FarmPolicy

July 24, 2014

Farm Bill; Political Notes; EPA Issues (Climate Change); Trade; and Biofuels

Farm Bill

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Not quite two years into the 2008 farm bill, the idea of giving up a definite payment for a better risk management option is largely failing to gain traction with farmers.

“Overall, the two prodigy programs of the farm bill — the Average Crop Revenue Election program (ACRE) and Supplemental Revenue program (SURE) — are not doing what policymakers expected.

Testimony from farmers and actions by the Obama administration have highlighted that farmers prefer direct payments over ACRE.”

Yesterday’s article noted that, “In terms of costs, it’s difficult to grade ACRE. The program was expected to generate more than $1 billion in savings over the five years of the farm bill, largely through the 20 percent cut in direct payments. But there aren’t enough farmers signing up for the program to make that savings work.

“On top of that, farmers repeatedly say both ACRE and SURE are just as complicated as heck.”

Mr. Clayton explained that, “Altogether, about 35 million acres are enrolled in ACRE, about 8 percent of base acres when projections had pegged farmers would enroll anywhere from 25 percent to 50 percent of base acres in some crops.

“‘Farmers have voted, basically, from looking at that,’ said Keith Collins, former USDA chief economist and now a crop-insurance industry consultant. ‘You are basically looking at one-tenth of the eligible farms, one-tenth of the eligible acres opted for the ACRE program. When you look at it and you ask producers why they didn’t participate, they say ‘Well, I am giving up something that is certain, the direct payment, for something that is uncertain.’ And that uncertainty becomes even greater the lesser the farmers’ yield is correlated with the state yield.’

“Also, bankers aren’t fond of ACRE. A banker will take a direct payment as collateral for operating loans, but not an ACRE guarantee.”

In a related article from yesterday, Chris Clayton reported that, “A change of party control in the House of Representatives likely ensures direct payments will be protected in the next farm bill, said current House Agriculture Committee Chairman Collin Peterson.

“Peterson, D-Minn., would lose his chairmanship and becoming ranking minority member on the Agriculture Committee in January if Tuesday’s elections go as expected and Republicans take the House. Peterson’s push to pass a farm bill next year will likely end, as will his attempt to put more emphasis on crop insurance rather than traditional commodity programs. Republican Rep. Frank Lucas of Oklahoma is expected to chair the Agriculture Committee.

“‘Lucas doesn’t want to move as quickly,’ Peterson said in a phone interview Friday. ‘He has got this idea it will be better if he waits. I don’t think that’s true, but that’s his prerogative. I think direct payments are a sure deal in the next farm bill. There won’t be any change in direct payments.’” [Note: See related item on Rep. Lucas and direct payments here.]

Yesterday’s DTN article indicated that, “‘We’ll try to be helpful and try to work with Republicans on the committee. It doesn’t really change much. It just changes who sets the agenda. I couldn’t pass a bill without Lucas’ support and he can’t pass a bill without me. So we have to work together.’

“Working together on the committee may depend on the shift in party numbers on the committee and whether leaders in both parties put reasonable people on the committee, Peterson said.

“‘If they put reasonable people on there, then at least we can work on the work of the committee,’ he said. ‘There’s going to be a core group there and we will work with the Republicans,’ Peterson said. ‘If the liberal Democrats don’t like it then they are going to have to take us on on the floor.’”

Political Notes

In a more general look at today’s elections, Alex Isenstadt reported yesterday at Politico that, “Political handicapper Charlie Cook is delivering an unwelcome pre-Election Day surprise for 11 House Democratic candidates in tough races, downgrading their prospects for electoral survival.

On Monday, Cook announced that he was shifting four Democratic-held seats from the ‘Toss Up’ category into the ‘Lean Republican’ category – including incumbent Reps. Dina Titus of Nevada, Harry Teague of New Mexico and Frank Kratovil of Maryland [who serves on the House Ag Committee] – freshmen who have been high on the GOP target list practically since they arrived in Washington.

“Cook also placed the Arkansas 1st District seat currently held by retiring Democratic Rep. Marion Berry, where Democrat Chad Causey is running against Republican Rick Crawford [a farm broadcaster], into the ‘Lean Republican’ field.”

The Politico article added that, “But Cook also laid down a warning marker for several veterans, placing House Transportation Committee chairman and 18-term Rep. Jim Oberstar of Minnesota, 14-term Rep. Rick Boucher of Virginia and seven-term Rep. Mike McIntyre [who serves on the House Ag Committee] into the Toss Up category.”

Bloomberg writer Lisa Lerer reported yesterday that, “On a windy Tuesday afternoon at the Louisville Sportsman’s Club in Ohio, U.S. Representative John Boccieri [who serves on the House Ag Committee] smoothly shot down a fluorescent orange target soaring across the long, grass-covered firing range.”

The article stated that, “Boccieri’s anger — and a resume that includes service in two wars and opposition to abortion that plays well in the district — may not be enough to save the 41-year-old lawmaker from getting swept away in a Republican wave.”

And Shailagh Murray and Paul Kane reported in yesterday’s Washington Post that, “But just as quickly as Midwestern voters embraced Obama and the Democrats, they are now recoiling from them. The sagging economy has a lot to do with it, of course. More Midwestern manufacturing plants have shut down over the past two years than when George W. Bush was president, and Democratic candidates here are struggling.

“On Tuesday, Obama and Democrats will find out whether voters who live along the industrial corridor traced by Interstate 70 from Kansas City through Pennsylvania still hold out hope that the president and his party can revive a region now 30 years past its glory days. Republicans are betting not. GOP pollster Glen Bolger predicts the Midwest will be a ‘killing field’ for Democrats in 2010.

“It wouldn’t be the first time. The central battleground of American politics for the past three decades, the Midwest has played an outsize role in determining the shape and direction of the federal government – and who sits in the Oval Office.”

With respect to the executive branch and today’s vote, an update posted recently at the Red River Farm Network Online stated that: “Mid-Term Elections Important for Agriculture, Says Vilsack — In an interview with the Red River Farm Network, Agriculture Secretary Tom Vilsack said agriculture and Rural America has a lot at stake in the mid-term elections. ‘My concern is that Rural America has a shrinking population and there are fewer and fewer people in Congress that understand and appreciate the struggles of those who farm and work and live in small towns,’ said Vilsack, ‘My hope is that we continue to have, even if they are small in number, people who are mighty in passion for Rural America.’ For the most part, the farm economy is strong. Yet, the polls indicate Democratic lawmakers in farm states, including North Dakota and South Dakota, are vulnerable. ‘It may be because that folks aren’t appreciative of the nature of what’s happening in the ag economy because there has been a lot of tough news in the general economy.’ Vilsack said US agriculture will enjoy a 24 percent increase in net farm income this year and the second-best year ever for farm exports. The complete interview with Vilsack can be found at http://www.rrfn.com/indepth/110110Vilsack.MP3 (about nine minutes)

In addition, Bob Cusack reported yesterday at The Hill Online that, “Republicans on Capitol Hill crave the oversight power that would come with winning a House majority. It would arm the GOP with something they have not had in four years: subpoena power.”

The Hill article noted that, “Here are the top 10 administration officials (outside of the White House) who have the most on the line,” and among those listed included:

“- EPA Administrator Lisa Jackson. With climate change legislation on life support, Republicans will likely act to ensure the Environmental Protection Agency (EPA) will not seek to curb carbon emissions through a rulemaking. Jackson has aggressively led EPA by pursuing a broad agenda. But that has drawn salvos from many Republicans and even a few Democrats, including Sen. Jay Rockefeller (W.Va.).”

“-USTR Ron Kirk. The Office of the U.S. Trade Representative hasn’t had a lot to do for two years, but that could change with a House Republican majority. Three pending trade deals that stalled under Speaker Nancy Pelosi (D-Calif.) could move next year and provide a rare bit of cooperation between Republicans and the White House. Kirk is expected to be more visible in the next Congress, though some GOP freshmen in 2011 won’t be anxious to move trade pacts.”

EPA Issues- Climate Change

Reuters writer Richard Cowan reported yesterday that, “Republicans are poised to make big gains in Tuesday’s congressional elections, putting them in position to reverse Democrats’ drive for comprehensive climate change legislation.

“President Barack Obama’s Democrats, who largely support legislation requiring the first mandatory cuts in greenhouse gas pollution, currently hold majorities in both chambers of the U.S. Congress.

A Republican takeover of either chamber, or even large gains by the party known for opposing climate change legislation, will make it harder, or impossible, for Obama to win legislation imposing mandatory reductions of greenhouse gas emissions from smokestacks and tailpipes.”

Mr. Cowan noted that, “Senator John Rockefeller, a Democrat representing West Virginia, is pushing for a vote during the ‘lame duck’ session of Congress planned for mid-November that would suspend Environmental Protection Agency regulation of greenhouse gases, including those emitted from burning coal, for two years. Rockefeller says a two-year pause is needed to give the coal industry time to perfect clean technologies.

“Passage would prevent EPA from regulating pollution from large factories and utilities starting in January.

“Of 100 senators, 47 voted in June to permanently strip EPA of its power to regulate greenhouse gas emissions.”

The article pointed out that, “If Republicans take control of the House of Representatives, they likely would try to stop EPA regulation of carbon by explicitly banning the use of EPA funds to administer such regulations. Annual EPA funding bills that Congress writes would be the avenue. Appropriations bills usually begin moving through the House around March or April.”

Meanwhile, Washington Post writer Juliet Eilperin reported yesterday at the Post Carbon Blog that, “If you needed one more sign that a comprehensive climate bill wasn’t going to move in 2011, look no farther than the fact that Kathleen Frangione is leaving Sen. John Kerry’s (D-Mass.) staff on the Foreign Relations Committee.

“Frangione, who performed the thankless task of spearheading the ultimately unsuccessful effort this Congress to pass a bipartisan climate and energy bill, will start work Nov. 8 at McBee Strategic, a Washington D.C.-based lobbying and communications firm.”

In a separate update, Juliet Eilperin reported yesterday at The Washington Post Online that, “As the next round of U.N. climate talks approach this month in Cancun, Mexico, the Obama administration finds itself in an awkward position: pushing its enduring commitment to bold climate action even as the prospects for comprehensive legislation have evaporated at home.

“The atmosphere is very different from a year ago, when U.S. negotiators headed to Copenhagen touting the recent success of a House-passed climate bill. Now that legislation has died in the Senate, and with candidates poised to win this week who are more likely to focus on immediate economic concerns than on long-term environmental and energy ones, these constraints are shaping U.S. climate diplomacy.

Administration officials might not be able to deliver on all the climate assistance they have promised to give poor countries by 2012 and have questioned some financing proposals linked to longer-term foreign aid. They are considering whether to challenge China’s renewable energy subsidies as violating international trade rules, and have objected to Europe’s plan to force airlines operating there to pay for their carbon emissions.”

Trade

Reuters writer Patricia Zengerle reported yesterday that, “Negotiators will put ‘maximum effort’ toward resolving objections in the Congress to a U.S.-South Korean free-trade agreement by the time President Barack Obama goes to Seoul on November 10, an administration official said on Monday.

“The United States and South Korea are trying to resolve beef and auto concerns blocking U.S. congressional approval of the trade pact by November 10. Obama meets with President Lee Myung-bak in Seoul on November 11.”

Biofuels

A news release yesterday from Growth Energy stated that, “Jim Nussle, former eight-term Congressman and Director of the Office of Management and Budget under President George W. Bush, was named President and Chief Operating Officer of Growth Energy, the coalition of ethanol supporters announced today. Nussle, who has served on the Board of Directors of Growth Energy since February 2009, started in the newly-created position on November 1.”

DTN writer Todd Neeley reported yesterday (link requires subscription) that, “Today, the blenders’ credit, or volumetric ethanol excise tax credit, gives fuel blenders 45 cents for every gallon of ethanol blended with gasoline. The credit cost the federal budget, and essentially U.S. taxpayers, was $6 billion in 2009, according to a Congressional Budget Office report.

“While there is continued debate about who receives the most benefit from that credit, ethanol plants or oil companies (see Oil vs. Ethanol – 2 for more on this issue), it is one of many federal programs that promotes ethanol use.

Considering all tax breaks and other incentives, including those open to all industries, the ethanol industry receives at least $16 billion in public support, DTN’s research concluded. The actual number is higher due to the hundreds of state-level subsidies, for which no complete list has been compiled, according to DTN’s research.”

The DTN article stated that, “Farmers are watching closely what happens to subsidies for ethanol, especially as several important ethanol subsidies are set to expire Dec. 31. That includes VEETC, the small producers’ tax credit and the 54-cent ethanol import tariff.

“But there are other ways that ethanol incentives help farmers.”

Mr. Neeley explained that, “DTN used the Environmental Working Group subsidy database to calculate an estimated portion of corn and sorghum crop subsidies that benefit the ethanol industry, http://farm.ewg.org.

“DTN used crop year 2008 because it provides the most complete and recent data available.

“Corn growers received about $4.2 billion in federal direct payments and crop insurance premium subsidies in 2008, according to EWG.

The 2008 corn crop came in at about 12.1 billion bushels, according to USDA, with about 3.7 billion bushels used to produce ethanol. So ethanol’s portion of corn subsidies totaled about $1.3 billion, or around 31 percent of federal subsidies to corn.”

An update posted on Friday at the AgMag Blog (Environmental Working Group- EWG) indicated that, “In a fall season rife with bad news for the corn ethanol industry, its lobby has been hyping a new partnership with NASCAR. According to USA Today, NASCAR CEO and chairman Brian France announced the sponsorship before the Oct. 16 Sprint Cup race at Charlotte Motor Speedway.”

The EWG update added that, “NASCAR is ‘not exactly certain’ of the supposed environmental benefits of corn ethanol but apparently they’re sure there is some. At EWG, we are certain that using corn ethanol as an alternative to gasoline is hardly a green solution to our energy needs. We know that between 2005 and 2009, U.S. taxpayers spent a whopping $17 billion to subsidize corn ethanol blends in gasoline – that produced a paltry reduction in overall oil consumption equal to a 1.1 mile-per-gallon increase in fleet-wide fuel economy.”

The AgMag item also pointed out that, “Last month (Sept. 17), The Associated Press reported that NASCAR’s corporate sponsorships have been drying up due to the sour economy. This ‘partnership’ is really about NASCAR teaming up with ethanol for financial reasons, not environmental concerns. When approached in 2007 about using ethanol — before the financial crisis — The Charlotte Observer reported that NASCAR officials were ‘lukewarm’ to the idea: ‘A NASCAR spokesman saying because ethanol is not as efficient as gasoline, larger fuel tanks or more frequent pit stops for refueling would be necessary, and that would constitute a safety concern.’”

Keith Good

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