Farm Bill Issues
A recent Congressional Research Report (CRS) report (“What Is the ‘Farm Bill’?,” by Renee Johnson and Jim Monke, Dec. 10), noted at page six that, “The traditional approach to agricultural policy has been to focus on the farm commodity programs and variations of the long-standing farm safety net. The 2008 farm bill added revenue- based support to the commodity programs. In the past, counter-cyclical support was tied only to prices, but some farmers wanted payments to respond to low-yield situations even when market prices are high. The new program, called the Average Crop Revenue Election (ACRE), has been criticized as highly complex and not responsive enough to local conditions or some commodities. Participation has been lower than expected. Will the next farm bill continue the program or revise it to make it more attractive? Some would rather shift support dollars to better revenue-based crop insurance programs. Others prefer the status quo. The 2008 farm bill also added a ‘permanent’ disaster assistance program (Supplemental Revenue Assistance, SURE)—a pool of money for disasters without needing supplemental appropriations. This program also has met with mixed reviews, and continuation likely will be debated on policy and budget grounds.
“Calls from some groups to reform current farm policies are often based on arguments for the need for greater equitable distribution of support within the farming sectors. Farm program critics point out that farm bill dollars are not equitably shared across the sector. Subsidies flow to a limited number of staple commodities—mainly grains, oilseeds, cotton, milk, and sugar—and not to fruits, vegetables, or livestock. Also, subsidies are proportional to production, allowing larger farms to receive more than smaller ones. Critics want to address these imbalances.”
The CRS item added that, “One option could be to further tighten annual payment limits. Another option would be to use the available funding to better promote production of other farm commodities and domestic food systems. This might include increased fruits and vegetables for a range of domestic food programs, such as the National School Lunch Program (NSLP) and other programs. Other options might be to target support to a wider range of agricultural producers, such as smaller-sized farms, organic producers, local food systems, direct-to-market producers, and sustainable farming operations. Defenders of the status quo counter that U.S. farm policy is designed to ensure domestic productivity, global competitiveness, and food security—regardless of farm size—and that efficiency should not be penalized by reducing support to successful large operations.
“Rural development is invoked by some who seek a more equitable distribution of support. Critics of past farm bills say that rural development policy remains unfocused and under-funded. They argue that the farm bill’s emphasis on commodity programs ignores the fact that most farmers earn a majority of their incomes from nonfarm sources, that farm subsidies may go to landlords in non-rural areas, and that most rural residents are no longer farmers. Rural development supporters call for shifting resources into programs that expand the nonfarm economic base and support new sources of competitive advantage in rural areas. Proponents of the commodity programs argue that farm payments are a primary contributor to rural economic activity” (at page six).
An item posted on Thursday at the Western Farm Press Online pointed out that, “With the end of the 111th Congress this week, U.S. agriculture and the rice industry will see two of its strongest advocates departing. Sen. Blanche L. Lincoln, D-Ark., chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, has been a steadfast supporter of production agriculture since first being elected to the U.S. House of Representatives in 1992, representing Arkansas’ first congressional district.”
“In 1996, Rep. Marion Berry, D-Ark., followed Lincoln as the representative of the state’s first congressional district, the largest rice-growing district in the nation. Berry served on the House Committee on Agriculture and was instrumental in writing the 2002 farm bill. He later gained a seat on the powerful Committee on Appropriations.”
Last week’s article added that, “These two individuals have had a tremendous impact on U.S. agriculture and particularly on the rice industry in their state. From farm policy to trade policy, environmental policy to tax policy, and appropriations for key research activities, their impact will be felt for years to come.”
Secretary of Agriculture Tom Vilsack appeared last week on Iowa Public Television during a wide-ranging interview on the “Iowa Press” program (video replay, audio and transcript available here).
One portion of the conversation, regarding farm subsidies, went like this:
“[Radio Iowa News Director Kay Henderson]: Mr. Secretary, I’d like to have a discussion with you about farm subsidies, the future of them. This past week the U.S. Census came out and the result of that will be fewer rural representatives in Congress. How do you build support in Congress for the continuation of farm subsidies if there are fewer rural members in Congress?
“Vilsack: Well, I think there’s a couple of things. First of all, let’s take a look at how important rural America is to the rest of us. It is the source of our food, our fiber and an ever-increasing amount of our fuel. 85% of the surface drinking water is impacted by what happens in rural America. It is the place where it’s 16% of the population but 44% of the people serving in the military come from rural America. It is the heart and soul of this country. Because we have agricultural production that is the best in the world consumers have a tremendous advantage in America. We only spend about 10% to 15% of our paycheck for groceries. Part of the reason we do that is because we have a strong safety net for those producers who are faced with bad weather or bad markets. That allows them to stay in business. If we want to continue to repopulate the rural communities, if we want to return political strength to the rural parts of this country we’re going to have to revitalize the rural economy. Part of that is a strong safety net for agriculture, for farmers, for farm families. Part of it is strategies to allow small farm producers to migrate into mid-sized operations.”
Later, with respect to the deficit and spending, Sec. Vilsack pointed out that, “We have already taken steps, and this is I think a very important thing to emphasize, we have already reduced the deficit by $4 billion with steps we took at USDA in reforming our crop insurance program which is part of the safety net. So, we’ve already started that process.”
In addition, Sec. Vislack also noted in the interview that, “On the estate tax, it’s just a recognition of what is happening to land prices. It doesn’t take much land today at $8,000 an acre or $13,000 an acre, which some of the land that has sold in Iowa recently has sold for that, to get to a $5 million number. So, people can be very land rich and cash poor and we want the capacity of families to be able to pass that farm on or that ranch on to the next generation so we can keep people living and working and raising their families in rural America.”
The AP reported last week that, “Increased commodity prices and strong demand have sent prices of farmland skyrocketing, making it more difficult for young and beginning farmers to get established but strengthening the balance sheets for those who own the land.
“Across the Corn Belt, the price of farmland was on the rise in 2010. The highest increases were seen in Iowa, where values rose 13 percent and an acre of farmland sold for upward of $7,000 in some areas of the state. Minnesota and Wisconsin also saw double digit increases in farmland value, averaging 12 percent and 11 percent respectively, according to the Federal Reserve Bank in Kansas City.”
Debbie Carlson reported last week at Barron’s Online that, “U.S. land values are rising on strong prices for agricultural products, fueled to a great extent by robust exports to emerging nations. Advocates for owning farmland include big-name investors like Marc Faber and Michael Burry. But skeptics wonder whether the boom is setting up investors for a rerun of the crash that ended a similar period almost 30 years ago.”
“Could a bubble be forming again in the heartland?” the article noted.
Ms. Carlson added that, “Fundamentals are supporting the farm economy, says James McCandless, a managing director of UBS AgriVest. Farm income is strong, he says, while debt is low and crop productivity is increasing.”
“Gary Schnitkey, a professor of agricultural and consumer economics at the University of Illinois, says that farmland prices in his state—one of the nation’s major agricultural producers—are in line with current interest and lease rates (also known as cash rents),” the article said.
Meanwhile, Ian Berry reported on December 23 at The Wall Street Journal Online that, “U.S. soybean futures rallied to a 28-month high on strong demand and concerns about the development of the Argentina crop.
“Soybeans for January delivery at the Chicago Board of Trade closed up 20.75 cents, or 1.6%, to $13.495 a bushel on Thursday. It is the highest price for front-month soybean futures since August 2008.”
The Journal article added that, “Corn futures set a 29-month high Thursday, with the March contract ending 0.8% higher, at $6.14 a bushel.”
Also last week, Bloomberg writer Terry Barrett provided a recap from USDA on annual food prices. The item stated in part that, “In 2010, the Consumer Price Index (CPI) for all food is projected to increase 0.5 to 1.5 percent–the lowest annual food inflation rate since 1992…[A]lthough inflation has been relatively weak for most of 2009 and 2010, higher food commodity and energy prices have recently exerted pressure on wholesale and retail food prices. Hence, food inflation is predicted to accelerate during the first half of 2011, leading to a forecast of 2 to 3 percent food price inflation in 2011.”
More broadly, Javier Blas reported last week at the Financial Times Online that, “Mexico has taken the unusual step of insuring itself against the effect of rising corn prices on tortilla, a food staple for millions in the country, in the latest sign of growing concern about food inflation in emerging countries.
“Rising food inflation has become a big headache in countries from Mexico to China and India as bad weather has ruined crops, forcing prices up.”
The FT article indicated that, “Luke Chandler, agricultural commodities analyst at Rabobank, said tightening food supplies could prompt ‘a return to widespread government intervention’ in agricultural markets next year, in a repeat of the 2007-08 food crisis.”
Lyndsey Layton reported in Saturday’s Washington Post that, “The massive overhaul of food safety laws approved by Congress this week will take years to implement and could be undercut by Republicans who don’t want to fund an expansion of the Food and Drug Administration.
“Rep. Jack Kingston of Georgia, the ranking GOP member on the appropriations subcommittee that oversees the FDA, said the number of cases of food-borne illnesses in the country does not justify the $1.4 billion the new law is estimated to cost over the first five years.”
The Post article pointed out that, “Mark McClellan, who served as FDA commissioner from 2002 to 2004, said that without additional funding, Congress is unfairly raising expectations.
“‘It’s relatively easy to pass legislation that the FDA needs to do more things,’ McClellan said. ‘It’s very hard to back that up with resources. And problems may be compounded by legislation like this, which raises expectations that the FDA should be doing this, that or other things.’”
EPA- Climate Issues
Robin Bravender reported last week at Politico that, “The Obama administration is plowing forward with greenhouse gas regulations next year but promises to be cautious in advance of a looming battle on Capitol Hill.
“The Environmental Protection Agency on Thursday announced plans to issue a new round of global warming rules aimed at power plants and petroleum refineries, which are responsible for nearly 40 percent of domestic greenhouse gas emissions.”
The article added that, “But as the agency prepares to play defense to safeguard its regulations in the next Congress, officials took a measured tone in their announcement.
“‘We are following through on our commitment to proceed in a measured and careful way to reduce GHG pollution that threatens the health and welfare of Americans and contributes to climate change,’ EPA Administrator Lisa Jackson said in a statement.”
With respect to some details of the EPA announcement, the Politico article explained that, “Under agreements reached with states and environmental groups in lawsuits over the rules, the EPA plans to issue a draft greenhouse gas performance standard for power plants by July 2011 and a final rule by May 2012, as first reported Tuesday by POLITICO. The draft rule for refineries is due by December 2011 and a final rule by November 2012.”
The article also pointed out that, “But despite the EPA’s best efforts to pre-empt a political firefight, the new climate rules are certain to come under attack from the agency’s foes on Capitol Hill.”
Juliet Eilperin reported in Friday’s Washington Post that, “The [EPA] move, coming on the same day the Interior Department unveiled a plan to protect a broader swath of the nation’s wilderness, demonstrated that the Obama administration is prepared to push its environmental agenda through regulation where it has failed on Capitol Hill, potentially setting up a battle next year with congressional Republicans.
“The two decisions were unrelated and are in their initial stages. But both could have broad ramifications, and both sparked an immediate outcry from key GOP lawmakers and some affected industry groups.”
The New York Times editorial board noted on Saturday that, “Republicans in the next Congress are obviously set on limiting the Environmental Protection Agency’s authority under the Clean Air Act to regulate a wide range of air pollutants — even if it means denying the agency money to run its programs and chaining its administrator, Lisa Jackson, to the witness stand. Fred Upton, who will become the next chairman of the House Energy and Commerce Committee, says he plans to call Ms. Jackson so often for questioning that he’ll guarantee her a permanent parking space on Capitol Hill.
“It is equally plain that Ms. Jackson has no intention of abandoning her agenda or her defense of one of the most successful of America’s landmark environmental statutes. What is not clear is where the White House stands and whether it is prepared to resist industry’s standard litany that E.P.A. is as an out-of-control agency threatening jobs with unnecessary rules.”
The Times noted that, “[Pres. Obama’s chief environmental adviser Carol Browner] could remind the president that it was after a dispiriting Republican midterm victory that President Bill Clinton found his feet on environmental issues. In 1995, the Newt Gingrich crowd came to town promising to overturn a whole body of environmental law. Mr. Clinton rose up, not only winning the big battles, but eventually compiling a sterling record. Mr. Obama should emulate him.”
The Wall Street Journal editorial board indicated today that, “If the Obama Administration is trying to lose its antibusiness reputation, you wouldn’t know it from the latest shakedown at the Department of Agriculture. In a move that caused jaws to drop in the farm industry, Agriculture Secretary Tom Vilsack has invited activists and biotech critics to shape the agency’s regulatory decision on a biotech product. If the precedent stands, it could permanently politicize a system that is supposed to be based on science.
“This tale began in 2006, when an activist group called the Center for Food Safety sued the Department of Agriculture to stop the distribution of a Monsanto alfalfa variety called Roundup Ready, which is designed to withstand a popular herbicide. In 2007, a federal judge in the Northern District of California issued an injunction to halt the sale of the product, pending a review and an environmental impact statement by the Animal and Plant Health Inspection Service branch of USDA.
“The review finally landed with a thud last week, but not because the product had been unmasked as a ‘plant pest’ or had dangers for human or livestock. According to the Department’s environmental review, the alfalfa was judged substantially equivalent to other varieties without red flags for regulators. But instead of taking the news as a green light to let the alfalfa on the market, the Agriculture chieftains are calling in biotech critics to suggest ways the product might be deregulated ‘with conditions.’”
The Journal item added that, “According to activists, the Roundup Ready crop menaces the purity of nearby organic fields, potentially cross-pollinating and threatening the livelihood of organic farmers. To mitigate the possible contamination, organic producers have suggested mandatory minimum planting distances and a USDA administered fund that would compensate organic farmers who were harmed by which way the wind was blowing. Some have also suggested a system whereby traditional farmers accept liability for any contamination of organic crops.
“If this sounds like vintage antibiotech activist fare with the imprimatur of the USDA, you’re getting the picture. By suggesting that industry and activist groups negotiate compromises in advance of the final ruling on whether to deregulate, Mr. Vilsack is using the Department’s regulatory authority as leverage against businesses whose products are overwhelmingly regulated by USDA.”
The biotech issue came up in the “Iowa Press” interview with Secretary Vilsack last week that was cited previously in today’s report; here is a transcript of that transaction:
“[Radio Iowa News Director Kay Henderson]: The USDA is considering some restrictions on alfalfa that is biotech in nature. Should Iowa farmers who are planting high tech seeds in their fields be concerned?
“Vilsack: Not at all. What we’re having is a discussion and a conversation to try to take the courts out of determining who gets to farm and who doesn’t get to farm. This is a very complicated discussion and one that probably should have taken place a long time ago. We’ve seen a rapid adoption of biotechnology in alfalfa and many other areas of agriculture. At the same time we’ve seen a substantial expansion and growth in organic production. We want both of them to survive and we want both of them to be profitable and we want both of them to be able to sort of co-exist in the same neighborhood. There hasn’t been a conversation — we are encouraging that kind of conversation — how can we get to a point where I get to farm and you get to farm and a judge can’t say to you, you can’t farm the way you want to farm, Kay, or the judge says to me, you have to stop doing what you’re doing, that’s not good for agriculture. So, we’re engaged in a conversation, we’re going to use science, we’re going to take a look at our regulatory authorities and powers and try to figure out if there is a way to encourage coexistence and I think this is a very important conversation because we need the biotechnology, we need the capacity to produce more on less, the capacity to use less pesticides and chemicals and water in an ever increasing demand globally for food. At the same time this organic operation is very profitable, it can help small farmers stay on the farm, it can help repopulate rural communities and there’s a greater consumer demand for it. So, we need to figure out how to do both.”