FarmPolicy

November 29, 2014

Farm Bill (Budget); Other Budget Provisions; and the Agricultural Economy

Farm Bill: Budget Issues- Political Background

David Rogers reported yesterday at Politico that, “Monday’s release of President Barack Obama’s new 2012 budget puts in sharp focus the week-long brawl that lies ahead in the House, as newly empowered Republicans seek to deal a crippling blow to the president’s agenda, at home and abroad.

“Obama appears to have hurt his cause by not being more bold in approaching the debt problem facing the nation. At the same time, what began for Republicans as a budget-cutting exercise has grown into more of raw power play.”

Mr. Rogers explained that, “Just hours after the White House documents arrived, the House Rules Committee was scheduled to meet late Monday in anticipation of floor debate Tuesday on the GOP’s own government-wide spending plan for the last seven months of this fiscal year.

Never before has Washington seen two such complete budgets aligned at once — like two planets vying to eclipse one another. It’s two visions of government but also a certain blindness that could leave each stumbling into a government shutdown next month unless they get a better grip on reality.”

Lori Montgomery reported in today’s Washington Post that, “The budget request – the president’s first since Republicans won control of the House in November – marks his opening bid in a partisan battle over spending that is likely to consume Congress for the rest of this year and shape the political debate heading into the 2012 presidential election.”

News reports documented the response to the President’s budget request from both the Senate and House Budget Committee Chairman: Peter Schroeder reported yesterday at The Hill’s On the Money Blog that, “Senate Budget Committee Chairman Kent Conrad (D-N.D.) said the president’s 2012 budget request starts strong but comes up short on fighting the deficit over the long run.”

While, Politico writer Richard E. Cohen reported yesterday that, “House Budget Committee chairman Paul Ryan (R-Wis.) dismissed President Obama’s budget as failing to meet the ‘critical test of leadership.’ But he said that Republican members of his panel ‘want to get serious’ and that he expects to bring a ‘consensus budget’ for next year to the House floor by mid-April.”

In a press briefing yesterday with Senate Budget Comm. Ranking Member Jeff Sessions (R-AL), Chairman Ryan explained the technical procedures that will guide the way forward on the budget process (MP3- 0:41).

The Washington Post editorial board stated today that, “The President punted. Having been given the chance, the cover and the push by the fiscal commission he created to take bold steps to raise revenue and curb entitlement spending, President Obama, in his fiscal 2012 budget proposal, chose instead to duck.” The Wall Street Journal editorial pages indicated today that, “This was supposed to be the moment we were all waiting for….[I]nstead, what landed on Congress’s doorstep on Monday was a White House budget that increases deficits above the spending baseline for the next two years.”

The New York Times editorial writers call the budget proposal “encouraging,” while the Los Angeles Times editorial board noted that, “The proposal was a remarkably tame response to Washington’s fiscal problems, not the bold statement about belt-tightening that the White House had suggested was coming.”

Jonathan Weisman reported in today’s Wall Street Journal that, “[W]hite House budget director Jack Lew—a veteran of bipartisan partisan deal-making since his days in the early 1980s as an aide to late House Speaker Thomas ‘Tip’ O’Neill—was explicit that the president’s fiscal 2012 budget was merely an opening bid. (Lew’s press briefing is available here).

“Administration officials believe that laying out detailed plans now for overhauling the tax code, shoring up the finances of Social Security and reining in the explosive growth of Medicare and Medicaid would only entrench partisan positions and invite attacks from the political left and the right.”

(Note that Director Lew will testify this morning before the House Budget Comm., and this afternoon before the Senate Budget Comm.).

Today’s Journal article added that, “Meantime, the four Senate members of the debt panel—Sens. Richard Durbin (D., Ill.), Kent Conrad (D., N.D.)., Tom Coburn (R., Okla.) and Mike Crapo (R., Idaho)—are teaming up with other senators to move the debt commission’s recommendations forward.”

Farm Bill: Budget Issues- Agriculture

DTN writers Chris Clayton and Todd Neeley reported yesterday (link requires subscription) that, “Two separate federal budget proposals for different years from House Republicans on Friday and the Obama administration on Monday each laid out roughly $100 billion a year in federal spending cuts, but reflect gaping philosophical differences in the process.”

The DTN article noted that, “Keep in mind that the plan laid out Friday by the House Appropriations Committee was $100 billion in cuts in the current fiscal year, which ends Sept. 30. President Obama’s budget proposal was for Fiscal Year 2012, which begins Oct. 1.”

Yesterday’s article indicated that, “In USDA, the House GOP plan proposes cutting $747.2 million from Women, Infants & Children programs, and $782.2 million total out of discretionary food-aid programs. The president’s proposed budget for FY 2012 goes the opposite direction, listing a $52 million spending increase in total discretionary food and nutrition programs. Vilsack noted that the president’s plan fully funds WIC, school lunches and the Supplemental Nutrition Assistance Program, formerly called food stamps.

While Republicans also recommended no cuts to commodity programs, the White House again proposed cutting direct payments, which would generate a savings of $2.5 billion over 10 years if approved.”

With respect to the President’s FY 2012 budget request and agriculture (Links: Agriculture Budget Proposal, USDA Budget Summary and Annual Performance Plan and Fact Sheet), Reuters writer Charles Abbott reported yesterday that, “In his proposed budget for fiscal 2012, Obama proposed that farm subsidies go to people with less than $500,000 in adjusted net income, down from $750,000. Also those with income earned off the farm, the cutoff would be halved to $250,000 from 500,000.”

Obama also called for a revision in the crop insurance program to save $1.8 billion over 10 years. It would reduce the amount paid to insurers for policies against catastrophic crop losses. The administration renegotiated its master agreement with insurance companies last year to save $6 billion,” yesterday’s article said, adding that, “The bulk of USDA funds, more than $106 billion, would go to food stamps, school lunch and other public nutrition programs.”

Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “President Barack Obama is setting up a battle with Republicans in Congress over farm spending by proposing to slash subsidies to the wealthiest farmers. It could shape up in part to be a choice between farm subsidies and food assistance to the poor.”

Mr. Brasher added that, “Additionally, the annual direct payments would be capped at $30,000 per farm, down from $40,000.”

Chris Clayton reported yesterday at DTN (link requires subscription) that, “The president’s team has consistently proposed cutting direct payments for higher-income farmers, but those plans have failed to advance in Congress.

“Secretary of Agriculture Tom Vilsack said the targeted cuts in direct payments affect roughly 2 percent of farmers. In a conference call with reporters, Vilsack noted there is a national consensus that the budget deficit has to get under control. He added, however, there is a need for a safety net for producers, depending on the size of the operation, commodity or livestock, or simply area of the country that could be hit harder by weather.

“‘The question is who ought to get those payments given the current circumstance and reality of a very strong ag economy generally for larger producers with cotton prices up, with corn and bean prices up, with wheat prices being relatively strong, who should receive the benefit of those payments,’ [Agriculture Sec. Tom Vilsack] said.”

(Note: A related audio clip from Sec. Vilsack’s budget briefing yesterday can be heard here (MP3- 1:47). Sec. Vilsack’s full statement on the budget is available here, while a complete audio replay of yesterday’s press briefing can be heard here. Sec. Vilsack also commented yesterday on the House GOP proposal for the remainder of this fiscal year, (MP3- 1:05).

The DTN article noted that, “Yet Senate Agriculture Committee Ranking Member Pat Roberts, R-Kan., sent a quick response to the president’s proposed budget on direct payments. Roberts, who crafted the original direct-payment program in the 1996 farm bill, effectively stated that Congress, not the administration, will determine who receives direct payments.”

Alan Beattie reported yesterday at The Financial Times Online that, “Similar proposals in the past have foundered on stiff opposition from the farm lobby. While lawmakers from the rural Midwest have supported cuts in direct payments, the restrictions are strongly opposed by cotton and rice growers from the southern states.

But a former senior administration official said that the proposal might get a better reception in the forthcoming negotiations over the farm bill – the five-year framework for agricultural subsidies – which is due for renewal in 2012.

“‘With the squeeze on budgets and the very high [commodity] market prices helping farmers’ incomes, this becomes an increasingly difficult programme to defend,’ the official said.”

P.J. Huffstutter reported yesterday at the LA Times Online that, “House Republicans, as well as members backed by the tea party, campaigned heavily on the push to rein in the budget deficit. But so far there seems to be more interest among Republicans in Congress in cutting back food programs — such as the Special Supplemental Nutrition Program for Women, Infants and Children — than in cutting payments to grain and cotton farms.”

And Bloomberg writers William McQuillen and Alan Bjerga reported yesterday that, “U.S. Department of Agriculture spending would increase 11 percent to $144 billion in fiscal 2012 as the number of people receiving nutrition assistance reaches records and food-safety spending rises, the government said.

The Supplemental Nutrition Assistance Program, or food stamps, will cost $85.2 billion in the year starting Oct. 1, up 15 percent from levels in 2010, the last time agencies had an enacted budget, according to the spending plan President Barack Obama sent to Congress today. A record 43.6 million people, more than one of every eight Americans, received food stamps in November, as the jobless rate stayed near a 27-year high, the USDA said earlier this month.”

Chris Clayton also pointed out additional cuts related to agriculture in the FY 2012 Budget proposal in an update posted yesterday at the DTN Ag Policy Blog.

Other Budget Issues Impacting Agriculture

Reuters writer Tom Doggett reported on Friday that, “The White House will ask Congress to repeal $3.6 billion in oil, natural gas and coal industry subsidies as part of its proposed government budget for the 2012 spending year that will be released on Monday;” while, Coral Davenport reported yesterday at the National Journal Online that, “Even as President Obama offers Congress a budget that would cut into dozens of government programs and trim $1.1 trillion from the federal deficit over the next decade, he will request robust increases in clean-energy spending.

In total, he will ask for about $8 billion in spending on clean-energy programs across all federal agencies.”

Ben Geman reported yesterday at The Hill’s Energy Blog that, “President Obama’s fiscal year 2012 budget plan would slash funding for the Environmental Protection Agency by roughly $1.3 billion while continuing the administration’s political collision with Republicans on climate change.”

Meanwhile, Steven Mufson reported yesterday at the Post Carbon Blog (Washington Post) that, “In President Obama’s new budget plan, the idea of comprehensive climate legislation appears to have disappeared into thin air…The phrase cap and trade — the touchstone of the climate legislation battles over the past two years — does not appear in the 216-page budget summary.”

And Reuters writers Sarah N. Lynch and Christopher Doering reported yesterday that, “The Commodity Futures Trading Commission would see an 82 percent spending jump to $308 million, but $117 million of that total would be offset through a user fee on financial firms that is unlikely to draw support in Congress.”

Agricultural Economy

A Reuters article posted yesterday at DTN (link requires subscription) stated that, “U.S. farmers will plant 92.0 million acres of corn, 57.0 million acres of wheat, 78.0 million acres of soybeans and 12.8 million acres of upland cotton this year, the Agriculture Department projected on MondayThe 10-year agricultural baseline is based on conditions in late 2010 and was released ahead of USDA’s Outlook forum Feb. 24 and 25. It assumes normal weather and yields.”

Also yesterday, USDA’s Economic Research Service (ERS) released its “Farm Income and Costs: 2011 Farm Sector Income Forecast,” which stated that, “Net farm income is forecast to be $94.7 billion in 2011, up $15.7 billion (19.8 percent) from the 2010 forecast [related graph]. The 2011 forecast is the second highest inflation-adjusted value for net farm income recorded in the past 35 years. The top five earnings years for the past three decades have occurred since 2004, attesting to the profitability of farming this decade.”

The ERS report added that, “After falling $12.0 (4.1 percent) billion in 2009 and rebounding a relatively modest $6.5 billion (2.3 percent) in 2010, total production expenses are set to jump $20.2 billion (7.0 percent) in 2011 to a nominal record $307.5 billion” [related graph].

Yesterday’s update noted that, “Government payments paid directly to producers are expected to total $10.6 billion in 2011, representing a 12.7 percent decrease from the forecast of $12.2 billion paid out in 2010. Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.65 billion for 2011.”

“With respect to program payments based on price levels, strong commodity crop prices are expected to persist through 2011. A 95-percent reduction in ACRE revenue insurance payments from $430 million in 2010 to $20 million in 2011 is also expected. No countercyclical payments are forecasted to be made to producers. Producers are expected to receive only $20 million in marketing loan benefits – including loan deficiency payments, marketing loan gains, and certificate exchange gains. This payout represents a projected decline of 93 percent from 2010 levels,” the ERS report said. (See related graph).

In a separate update yesterday (“2010 Farm Income Forecast”) ERS noted that, “In 2011, average family farm household income is forecast to be up 4.0 percent over 2010 to $86,352. Both farm and off-farm income are forecast to be up in 2010 and 2011, compared to the previous years and compared to the 5-year average for 2005-09. In 2011, 12.9 percent of the income of farm families is expected to be from farm sources, with the rest from off-farm income. Farm income is forecast to average $11,174 in 2011. Average off-farm income is forecast to be $75,178.” (See related graph).

On Thursday, both the House and Senate Agriculture Committees will be holding hearings on the farm economy.

Keith Good

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