FarmPolicy

October 31, 2014

Farm Bill; Animal Ag; World Hunger; Food Safety; Biofuels; 1099 Issue; Climate Policy; and Corn Sugar

Farm Bill Issues

The Washington Insider section of DTN indicated yesterday (link requires subscription) that, “The Iowa Farm Bureau made headlines recently when it voted to recommend ending fixed direct payments. These ‘transition payments’ were a component of the Republican Contract with America’s Freedom to Farm initiative in 1996 — and were included to gain support for ending hold-over supply control programs that producers had come to hate. Even when prices weakened later on and the producer safety net was re-strengthened, the fixed payments were continued in the 2002 and 2008 bills.

“At the time they were first implemented, the payments were considered something of an advance by supporters of the World Trade Organization’s Doha Round negotiations because they were decoupled from production and prices. However, as the ‘transition’ payments have became to be seen as a fixture, they have become much more controversial, for several reasons.

“They are expensive, for one thing, at around $5 billion year annually.”

Yesterday’s DTN item noted that, “One reason the Iowa proposal may be taking root is the assumption the $5.2 billion spent on direct payments would be available for another, more effective program. Iowa State University economist Bruce Babcock last spring presented to the House Ag Committee a plan to shift the money that goes to fixed payments into expanding the Average Crop Revenue Election program, which he says could be more effective in countering declines in revenue. He wants payments to be based on yearly changes in county-level farm revenue rather than fluctuations in state averages, as is now the case.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., also says the fixed payments are hard to defend and signaled he would be open to suggestions for different types of programs for different commodities.

“The major difficulty with such proposals is that the current recipients of direct payments want to retain recent spending levels for their commodity on a more or less permanent basis. However, since the program now is divided among a relatively short list of commodities, sorting out winners and losers could be difficult and extremely contentious.”

The DTN piece added that, “There is still another problem with the discussion, observers say, one that reflects recent political winds. In most discussions, producer groups assume the $5.2 billion in direct payments could be used in different ways if producers could agree. However, if public sentiment against deficits and government spending materializes at the levels some expect, it could be hard to defend anything like the current baseline items for agriculture — especially if producers are perceived as bickering over how to split the spending pot.

“In almost any event, Chairman Peterson — or, his successor — seems likely to have challenges ahead as serious issues of program reform emerge.”

Meanwhile, Sean Wardwell reported yesterday at The McPherson Sentinel Online (Kansas) that, “The Sentinel was able to sit down with 1st District Representative and Republican Senate nominee Jerry Moran at the Kansas State Fair on Saturday for a short question and answer session. Moran is a long-time member of the House Agriculture Committee.”

The item quoted Rep. Moran as saying, “In the last farm bill, much of the spending became spending for food stamps and nutrition programs, and not much left for the farm programs. That theme seems to be continuing. Our Secretary of Agriculture (Tom Vilsack) has said the safety net is no longer necessary, we want to create opportunities for jobs in cities and let people return home to their 100-acre farms. While hobby farming is a fine thing, it doesn’t feed or clothe the world. So, we have our work cut out for us once again, explaining this to a very urban and suburban congress, apparently without much help from USDA in that explanation, about the importance of production agriculture.”

Mr. Wardwell also asked Rep. Moran, “What other concerns do you have with changes proposed by President Obama in this area?”

Rep. Moran responded by saying, “We have to be very careful, because we’ve seen it already this year – crop insurance is one of the most important components of the safety net we provide for farmers. Once again, it’s under attack. There are those who want to spend the money that’s provided for crop insurance on other things. If we lose the federal support for crop insurance, we lose our ability for crop insurance companies to write policies for places like Kansas, where the risks are high. Our weather is not very helpful all the time. As a result, it will be impossible for banks to make a loan on agricultural operations. The other issue is direct payments. It’s a component of the farm bill that provides a payment to farmers, regardless of the price, and it’s been very useful to us – particularly young farmers…”

More specifically with respect to crop insurance and the budget, former House Ag Committee Chairman Larry Combest penned a column that was posted today at the Lubbock Avalanche-Journal Online (Texas) where he stated that, “Hail and drought are all too common in these parts, which might explain why a local wheat, sorghum, and beef producer told the House Agriculture Committee in May, ‘Risk management, specifically crop insurance, is critical to Texas producers generally and especially those in this region of the state.’

Too bad the U.S. Department of Agriculture slashed a giant chunk out of crop insurance just a few months later, leaving area farmers more vulnerable to Mother Nature’s whims.

“Just as it was during the 2008 Farm Bill debate, crop insurance became a piggy bank to pay for other things. In this case, about $400 million per year was taken from the farm safety net, which is astounding since areas outside of agriculture have all but escaped budget cuts.

“All told, nearly $12.5 billion total has been cut from the farm safety net.”

After pointing out concerns over a tight federal budget situation, Mr. Combest stated that, “In other words, even though agriculture has already felt the pain of budget cuts, and even though it is one area of federal spending where taxpayers see a huge return on investment, farmers’ safety net could be placed under the microscope once again. And that debate will get under way very soon.

“If additional hits come to the crop insurance delivery system, it could mean lower coverage and higher premiums, which spells disaster for farmers and ranchers who are already vulnerable to a commodity price collapse.”

Today’s piece added that, “It will take unparalleled energy and involvement from producers across the country to survive the upcoming Farm Bill and a political atmosphere where the farmers’ safety net seems to be a favored well from which to draw dollars.

“There is some good news, though. Farm state lawmakers are fans of crop insurance and would like to see the safety net strengthened. And if constituents and lawmakers team up to work for expanded insurance options instead of budget cuts, it could become a reality.”

In more detailed analysis of the budget implications for the next Farm Bill, the Farm Foundation held a forum yesterday in Washington, D.C. titled, “Budget Implications for the Next Farm Bill.”

The event included presentations from Craig Jagger, Chief Economist, House Agriculture Committee; Patrick Westhoff, Food and Agricultural Policy Research Institute; and Ferd Hoefner of the National Sustainable Agriculture Coalition.

An audio replay of yesterday’s Farm Foundation event is available here, and FarmPolicy.com is working on securing an UNOFFICIAL transcript of yesterday’s meeting that will be referenced when available.

In other news regarding crop insurance, Bloomberg writer Kelly Bit reported yesterday that, “Ace Ltd., the Zurich-based insurer with operations in more than 50 countries, agreed to pay $1.1 billion in cash to buy a majority stake in Rain & Hail Insurance Service Inc. and expand coverage of crops in the U.S.

“The price values the insurer at about 1.59 times its projected yearend book value of $840 million, Ace said in a presentation today on its website. Ace said the deal will add about 22 cents to earnings per share next year. Ace already holds about 20 percent of the common stock in the Johnston, Iowa-based insurer, which is majority-owned by employees.”

In other Farm Bill related news, Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “Despite a late-summer surge in wheat prices, land owners offered to enroll 1.5 percent of U.S. cropland in a federal program that pays them an annual rent for taking fragile land out of production.

Some 4.3 million acres will be accepted of 4.8 million acres offered for the Conservation Reserve, said the U.S. Agriculture Department on Tuesday.

“Texas, Colorado and Kansas — all part of the Wheat Belt — are the leading states for acceptances, said USDA. The figures were 858,436 acres for Texas, 739,467 for Colorado and 618,905 acres in Kansas.”

Animal Agriculture (Antibiotics)

Erik Eckholm reported in today’s New York Times that, “Piglets hop, scurry and squeal their way to the far corner of the pen, eyeing an approaching human. ‘It shows that they’re healthy animals,’ Craig Rowles, the owner of a large pork farm here, said with pride.

“Mr. Rowles says he keeps his pigs fit by feeding them antibiotics for weeks after weaning, to ward off possible illness in that vulnerable period. And for months after that, he administers an antibiotic that promotes faster growth with less feed.

“Dispensing antibiotics to healthy animals is routine on the large, concentrated farms that now dominate American agriculture. But the practice is increasingly condemned by medical experts who say it contributes to a growing scourge of modern medicine: the emergence of antibiotic-resistant bacteria, including dangerous E. coli strains that account for millions of bladder infections each year, as well as resistant types of salmonella and other microbes.”

The Times article added that, “Now, after decades of debate, the Food and Drug Administration appears poised to issue its strongest guidelines on animal antibiotics yet, intended to reduce what it calls a clear risk to human health. They would end farm uses of the drugs simply to promote faster animal growth and call for tighter oversight by veterinarians.

“The agency’s final version is expected within months, and comes at a time when animal confinement methods, safety monitoring and other aspects of so-called factory farming are also under sharp attack. The federal proposal has struck a nerve among major livestock producers, who argue that a direct link between farms and human illness has not been proved. The producers are vigorously opposing it even as many medical and health experts call it too timid.”

World Hunger

Javier Blas reported yesterday at the Financial Times Online that, “The number of chronically hungry people will decline 10 per cent this year, the first fall since 1995, said the UN, while warning the global agreement to cut the percentage of people suffering from hunger by 2015 was in jeopardy [related graphs here and here].

“The recent spike in cereal, meat and sugar prices, which has pushed global food prices to a two-year high, could further derail recent progress, the UN’s Food and Agriculture Organisation said.”

The FT article added that, “The Rome-based agriculture body said a ‘more favourable economic environment’ in developing countries this year, coupled with lower prices than during the 2007-08 boom, had cut the total number of undernourished people to about 925m, down nearly 10 per cent from a peak of more than 1bn last year.

“Jacques Diouf, FAO director-general, warned that the estimate for this year did not take account of the recent increases in wheat and other food prices.”

Meanwhile, Bloomberg writer Wendy Pugh reported yesterday that, “Wheat exports from Australia, the fourth-largest shipper, may surge to the highest level in more than a decade after rains boosted this year’s harvest, according to revised predictions from the government’s forecaster.

“Output may be 25.1 million metric tons in 2010-2011, compared with a June estimate of 22.1 million and last year’s harvest of 21.7 million, the Australian Bureau of Agricultural and Resource Economics-Bureau of Rural Sciences forecast in a report today. Exports may surge to 18.4 million tons, the second-highest level on record, according to the report.”

Food Safety

Gardiner Harris and William Neuman reported in today’s New York Times that, “A major egg producer linked to an outbreak of salmonella that has sickened more than 1,500 people conducted tests as far back as 2008 that indicated the possible presence of the dangerous bacteria in its henhouses, according to records released on Tuesday by Congressional investigators.

The records show that there were 73 instances over about two years in which sponges swabbed on egg conveyor belts and other areas in Wright County Egg’s barns showed the presence of salmonella bacteria, including the strain that infects eggs and causes human illness. In at least one case, further tests showed that the toxic form, Salmonella enteritidis, was present.

Records the company provided to Congress, however, ‘did not show whether Wright County Egg took appropriate steps to protect the public after receiving the positive test results,’ Representative Bart Stupak, a Michigan Democrat who is chairman of the House Subcommittee on Oversight and Investigations, wrote in a letter this week to Austin J. DeCoster, the owner of the company.”

Meredith Shiner reported yesterday at Politico that, “Senate Democrats say they are on the brink of passing a sweeping food safety overhaul the House approved more than a year ago — but Sen. Tom Coburn (R-Okla.) is set to block a final push from the Health, Education, Labor and Pensions Committee to reach a consent agreement on the bill.

“Majority Leader Harry Reid (D-Nev.) told reporters Tuesday he believed the bipartisan legislation — which gained momentum over recess as thousands of Americans fell ill from more than half a billion contaminated eggs — could pass within the next 24 hours. Sources close to the situation say committee staffers are working to fashion an agreement acceptable to the Oklahoma Republican.”

The article added that, “”On food safety legislation, I thought we had all that cleared, but there’s still a Republican senator saying ‘no.’ We hope within the next 24 hours he will say yes. That’s where we are,’ Reid said Tuesday afternoon.

A top GOP aide, however, said that Reid has yet to approach Minority Leader Mitch McConnell (R-Ky.) with any sort of time agreement and expressed skepticism that a deal was close.”

Biofuels

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Environmental Protection Agency Administrator Lisa Jackson offered no timeframe Monday for her agency’s decision on allowing 15-percent blends of ethanol, but did stress the importance of ethanol to the nation’s energy production, rural economy and reducing greenhouse-gas emissions.

“Speaking to about 90 people at Growth Energy’s legislative conference, Jackson said the timeframe to make a decision on Growth Energy’s waiver request that would allow blenders to sell E-15 ethanol continues to hinge on the Department of Energy completing its testing on vehicles. Final test results on 2007 and newer automobiles are scheduled to be done by the end of the month, she said.”

1099 Issue

An update posted yesterday at CQPolitics reported that, “The Senate on Tuesday rejected two different proposals to eliminate or reduce the burden associated with a tax-compliance reporting requirement in this year’s health care law.

“The two proposals were offered as amendments to a small-business bill. Senators voted 46-52 against invoking cloture — or limiting debate — on a Republican plan, and they voted 56-42 against limiting debate on a Democratic alternative. Sixty votes are needed to invoke cloture.

“Current law requires businesses, beginning in 2012, to report annually to the IRS any vendor receiving more than $600 in a tax year. Critics of the requirement say it places a large paperwork burden on many businesses.”

See also a related news release on this development yesterday from Nebraska GOP Senator Mike Johanns.

Climate Policy

Darren Samuelsohn reported yesterday at Politico that, “The Obama administration scored a minor victory Tuesday when Senate Democrats abandoned plans for a committee vote that could have handcuffed its ability to write climate regulations.

“The Appropriations Committee canceled Thursday’s markup of the fiscal 2011 spending bill for the Environmental Protection Agency and Interior Department. Republicans were optimistic they would win on an amendment targeting the Environmental Protection Agency’s global warming authority because of help from moderate and conservative Democrats.”

Ben Geman reported yesterday at The Hill’s Energy Blog that, “EPA Administrator Lisa Jackson on Tuesday accused energy industry lobbyists of wildly inflating the impact of looming climate change regulations on the U.S. economy.”

“[D]ow Jones reports that Jackson swung back Tuesday at a symposium marking the 40th anniversary of the Clean Air Act. ‘We are not going to fall victim to another round of trumped-up doomsday predictions,’ she said, according to the Dow Jones account.”

Corn Sugar

Emily Fredrix reported in today’s Washington Post that, “The makers of high-fructose corn syrup asked the federal government Tuesday for permission to sweeten its image with a new name: corn sugar.

“The Corn Refiners Association wants to use the name on food labels. The Food and Drug Administration could take two years to render a decision, but in the meantime, the industry has begun using the term in its advertising – in an online marketing campaign, at www.cornsugar.com, and on television.

“Corn syrup is used in soft drinks, bread, cereal and other products. Americans’ consumption of the sweetener has fallen to a 20-year low because of concerns that it is more likely to cause obesity or otherwise more harmful than ordinary sugar, fears that are supported by little scientific evidence.”

Keith Good

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