit producers of all sizes.”


With respect to issues associated with biofuels, Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “The ethanol subsidy is running into trouble in Congress.

“Citing a congressional study of the cost of the 45-cent-per-gallon tax credit, the chairman of the Senate energy committee issued a statement today saying that the subsidy should not be ‘reflexively’ extended when it expires at the end of the year.

Sen. Jeff Bingaman, D-N.M. ‘thinks Congress needs to take a careful look’ at the cost of the subsidy ‘as it decides whether or not to renew it,’ said spokesman Bill Wicker.”

The update explained that, “The study by the Congressional Budget Office evaluated biofuel subsidies by the energy content of the products and found that costs taxpayers $1.78 to reduce gasoline consumption by one gallon using corn ethanol. The cost rises to $3 with ethanol made from crop residue and other forms of plant cellulose, for which there is a $1.01 per gallon tax credit.

“The study’s release comes as some Midwest senators are trying to attach a long-term extension of the ethanol tax credit to an energy bill Democrats are struggling to pass. The Renewable Fuels Association said the congressional study did not fully account for the benefits of biofuels and the ‘clear destruction wrought by fossil fuels.’

Separately today, the chairman of the House Agriculture Committee, Rep. Collin Peterson, D-Minn., warned members of the National Corn Growers Association that Congress is unlikely to provide a long extension of the ethanol credit and that it could even lapse at the end of the year.”

A related update posted yesterday at the Environmental Working Group (EWG) Blog stated that, “In an bid to garner support for legislation to address the looming danger of climate change, Midwest senators are reportedly pressing to attach a long-term extension of biofuel tax breaks to a Senate energy bill being crafted by Democratic leaders. The Volumetric Ethanol Excise Tax Credit (VEETC), currently set to expire on Dec. 31, pays oil companies $0.45 per gallon in the form of tax credits to blend ethanol with gasoline.

“Word of the senators’ move surfaced as the Congressional Budget Office (CBO) released a sobering assessment Wednesday (July 14) of corn ethanol’s costs and effectiveness.”

The EWG update added that, “Craig Cox, Environmental Working Group Midwest vice-president, had this to say of continued efforts to prop up the corn ethanol industry from EWG’s Ames, Iowa, office:

“In these times of tight budgets, growing deficits and a pressing need to make real progress on alternative energy, it makes little sense to continue lavish government support for corn ethanol, a fuel that has failed to live up to its promise as an environmentally friendly, financially viable alternative to burning oil.

Corn ethanol is really agriculture policy masquerading as energy policy. The only beneficiaries of extending the ethanol tax credit will be large-scale industrial growers of corn — who already enjoy billions in traditional farm subsidies — and the oil companies that blend ethanol with gasoline.”

Animal Agriculture (Antibiotics)

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “President Obama’s administration says there is a clear link between the use of antibiotics in livestock and drug resistance in humans, a position sharply at odds with agribusiness interests.

“In testimony to a House committee on Wednesday, even the Agriculture Department, which livestock producers have traditionally relied on to advocate for their interests, backed idea of a link between animal use of antibiotic use and humans.

The USDA ‘believes that it is likely that the use of antimicrobials in animal agriculture does lead to some cases of antimicrobial resistance among humans and in animals themselves,’ said John Clifford, the department’s chief veterinarian.”

Mr. Brasher noted that, “The Food and Drug Administration, which regulates antibiotics in animals as well as humans, has recently proposed to end the use of many drugs as growth promoters in hogs and other livestock. Only antibiotics, such as ionophores, that have no human use would be permitted to speed animals’ growth. The FDA has set a schedule for phasing out the drugs’ use or proposed specific restrictions.”

Yesterday’s update added that, “At an earlier hearing, the government’s top health experts said that U.S. data on the linkage was lacking. But on Tuesday, the CDC sent a letter to the committee saying there were ‘multiple North American studies’ showing such connections. Studies of salmonella, for example, have shown that giving antibiotics to livestock causes bacteria in the animals to develop resistance and that resistant bacteria in food can be transmitted to people, Assistant Surgeon General Ali Khan told the lawmakers.

“Agribusiness representatives and their allies on the committee insisted that more research is needed to justify restricting antibiotic usage.

“‘So far there’s nothing that links use in animals to a buildup of resistance in humans,’ said Rep. John Shimkus, R-Ill.”


An update posted yesterday at CQPolitics reported that, “Senators seeking to advance a new, less onerous estate tax to replace the version that expired last year hope to attach their proposal to a small-business lending bill awaiting Senate action.

“Sens. Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., have laid down an important marker in the continued fight over the tax, which expired Dec. 31 but will kick in again next year. Although Republicans and some moderate Democrats are likely to support their plan, the issue is highly contentious and Democratic leaders have not signaled whether they intend to allow a vote on it.”

Keith Good

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