October 16, 2018

House Hearing (Crop Insurance); Climate Issues; Biofuels; and Trade

House Agriculture Subcommittee Hearing on Crop Insurance

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Groups representing crop insurance companies and agents told members of a House Agriculture Subcommittee that USDA didn’t negotiate in good faith in a new Standard Reinsurance Agreement and that farmers will feel the effects of $6 billion in cuts the industry must absorb over the next 10 years.

“At a hearing on Capitol Hill on Thursday, representatives from the crop-insurance industry questioned USDA’s authority to demand such a steep fiscal cut and said services to farmers would end up being affected by the new contract. DTN/The Progressive Farmer watched the hearing through the House Agriculture Committee webcast.

“Rep. Leonard Boswell, D-Iowa, who chairs the Subcommittee on General Farm Commodities and Risk Management, said he was concerned by the level of cuts in the SRA due to cuts already made when lawmakers chopped $3 billion from the industry and also created a timing shift that will delay up to $3 billion in payments in 2012 as well. ‘We also must acknowledge that the crop insurance industry is a business, and both the companies and agents need to make a profit in order to stay in the market,’ Boswell said.”

Mr. Clayton noted that, “The SRA, which all 16 crop insurance companies signed last week, spells out payment terms to the companies starting next year. The contract cuts about $600 million a year out of administrative and operating (A&O) expenses reimbursed by USDA to companies, as well as makes cuts in underwriting gains.

“Rep. Frank Lucas, R-Okla., ranking member of the House Agriculture Committee, questioned why a hearing was being held a week after companies had a ‘take-it-or-leave-it’ scenario forcing them to sign the contract. ‘The signing of the agreement does not imply that the company agrees to the terms,’ Lucas said.

Lucas also complained that the $6 billion in cuts end up disappearing from the farm-bill baseline.”

The DTN article added that, “Bob Parkerson [written testimony], president of the National Crop Insurers Service, said he felt the administration had a budget-cutting target for the program ‘and simply staked out an extreme position to the right of it, knowing full well that, in the end, the companies had no choice but to accept the final outcome.’ [Related audio comments by Mr. Parkerson from yesterday can be heard here– MP3- 2:06].

“Stephen Frerichs [written statement] of Rain and Hail LLC, speaking for the American Association of Crop Insurers, said companies had no choice but to sign the SRA or lose their business. He said USDA exceeded the intent of Congress with the cuts. So AACI recommends Congress review the renegotiation authority.

“‘Perhaps it should be repealed or at a minimum modified to include safeguards such as maintaining the integrity of the Agriculture budget baseline,’ Frerichs said. [Related Audio comments by Mr. Frerichs from yesterday can be heard here– MP3- 1:34].

“The Obama administration plans to take $4 billion of the cuts and use that for specific reductions in federal spending. The other $2 billion will be used to prop up spending on some key conservation programs, such as rangeland programs and the Conservation Reserve Program.”

Mr. Clayton pointed out that, “Bill Murphy [written testimony], administrator for USDA’s Risk Management Agency, said the new SRA ‘provides a reasonable rate of return to the companies’ while still ‘having no adverse impact on farmers’ premium costs.’

“Murphy said the new SRA takes away excess and windfall profits that can come through price spikes in commodities. The new agreement limits A&O to about $1.3 billion in 2011, still 40 percent more than what companies received in 2006, but less than the $2 billion paid to the industry during the 2008 price spike.”

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “The companies and agents who sell federally subsidized crop insurance said the Obama administration’s cuts to the program may force firms and agents out of the business.”

“Steve Rutledge [written testimony], president and CEO of West Des Moines-based Farmers Mutual Hail Insurance Co. of Iowa, told a House Agriculture subcommittee that today ‘the industry has finally reached the point where many companies are considering leaving the business,’ said.

“‘Many agents are also looking for operations to sell,’ added Rutledge, who was testifying on behalf of an industry trade group, Crop Insurance Research Bureau Inc. He did not name any of the companies that might be reconsidering the business.”

Mr. Brasher noted that, “The hearing came too late for Congress to block the cuts, but it gave the industry a chance to air their gripes. The chairman of the full committee, Rep. Collin Peterson, D-Minn., has defended the cuts and agreed with the USDA that agent commissions had become excessive.

“The cuts will take $6 billion over 10 years from a program that cost the USDA $8 billion last year. The cap on commissions is designed to keep companies from paying agents more than the firms receive from the USDA for expenses.

Bill Murphy, administrator of the USDA’s Risk Management Agency, said the commission cap was needed to keep companies from getting overextended in trying to compete for agents.”

A news release from yesterday by the Crop Insurance Professionals Association noted that, “Crop insurance agents today told Congress that the U.S. Department of Agriculture (USDA) missed the opportunity to strengthen the nation’s crop insurance program, which has become an essential piece of the safety net for producers of nearly all crops and regions.

“In a hearing before the House Agriculture Committee, California crop insurance agent Jordan Roach [written testimony], who serves as vice chairman of the Crop Insurance Professionals Association (CIPA), testified about the state of the industry—noting the positive growth and increasing importance—but was critical of the USDA’s mishandling of the recent Standard Reinsurance Agreement (SRA) negotiation that shortchanged the agriculture budget and farmers to the tune of $6 billion.”

A news release from yesterday by Rep. Earl Pomeroy (D-ND) stated that, “At a hearing Thursday of the House Agriculture Subcommittee on General Farm Commodities and Risk Management, Congressman Earl Pomeroy discussed the recently finalized Standard Reinsurance Agreement (SRA) renegotiation between the Administration and the crop insurance companies.

“‘It is clear that the crop insurance program remains the most important risk management tool for producers in North Dakota,’ said Congressman Pomeroy. ‘Looking out at the fiscal challenges we have before us in crafting the 2012 Farm Bill, I feared that without action the crop insurance program would have been in danger of unsustainable cuts.’”

[Related Audio comments by Rep. Pomeroy from yesterday, in which he provided additional background regarding crop insurance and the 2008 Farm Bill debate, perspective on a pre-determined negotiated target cut, and budget implications, can be heard here– MP3- 4:38].

At the conclusion of yesterday’s hearing, Rep. Jerry Moran also commented on the concern that a pre-determined negotiated target could drive a future SRA negotiation rather than “a lot of other factors that are very important.” [Related audio available here– MP3- 0:36).

Climate Issues

Darren Samuelsohn and Carol Davenport reported yesterday at Politico that, “Senate Democrats pulled the plug on climate legislation Thursday, pushing the issue off into an uncertain future ahead of midterm elections where President Barack Obama’s party is girding for a drubbing.

“Rather than a long-awaited measure capping greenhouse gases — or even a more limited bill directed only at electric utilities — Senate Majority Leader Harry Reid (D-Nev.) will move forward next week on a bipartisan energy-only bill that responds to the Gulf of Mexico oil spill and contains other more popular energy items.”

The article added that, “The bill headed to the floor will not include a carbon cap or a renewable electricity standard, [Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.)] said. Instead, it has low-hanging-fruit provisions dealing with the oil spill, Home Star energy efficiency upgrades, incentives for the conversion of trucking fleet to natural gas and the Land and Water Conservation Fund.”

Stephen Power reported in today’s Wall Street Journal that, “Senate Democratic leaders Thursday shelved their effort to cap greenhouse-gas emissions as part of a broad energy bill, putting aside indefinitely a centerpiece of President Barack Obama’s ambitious effort to transform the way Americans produce and consume energy.”

The Journal article stated that, “The Senate’s inaction leaves Mr. Obama’s Environmental Protection Agency administrator, Lisa Jackson, in charge of setting federal limits on greenhouse gases. Ms. Jackson has already adopted rules limiting emissions from cars and requiring state regulators to account for such emissions when they issue air-quality permits to large refineries and manufacturing facilities.

“The agency’s authority to do so is under assault. Business groups have sued, challenging the legality of EPA proposals to regulate greenhouse-gas emissions. And a group of Democrats is pushing legislation to bar the agency for two years from regulating emissions from stationary sources.

“Utilities now will be forced to make long-term decisions without knowing how carbon dioxide will be treated, said Mike Morris, chief executive of American Electric Power, Columbus, Ohio.”

Perry Bacon Jr. reported in today’s Washington Post that, “Conceding that they can’t find enough votes for the legislation, Senate Democrats on Thursday abandoned efforts to put together a comprehensive energy bill that would seek to curb greenhouse gas emissions, delivering a potentially fatal blow to a proposal the party has long touted and President Obama campaigned on.

Instead, Democrats will push for a more limited measure that would seek to increase liability costs that oil companies would pay following spills such as the one in the Gulf of Mexico. It also would create additional incentives for the development of natural gas vehicles and would provide rebates for products that reduce home energy use. Senate Democrats said they expected to find GOP support for the bill and pass it in the next two weeks.”

Darren Goode reported yesterday at The Hill’s Energy Blog that, “Sen. Debbie Stabenow (D-Mich.) said the energy provisions slated to move before the break are aimed at boosting deployment of natural gas-powered vehicles and funding home energy efficiency retrofits.”

More specifically with respect to agriculture, a news release from yesterday by the Pew Center and The Clark Group stated that, “In the high-stakes debate over the United States’ climate and energy future, a new paper explains the key reasons why farmers should be engaged participants. The study – U.S. Agriculture and Climate Change Legislation: Markets, Myths, and Opportunities – presents an objective assessment of climate legislation’s impacts on agriculture and identifies realistic opportunities such legislation can deliver. 

“The paper, prepared by the Pew Center on Global Climate Change and The Clark Group, LLC, argues that U.S. farmers are best suited to advocate for key policy provisions that could unleash new market opportunities for agriculture. These include the principles of a robust greenhouse gas offset market and the creation of renewable energy opportunities.”


Dan Piller reported yesterday at The Des Moines Register Online that, “The president of the Renewable Fuels Association said Wednesday that ending a major subsidy could wipe out almost 40 percent of the U.S. ethanol industry.

“‘We need to have that tax credit renewed,’ Bob Dinneen said as he kicked off a meeting of the group’s board in Des Moines.

“The 45-cent-per-gallon tax credit, which goes to oil companies that mix ethanol with gasoline, expires Dec. 31.”

Mr. Piller added that, “The U.S. House Ways and Means Committee is considering a reduction of the tax credit to 36 cents per gallon for a green-energy bill. Growth Energy, a rival of the Renewable Fuels Association, has proposed phasing out the tax credit and directing the money to infrastructure to benefit ethanol, such as blender pumps and an ethanol pipeline.

“Dinneen hopes ethanol avoids the fate of biodiesel, which has struggled for life since Congress allowed its $1-per-gallon tax credit to lapse last Dec. 31. Most biodiesel plants in Iowa and elsewhere have been closed or put on reduced production.

“‘This is a very dysfunctional Congress,’ Dinneen said.

The ethanol industry has been frustrated by what it considers foot-dragging by the Environmental Protection Agency over requests to raise the allowable percentage of ethanol blended in gasoline from 10 percent to 15 percent.”

An update posted yesterday at USA Today Online reported that, “An odd coalition of environmental and business groups is banding together to head off a move to increase the amount of ethanol in gasoline to 15%, up from 10% in most places now.

“A spokeswoman, Abbey Franke, says that the government may decide whether to allow the higher blend by September, if not sooner.

“Groups ranging from the Natural Resources Defense Council to the International Snowmobile Manufacturers Association issued a joint statement yesterday opposing more ethanol in gas. They say they fear that if the 15% ethanol 85% gas mix isn’t approved, ethanol backers might try for a 12% compromise, which they also oppose.”

And Bloomberg writer Alex Morales reported yesterday that, “Commercial airlines may derive 1 percent of their fuel by 2015 from biofuels made of plants including algae, Boeing Co.’s environment chief said.

“Carriers including British Airways Plc and Continental Airlines Inc. are testing the carbon-cutting alternative fuels as the global air industry accelerates efforts to slash greenhouse-gases blamed for global warming.

“Boeing has worked with airlines from the U.S. to Japan to test jet fuels made from plants such as jatropha and camelina. That’s because moving more toward cleaner fuels is in the industry’s best interest, said Billy Glover, managing director of environmental strategy at Boeing’s commercial airplanes unit.”


Bloomberg writer Alexandre Deslongchamps reported yesterday that, “U.S. Trade Representative Ron Kirk says it’s too early to gauge the impact of the Canada-Colombia trade agreement on U.S. producers.

“Kirk, who met Canadian Trade Minister Peter Van Loan today in Ottawa, told reporters he ‘values’ the partnership with Colombia.

“He also said that World Trade Organization negotiations on a new trade accord, which have been dogged by clashes between rich and poor economies since they began in Doha, Qatar in 2001, will progress when advanced emerging countries are ready to make concessions.”

The Bloomberg article added that, “Countries like Brazil, China, Russia and India have already benefited ‘extraordinarily’ from the access they have to markets in the U.S., Canada and the European Union and must now prepare to make some of the ‘very difficult decisions’ required to conclude the Doha round, Kirk said.

“‘The surest way to bring the Doha round of development talks to a conclusion is to begin with a dose of reality,’ Kirk said. ‘Let’s look at the world as it is today and not as it was 15 years ago.’”

A news release from yesterday by Rep. Adrian Smith (R-Neb.) stated that, “[Congressman Smith] recently demanded any renewed support for Russia’s accession to the World Trade Organization be contingent on Russia dropping a ban on the import of cooked beef from the United States.

“In a letter to President Obama, Smith and 19 of his colleagues urged the Administration to press Russian authorities to actively work with their American counterparts to reach a resolution.

“‘U.S. cooked beef patties are barred from entry into Russia despite the fact that under existing trade agreements American companies have the right to ship American beef patties to Russia. This illogical trade barrier not only limits the export potential of a safe, American product but also creates an unnecessary burden on American beef and cattle industries.’”

The release noted that, “Nebraska has the top three beef cow counties in the U.S., and produces more beef per square mile than any other state. Cattle production is Nebraska’s single largest industry and has a $12 billion impact on the state’s economy.”

Keith Good

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