Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “Agriculture Secretary Tom Vilsack vigorously defended federal farm subsidies today, saying they’ve enabled American’s to have relatively cheap food, a claim strongly disputed by economists.
“Even though prices for most subsidized crops are soaring this year, Vilsack said farmers still need subsidy program to protect them from future drops in prices.
“‘Who benefits ultimately for all of this? I would argue that it’s not the 250,000 to 270,000 farmers who benefit from this structure. It is actually the rest of us that benefit,’ Vilsack said in a meeting with the Register editorial board. He said Americans have more disposable income than people in the rest of the world because U.S. consumers spend just 10 to 15 percent of their earnings on food.”
Yesterday’s update added that, “But farm subsidies actually have only a ‘very, very small’ effect on what U.S. consumers pay for food, said Patrick Westhoff, a University of Missouri economist and author of a recent book, ‘The Economics of Food: How Feeding and Fueling the Planet Affects Food Prices.’
“Because subsidies ‘don’t affect production levels all that very much, they probably don’t affect food prices all that much.’”
Mr. Brasher noted that, “Vilsack said that the administration continues to want a cap on payments to limit the amount of subsidies flowing to the largest farmers. And he said that some of the $5 billion in fixed payments that now go out to grain and cotton farmers annually could be shifted could be directed into other forms of subsidies.
“But he said farmers need a safety net of subsidies that is ‘solid and it has to be strong and it has to be sufficient.’ The Iowa Farm Bureau Federation recently ignited a debate about the payments among farm groups. The Farm Bureau says the payments are difficult to defend politically and has proposed to shift them into payment systems that could be tied to fluctuations in farm revenue.”
A recent Congressional Research Service Report (CRS), “Actual Farm Bill Spending and Cost Estimates,” by Jim Monke and Renee Johnson, indicated that, “Much of the 2008 farm bill expires in 2012 or with the 2012 crop year. In anticipation of this expiration and the desire by some for a restructuring of commodity supports (for example, to better reflect whole-farm risk management), the House Agriculture Committee began hearings on the next farm bill in April 2010. Given a strong belief by most observers that budget reconciliation might be necessary before the 2008 farm bill expires, the Agriculture Committees could begin marking up a new farm bill in 2011. This could allow any policy changes in a new farm bill—including new costs and savings offsets—to be coordinated with budget reconciliation requirements. The Administration already has submitted budget proposals for FY2011 to reduce farm supports, an approach at odds with that of many farm sector advocates, who support the status quo.
“The budget situation for a new farm bill is going to be more like that for the 2008 farm bill than for the 2002 farm bill. The budget resolution that funded the 2002 farm bill was written during a brief period of budget surplus at the turn of the millennium, and allowed the Agriculture Committees to spend $73 billion more than baseline over the 10-year budget window. In contrast, the 2008 farm bill was basically budget-neutral. The 2008 farm bill was unusual in that tax provisions outside the jurisdiction of the Agriculture Committees were used to create offsets for new provisions, presumably for nutrition programs. The procedural difficulties of reaching budget and policy compromises with multiple committees of jurisdiction (particularly the House and Senate Agriculture Committees and the House Ways and Means and Senate Finance Committees) prolonged the development of the farm bill. Given these difficulties in 2007 and 2008, House Agriculture Committee Chairman Peterson has expressed a desire to keep the finances of the 2012 farm bill within the jurisdiction of the Committee of Agriculture.”
The CRS report added that, “A future budget resolution, possibly the FY2012 budget resolution, could be used to set the parameters against which a new farm bill could be developed and scored. However, certain intervening policy changes in other active legislation could have consequences for a future farm bill baseline. For example, in March 2010, the Senate Agriculture Committee approved a bill to increase funding for child nutrition programs (part of the reauthorization of the Child Nutrition Act, P.L. 108-265) that used the Environmental Quality Incentives Program (EQIP) as an offset. If adopted, this action could reduce baseline levels for the next farm bill by reducing the amount of available funds in the EQIP baseline calculation.
“As Congress moves toward considering reauthorization of the omnibus farm bill, questions about the cost of the farm bill and policy considerations about different farm bill programs—each with sometimes different constituencies—will likely become more prominent.”
In other Farm Bill developments, a news release from late last month by Rep. Joe Pitts (R-Penn.) stated that, “[Rep. Pitts] introduced the Free Market Sugar Act, a bill to eliminate the USDA sugar program and stop federal government sugar purchases. Ending the program would save approximately $1.4 billion over the next ten years.
“Currently, the USDA runs a program that loans money to sugar producers and purchases sugar when the price is low. For instance, in 2000 the USDA purchased sugar at a cost of $500 million. According to the Department of Commerce, artificially high prices created by the sugar program have led to 90,000 jobs lost in sugar-using industries in the last decade.”
Robin Bravender reported this week at Politico that, “The Obama administration’s decision Wednesday to allow more ethanol in gasoline was met with fury from environmentalists and Big Oil, but it could help Democrats in the nation’s Corn Belt.
“Less than three weeks before Election Day, the Environmental Protection Agency issued a long-awaited decision to allow 15 percent of the corn-based fuel in gasoline in new cars – a major boost from the current 10 percent.
“The timing of the announcement seems aimed at shoring up Democratic support in Midwestern states that President Obama carried in 2008, such as Iowa, Illinois and Wisconsin, but where some of his fellow Democrats are now scrambling.”
The article stated that, “South Dakota Rep. Stephanie Herseth Sandlin (D) could use the help in her race against Republican Kristi Noem. And in Wisconsin, Democratic Sen. Russ Feingold, who has trailed Republican businessman Ron Johnson, may also reap some benefits.
“The decision could also offer welcome talking points for Midwestern House Democrats who are coming under fire in their districts for voting for the cap-and-trade climate bill that passed the House in 2009, [Barry Rabe, a professor of public policy at the University of Michigan] added.
Matthew L. Wald reported yesterday at the Green Blog (New York Times) that, “Will consumers want to buy E15, the ethanol blend that the Environmental Protection Agency says it will approve for cars in the 2007 model year and later? Will they even be able to find it?”
“A retailer who wanted to sell E15 could install another tank to store the inventory at a cost often running over $100,000. (Many retailers have multiple pumps, but they usually draw from just two tanks, premium and regular. Midgrade is blended by the pump from the two tanks.)”
The article pointed out that, “The new mixture presents an interesting choice for a gas station owner, who could make space for it by dropping premium. But some cars run only on premium, so it would mean swapping one set of customers for another.
“Retailers have been slow to install new fueling infrastructure for E85, the fuel that is 85 percent ethanol and 15 percent gasoline. Most of the pumps are in the farm belt, where they are often required by state governments. Yet most of the E85 vehicles are on the densely settled coasts. Retailers say that experienced customers know they cannot go as far on a gallon of E85 and figure that into their calculation of costs.
“The E.P.A.’s announcement that it would allow the new blend applies to a relatively small group of cars, about one in seven on the roads.”
Bob Meyer noted yesterday at Brownfield that, “The announcement by the Environmental Protection Agency that E15 can be used in 2007-and-newer cars will probably not mean the fuel will be available at your local gas station. Retailers say that is not enough potential cars to justify putting in additional tanks, pumps, etc.”
The Brownfield link included an audio interview on this issue with Steve Loehr, the Vice President of Operations for Kwik Trip; the company has 370 convenience stores in Wisconsin, Minnesota and Iowa which sold more than 80 million gallons of ethanol last year.”
A Daily Radio News Service item from USDA yesterday stated that, “Even if the EPA gives approval for use of E15 ethanol blends in gasoline for a much wider range of cars, one analyst says it will still take time for the approval to have any effect on the demand for ethanol.” The one-minute audio report includes comments from USDA Chief Economist Joe Glauber.
Meanwhile, Jay Heflin reported yesterday at The Hill’s Finance Blog that, “The Obama administration’s decision to increase ethanol limits for newer vehicles has prompted the Brazilian Sugarcane Industry Association (UNICA) to call for an end to tax credits used by domestic companies.
“‘Many U.S. ethanol groups have argued recently that after 30 years of tax credits and trade protections they are ready to compete without subsidies provided the government grants them greater access to America’s fuel pumps. With the EPA’s decision to increase ethanol limits by 50 percent for newer vehicles that day has arrived,’ said UNICA chief representative in North America Joel Velasco, in prepared remarks.”
DTN writer Todd Neeley reported earlier this week (link requires subscription) that, “In the eternal mudslinging between supporters and opponents of biofuels, ‘subsidies’ are one of the opponents’ biggest and most painful mud balls.
“‘If ethanol is such a good idea, why does it need government help?’ the opponents demand. Supporters retort that the oil industry is subsidized, too, but that argument often doesn’t seem to win much respect.
“It should. The oil industry receives substantial amounts of taxpayer support — by some definitions significantly more than ethanol — a months-long DTN investigation concludes.”
Mr. Neeley added in his detailed article that, “Looking at state and federal tax and other incentives available exclusively to the oil industry, DTN’s tally comes to $17.9 billion annually. The comparable figure exclusively for ethanol is $7.1 billion. This does not include tax credits and other incentives that both industries share, such as the blenders’ credit or VEETC.
“But oil also benefits from a variety of indirect taxpayer supports, including U.S. military spending to protect the Persian Gulf. Mark Delucchi, a research scientist from the Institute of Transportation Studies at University of California Davis, said in a study that oil’s share of that protection ranges between $6.9 billion and $28.8 billion.
“Using the most liberal definition of public financial support, including tax breaks on equipment depreciation and foreign investments, oil’s total benefit from the public treasury can be as much as 10 times that of ethanol.”
Javier Blas reported yesterday at the Financial Times Online that, “Only a short time ago, arable land seemed of little interest to anyone but farmers. But the 2007-08 food crisis, which saw the cost of agricultural commodities rising to an all-time high and food riots in countries from Haiti to Bangladesh, has changed appetites and investors and countries are now buying farmland.
“‘The magnitude and often speculative nature of land transactions observed recently has caught many actors by surprise,’ the World Bank says in its report ‘Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits?’ It adds: ‘Demand for land acquisition continues and may even be increasing.’
“With food prices rising again, interest in farmland is on the rise. And most experts, in the private and public sectors, believe the trend will continue, given that the world needs to increase food production by 70 per cent by 2050 to feed a rising and wealthier population.”
Dow Jones News writer Ian Berry reported yesterday that, “Use of genetically modified crops in Africa, where yields lag far behind the rest of the world, is a decision best left to individual nations, former United Nations Secretary General Kofi Annan said Thursday.
“Annan, in an interview, said high prices and safety concerns stand in the way of the adoption of genetically modified crops in Africa, which is the only continent yet to attain food self sufficiency.
“‘What is important is that these governments develop the (expertise) that is necessary to determine whether [genetic modification] poses problems for health,’ Annan said on the sidelines of the World Food Prize Conference in Iowa. ‘The decision of whether they use [genetic modification] or conventional methods is up to the government.’”
Yesterday’s article added that, “Annan said the recent run up in agricultural commodity prices will have an impact on African populations, given many people there already spend 70% to 80% of their salaries on food. Corn and wheat prices at the Chicago Board of Trade have soared in recent months on supply concerns in the U.S. and places such as Russia and Pakistan.
“‘If this continues, I think you’ll see some more social unrest,’ Annan said.
“He said the use of food crops for ethanol remains a concern. Annan has ‘no problem’ with Brazil’s use of sugar cane for ethanol, but questioned government subsidies for corn-based ethanol, which he said pushes food prices higher.
“‘Some people say it has no impact,’ he said. ‘I’m not convinced.’”
Jake Sherman and Robin Bravender reported yesterday at Politico that, “Republicans don’t even have the House majority yet, but Rep. Joe Barton is already making a play for a chairmanship his leadership is highly unlikely to give him.
“In his quest to lead the Energy and Commerce Committee, the Texas Republican is petitioning the Steering Committee that awards chairmanships to “clarify” whether the party’s six-year term limits for the position apply to time served in the minority. He’s already talking about investigations he’d like to launch and asserts that he’s got a ‘very good’ shot at the chairmanship.”
The article explained that, “But Energy and Commerce may not be one the Lone Star State wins. Michigan Rep. Fred Upton is talked about by Hill insiders and K Street sources as having the upper hand in the chairmanship battle. Florida Rep. Cliff Stearns and Illinois Rep. John Shimkus are also in the mix. Why so much maneuvering for a chairmanship before the election?
“The energy panel, under a Republican majority, could become the launching pad for ideological battles that would define a GOP House digging in on global warming, cap and trade, energy bills, health care repeals and a wide range of business regulations.”
And Ben Geman reported yesterday at The Hill’s Energy Blog that, “The top Republican on the House Energy and Commerce Committee is accusing the Environmental Protection Agency of rolling out air pollution rules that will cost various industries billions of dollars without fully weighing the economic effects.
“‘Just as appropriate implementation of the Clean Air Act is essential for protecting public health, appropriate consideration of the economic and employment impacts of regulations under the Act is essential for protecting the nation’s economic health,’ Committee ranking member Joe Barton (R-Texas) and Rep. Michael Burgess (R-Texas) said in a letter to EPA Thursday. Burgess is the top GOP member of the Oversight and Investigations Subcommittee.”
Reuters news reported yesterday that, “The U.N. panel of climate scientists agreed on Thursday to change its practices in response to errors in a 2007 report, and its chairman, Rajendra Pachauri of India, dismissed suggestions he should step down.
“At an October 11-14 meeting in Busan, South Korea, the 130-nation panel agreed to tighten fact-checking in reports that help guide the world’s climate and energy policies and to set up a ‘task force’ to decide on wider reforms by mid-2011.”