FarmPolicy

September 23, 2014

Policy Issues; Climate Issues; Ag Economy; Biotech; Trade; and GIPSA Rule

Policy Issues: Farm Bill

A July 20 Congressional Research Report (“Measuring Equity in Farm Support Levels”- by Randy Schnepf) stated that, “Federal farm law mandates support for, among others, 21 ‘covered commodities.’ Support for these agricultural commodities, as specified in the 2008 farm bill (P.L. 110-246) includes direct payments, counter-cyclical payments, and marketing loan benefits. Since 1996 a handful of these program commodities—feed grains (corn, sorghum, barley, and oats), cotton, wheat, rice, soybeans, and peanuts (hereafter referred to as the major program crops)—have received over $160 billion or 72% of all U.S. farm program payments, primarily in the form of commodity price and income support benefits.

Large disparities in the relative levels of benefit among these commodities have led to questions of equity. This report looks at available data for the major program crops and compares support rates per unit, total payments, payments per harvested acre, payments as a share of the value of production, and payments as a share of the total cost of production. In addition, price and income support levels are compared to market prices. By all of these measures there has been little equity across commodities. However, farmers often have argued for equity based on cost of production. Economists, on the other hand, would use trend (or a moving average of) market prices as the basis for setting support prices in order to avoid market distortions and resource misallocations.”

The CRS report stated that, “With respect to commodity price and income support payments, this report focuses its equity analysis on the covered commodities since they are the primary beneficiaries. The author recognizes that fruits, vegetables, tree nuts, ornamental plants, and other minor crops account for nearly half of the value of U.S. crop production but do not receive any direct subsidies. Whether the lack of support for nearly 50% of crop production is equitable is beyond the scope of this analysis.

“With the benefit of hindsight it is possible to compare support prices and actual payments against several standards to address questions of equity. Across these commodities, this report compares (1) support levels in the law, (2) yearly average program payments, [related graph] (3) program payments per acre [related graph], (4) payments as a share of crop market values [related graph], (5) payments as a share of production costs [related graph], and (6) support levels with market price trends.”

The CRS report stated on page 14 that, “To the extent that the January 1997 through May 2010 time period reflects long-run market conditions, this exercise suggests that upland cotton and rice growers receive a disproportionately high level of both CCP and marketing loan support relative to the other major covered commodities. Barley and soybeans receive disproportionately lower CCP and marketing loan support. The situation is mixed for most of the other crops; however, wheat, corn, sorghum, and oats are within +/- 5% of the parity value for both loan rates and target prices, suggesting that they are the closest to achieving policy equity under this somewhat ad hoc analysis.

Policy Issues: Disaster Aid

The August 13 edition of The Kiplinger Agriculture Letter (link requires subscription) indicated that, “The proposed disaster aid for ’09 crops won’t be paid out anytime soon. Senate Ag Com. Chairman Blanche Lincoln (D-AR), fighting for reelection, is pressing for $1.5 billion in payments. Ark. farmers would pocket the most… over $200 million…with the bulk of the money going to big farms in the state. Other senators, however, are thwarting Lincoln’s efforts to get the payments.

“Though Obama plans to sidestep Congress and tell USDA to pay the aid…

Court challenges are sure to delay payments if USDA acts unilaterally. Taxpayer groups and many lawmakers would object to the Obama administration grabbing Congress’ power of the purse. Many see the payments as campaign pork. But ag secretaries have often stretched their authority to hand out money.

“Note that the aid is mislabeled and has little relation to actual crop losses. It amounts to a near doubling of the annual subsidies paid for owning cropland, though recipients would have to report ’09 losses of at least 5% from usual yields. USDA crop insurance data show that some states getting big chunks of the aid… Texas, Okla., Miss…did report high losses on ’09 crops. But in the two states that would collect the most aid…Ark. and Ill…farmers had only moderate losses.”

Climate Issues

Ben Geman reported on Saturday at The Hill’s Energy Blog that, “The U.S. Chamber of Commerce on Friday filed a lawsuit that challenges EPA’s recent rejection of its petition for reconsideration of the agency’s 2009 ‘endangerment finding’ that greenhouse gases threaten humans.

“The finding is the underpinning for upcoming EPA rules limiting emissions from power plants, factories and other sources that are opposed by a number of business groups.

“‘The U.S. Chamber, policymakers, numerous trade groups, state governments, and businesses throughout the country have collectively raised strong concerns about the significant negative impact the EPA’s endangerment finding will have on jobs and local economies,’ said Robin Conrad, executive vice president of the U.S. Chamber’s National Chamber Litigation Center, in a prepared statement.”

Mr. Geman added that, “The chamber filed for judicial review in the U.S. Court of Appeals for the District of Columbia Circuit.

“EPA in late July rejected petitions from the Chamber, states of Virginia and Texas, the Competitive Enterprise Institute, coal giant Peabody Energy Corp. and others that sought to nix the finding.”

Darren Samuelsohn reported on Friday at Politico that, “Sen. Jeff Bingaman said Thursday that he doubts Congress will pass any major legislation before Election Day, including a pared-back energy bill focused on responding to the Gulf of Mexico oil spill.

“‘I think the Republicans are reluctant to support anything that might result in another signing ceremony between now and the election,’ the chairman of the Energy and Natural Resources Committee told POLITICO after a Mexican lunch here with Rep. Harry Teague and other local Democrats.”

Meanwhile, Justin Gillis reported in yesterday’s New York Times that, “The floods battered New England, then Nashville, then Arkansas, then Oklahoma — and were followed by a deluge in Pakistan that has upended the lives of 20 million people.

“The summer’s heat waves baked the eastern United States, parts of Africa and eastern Asia, and above all Russia, which lost millions of acres of wheat and thousands of lives in a drought worse than any other in the historical record.

Seemingly disconnected, these far-flung disasters are reviving the question of whether global warming is causing more weather extremes.”

Yesterday’s article noted that, “The collective answer of the scientific community can be boiled down to a single word: probably.

“‘The climate is changing,’ said Jay Lawrimore, chief of climate analysis at the National Climatic Data Center in Asheville, N.C. ‘Extreme events are occurring with greater frequency, and in many cases with greater intensity.’”

David A. Fahrenthold reported in Saturday’s Washington Post that, “So far, this has been the hottest year in recorded history.

“On Friday, the National Oceanic and Atmospheric Administration released data showing that, from January to July, the average global temperature was 58.1 degrees. That was 1.22 degrees over the average from the 20th century, and the highest since 1880, when reliable records begin.

Although NOAA experts say global climate change isn’t the only reason 2010 has been so hot — an El Nino event earlier in the year pushed temperatures up — they said it’s still the most important reason.”

And the AP reported on Friday that, “Floods, fires, melting ice and feverish heat: From smoke-choked Moscow to water-soaked Iowa and the High Arctic, the planet seems to be having a midsummer breakdown. It’s not just a portent of things to come, scientists say, but a sign of troubling climate change already under way.”

Agricultural Economy

Mike Hughlett reported late last week at the Minneapolis Star-Tribune Online that, “From corn to soybeans to sugar beets, Minnesota farmers are looking at bumper crops this year.

“They’ve benefited from good weather and a particularly mild spring that allowed for early planting. And wheat growers are particularly in the green, as prices for that grain have rocketed over the past several weeks.

“Meanwhile, livestock and dairy farmers — who mostly lost money last year — are back in the black in 2010.”

The article stated that, “The upshot: ‘Farm income trends should be very good this year,’ said Michael Swanson, an agricultural economist at Wells Fargo in Minneapolis. ‘It’s a very positive outlook right now.’”

Tom Sellen reported in Saturday’s Wall Street Journal Online that, “Cotton prices are surging on the back of anticipated shortfalls in global stockpiles caused partly by the devastating floods in Pakistan.

Prices of futures contracts have risen 16% in the past month to the highest since March 2008. The latest rally got underway on widespread concerns that tight global supplies wouldn’t be able to keep pace with surprisingly robust demand from textile makers.”

And Anna Raff reported on Saturday at Barron’s Online that, “Given the uncertainty surrounding weather, there’s talk that $7 a bushel is the new floor for wheat futures traded on the Chicago Board of Trade. Wheat recently spiked as high as $8.41 (Aug. 6). This is almost double the nine-month low the grain hit in early June.

‘If Russia’s out for two years, that changes the dynamics,’ says Daniel Basse, president of AgResource Co., a research firm.”

Meanwhile, Elizabeth Williams reported on Friday at DTN (link requires subscription) that, “U.S. homeowners are still smarting from a catastrophic drop in property values, the stock market is again sputtering, and the Federal Reserve is driving Treasuries to near zero interest rates. But bucking this gloomy trend is Midwest farm real estate, one of the few assets apparently immune to the nation’s economic downturn.”

The DTN article pointed out that, “‘The farmland real estate market caught fire this summer,’ said Jon Hjelm of the ACRE Company in Spencer, Iowa. Per acre prices are once again climbing over $7,000 in parts of northwest Iowa, he reported. Typical of the trend is an outside investor from Chicago who just bought an 80-acre parcel that needed tile and a grass waterway for $7,425 per acre. (Iowa State University pegged the average value of land in that county at $5,153 per acre last December and said prices were virtually unchanged from 2008’s highs.)

“Other Iowa realtors estimate that the state’s land values have jumped an average of 3 percent to 5 percent so far this year, but gains aren’t limited to the prime Corn Belt. The Kansas City Federal Reserve reported that farmland in its second quarter survey gained 4.8 percent compared to a year ago, and irrigated land gained 5.6 percent.”

Biotech

Andrew Pollack reported in Saturday’s New York Times that, “A federal district court judge revoked the government’s approval of genetically engineered sugar beets Friday, saying that the Agriculture Department had not adequately assessed the environmental consequences before approving them for commercial cultivation.

“The decision, by Judge Jeffrey S. White of Federal District Court in San Francisco, appears to effectively ban the planting of the genetically modified sugar beets, which make up about 95 percent of the crop, until the Agriculture Department prepares an environmental impact statement and approves the crop again, a process that might take a couple of years.

The decision could cause major problems for sugar beet farmers and sugar processors. In the past the sugar industry has warned there might not be enough non-engineered seeds available. However, the judge ruled that crops currently in the ground can be harvested and made into sugar, so the effects will not be felt until next spring’s planting season.”

Scott Kilman reported in today’s Wall Street Journal that, “A federal judge’s decision Friday to undo the government’s five-year-old approval of genetically modified sugar beets, from which roughly half of U.S. sugar is derived, won’t disrupt supplies for at least a year, but could pose headaches for food companies after that.

“The order by U.S. District Judge Jeffrey S. White—who had concluded in September 2009 that the U.S. Department of Agriculture hadn’t lived up to its obligation to fully consider whether the weedkiller-tolerant sugar beets might harm the environment—effectively blocks farmers from planting the seed next spring, but leaves alone the crop already in the ground, which can be harvested this fall, processed and sold as sugar.”

Mr. Kilman added that, “‘In the short term, at least, we’re aren’t going to see any disruption in the marketing of this year’s crop,’ said Luther Markwart, executive vice president of the American Sugarbeet Growers Association, a Washington, D.C., trade group.

However food companies that depend on a steady supply of U.S. sugar face uncertainty over where they will source their sugar beets after next year.”

Trade

Reuters news reported on Friday that, “Russia, the top market for U.S. chicken, will lift a ban on U.S. poultry imports starting Aug. 16, the Interfax news agency quoted Russian Agriculture Ministry spokesperson Oleg Aksyonov as saying on Friday.

“Russia, where U.S. poultry has been banned since January, will allow poultry imports from 68 U.S. plants out of a total of 87 proposed by the U.S. side, Aksyonov said.

“But after meeting with Russian counterparts in Geneva to try to restart trade, halted since January, a U.S. government team said Russia’s proposal was not an acceptable way to implement a deal signed on June 24 by President Barack Obama and President Dmitry Medvedev.”

GIPSA Rule

Chris Clayton reported on Friday at the DTN Ag Policy Blog that, “Twenty one senators — 19 Democrats, one independent and one Republican — pushed back on Friday to resistance regarding the proposed livestock competition rule from USDA’s Grain Inspection, Packers and Stockyards Administration. Senators wrote Agriculture Secretary Tom Vilsack that the livestock rule should be implemented to better clarify protections for livestock producers under the Packers & Stockyards Act.

“‘We urge you to issue a final rule as expeditiously as possible once the comment period is closed and the Department has reviewed the comments and made any appropriate modifications to the proposed rule,’ the senators wrote Vilsack.”

Friday’s update stated that, “National Farmers Union President Roger Johnson praised the senators, saying the proposed rule addresses concerns that have been discussed for years and were developed at the direction of the 2008 Farm Bill.

“‘The proposed rule is a significant step in the right direction to provide our producers with the means to sell their products in a fair marketplace,’ Johnson stated in a news release. ‘The process for passing this rule has already been slowed due to an extension for the comment period being granted. I urge Secretary Vilsack to issue a final rule as soon as practically feasible after the comment period is closed.’”

Keith Good

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