February 27, 2020

Farm Bill; Regulations; Ag Economy; Energy-Biofuels-Biotech; and Trade

Farm Bill: Background- Budget and Spending Issues

Janet Hook and Corey Boles reported in today’s Wall Street Journal that, “House Republican leaders on Thursday proposed cutting more than $30 billion from government spending for the remaining eight months of the fiscal year. Their approach could mean big reductions for virtually all federal agencies other than the Pentagon.

“The GOP plan calls for a 9% reduction in nondefense, discretionary spending, a cut of $43 billion compared with 2010 levels. Defense spending would see a boost of 1%, or $8 billion.

“That is a direct challenge to President Barack Obama’s argument against deep and immediate spending cuts, which Democrats believe would harm the fledgling economic recovery. Republicans say the greater risk is in failing to move quickly to rein in the federal deficit.”

The Journal article stated that, “The House Appropriations Committee will now write a bill specifying which agencies will be cut to meet the target. On Thursday, the panel said the biggest reductions would be made to transportation and housing programs, which would be cut 17% from 2010 appropriated amounts. Commerce and Justice programs would be cut by 16% and agriculture programs by 14% [see related graph]. The panel is still working out its proposals in more detail.”

Lori Montgomery reported in today’s Washington Post that, “House Republicans pledged Thursday to slice more than $32 billion from agency budgets over the next few months, firing the opening shot in a battle over government spending that is likely to dominate debate heading into the 2012 presidential campaign.

“The figure, announced by House Budget Committee Chairman Paul Ryan (R-Wis.), represents an unprecedented rollback that would force some domestic agencies to immediately slash spending by as much as 20 percent, independent budget analysts said.

“Democrats immediately vowed to fight the proposal, calling it a short-sighted plan that would kill many critical government services and slow the burgeoning economic recovery. But a group of conservative Republicans is demanding even deeper cuts and vowing to offer a plan to slash $100 billion from agency budgets when House leaders bring a spending bill to the floor Feb. 14.”

David M. Herszenhorn reported in today’s New York Times that, “After clamoring loudly about their plans to curtail federal spending, House Republicans announced Thursday that they would cut $32 billion for the remainder of the fiscal year — a minuscule amount compared with a projected annual deficit of nearly $1.5 trillion.”

The AP reported yesterday that, “But Republicans won’t get everything they want. Democrats control the White House and the Senate, and even Republicans in the stoutly conservative House may have second thoughts when the magnitude of the cuts sinks in.

“The White House says the cuts could lead to widespread furloughs of federal employees and force vulnerable people off subsidized housing, reduce services in national parks and slash aid to schools and local police and fire departments.”

And Reuters writer Richard Cowan reported yesterday that, “The legislation is a warm-up to a much bigger fight over spending priorities — and possibly tax policy — that will intensify on February 14 when President Barack Obama submits his fiscal 2012 budget proposal to Congress,” and added that, “Democrats have countered that cutting spending too much too fast could threaten the economic recovery.”

More specifically with respect to agricultural policy and spending, an article posted earlier this week at the Dyersburg State Gazette (TN) Online, reported that, “The newly elected Congressman [Stephen Fincher (R-TN)] stopped at the Lannom Center on Tuesday morning to hear the concerns of area residents firsthand, answering questions and providing information on his service in Washington so far.”

The article stated that, “Fincher has been named to both the Ag and Transportation committees. Both organizations are preparing new bills for legislation. Fincher said many conservatives would like to use the upcoming Farm Bill as an example of how to cut government spending. Fincher said he will stand for farmers…[w]hile continuing to cut government waste.”

And Greg Martin reported yesterday at Online that, “Texas 11th District [GOP] Congressman Mike Conaway – Chairman of the House Ag Subcommittee on General Farm Commodities and Risk Management – says the new farm bill is going to have to accept funding cuts.”

The item stated that, “House Ag Chair Frank Lucas [R-OK] has said everything will be on the table when the farm bill debate begins. Conaway agrees that everything must be given a closer look.”

The article quoted Rep. Conaway as saying: “Last year during the campaign in October we were all screaming and waving flags about cutting spending and reducing the size of the government but it was all in the generic. Now food stamps have got to be in there, spectacular increases in food stamps over the last 2 years particularly on the stimulus plan and then under the other, so if I’m going to take a hard look at Department of Defense spending I‘ve got to take a hard look at all the social programs as well.”

“Lucas meanwhile says the farm bill debate – once it starts later in 2011 or early in 2012 – will be about choices that the farm community will have to make. Because of limited dollars – it will likely mean that some ‘good’ programs will have to be eliminated to fund ‘better’ ways to have the best farm safety net,” yesterday’s update said.


Sen. Jerry Moran (R-KS) was a guest on yesterday’s AgriTalk Radio Program with Mike Adams. In part the discussion focused on regulatory issues and agriculture. To listen to a portion of yesterday’s interview, just click here (MP3- 2:18).

Agricultural Economy

Leslie Reed reported yesterday at the Omaha World-Herald Online that, “‘Nobody’s ever seen any [farmland] prices like this,’ said Lee Vermeer, vice president of real estate sales for Farmers National Co., which specializes in agricultural real estate across the country.

The Omaha-based executive said choice irrigated properties have sold for more than $8,000 an acre in Nebraska and more than $9,000 an acre in Iowa.”

In a related article, Ian Berry reported yesterday at The Wall Street Journal Online that, “There is little chance of a farmland bubble damaging the U.S. economy, Minneapolis Federal Reserve President Narayana Kocherlakota said Thursday.

“Farmland values, which have soared during the past year amid an agricultural commodity boom, ‘seem high,’ Kocherlakota said. But with interest rates low, that is to be expected, he said.

“‘It doesn’t seem like the prices are all that out of whack,’ he said during a question-and-answer session at a policy forum at the University of Minnesota in St. Paul Thursday evening.”

The article added that, “Kansas City Federal Reserve President Thomas Hoenig has warned in recent months that conditions appeared to be conducive to a bubble. Kocherlakota said that while a bursting bubble would cause significant harm in his own district, farmland does not represent a big enough share of the national gross domestic product to hurt the economy as a whole.”

Meanwhile, Neil MacFarquhar reported in today’s New York Times that, “Global food prices are moving ever higher, hitting record levels last month as a jittery market reacted to unpredictable weather and tight supplies, according to a United Nations report released Thursday.

“It was the seventh month in a row of food price increases, according to the United Nations Food and Agriculture Organization, which put out the report. And with some basic food stocks low, prices will probably continue reaching new heights, at least until the results of the harvest next summer are known, analysts said.”

The Times article stated that, “Scattered bright spots in the report led experts to suggest that a repeat of the 2008 food riots stemming from similar sharp price increases might not be imminent. Rice was slightly cheaper and meat prices stable, they noted. But the overall uncertainty and inflation could eventually make the situation worse than three years ago, they said.

Riots and demonstrations erupting across the Middle East are not directly inspired by rising food prices alone, experts noted, but that is one factor fueling the anger directed toward governments in the region. Egypt was among more than a dozen countries that experienced food riots in 2008.”

Today’s article explained that, “The FAO price index, which tracks 55 food commodities for export, rose 3.4 percent in January, hitting its highest level since tracking began in 1990, the report said. Countries not dependent on food imports are less affected by global volatility. Still, food prices are expected to rise 2 percent to 3 percent in the United States this year.

Four main factors are seen as driving prices higher: weather, higher demand, smaller yields and crops diverted to biofuels. Volatile weather patterns often attributed to climate change are wreaking havoc with some harvests. Heavy rains in Australia damaged wheat to the extent that much of its usually high-quality crop has been downgraded to feed, experts noted.”

Javier Blas reported yesterday at The Financial Times Online that, “‘The new [FAO] figures clearly show that the upward pressure on world food prices is not abating,’ said Abdolreza Abbassian, economist at the UN’s Food and Agriculture Organisation. ‘These high prices are likely to persist in the months to come.’”

And Tom Polansek reported in yesterday at The Wall Street Journal Online that, “U.S. rice futures reached 27-month highs Thursday on concerns Egypt will start importing in the face of escalating tensions and U.S. farmers will sow fewer rice acres come spring.

“Rice futures climbed 2% to settle at 16.285 cents a pound at the Chicago Board of Trade. The grain was left out of a boom in U.S. commodity prices last year, but has more than kept pace in 2011, up 16% so far this year. In 2010, rice futures fell nearly 4%, while soybean futures climbed 34% and cotton futures surged 91%.”

Meanwhile, Sudeep Reddy and Brian Blackstone reported in today’s Wall Street Journal that, “Federal Reserve Chairman Ben Bernanke rejected complaints by China and other developing economies that U.S. policies are driving up global food and energy prices, and instead pinned the blame on accelerating growth in emerging markets and their inadequate response.

“Mr. Bernanke, speaking at the National Press Club in Washington, said it is up to other countries to control their inflation.

“‘I think it’s entirely unfair to attribute excess demand pressures in emerging markets to U.S. monetary policy, because emerging markets have all the tools they need to address excess demand in those countries,’ he said in answering a question from the audience. ‘It’s really up to emerging markets to find appropriate tools to balance their own growth.’”

Chairman Bernanke added that, “Emerging markets are growing very quickly for a couple of reasons. One is just the fact there has been a long-term trend for emerging markets to develop very quickly and that on the whole is a very positive development because it means that people who were in poverty are moving closer and closer to a more middle class standard of living.

But as people’s diets are becoming more sophisticated and as they eat more beef and less grains and so on, the demand for food and energy rise and that’s the primary long-term factor affecting the real price of commodities and food.”

Energy- Biofuels- Biotech

Reuters writers Tom Doggett and Ayesha Rascoe reported yesterday that, “Stronger oil demand from rebounding economies and concern over unrest in Arab countries have pushed crude prices above $100 a barrel, the International Energy Agency told the U.S. Congress on Thursday.”

Darren Goode noted yesterday at Politico that, “The heads of the Senate Energy and Natural Resources Committee said today that rising tensions in Egypt should spur action on reducing foreign oil imports… Energy and Natural Resources ranking member Lisa Murkowski (R-Alaska) said the rising tensions in Egypt and elsewhere in North Africa should be ‘a wake-up call’ for the United States to pursue an energy policy ‘that promotes all forms of energy’ domestically.”

Bloomberg writer Alex Morales reported yesterday that, “The market for ethanol made from plant waste and grasses rather than foodstuffs is set to ramp up in 2013 as the first commercial plants start, Novozymes A/S Chief Executive Officer Steen Riisgaard said.

“Novozymes partner Poet LLC is seeking a government loan guarantee to build a plant to make the clean fuel, called second-generation or 2-G biofuel, within two years, Riisgaard said yesterday in an interview. London-based BP Plc and Abengoa SA of Seville, Spain, plan U.S. plants by 2013, when refineries may also open in Brazil and China, the Novozymes CEO said.”

Reuters writer Christine Stebbins reported yesterday that, “Biodiesel, still a money-losing proposition in the United States compared to oil-based diesel, is about to have its best year ever thanks to government tax credits and usage mandates.

“But it will take months for the biodiesel industry to bounce back after being stranded last year, when the government let its six-year subsidy expire. Biodiesel production fell 20 percent in 2010 and was only half of 2008 output as plants across the country closed or slashed production.”

And in news regarding biotechnology and ethanol, Philip Brasher reported this week at The Des Moines Register Online that, “Corn chips that could crumble in the bag. Cereal that’s soggy before you can get it to your mouth.

“The companies that mill corn into food products claim they could face problems like those should the government allow biotech giant Syngenta Seeds Inc. to commercialize a new variety of corn. The corn was engineered to cut the cost and greenhouse gas emissions of making ethanol.

Agriculture Secretary Tom Vilsack is expected to announce any day now whether he’ll clear the biotech product for production. Corn millers are urging him not to do so yet, claiming the biotech kernels could accidentally get into the processors’ grain supplies and ruin them, a fear Syngenta says is unfounded.”

Mr. Brasher noted that, “The millers don’t claim Syngenta’s new variety of corn would harm someone who ate it — the Food and Drug Administration approved the corn for human consumption in 2007. But they say that contamination by as little as one kernel of Syngenta’s corn in 10,000 kernels of conventional grain would be enough to harm the entire batch.

Syngenta’s corn contains an enzyme, called amylase, that aids in breaking down the starch in the kernel. That would save ethanol plants in energy costs, but it would make the corn unsuitable for cooking into products like snack chips, breakfast cereal or the batter on corn dogs, processors say.

“Most corn now grown by U.S. farmers is already genetically engineered to resist pests or to be immune to a herbicide, but that grain is OK for all uses, including food, livestock feed or ethanol.”


Josh Mitchell reported yesterday at The Real Time Economics Blog (Wall Street Journal) that, “The U.S. Senate Finance Committee chairman vowed Thursday to oppose a proposed free-trade deal between the U.S. and South Korea unless more concessions are made to boost U.S. beef exports.

“‘I’m not going to support the agreement unless there’s a change,’ Sen. Max Baucus (D., Mont.) said after a hearing on an unrelated matter.

“Baucus said he believes the current proposed pact doesn’t go far enough in lifting South Korean restrictions on U.S. beef exports arriving in the Asian country. The restrictions date back to health concerns over U.S. beef. South Korea has agreed to loosen the restrictions under the current proposal, but Baucus said the concessions are insufficient. Beef is a key industry in Baucus’s state.”

Keith Good

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