Farm Bill: Political Notes- Budget and Spending
Bill Bartel reported yesterday at The Virginia-Pilot Online (Norfolk) that, “U.S. Sen. Mark Warner is about to heed his own admonition that Congress ‘put up or shut up’ when confronting the dangerously high federal debt.
“The Virginia Democrat and U.S. Sen. Saxby Chambliss, a Georgia Republican, are close to introducing a complex bill that would cut trillions in federal spending, raise some taxes and lower others, and spread the pain of cutting the federal deficit among just about everyone in America.”
The article noted that, “Nothing will be sacred. Everything is open for cutbacks or change to get spending under control, including defense, Social Security and Medicare. Look for smaller tax write-offs on house payments or charitable contributions. Higher gasoline taxes are likely.
“The political cost is so high, Warner said in a recent interview, that the entire plan has to be a single bill – one up-or-down vote.”
Mr. Bartel explained that, “The two senators, who first made known their intentions last month, are basing the legislation on the presidential debt commission, which in December proposed spending cuts and revenue changes that cut federal spending by $4 trillion over 10 years. The national debt stands at more than $14 trillion.
“The commission warned that unless changes are made, by 2025 entitlement programs and debt payments will require every dollar taken in by the federal government.”
“For the survival of the country, Chambliss said, it has to be done.
“‘Here’s what is going to happen…. Everybody is going to have their ox gored,’ Chambliss said. ‘It’s going to be tough. I cannot overemphasize that, but this is unique from the standpoint that the issue is so serious.’”
(Note: Recall that the Debt Commission report included a reduction in federal farm spending of $1 billion annually).
Farm Bill: Spending and Policy
Secretary of Agriculture Tom Vilsack was a guest on yesterday’s AgriTalk Radio Program with Mike Adams. During the course of their conversation, Mike Adams asked Sec. Vilsack about budgetary issues at USDA.
Sec. Vilsack discussed the Supplemental Nutrition Assistance Program (SNAP- food stamps) and other aspects of the USDA budget, and he also pointed out that under the new agreement with crop insurance companies, USDA has already contributed $4 billion towards deficit reduction. To listen to portion of yesterday’s conversation from the AgriTalk program, just click here (MP3- 2:53).
Meanwhile, David Rogers reported last night at Politico that, “As eager as they are for a fight with the White House, Republican budget cutters have a problem in their own back pasture: what to do about a system of farm subsidies that’s still pumping billions into GOP districts at a time of record income for producers.
“Net cash farm income for 2010 is projected to finish near $92.5 billion — a 41 percent increase even after subtracting payments from the government. Yet conservatives are almost tongue-tied, as seen last week with the Republican Study Committee’s proposal to eliminate relatively modest subsidies for an organic food growers program without mentioning the nearly $5 billion in much larger government direct payments to farm country — including to the home districts of many of the RSC’s members.”
The Politico article added that, “Indeed, 24 of the RSC’s estimated 165 members hail from the House Agriculture Committee, and total annual direct payments to their districts run more than $1.09 billion a year, according to a POLITICO review of data compiled by the Environmental Working Group. RSC Chairman Rep. Jim Jordan doesn’t sit on the Agriculture panel but represents an Ohio district that ranks among the top 50 recipients of farm subsidies, including $30 million in annual direct payments.
“Rep. Jeff Flake (R-Ariz.), a longtime activist in the RSC’s ranks, told POLITICO that farm subsidies remain ‘low-hanging fruit’ for future budget cuts, and it’s wrong to read too much into conservative silence. But after winning back swing farm seats last November, the costly payments are clearly a sensitive subject for the GOP, even as the party demands deep cuts elsewhere in domestic spending.”
After more detailed analysis, Mr. Rogers explained that, “The direct payments program itself is rooted in the early years of the so-called Republican Revolution of the mid-’90s and the famous Freedom to Farm Act, which promised to wean producers off federal support. The payments were billed as a temporary measure but have stubbornly endured, paid out under a formula driven by past production levels and not what prices or costs are for farmers today.
“The result is really an ‘income enhancement’ payment for producers and one that stands out even more now that farm income has risen dramatically. While 2009 and the global recession saw much lower farm income than today, there is significant evidence of a more permanent change in U.S. and world commodity markets from when the direct payments were first conceived.”
Yesterday’s article pointed out that, “Keith Collins, former chief economist for the Agriculture Department and now a private adviser to the crop insurance industry, said that two trends are chiefly responsible. First, new middle-classes are emerging in developing countries like India and China that are able to pay more for food and second, closer to home, is the growth in the heavily subsidized production of ethanol and other biofuels.
“Thus the projected farm income for 2010 is not only a rebound from 2009 but also significantly higher than the historic 10-year average. And the president’s deficit reduction commission recommended a net decrease of about $10 billion over 10 years in subsidies.
“With a new farm bill in the offing, there is sure to be resistance to any dramatic changes this year. And it can be argued that Agriculture already took a $6 billion hit last July in renegotiating the Standard Reinsurance Agreement that governs crop insurance. One-third of those savings, or about $2 billion, was to be invested in improvements to the Conservation Reserve Program, but farm interests will argue that they are already out front in deficit reduction.”
Ron Hays reported yesterday at the Oklahoma Farm Report Online that, “The National Association of Wheat Growers approved several policy positions at their winter board meeting this past week in Washington. Some of the major areas covered by the NAWG Board included the following:
“NAWG supports the policy that if federal agriculture programs are subject to budget cuts to achieve deficit reduction, then the same percentage of cut should apply to all federal government programs.”
Mr. Hays added that, “NAWG supports multiple safety-net programs in the next farm bill. We recognize different production areas of the country rely on a variety of farm programs to provide a multi-legged safety net.
“NAWG supports the development of ‘third generation’ crop insurance products whereby input cost volatility or an energy index is incorporated to provide enhanced risk management options for producers. Wider swings in fertilizer and fuel cost may reduce that true value of harvest price insurance calculations.”
Farm Bill: Crop Insurance
Gary Truitt reported earlier this week at Hoosier Ag Today Online that, “Higher commodity prices and input costs are driving more and more growers to take out crop insurance this year. With the costs of seed, fertilizer, and land going up in 2011, farmers are facing a greater risk for their corn and soybean crops. As a result, sales of crop insurance policies are up. Allen Leising, with Midwest Ag Finance, said changes in the crop insurance program are also making it more attractive, ‘They have combined a number of the policies. Where in the past there were seven policies, now with the combo policies there are only five.’ He said this new structure would make crop insurance more economical in some cases.”
Meanwhile, a news release yesterday from National Crop Insurance Services noted in part that, “The private insurance industry supports USDA’s decision to implement a good performance-based program for farmers.
“‘The Good Performance Refund (GPR) program has its merits, and we were pleased to see the savings resulting from the renegotiation of the 2011 Standard Reinsurance Agreement reinvested into the program’ said Tom Zacharias, President of National Crop Insurance Services, a trade association representing the private crop insurance companies. ‘However, it would have been preferable to have more time to evaluate the proposal and provide effective input.’”
However, in comments regarding the Federal Crop Insurance Corporation’s (FCIC) proposed rules for good-performance refunds from last week, the American Association of Crop Insurers (AACI) pointed out that, “Unfortunately, the rule proposed by FCIC does not provide a premium discount and does not comply with the law that FCIC cites as its authority.”
The AACI comments added that, “The FCIC has failed to follow the law that it cited as legal authority in two respects. First, the proposal is for a refund, not a premium discount. The law provides no authority for a refund or rebate. In fact, a farmer could receive the refund check in 2011 without even buying a new insurance policy. The FCIC rule lacks legal authority for that reason alone.
“FCIC apparently considers the terms ‘discount’ and ‘refund’ to be interchangeable, which, of course, is not the case. Ordinary and everyday commerce in the United States provides an abundance of clear and compelling evidence that the terms ‘discount’ and ‘refund’ are not interchangeable.”
The AACI comments from last week also noted that, “The FCIC proposal is inconsistent with another provision of the law cited above, which states that good-performance premium discounts may be provided for a producer of an agricultural commodity who has good insurance or production experience relative to other producers of that agricultural commodity in the same area, as determined by the corporation.
“Nowhere in the FCIC’s proposed rule is there any reference made to comparing a producer’s performance to others in the same area. Thus, the impact of the proposal would be to concentrate the refunds to those farmers in areas with the lowest loss ratios, while effectively excluding farmers in high-risk areas. This is contrary to the plain meaning of the law, which requires an area-by-area comparison.”
Eric Bellman and Alex Frangos reported in today’s Wall Street Journal that, “Fast-growing emerging nations are taking increasingly aggressive actions to beat back rising food prices as they grow more worried of threats to stability if prices don’t start to retreat.
“Developing-market governments have unveiled a laundry list of measures—including price caps, export bans and rules to counter commodity speculation—to keep food costs from disrupting their economies as price spikes that some had hoped were temporary have stretched into the new year. Some economists worry that any further supply shocks could push prices even higher, triggering a food-price crisis like the one the world witnessed in 2008, when higher food costs led to violent unrest across the developing world.”
After highlighting procedures undertaken by specific countries, the Journal writers indicated that, “It’s unclear whether the latest steps will be enough to curb the price increases or whether they are a precursor to more drastic—and potentially destabilizing—actions later, such as trade barriers and government-sanctioned hoarding. Economists have long argued steps such as price controls don’t work because they distort markets and discourage farmers from planting more crops.”
Today’s Journal article added that, “Lower-income economies are more sensitive to food inflation because the poor spend a higher percentage of their incomes on food. Any jump in the price of basic ingredients for villagers or slum dwellers can trigger widespread distress and even rioting. France, which holds the presidency of the Group of 20, has pledged to put food prices at the top of the agenda at multilateral talks in coming months.”
Reuters writer Charles Abbott reported yesterday that, “The higher quality of the U.S. corn crop could yield more ethanol per bushel and divert less of the crop to biofuels, which could raise tight ending stocks by 20 percent, said a biofuels executive on Friday.
“End stocks for 2010/11 are estimated by the Agriculture Department at 745 million bushels, the smallest in 15 years due to strong export and domestic demand. USDA estimates 4.9 billion bushels of the 2010 corn crop, or 39 percent, will be used in making ethanol.”
Pete Kasperowicz reported yesterday at The Hill’s Energy Blog that, “Rep. Michael Burgess (R-Texas) said Monday he would soon introduce legislation aimed at slowing down the Environmental Protection Agency’s (EPA) recent decision to allow gasoline with a 15 percent ethanol blend to be used on cars made after 2001.
“In remarks on the floor, Burgess said he is worried that EPA has not done enough research into whether a so-called E15 blend would damage small engines or even lead to possible safety issues.”
John M. Broder reported in today’s New York Times that, “Carol M. Browner, the White House coordinator for energy and climate change policy, will leave the administration shortly, officials confirmed Monday night. Her departure signals at least a temporary slowing of the ambitious environmental goals of President Obama’s first two years in the face of new Republican strength in Congress.”
Michael O’Brien reported yesterday at The Hill’s Blog Briefing Room that, “President Obama is likely to announce ‘major initiatives’ on energy and climate change in his State of the Union address, Sen. John Kerry (D-Mass.) said Monday.”
Meanwhile, Sen. Richard Lugar (R-IN) “called on the Obama Administration to shift its attention from the divisive issue of reducing carbon emissions to a comprehensive campaign to reduce America’s dependence on foreign oil.”
Sen. Lugar noted that, “For example, the President could establish the national goal of making competitively-priced biofuels available to every motorist…”
Rod Smith reported on Friday at FeedStuffs Online that, “In keeping with instructions from its board of directors, the United Egg Producers (UEP) has developed and released a ‘U.S. Egg Industry Sustainability Vision’ that will culminate in concepts egg producers can adopt for their operations that will advance industry and producer social responsibilities.
“The board, at its annual business meeting last October, called for the appointment of a producer task force to establish an industry-wide sustainability strategy that would ‘bundle’ a number of socially responsible practices — from animal and environmental stewardship to worker safety — into one vision.”
The article noted that, “UEP has named the task force, which will be chaired by UEP chair Bob Krouse, an Indiana egg producer, and last week released the vision statement.
“The statement notes that feeding a growing world with nutritious, safe and affordable food is ‘a critical responsibility’ for U.S. egg producers.”
AP writer Mae Anderson reported yesterday that, “Some of the nutrition information listed in government-mandated food labels will be repeated on package fronts under a new system that food makers and major grocers are introducing.
“The Grocery Manufacturers Association and the Food Marketing Institute on Monday announced the industry’s voluntary new ‘Nutrition Keys,’ which will list calories, saturated fat, sodium and sugars per serving. Manufacturers may choose to use only one or two of the figures in small, package-front icons, or all four.”