FarmPolicy

December 15, 2019

WASDE (Food Security); Biofuels; Farm Bill; and Political Notes

WASDE (Food Security)

Yesterday, USDA’s National Agricultural Statistics Service (NASS) released its Crop Production report, which indicated that, “Corn production is forecast at 12.5 billion bushels, down 1 percent from the October forecast and down 4 percent from last year’s record production of 13.1 billion bushels [related graph]. As of November 1, yields are expected to average 154.3 bushels per acre, down 1.5 bushels from the previous month and 10.4 bushels below last year’s record of 164.7 bushels.

The NASS report added that, “Soybean production is forecast at a record high 3.38 billion bushels, down 1 percent from the October forecast but up slightly from last year [related graph]. Based on November 1 conditions, yields are expected to average 43.9 bushels per acre, down 0.5 bushel from last month and down 0.1 bushel from last year’s record high yield.

Also yesterday, the World Agricultural Outlook Board (WAOB) released its monthly World Agricultural Supply and Demand Estimates (WASDE) report, which incorporated the NASS production report.

The WASDE report included this overview table of corn supply and demand variables, and stated that, “The season-average farm price [for corn] is projected at $4.80 to $5.60 per bushel, up 20 cents on both ends of the range and well above the previous record of $4.20 per bushel in 2007/08.”

With respect to ethanol production, yesterday’s report indicated that, “Corn use for ethanol is raised 100 million bushels with record October ethanol production indicated by weekly Energy Information Administration data and favorable ethanol producer margins.”

Likewise, yesterday’s WAOB report included this overview table of soybean variables, and explained that, “The U.S. season-average soybean price range is projected at $10.70 to $12.20 per bushel, up 70 cents on both ends.”

With respect to wheat, yesterday’s WASDE update added that, “The projected season-average price received by producers is narrowed 5 cents on each end of the range to $5.25 to $5.75 per bushel. Heavy early season marketings and forward sales limit upside potential for the season-average farm price.”

To listen to a brief overview analysis of some of yesterday’s WAOB indicators from University of Illinois Agricultural Economist Darrel Good, just click here (MP3- 5:17).

Gregory Meyer reported yesterday at The Financial Times Online that, “The spectre of inflation loomed over agricultural markets after the US slashed key crop forecasts and warned of shortfalls in grains.

“The agriculture department on Tuesday cut estimates of US corn yields for a third successive month, forecast record soyabean exports to China and warned of the slimmest cotton stocks since 1925.

“‘The combined production shortfalls and dramatic potential stock drawdowns mean a much tighter supply picture than just a few months ago,’ the agency said in a separate grains report.”

The FT article added that, “Abdolreza Abbassian, senior grains economist at the UN’s Food and Agriculture Organisation in Rome, said the report was ‘alarming’.

“‘It reiterates the tightening of the overall situation as we go into 2011, which means eventually even those basic food commodities that haven’t risen so much could be influenced,’ he said. The FAO food price index is nearing the highs set in mid-2008.”

A Daily Radio News item from USDA yesterday noted that, “Rapidly rising farm and food prices in 2008 brought on many problems, including food riots around the world. Are we headed for another year like 2008?” To listen to this one-minute audio overview, just click here.

Liam Pleven, Carolyn Cui and Scott Kilman reported yesterday at The Wall Street Journal Online that, “Food markets also look tight. China will probably buy about one-third of the U.S. soybean crop, and the USDA said Tuesday inventories of corn and soybeans will fall sharply ahead of the 2011 harvest.

“Prices for both crops are up this year, with corn rising 39% and soybeans 27%. The thin supplies and high prices are striking because the U.S. soybean crop is still forecast to be a record, while the corn crop is expected to be the third-largest ever.

The world’s total grain reserves are still bigger than in 2007 and 2008, when soaring costs sparked riots and street protests across some parts of the world. Harvests of rice, a staple for the world’s poor, are also at record highs, helping keep prices low. And in the U.S., food companies are only starting to try to pass along higher costs to customers.”

P.J. Huffstutter and Tom Petruno reported today at the Los Angeles Times Online that, “This latest run-up in commodities, which began in late August, so far has boosted prices only modestly for consumers. But next year the impact could be far more serious, particularly if harvests for major crops are poor, Wall Street and agricultural analysts warned.

“Retail food prices have already started to rise after remaining relatively flat for the first half of the year, said Ephraim Leibtag, an economist with U.S. Department of Agriculture’s Economic Research Service.

The agency forecasts that overall inflation for food prices, projected at 0.5% to 1.5% this year, in 2011 will range from 2% to 3%. ‘But some segments — such as dairy and meat — will be higher than that,’ Leibtag said.”

The LA Times article noted that, “General Mills Inc., citing higher costs for grain and other ingredients, is raising prices on some of its breakfast cereals this month and some baking products in January. Kraft Foods Inc. said during a call with analysts last week that it had raised or planned to raise prices on about 40% of its products sold in the U.S., including coffee and cheese.”

Biofuels

Reuters writer Timothy Gardner reported yesterday that, “Livestock producers and food industry groups filed a suit on Tuesday seeking to overturn a U.S. decision to allow higher levels of ethanol in gasoline, saying it could push up food prices.

“The Grocery Manufacturers Association, the National Meat Association and other groups sued the Environmental Protection Agency, saying regulators overstepped their authority when they ruled last month that gasoline retailers could sell fuel containing up to 15 percent ethanol. That is an increase from the current allowable level of 10 percent.

“The EPA ruled that cars built in 2007 and later could burn the fuel, known as E15.”

The article noted that, “The EPA defended its action. ‘First and foremost, EPA’s decision was based on strict adherence to the Clean Air Act and grounded firmly in science,’ said Betsaida Alcantara, a deputy press secretary at the agency.”

Mr. Gardner pointed out that, “Growth Energy, the ethanol industry group that had asked for the E15 waiver, said that food companies, not ethanol production, have raised food prices.

“‘In 2008, these big food companies gouged consumers while trying to shift the blame to America’s ethanol producers and farmers, so we’re not surprised by their actions today,’ said Tom Buis, the head of Growth.”

Farm Bill

Steve Baragona reported yesterday at the Voice of America (VOA) Online that, “After this month’s U.S. elections, Republicans are poised to take control of the House of Representatives with the promise to cut federal spending. The billions spent supporting American farmers are a ripe target for some.”

The article noted that, “The most objectionable of the farm subsidies, [David de Gennaro with the Environmental Working Group] says, is the roughly $5 billion a year that U.S. farmers receive in so-called direct payments. They get that money whether they are hurting or prospering.”

The VOA update added that, “Meanwhile, the United States is $13 trillion in debt. That’s why even the nation’s largest farm groups expect those direct payments to come under greater scrutiny.

“National Farmers Union President Roger Johnson says, ‘It is very hard to justify making these payments during good years. That’s why we would argue that you should have programs to help when times are tough for those farmers and spend these scarce resources just where they are really needed.’”

Mr. Baragona pointed out that, “‘Reducing the direct payments and redirecting the money to other kinds of farm support could actually be detrimental to the world trading system and detrimental to the interests of farmers in other countries,’ says David Orden with the International Food Policy Research Institute, ‘because they are more trade-distorting.’”

“[Dr. Orden] admits it doesn’t look good politically to be paying farmers when prices are high. But he is skeptical that the policy will change,” the article said.

“‘The history of us cutting support for farmers in the U.S. under Democratic or Republican Congresses is not very strong,’ [Dr. Orden] says. ‘And so I don’t think we can take the new Congress as an indication that there will clearly be cuts in farm spending.’

“[Dr. Orden] notes that in 1994, the last time Republicans swept into Congress on a platform of cutting spending, farm subsidies actually went up.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “House Agriculture Committee Chairman Collin Peterson is worried that Republicans will propose a revival of Freedom to Farm, the 1996 farm bill that was supposed to end some farm payments but was later revised at great expense when prices plummeted.

“In a wide-ranging post-election interview last week, Peterson, D-Minn., said the conditions for writing the 2012 farm bill — high commodity prices and a federal budget crisis — will be so similar to 1996 that he believes Republicans will once again propose ending or dramatically reducing price-triggered payments on the theory that they will no longer be needed because world crop prices will remain high.

“The Republican-led Congress put Freedom to Farm in place in 1996, but within two years, farm prices collapsed and Republican-led congresses increased payments. In the 2002 farm bill, Congress revived some of the price-triggered payments and made some of them more generous in 2008. Commodity prices have been so high since 2008, however, that payments under those programs have been low.”

Mr. Hagstrom indicated that, “But Peterson predicted the Republican takeover will mean that one controversial element of the Freedom to Farm program, the almost $5 billion in direct payments per year that crop producers get whether prices are good or bad, will survive.

“Peterson has been encouraging farm leaders to think about whether the money could be spent more wisely on other programs such as crop insurance, but House Agriculture ranking member Frank Lucas, R-Okla., who is in line to become chairman, has defended the direct payments, which are popular with Southern farmers.

Peterson has argued it would be possible to establish a better safety net by using the direct payment money to improve the crop insurance program or develop other alternatives, but he said last week, ‘That’s over with now. With Lucas in there, direct payments will be golden. It’s not the most elegant, but it works. I am not going to fight that fight.’”

Congressional Quarterly writer Ellyn Ferguson reported recently that, “Rewriting federal farm programs will still demand most of the [agriculture] committee’s attention over the next two years, and [Rep. Frank] Lucas plans to expand on hearings held by the current chairman and future ranking Democrat Collin C. Peterson of Minnesota into the effectiveness of federal farm policies. Lucas said he will particularly focus on 37 programs set to expire with the current farm law in 2012. They cost almost $9 billion annually, and continuing them at even their current rate of spending would add to the budget deficit, which makes them targets for savings.”

Reuters writer Christine Stebbins reported on Monday that, “The Farm Credit System (FCS) and the U.S. farm bill, two frequent targets of conservative attacks on government spending and farm supports, will likely see little change despite the big win for Republicans in U.S. mid-term elections, a top critic of the FCS said on Monday.”

Meanwhile, Alexander Bolton reported yesterday at The Hill’s Briefing Room that, “Sen. Kent Conrad (D-N.D.) told reporters Tuesday that he may step down as chairman of the Senate Budget Committee to take the helm of the Agriculture panel.

“‘I represent the state of North Dakota and I’m talking to constituents and talking to colleagues about where do people think it would be most valuable for me to be,’ he said. ‘Those conversations are continuing.’”

Reuters writer Charles Abbott reported yesterday that, “Now the Budget Committee chairman, Conrad, of North Dakota, has seniority over Debbie Stabenow of Michigan, who has declared her interest in the [Senate Ag Committee leadership] post. Democrats could decide the issue as early as next week.”

The article stated that, “Conrad is a backer of traditional farm supports but has supported stricter limits on how much a farmer can collect in subsidies each year. Stabenow is a supporter of land stewardship and programs for fruit and vegetable growers.”

In other Farm Bill related news, AP writer Mary Clare Jalonick reported today that, “First lady Michelle Obama’s campaign for healthier school lunches could be revived in Congress after two key Democrats said they will drop opposition to using funding from food stamps to pay for it.

“Reps. Rosa DeLauro of Connecticut and Jim McGovern of Massachusetts have said they will support House passage of a $4.5 billion child nutrition bill that passed the Senate earlier this year. Backed by some anti-hunger groups, the two lawmakers led opposition to passage of that version before the election because it is partially paid for with $2.2 billion taken from future funding for food stamp programs.

“Since then, a push from the White House, which promised to find other legislation to trim costs, and political reality after the midterm elections – the bill would probably not fare as well when Republicans take over the House in January – appear to have softened opposition.”

Political Notes

Patrick McGreevy reported today at the LA Times Online that, “In the Central Valley, Republican cherry farmer Andy Vidak held a 27-vote lead over [House Ag Committee Member] Rep. Jim Costa (D-Fresno) on Tuesday, but tens of thousands of ballots remain to be counted to determine whether the political neophyte will harvest the seat from the three-term incumbent.”

David Catanese reported yesterday at Politico that, “Montana Republicans expect Bozeman businessman Steve Daines to announce Saturday that he will challenge Democratic Sen. Jon Tester in 2012.

“State GOP chairman Will Deschamps told POLITICO on Tuesday he believes Daines will become the first Republican to enter the race, although he has not spoken directly with him.”

The article added that, “Tester won his first term in 2006, defeating GOP Sen. Conrad Burns by less than a percentage point. His victory came in one of the closest races in the country that year.”

And Kevin Bogardus reported yesterday at The Hill Online that, “‘[Rep. Frank Lucas] did not have to learn about ag. He grew up ag,’ one Republican lobbyist said of Lucas. ‘I suspect he will spend an enormous amount of time on oversight because of these concerns that production agriculture have about increased regulation, whether it is from EPA or [the Agriculture Department] or somewhere else.’

“Lobbyists considered close to Lucas include Tim Sanders, a former House Agriculture Appropriations subcommittee clerk and staff director now at Cornerstone Government Affairs; John Bode with Olsson Frank Weeda; Colin Woodall, who lobbies for the National Cattleman’s Beef Association; Chandler Keys, a lobbyist for JBS USA, a multinational beef and pork processor; and Randy Russell, a former Reagan Agriculture Department chief of staff at Russell Baron.”

Keith Good

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