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Farm Bill, Ag Economy; and EPA

Farm Bill: Key Personnel Changes

Associated Press writer Dale Wetzel reported yesterday that, “North Dakota U.S. Sen. Kent Conrad said Tuesday he will not seek re-election in 2012 because he wants spend more time working on ways to reduce the nation’s $14 trillion debt, which he ranks with a terrorist attack as ‘the central threat facing the country’” [related statement here, related video here).

The AP article noted that, “In an e-mail message to supporters, Conrad said his remaining priorities are to get the national debt under control, reduce U.S. dependence on foreign energy, write a new five-year farm bill and address flooding problems in North Dakota’s Devils Lake basin and Red River Valley.”

The article pointed out that, “[Recently retired North Dakota Democrat Sen. Byron Dorgan], served in the U.S. Senate and House for 30 years before declining to run last year for his fourth Senate term. His successor in the U.S. House, Democrat Earl Pomeroy, lost to Republican Rick Berg last year in a bid for his 10th term.

Dorgan, Conrad and Pomeroy became political allies when Dorgan ran unsuccessfully for the U.S. House in 1974. At the time, Dorgan was state tax commissioner, Conrad was his House campaign manager, and Pomeroy was Dorgan’s driver.

“The three men often advertised themselves as ‘Team North Dakota’ during the 18 years they served together in Congress, and Conrad said the departures of Dorgan and Pomeroy influenced his decision to step down.”

Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “Sen. Kent Conrad, a North Dakota Democrat who is one of the strongest and most influential defenders of farm subsidies in Congress, has announced that he’s not going to run for re-election. There are few retirements that would be as significant for agribusiness. Sen. Charles Grassley, R-Ia., is another.

Part of Conrad’s influence comes from the fact that he knows the details of farm policy cold. But Conrad was also a consummate horse-trader who knows what it takes to enact policies that protect the interests farmers in his state, and he does. While Conrad supported tightening caps on the amount of subsidies that a farmer or landowner could receive, he never pushed the issue as his North Dakota colleague, former Sen. Byron Dorgan, or Grassley did. Conrad told me years ago that he understood that lower caps were unacceptable to southern farmers.

Conrad authored commodity sections of farm bills without ever having been the chairman of the Senate agriculture committee. In 2002, he worked with the Rep. Larry Combest, the Republican chairman of the House Agriculture Committee. In 2008, he teamed up with the senior Republican on the Senate committee, Saxby Chambliss of Georgia. Conrad’s stamp on the 2008 bill is most obvious in the formation of a permanent disaster assistance program that farmers in his state had long wanted. The biggest recipient of the payments has been, no surprise, North Dakota.”

David Catanese and Manu Raju reported yesterday at Politico that, “In a telling decision late last year, Conrad passed up an opportunity to chair the Agriculture Committee in the new Congress, which would have allowed him to take the lead in crafting a major farm bill important to his home state. Instead, he decided to stay as chairman of the Budget Committee, giving him the politically challenging role of trying to reverse the skyrocketing national debt.”

Bloomberg writer Brian Faler reported yesterday that, “The decision will give Republicans a major pickup opportunity in a state where last year they defeated longtime Democratic Representative Earl Pomeroy. Veteran Democratic Senator Byron Dorgan also retired rather than face a Republican challenge.”

New York Times writer Carl Hulse reported today that, “Senator Kent Conrad of North Dakota on Tuesday became the first Democrat to announce he would not run for re-election in 2012, handing Republicans an early opportunity to gain a seat in a conservative-leaning state.

The development came the same day that Senator Joseph I. Lieberman, independent of Connecticut, was reported to have told associates that he would forgo a re-election bid. The moves could complicate Democratic efforts to hold on to a majority in the Senate in the 2012 elections.

“Senator Richard G. Lugar, the veteran Indiana Republican, reaffirmed his commitment Tuesday to seek re-election to a seventh term, saying he would not be deterred by a frustrated electorate and a Tea Party movement that has turned out established Republican incumbents in primaries. He conceded that he could face ‘a competitive situation’ in a primary.”

More broadly, Janet Hook and Danny Yadron reported in today’s Wall Street Journal that, “Many other senators up for reelection in 2012 have not yet stated their intentions. Democratic leaders are uncertain, for example, whether Sen. Jim Webb (D., Va.) will run for a second term. Also uncertain is whether Sen. Herb Kohl (D., Wisc.) will seek a fifth term.”

In another significant development with potential 2012 Farm Bill implications, DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “USDA Undersecretary for Farm and Foreign Agricultural Services Jim Miller is stepping down, making him the second key political appointee to leave USDA during the past week.

“Miller, who had worked as senior analyst of agriculture and trade for Senate Budget Chairman Kent Conrad, D-N.D., throughout the 2008 farm-bill debate, had joined USDA in spring 2009 to help implement the rules of the farm bill for farmers. Miller provided some assurance to commodity and agricultural organizations that the Obama administration had a high-level official who understood issues hammered out in the farm-bill process.

The Washington, D.C., newsletter Agri-pulse posted a letter from Miller to colleagues where Miller stated he planned to remain in the public sector, but declined to say where he was headed. ‘This was an extremely difficult decision, but one that I believe is important and appropriate for the Obama Administration, our stakeholders and personally,’ Miller stated.”

Mr. Clayton pointed out that, “Miller had also served a stint as chief of staff for the National Farmers Union before going to USDA. From 1999-2004, he was NFU’s chief economist. He also served as president of the National Association of Wheat Growers in 1987, and was its vice president for government relations for the group from 1995-99.

“Last week, Vilsack’s chief of staff, Karen Ross, resigned to become California’s agriculture secretary.”

Farm Bill: Budget and Policy Issues

In an interview on Monday’s Agriculture Today program (Red River Farm Network), Former House Agriculture Committee Chairman Larry Combest was asked about the possibility of budget reconciliation in 2011.

Mr. Combest stated that, “In order to reconcile it within the constraints of budget reconciliation it would take such huge amount of change that I don’t see that occurring…I can’t speak for (Senator) Kent Conrad, but I have already heard from those in the House that there has been a decision made that they will not do reconciliation.”

To listen to a portion of the interview with Mr. Combest from Monday’s Agriculture Today program (Red River Farm Network), just click here (MP3- 2:13).

Meanwhile, American Farm Bureau Federation (AFBF) President Bob Stallman appeared on this week’s Open Mic program with Stewart Doan of Agri-Pulse. In part, Mr. Stallman “explains why AFBF wants the concepts of the current Farm Bill safety net written into the 2012 Farm Bill.”

To listen to a segment of the Agri-Pulse interview with Mr. Stallman in which he reflects on farm policy, the recent AFBF convention and the budget, just click here (MP3- 1:47).

Farm Bill: Crop Insurance

Linda H. Smith reported yesterday at DTN (link requires subscription) that, “Just as Medicare leaves holes in medical coverage for the elderly, federal crop insurance leaves gaps in risk protection against weather-caused losses. Weather insurance policies seek to bridge that gap.

For the first time this year, WeatherBill is launching a Total Weather Insurance (TWI) package that will allow growers to cover specific weather events in their area, not just yield and revenue on individual farms. Companies such as Growers Edge also have issued weather-proofing policies in recent years.

“‘We have covered the gap left by 60 to 85 percent MPCI (Multiple Peril Crop Insurance) coverage,’ WeatherBill’s Greg Smirin, vice president of marketing and products, told DTN. ‘Given MPCI coverage is based on 10-year-plus Actual Production History (APH) and not the higher production target the farmer is planting for, the potential loss of profit can be quite large.’”

The DTN article noted that, “University of Illinois economist Gary Schnitkey thinks such policies have merit, but questioned whether most farmers will find private insurance worth the extra premiums. Growers will already suffer sticker shock over the price of their conventional crop insurance coverage in 2011 once volatility factors are set in February, said Schnitkey. He estimated premiums on an 85 percent Revenue Protection enterprise unit policy could jump 70 percent compared to a similar policy last year, or up to about $30 per acre from $17.50. ‘There’s only so much money to spend on insurance premiums,’ he said.”

Larry Combest, the former House Ag Comm Chairman, indicated in a recent column posted at Agri-Pulse that, “Still, while crop insurance is indispensable, there are serious concerns that the tools available under the Farm Bill are insufficient to avoid financial crisis under the kind of collapse agriculture has experienced in the past. After singling out risk management tools for producers in budget cuts in ’06, ’08, and ’10, it’s time for others to step up to the plate. Given the cyclical nature of agriculture, it would be prudent to strengthen the risk management tools for producers when they face a downturn, within available resources, and pennywise and pound foolish to weaken them.”

(Note: Agri-Pulse also posted additional columns regarding the direction of national farm policy at its homepage; brief and easy to read perspectives from Marshall Matz, Bruce I. Knight and Dan Glickman can be found at Agri-Pulse Online.)

Ag Economy

Bloomberg writer Jeff Wilson reported yesterday that, “Corn futures rose, extending a rally to a 30-month high, as buyers snapped up supplies from shrinking stockpiles.”

Mr. Wilson explained that, “Corn futures for March delivery jumped 10.75 cents, or 1.7 percent, to close at $6.595 a bushel at 1:15 p.m. on the Chicago Board of Trade. Earlier, the grain reached $6.6275, the highest since July 17, 2008.

“Prices at $6 a bushel won’t lead to losses from raising hogs, said C. Larry Pope, the chief executive officer of Smithfield Foods Inc., the world’s largest pork processor. Corn is the main ingredient in livestock feed.

Cattle futures jumped to a record and hog prices rose to the highest since April on speculation that demand for U.S. meat exports will increase as South Korea culls herds to combat the nation’s worst outbreak of foot-and-mouth disease.”

AP writer Sandy Shore reported yesterday that, “In contracts for March delivery, wheat added 20 cents, or 2.6 percent, to settle at $7.9325 a bushel.”

University of Illinois Agricultural Economist Darrel Good indicated yesterday (“Soybean and Corn Prices Need to Direct Consumption and Acreage”) that, “Over the next three months, the prices of corn and soybeans have two major objectives. First, prices must allocate remaining old crop supplies to maintain at least pipeline stocks by the end of the current marketing year. Second, prices must direct spring planting decisions.”

After additional analysis, yesterday’s update added that, “It appears that soybean prices have increased enough to ration current supplies, but corn prices have not, although the demand for U.S. corn and soybeans will still be influenced by the outcome of South American production. It appears that the Argentine corn crop, and perhaps the soybean crop, could be smaller than the current USDA forecast, further increasing the export demand for both crops.

The prospects for both very tight year ending stocks of corn and soybeans and a continuation of strong demand implies that 2011 crops need to be large. More acreage of both crops in the U.S. may be needed to meet projected consumption levels at reasonable prices and to start re-building domestic stocks to a more acceptable level.”

Yesterday’s report noted that, “Planted acreage of all crops in the U.S. declined by 8.3 million acres from 2008 to 2010. At the same time, acreage enrolled in the Conservation Reserve Program declined by 3.4 million acres. These changes suggest that as much as 11.7 million acres of additional crop land (including double cropped acres) may be available for planting in 2011. Of that total 3.7 million has already been planted to winter wheat. Double cropped acreage of soybeans following wheat harvest could increase by 2 million acres, following a similar decline last year. That leaves 6 million acres for additional acreage of spring planted crops in 2011. Soybeans may not require any of that acreage due to increased double cropping. Assuming that corn consumption remains near the 13.4 million bushel level next year, that year ending stocks need to expand by at least 500 million bushels next year, and that the 2011 average corn yield is near the trend of 159 bushels, most of that 6 million acres needs to be planted to corn.

Based on the need to reduce the pace of consumption and to aggressively expand acreage, corn prices likely need to remain high in absolute terms and relative to other crop prices for an extended period.”

Bloomberg writers Alan Bjerga and Tony Dreibus reported yesterday that, “The same record food prices causing riots in Algeria and export bans in India are allowing President Barack Obama to combine the biggest-ever U.S. farm exports with the tamest inflation since the 1960s.”

The Bloomberg authors pointed out that, “Governments from Beijing to Belgrade are boosting imports, limiting sales or releasing stockpiles to curb food inflation. Higher prices will push U.S. agricultural exports up 16 percent to a record $126.5 billion this year, according to a USDA forecast. While U.S. consumers haven’t been squeezed so far, grocers from Winn-Dixie Stores Inc. to SuperValu Inc. have said they plan increases. Commodities will keep rising, according to a Bloomberg survey of more than 100 analysts and traders.”

Yesterday’s article added that, “Corn advanced 52 percent last year in Chicago, wheat jumped 47 percent and soybeans gained 34 percent. Cattle futures touched a record on Jan. 13 in Chicago, a day after coffee reached a 13-year high in New York. Rice futures jumped as much as 3.6 percent in Chicago today.

Wheat may rise as much as another 16 percent this year, with sugar, corn, soybeans, coffee and cocoa also gaining, according to the Bloomberg survey of analysts, traders and investors in December.”

Globally, the Bloomberg item pointed out that, “Unrest is starting again. Three people were killed and 420 injured in protests over milk and flour costs in Algeria this month. Tunisian President Zine El Abidine Ben Ali tried to end a month of protests by promising lower prices for bread, milk and sugar, before handing over power to his prime minister on Jan. 14 and leaving the country.

“The Serbian government said Jan. 10 it will consider an export duty on wheat to discourage shipments. South Korea said the following day it plans to increase the supply of some food products to help damp prices.

India, home to 1.2 billion people, halted onion exports in December after prices more than doubled in a year. Opposition parties have said they plan nationwide protests. China sold commodities including sugar and corn from strategic reserves last year to contain inflation that reached 5.1 percent in November, the most in 28 months.”

Environmental Protection Agency (EPA)

The Wall Street Journal editorial board opined today that, “President Obama took to these pages yesterday to announce a new executive order to restore ‘balance’ to federal regulation and root out rules that impede job creation and economic growth.”

The opinion piece added that, “The EPA’s goal is to impose carbon emissions limits that even Democrats in Congress rejected, in particular through its ‘endangerment finding’—which unless Congress intervenes will become the costliest regulation in government history. EPA is also re-regulating conventional air pollutants, often bypassing the usual notice and public comment. It isn’t a good omen that Mr. Obama singled out the EPA and its carbon-emissions rules (as related to auto fuel efficiency) as a model of ‘smart’ regulation.

“Still, the spectacle of this White House declaring ‘least burdensome’ as its default position really is something to behold. As the old line goes, the surprise is not that it’s done well, but that it’s done at all.”

Keith Good