FarmPolicy

December 20, 2014

Farm Bill; Climate Issues; Ag Economy (WASDE); and Trade

Farm Bill: Background- Budget and Spending Issues

David Rogers reported yesterday at Politico that, “Faced with a revolt on the right, House Republicans scrambled Wednesday to adjust their budget strategy and come up with tens of billions of dollars in additional savings — including a possible across-the-board cut — to appease tea party supporters.

“The day began with the once-proud House Appropriations Committee previewing what it saw as an unprecedented package of more than $40 billion in reductions from current domestic and foreign aid funding. But even as the numbers were released, conservatives at a morning caucus demanded twice the reductions. And by late in the day, the committee’s cardinals were closeted away in the Capitol, fending off talk of across-the-board cuts but also admitting they will most likely need days more to come up with an alternative.”

Mr. Rogers noted that, “Republican freshmen, having just returned from their recent recess at home, complained at the morning meeting of being embarrassed now after telling their constituents that the $100 billion target would be met.”

Meanwhile, the House Appropriations Committee released “a partial list of 70 spending cuts” that included the following reductions in spending levels: EPA (-$1.6B), Food Safety and Inspection Services (-$53M), Farm Service Agency (-$201M), Agriculture Research (-$246M), Natural Resource Conservation Service (-$46M), Rural Development Programs (-$237M), WIC (-$758M), and International Food Aid grants (-$544M).

Janet Hook reported in today’s Wall Street Journal that, “Even as Congress debates budget cuts for the fiscal year now under way, the White House is preparing a menu of spending cuts of its own for the fiscal year that starts Oct. 1, to be unveiled when its budget is released Monday. ‘When you see the budget come out, you’ll see very little that was spared,’ press secretary Robert Gibbs said.”

The Journal article added that, “Mr. Obama’s budget for next year is expected to be particularly hard on programs that presidents have traditionally targeted with an understanding that their proposed cuts would be reversed by Congress. The Army Corps of Engineers, agricultural subsidies and the EPA’s clean-water fund for the states are all in for significant cuts under Mr. Obama’s plan for 2012, according to congressional aides who have heard from agencies they monitor about the administration’s plans.”

Climate Issues: EPA Greenhouse Gas Regulation

John M. Broder reported in today’s New York Times that, “Congressional Republicans on Wednesday opened a formal assault on the authority of the Environmental Protection Agency to regulate greenhouse gases, raising doubts about the legal, scientific and economic basis of rules proposed by the agency.

“The forum was a hearing convened by the energy and power subcommittee of the House Energy and Commerce Committee to review the economic impact of pending limits on carbon dioxide and other heat-trapping gases. But much of the discussion focused instead on whether climate science supports the agency’s finding that greenhouse gases are a threat to health and the environment; that finding is what makes the gases subject to regulation under the Clean Air Act.

Lisa P. Jackson, the EPA administrator, was subjected to more than two hours of questioning, some of it hostile, about proposed limits on emissions from factories, refineries, power plants and vehicles.”

The article added that, “She said the Supreme Court, in Massachusetts v. Environmental Protection Agency, obliged the agency to determine whether carbon dioxide emissions endangered human health and welfare…And she strenuously objected to a bill introduced last week by two top Republicans on the committee, Representatives Fred Upton of Michigan and Edward Whitfield of Kentucky, seeking to overturn that court decision and thwart the agency’s efforts to carry it out.”

A few lawmakers brought up agricultural issues and greenhouse gas (GHG) regulation.

In response to a question from Rep. Upton, Administrator Jackson indicated that, “The number of agricultural sources subjected to EPA’s reporting rule is zero, the number of agricultural sources that would face any regulation for greenhouse gas emissions under Clean Air Act permitting before July 2013 is zero.” Click here to listen to the exchange (MP3- 0:36).

Rep. John Sullivan (R-OK) also brought up agricultural concerns and asked Admin. Jackson if EPA had done an analysis of GHG regulation’s impact on the price of food. To listen to this exchange, just click here (MP3- 3:11).

Later in the hearing, Rep. Cory Gardner (R-CO) asked Admin. Jackson if agriculture would be subjected to GHG regulation after the July 2013 time frame. Admin. Jackson responded that she “can’t speculate to that.” To listen to this portion of yesterday’s hearing, just click here (MP3- 2:23).

With this information in mind, Rep. Mike Pompeo (R-KS) brought up the issue of regulatory certainty and noted that agriculture “gets something less than two years of certainty with respect to GHG regulation. I will tell you that their return on invested capital calculations go far past 24 months. I’m trying to understand how you can argue that you think regulatory certainty is important and yet tell us that our agricultural folks in the fourth district [KS-04] get just a little less than 24 months before you’ll chase them too.” This exchange can be heard here (MP3- 1:04).

A couple of hours later, and after an additional panel of witnesses followed Admin. Jackson, a fourth panel of witnesses testified before the Committee yesterday. A representative from the American Farm Bureau Federation (AFBF) was part of this panel (testimony available here).

Rep. Bobby Rush (D-IL) indicated that he was pleased with Admin. Jackson’s assurances regarding agricultural regulatory exclusions. He asked, “As of today, there is no farm that you are aware of that has to report under the GHG reporting rule, as of today, as it stands right now.”

In response, the AFBF representative indicated that, “[T]here are approximately 100, based on what we know, that do report to the EPA.” This part of the discussion from panel four of yesterday’s hearing can be heard here (MP3- 2:52).

Meanwhile, Robin Bravender reported last night at Politico that, “Everyone was anticipating a brawl, and got one.

“Environmental Protection Agency chief Lisa Jackson played defense for nearly three hours Wednesday against a panel full of congressional Republicans looking to strip her regulatory powers.

“GOP members on the House Energy and Commerce Committee blasted EPA’s greenhouse gas regulations from every angle, accusing the Obama administration of ignoring the rules’ impacts on jobs and circumventing Congress by plowing ahead on its own.”

Agricultural Economy

Reuters writer Charles Abbott reported yesterday that, “The U.S. government made a surprisingly deep 9 percent cut in its forecast for corn stockpiles on Wednesday, projecting the tightest supply-to-useratio since the Great Depression as more of the feedgrain is used to make ethanol.

“Corn prices in Chicago jumped to their highest level since July 2008 following the Agriculture Department report, which threatened to rekindle heated debate about using crops for fuel as food prices soar and big importers scramble to build up stocks in order to head off civic unrest.”

The Reuters article added that, “‘I think there’s going to be enough corn for food, for feed, for fuel and for export opportunities,’ said Agriculture Secretary Tom Vilsack.

Joe Glauber, USDA chief economist, said in an interview that corn stocks would remain tight into 2012. Some rebuilding is likely with this year’s crop ‘but we’re obviously going to need a lot more corn acreage’ in the face of strong demand.”

The Wall Street Journal reported today that, “The USDA increased its one-month-old projection of how much of the recent U.S. corn harvest will end up as ethanol by 50 million bushels to 4.95 billion bushels, or 40% of the harvest.”

The Journal noted that, “An even steeper rise in sugarcane prices is depressing exports of sugar-derived ethanol from Brazil, opening markets for the U.S. industry, which saw its exports triple in 2010 to 350 million gallons, according to the Renewable Fuels Association, a Washington trade group.

“Evidence of the ethanol industry’s expanding appetite for corn increased tensions between it and the food industry. ‘The fact that more U.S. corn is being exported in the form of ethanol at a time when corn supplies are already low is simply indefensible,’ said a statement issued by Tyson Foods Inc., the Springdale, Ark., meat giant. ‘We’ve got to get our energy and agriculture policies in sync.’

“The Obama administration defended its ethanol policy Wednesday. At a public appearance with other cabinet members, Agriculture Secretary Tom Vilsack said he doesn’t think the ethanol industry’s appetite for corn is raising food costs.”

Sec. Vilsack was also interviewed recently by Fox News host Neil Cavuto; the interview segment was called, “Are Food Prices Leading to Global Unrest,” and can be viewed by clicking here.

Meanwhile, on yesterday’s OnPoint radio program with Tom Ashbrook (NPR- WBUR), Gawain Kripke, director of policy and research for Oxfam America; Bruce Babcock, professor of economics and the director of the Center for Agricultural and Rural Development at Iowa State University; and Holly Wang, professor of agricultural economics at Purdue University, discussed “Global Food Price Spikes.” A replay of this program is available here.

And James T. Areddy reported yesterday at The Wall Street Journal Online that, “China’s government outlined farm subsidies and other new support on Wednesday aimed at encouraging grain production as the country braces for the possibility of a weak wheat crop that could further exacerbate a global food inflation scare.

“The State Council, China’s highest administrative organ, issued a 10-point plan pledging small amounts of cash to irrigate wheat fields, plant wheat and corn sprouts, and treat crop disease, as well as a $180 million fund to buy equipment and more than $1 billion for drought-alleviation works. Beijing also said it would raise a symbolic minimum purchase price for rice by almost 40%.”

Domestically, Bloomberg writer Whitney McFerron reported earlier this week that, “The jump in commodity prices last year improved the financial health of U.S. farmers, sending Midwest cropland to record values and boosting profits for rural banks and equipment makers, a Federal Reserve report concluded.

“Higher incomes allowed farmers to repay debt in the fourth quarter, reducing delinquencies and boosting bank profit, according to the report, produced by the Federal Reserve Bank of Kansas City. Agricultural lenders are outperforming other bankers as returns on assets and equity gained for a third straight quarter, the Fed said.

The price of corn, the biggest U.S. crop, surged 88 percent in the past year, cotton more than doubled, and soybeans rallied 53 percent. Wheat touched a 29-month high today. The rally has fueled a jump in property values. In Iowa, the largest corn- grower, cropland jumped 13 percent from a year earlier, and as much as 25 percent of purchases in the state are being made by outside investors, said Jason Henderson, a Fed economist.”

Trade

Sewell Chan reported in today’s New York Times that, “The Obama administration on Wednesday pledged to ‘immediately intensify’ talks with Colombia and Panama on two free trade agreements with the aim of submitting the accords to Congress by the end of the year.

“The United States trade representative, Ron Kirk, who made the commitment at a House hearing, also said the administration would submit a revised free trade agreement with South Korea to Congress ‘in the next few weeks.’

“That accord, which was first signed in 2007, hit a roadblock with Democrats that was cleared up with South Korea last December.”

Howard Schneider reported in today’s Washington Post that, “At a House Ways and Means Committee hearing Wednesday, Republicans urged the Obama administration to submit the Colombia and Panama agreements soon to keep in step with Canada and Europe, which are moving ahead on trade agreements with the two countries.

“Further delay ‘severely disadvantages U.S. businesses who sell their products in these markets,’ said committee Chairman Dave Camp (R-Mich.). ‘Other countries are signing agreements that lower barriers for their exports and seize our opportunities.’

The hearing marked U.S. Trade Representative Ron Kirk’s first congressional testimony since the Obama administration’s debut – a delay that illustrates the administration’s struggle for a trade policy that squares the president’s goal of increasing exports and his tough campaign rhetoric on how globalization contributes to the nation’s soaring unemployment.”

A news release yesterday from Rep. Adrian Smith (R-Neb.) indicated that, “Today, [Rep. Smith] questioned United States Trade Representative Ron Kirk about regulatory barriers American farmers and ranchers face with U.S. trading partners. Ambassador Kirk testified for the first time before a hearing of the House Committee on Ways and Means, to which Smith was recently appointed.

“‘The government’s role should be making certain our trading partners maintain predictable and timely regulations based on science, not politics, so our agriculture producers can meet growing global demands for their products without obstacles,’ Smith said. ‘We must work closely with our trading partners to eliminate barriers hindering Nebraska farmers and ranchers from entering new markets – especially those not based on sound science.’”

A video replay of Congressman Smith’s question to USTR Kirk yesterday, can be found here.

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “The Obama administration is promising to send the Korean free-trade agreement to Congress for ratification in the next few weeks. That’s good news for the pork industry, which is expected to be one of the biggest beneficiaries from the deal to lower trade barriers to meat, autos and other products.

“The deal is projected to raise hog prices by $10 a head and generate an additional $687 million in annual U.S. pork exports. South Korea alone would absorb 5 percent of total U.S. pork production, according to the National Pork Producers Council.”

Mr. Brasher added that, “Sen. Chuck Grassley, R-Ia., said the administration’s plan to send the Korean deal to Congress shortly ‘is very good news, if it’s not more lip service. The rest of the world has been moving forward with trade expansion, while this administration has put the United States on the sidelines, and it’s been at the expense of America’s workforce.’”

Meanwhile, Chris Clayton reported yesterday at DTN (link requires subscription) that, “President Barack Obama is committed to boosting trade and opening access for agricultural products, but there are no timetables for resolving many outstanding issues in trade, including bringing the South Korean free-trade agreement to Congress, one of the Obama administration’s top agricultural trade advisers told farmers in California on Tuesday.

Richard Chriss, chief agricultural counsel in the U.S. Trade Representative’s office, spoke about the administration’s trade negotiations on several fronts with farmers and others attending the World Ag Expo in Tulare.”

Mr. Clayton added that, “Senate Finance Committee Chairman Max Baucus, D-Mont., whose committee must clear the FTA to bring it to the Senate floor, has said he won’t support the South Korea FTA unless there are better provisions over that country’s current restrictions against U.S. beef. Chriss said the FTA does reduce tariffs on U.S. beef, but negotiations are ongoing regarding what trade officials characterize as ‘phytosanitary’ restrictions.

“‘With the implementation of the Korea free-trade agreement, we’re going to significantly have more access for American meat, certainly in pork, certainly in beef,’ Chriss said. ‘But we still have issues to address as far as sanitary issues.’”

Yesterday’s DTN article stated that, “Chriss said the administration met with officials last month to discuss ‘a concept for a long-haul cross-border Mexican trucking program.’ Chriss said the administration offered a ‘concept document’ but a formal proposal will be announced in the coming months. He did not say whether this would be a regulatory fix or need approval by Congress to get the trucking issue resolved.” (For more background on the Mexican trucking dispute, click here)

“On the Doha Round of the World Trade Organization talks, Chriss said Obama ‘is seizing the initiative in reframing the Doha debate’ and ‘kick starting’ the negotiations again. Yet, the Doha talks themselves are becoming their own institution given that the negotiations, which began with a meeting in Doha, Qatar, are approaching their 10-year anniversary later this year.”

Keith Good

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