Farm Bill: Background- Budget and Spending Issues
Naftali Bendavid explained in today’s Wall Street Journal that, “The battle over federal spending will unfold this week in two separate but related fights. Congress and the White House must devise a plan to fund the government for the rest of the current fiscal year while simultaneously debating a spending plan for next year.
“On Monday, the House begins debating a Republican spending plan for the rest of the 2011 fiscal year, which ends Sept. 30.
“The plan is needed because the last Congress failed to pass appropriations to cover the entire year. Government operations are currently being funded by a stopgap spending measure that expires March 4.”
Today’s Journal article added that, “Separately, President Barack Obama’s proposed budget for 2012 will cover the fiscal year that begins Oct. 1.” This will be released today.
David Rogers noted yesterday at Politico that, “Indeed, nothing in modern federal budgeting matches the situation today.”
Issues for the Remainder of 2011 Fiscal Year (Ends Sept. 30)
David Rogers reported on Friday at Politico that, “Doubling down their bets, House Republicans announced a new round of appropriations cuts in an accelerated push to reduce government spending by $60 billion and deny President Barack Obama close to $100 billion requested in his 2011 budget.
“The nearly 360-page, seven-month funding resolution was filed Friday night by the House Appropriations Committee in anticipation of floor action and passage before lawmakers go home for the Presidents’ Day recess next weekend.
“The speed and depth of the new reductions take the GOP well past the recommendations of a bipartisan debt commission in December and all but invite a fight with Senate Democrats, even as government funding is due to expire March 4.”
Mr. Rogers indicated that, “The $60 billion cut effectively doubles the $32 billion reduction outlined by the GOP leadership only last week and would bring total discretionary spending for 2011 down to $1.028 trillion…[B]ut of all the numbers, the most magic politically is the $100 billion cut measured against Obama’s 2011 budget — an outdated standard but one that great currency with tea party freshmen elected in November.”
Paul Kane and Felicia Sonmez reported on Saturday at The Washington Post Online that, “Republicans from moderate districts privately expressed concern about the steep cuts, but conservatives cheered the additional trims as an important political objective – meeting a campaign pledge they made to grass-roots activists who propelled the party to a historic 63-seat gain in November…[T]he House expects to begin debate on the bill Tuesday and to set up a final vote by the end of the week.”
A list of the program cuts announced Friday by the House Appropriations Committee can be found here (alphabetical order, Ag listed first), and Subcommittee savings tables can be found here (Ag listed first).
An update posted on Saturday at the National Sustainable Agriculture Coalition (NSAC) Blog explained that, “The agriculture function would take an enormous $5.2 billion or 22 percent cut under the House GOP proposed bill.”
The NSAC update added that, “Not all of that $5.2 billion proposed cut to food and agriculture programs are represented by cuts to programs under the jurisdiction of the Appropriations Committee. The bill also targets mandatory 2008 Farm Bill spending officially under the jurisdiction of the Agriculture Committee, including cuts to the Environmental Quality Incentives Program, Conservation Stewardship Program, Wetlands Reserve Program, and Biomass Crop Assistance Program, among others. Cuts to just those four mandatory programs total over $500 million. By attacking farm bill direct spending nominally under the control of the Agriculture Committee, the Appropriations Committee was able to reduce cuts to spending under their direct control by the same amount.”
Saturday’s NSAC update noted that, “Among the big ticket items, feeding programs rank at the top, with the Women Infants and Children (WIC) program slashed by $747 million…[and]… Mission areas and agencies would be cut by the following amounts under the terms of the bill: Rural development ($482 million); National Institute for Food and Agriculture cooperative research and extension ($217 million); Farm Service Agency ($190 million); Agricultural Research Service (ARS) federal research budget ($185 million); Natural Resources Conservation Service ($173 million); Food Safety and Inspection Service ($88 million); and Food and Drug Administration ($241 million).”
As a sidebar with respect to farm spending and the tea party, Jonathan Ellis indicated on Saturday at the Argus Leader Online (SD) that, “A new poll of 401 South Dakota tea party supporters is available today. The poll is the most comprehensive public analysis of the movement in this state…[and]…Eighteen percent have an immediate family member who receives federal farm subsidies. Yet 47 percent think federal farm payments to farmers and ranchers should be left at current levels or increased.”
In addition, Robin Bravender, Patrick Reis and Dan Berman reported on Friday at Politico that, “House Republicans threw down the gauntlet at the Obama administration’s energy and environmental agenda Friday night, proposing to defund the White House energy adviser’s office and block EPA from regulating greenhouse gas emissions.
“In addition to slashing the Environmental Protection Agency’s budget by $3 billion – nearly twice as much as they originally proposed – GOP lawmakers included language in the continuing resolution to strip the agency of its ability to implement climate change rules.”
Procedurally, an update posted on Friday at the Political Hot Sheet Blog (CBS News) explained that, “Once the measure passes the House, it will go to the Senate – where we can expect many of the spending cuts to be stripped out. The House and Senate will have to work out some kind of compromise by March 4th to prevent a government shutdown. House members did not rule out the possibility of needing to pass short-term spending bills to keep the government running while the two chambers work out differences.
President Obama’s Proposed Budget for 2012 (For the Fiscal Year That Begins Oct. 1)
Jonathan Weisman and Naftali Bendavid reported in today’s Wall Street Journal that, “[President] Obama’s budget, to be released Monday, calls for spending cuts and tax hikes that would slice about 14% of the approximately $8 trillion in cumulative federal deficits that would occur over the next 10 years without action being taken. It estimates the deficit will fall to $1.1 trillion next year as the economy picks up and the president’s proposed spending freeze begins to have effect…White House officials described the plan as a ‘down payment’ on future deficit reduction.”
Lori Montgomery reported in today’s Washington Post that, “President Obama drew fire Sunday from congressional Republicans and independent budget experts for his reluctance to advance a plan that would tackle the nation’s biggest budget problems in the spending blueprint he will submit to Congress on Monday.
“In the first statement of his budget priorities since Republicans regained control of the House, Obama will avoid politically dangerous recommendations to wipe out cherished tax breaks and to restrain safety-net programs for the elderly, put forward last year by his own bipartisan fiscal commission as a strategy for reining in a soaring national debt.”
Reuters writers Roberta Rampton and Christopher Doering reported on Friday that, “President Barack Obama’s proposed budget for fiscal 2012 includes $308 million for the Commodity Futures Trading Commission, up 82 percent from the regulator’s current spending level, two sources with direct knowledge of the number said on Friday.
“But House Republicans looking to slash government spending want steep cuts at the CFTC, in a bid to starve it because of its lead role in implementing Dodd-Frank financial reforms. The CFTC is one of the focal points of anticipated bitter partisan fights over funding.”
From a procedural perspective on the 2012 budget, Shailagh Murray and Lori Montgomery noted in yesterday’s Washington Post that, “House Budget Committee Chairman Paul Ryan (R-Wis.) is crafting his own budget plan, due in April.”
Farm Bill: Policy Issues
On Friday USDA’s Economic Research Service (ERS) released a report titled, “The Influence of Rising Commodity Prices on the Conservation Reserve Program.”
An ERS summary of the report stated that, “This report considers how increased commodity prices might influence enrollment in and benefits from the Conservation Reserve Program (CRP) using two complementary models: a likely-to-bid model that uses National Resources Inventory data to simulate offers to the general signup portion of the CRP and an opt-out model that simulates retention of current CRP contracts. Under several higher crop price scenarios, including one that incorporates 15 billion gallons of crop-based biofuels production, maintaining the CRP as currently configured will lead to significant expenditure increases. If constraints are placed on increasing rental rates, it might be possible to meet enrollment goals with moderate increases in CRP rental rates—but this will mean accepting lower average Environmental Benefits Index scores as landowners with profitable but environmentally sensitive lands choose not to enroll.”
Jim Hamilton reported on Friday at the Marshfield Mail Online (Marshfield, MO) that, “The nation’s dairy industry needs ‘total reform,’ Rogersville dairyman Randy Mooney told a gathering of his peers Friday, Jan. 28, at the 2011 Missouri Dairy Forum at the University Plaza Hotel in Springfield.
“Speaking as the chairman of the board for the National Milk Producers Federation, Mooney outlined new dairy policies developed through a collaborative effort of several dairy organizations, including Dairy Farmers of America, the nation’s leading milk marketing cooperative, where he also serves as chairman of the board.
“Mooney said DFA members today face ‘winds of change’ in the dairy industry, including increasing volatility in feed and milk prices, increased focus on margin over feed (rather than just price), and increased global trade (14 percent of dairy products are exported, only 2 percent imported).”
Meanwhile, Rebecca Martinez reported on Saturday at The News Leader Online (Staunton, VA) that, “Federal subsidies for ethanol could boost the cost of feeding cows — and people — dairy farmers said at the Virginia Beef Industry and State Dairymen’s Convention in Roanoke on Friday.
“In December, Congress extended tax breaks for ethanol refiners to continue producing the corn-based alternative fuel. China also relies on U.S.-grown corn for ethanol.
“But the more people who buy corn to make fuel, the higher the price for corn to feed cows goes. And, whether you’re talking milk or beef, the higher the cost of producing food for people, too.”
Chris Clayton reported on Friday at the DTN Ag Policy Blog that, “Members of Congress pushed on rules affecting agriculture on Friday as lawmakers debated House Resolution 72, which directs committees to inventory and review existing, pending and proposed regulations and orders from federal agencies, particularly with respect to the effect on jobs and economic growth.
“The resolution passed in mid-afternoon on Friday.”
A House Ag. Comm. news release from Friday noted that, “Today, Republican members of the Agriculture Committee, led by Chairman Frank Lucas, spoke on the floor of the U.S. House of Representatives in support of H. Res. 72, a resolution that instructs various committees to investigate existing, pending, and proposed regulations that hurt job creation and economic growth. Members of the committee addressed the many regulatory burdens farmers, ranchers, and small business owners are facing in rural America.”
The release included excerpts from their remarks.
Andrew Pollack reported in Saturday’s New York Times that, “A type of corn that is genetically engineered to make it easier to convert into ethanol was approved for commercial growing by the Department of Agriculture.
“The decision, announced Friday, came in the face of objections from corn millers and others in the food industry, who warned that if the industrial corn cross-pollinated with or were mixed with corn used for food, it could lead to crumbly corn chips, soggy cereal, loaves of bread with soupy centers and corn dogs with inadequate coatings.”
The Times article added that, “The corn, developed by Syngenta, contains a microbial gene that causes it to produce an enzyme that breaks down corn starch into sugar, the first step toward making ethanol. Ethanol manufacturers now buy this enzyme, called alpha amylase, in liquid form and add it to the corn at the start of their production process.
“Syngenta says that having the crop make the enzyme for its own breakdown — self-processing corn, as it were — will increase ethanol output while reducing the use of water, energy and chemicals in the production process. The company, a seed and pesticide manufacturer based in Switzerland, said it would take various measures to prevent the corn from getting into the food supply.
“The corn, which is called Enogen, is one of the first crops genetically engineered to contain a trait that influences use of the plant after harvest. Virtually all past biotech crops have had traits like insect resistance, aimed at helping farmers more than manufacturers or consumers.”
The AP reported on Friday that, “Corn prices closed at their highest levels since the global food crisis of 2008, reflecting tighter supplies that have markets jittery about shortages in the face of growing demand.
“Corn started rising earlier this week after the U.S. Department of Agriculture forecast showed reserves of corn at their lowest levels in 15 years [related graph]. U.S. farmers will have only 675 million bushels of corn on hand by the end of August, which is roughly 5 percent of all corn expected to be used by that time…[C]orn for March delivery rose 8 cents to settle at $7.065 a bushel.”
Bloomberg writer Tony C. Dreibus reported on Friday that, “Corn and soybeans will rise through the second quarter this year as high prices haven’t rationed demand for the commodities, Rabobank said. [See related graph for corn].
“Rising corn, soybean and wheat prices haven’t discouraged buyers from purchasing the grains as countries seek to curb food-price inflation, the bank said today in a report. Corn has surged 90 percent in the past year, soybeans have jumped 51 percent and wheat is up 71 percent.”
The Bloomberg article noted that, “Ethanol, made from corn in the U.S., may beat Department of Agriculture forecasts for production [related graph], as blending is profitable as long as corn futures on the Chicago Board of Trade remain below $7.50 a bushel, according to the report. Corn will lead the grains higher and will need to reach records to encourage growers to plant more, the bank said.”
Meanwhile, Jack Farchy and Gregory Meyer reported on Friday at The Financial Times Online that, “Cotton prices hit a record high on Friday, surging above $1.90 a pound amid a global shortage of the fibre…The cost of the commodity has jumped 150 per cent since the start of 2010.”
Also on Friday, USDA’s National Agricultural Stastics Service released its annual “Farms, Land in Farms, and Livestock Operations” report, which stated that, “The number of farms in the United States in 2010 is estimated at 2.2 million, virtually unchanged from 2009. Total land in farms, at 920.0 million acres, increased 100 thousand acres from 2009. The average farm size is 418 acres, unchanged from the previous year.”
The report contained several interesting graphics including, “Number of Farms and Average Farm Size (1994-2010),” “Number of All Cattle and Beef Cow Operations (1990-2010),” “Number of Milk Cow Operations (1990-2010),” and “Number of Hog Operations” (1990-2010).
Lastly today, Keith Bradsher reported in today’s New York Times that, “It is weather with global breadbasket implications.
“Even as senior Chinese officials exhort local officials to do everything possible to cope with a severe drought in the country’s wheat belt, the government is trying to reassure the public that food prices will not rise.”
The Times article added that, “China’s drought-control headquarters posted a statement on its Web site on Sunday that described conditions as ‘grim’ across a wide area of the wheat belt in Northern China and called for emergency irrigation efforts.
“Agricultural experts say it is too early to assess the damage to the wheat harvest.”