January 19, 2020

Continuing Resolution; Farm Bill; Ag Economy; Biofuels; and Regulations

Budget Issues: Continuing Resolution

Jonathan Allen reported yesterday at Politico that, “House Republicans plan to pass a two-week stopgap spending bill next week that would keep the government running past March 4 at reduced levels, GOP aides told POLITICO Wednesday.

“The measure comes on the heels of last week’s seven-month appropriation bill that would have slashed $61 billion from federal accounts but has no chance of passage in the Senate.

Republican aides say the cuts in the two-week spending bill would be proportional — or pro-rated — to reflect the levels in the first measure. That means cutting about $4 billion over two weeks. The plan is tentative and the contours of the measure are still being crafted.”

The article explained that, “It’s House Republicans’ opening bid in a war of attrition that pits their promise to slash spending against Senate Democrats’ refusal to allow any cuts on a short-term bill. If no one backs down by March 4, the government will shut down. House Republicans want to leave the hot potato in Senate Majority Leader Harry Reid’s hands.”

“Other than issuing a veto threat on the first Republican-written bill, President Barack Obama has kept his distance from a combustible situation that threatens to do damage to anyone standing in the vicinity of a shutdown,” Mr. Allen reported.

Yesterday’s Politico article added that, “David Krone, Reid’s chief of staff, and Barry Jackson, chief of staff to House Speaker John Boehner (R-Ohio), are currently negotiating, but those talks are mostly focused on the process of getting to a deal, including timing and which members will be involved.”

Rebecca Kaplan reported yesterday at National Journal Online that, “The White House continues to express confidence that a last-minute deal will be reached to fund the government before a shutdown is triggered on March 4.

“‘We believe there is the strong potential there for us to reach an agreement to avoid what you called a government shutdown,’ press secretary Jay Carney told reporters in today’s briefing.”

And a daily radio news item from USDA yesterday indicated that, “Agriculture Secretary Tom Vilsack says he’s confident that lawmakers will resolve their budget differences and that a shutdown of the federal government will be averted.”

Farm Bill: Dairy

Marc Heller reported yesterday at the Watertown Daily Times Online (NY) that, “Higher milk prices may be helping farmers this year. But farm groups say they still need a better federal safety net — and fast.

“Increased feed prices are eating up any improved returns farmers see for their milk, the National Milk Producers Federation has said. So the group is pushing Congress to consider a new type of program well before next year’s rewrite of federal farm policy.

“The federation, which represents farmers’ bargaining cooperatives, has proposed a margin insurance program to be supported with a combination of government money and fees charged to farmers and administered by the U.S. Department of Agriculture. The program would pay farmers when high feed prices or low milk prices — or both — undermine their typical operating margins.”

The article explained that, “The program has been in development since last year, but the NMPF now is dealing with a different cast of lawmakers in the House, dominated by Republicans who are sour on farm subsidies, government-sponsored insurance and many other domestic programs. Any program that increases federal spending is a tough sell to the new majority, although the NMPF figures the government can pay for its proposal by dismantling subsidies now paid to farmers when milk prices are low. The current dairy program costs about $102 million annually.”

Yesterday’s article added that, “[Christopher Galen, a spokesman for the federation] said the NMPF has discussed the proposal with the new chairman of the House Agriculture Committee, Rep. Frank D. Lucas, R-Okla., as well as with the top Democrat, Rep. Collin C. Peterson, D-Minn. They have not necessarily promised it will be approved, Mr. Galen said, but the NMPF was pleased by the reception.

“On the other side of the Capitol, Sen. Kirsten E. Gillibrand, D-N.Y., has supported programs that help farmers manage risk. After a Senate Agriculture Committee hearing last week with Agriculture Secretary Tom Vilsack, Mrs. Gillibrand submitted written questions to the USDA, asking about a margin insurance program — called the livestock gross margin dairy program — already offered that only recently has begun to attract interest.”

Farm Bill: Crop Insurance

A daily radio news item from USDA yesterday reminded listeners that, “A Risk Management Agency official says producers should check with local crop insurance agents on closing dates for insurance for their crops.”

Meanwhile, University of Illinois Agricultural Economists Gary Schnitkey and Bruce Sherrick noted in a recent paper (“Higher 2011 GRIP Premiums Still Below Expected Payments”) that, “Group Risk Income Plan with the harvest price option (GRIP-HR) will have higher premiums in 2011 as compared to 2010. Premiums were estimated for corn using a projected price of $6.00 and a volatility of .29. This price and volatility will not be final until the end of February. Hence, actual premium could vary from estimates shown in this paper. Over all counties in Illinois, GRIP-HR premiums will be about 75% higher in 2011 as compared to 2010. Even with these increased premiums, the estimated expected payments exceed farmer-paid premium in most counties of Illinois.”

Farm Bill: Nutrition- Hunger

A news release from USDA yesterday stated that, “Agriculture Secretary Tom Vilsack today announced a series of new initiatives aimed at helping communities increase food access by promoting coordination and partnerships between public, private and non-profit partners. USDA will be investing $4.98 million in grants to 14 communities in eight states to end hunger and improve the nutrition of low-income Americans. Authorized by the Food, Conservation, and Energy Act of 2008, the grants fund research, planning, and activities designed to improve access to nutrition assistance for those in need…The 14 Grantees are located in New York, New Jersey, California, Arizona, Pennsylvania, Texas, Washington and Maryland. The grants fund the development and implementation of plans to help communities expand access to healthy food through increased participation in federal nutrition programs and other creative initiatives that meet a community’s unique needs.”

Farm Bill: Lawmakers Conduct State- District Activity on Rural Issues

While the Senate and House are not in session this week, some lawmakers are meeting with constituents back home on Farm Bill issues, including: Senate Ag Committee Chairwoman Debbie Stabenow (D-MI) (news release); Rep. John Barrow (D-GA) (related news article and video– “[Farmer Joe Boddiford] and others wanted to remind Barrow, and Congress, that federal farm subsidies are more for keeping food safe and affordable than making farmers rich.”); and Rep. Sanford Bishop (D-GA) (related article– “A Republican budget proposal cutting roughly $5 billion in federal agriculture spending would have a ‘pretty devastating effect’ on the state’s single-largest economic sector.” The article added that, “Bishop, who sits on an agriculture subcommittee of the House Appropriations Committee, said his top priorities are maintaining direct federal payments to farmers, keeping programs that pay growers when commodity prices drop and keeping federally subsidized crop insurance programs. He said he also supports federal money for agriculture research and marketing.”)

Agricultural Economy

Bloomberg writers Jeff Wilson and Whitney McFerron reported Tuesday that, “The smallest corn inventories in 37 years are a sign farmers around the globe are failing to produce enough grain to meet rising consumption, even as planting expands and food prices surge.

“Growers from Canada to Russia boosted annual output of wheat, rice and feed grain by 16 percent since 2000, not enough to keep up with the 20 percent gain in demand, U.S. Department of Agriculture data show. While a Bloomberg survey of 25 analysts shows the agency on Feb. 24 may forecast a 3.5 percent increase in U.S. corn planting, the government says world stockpiles will equal 15 percent of use, the lowest since 1974.

Global inventories for all grain will drop 13 percent before the next harvest, the USDA estimates.”

The article added that, “The rally is encouraging farmers to plant more this year. The USDA, at its annual Agricultural Outlook Forum on Feb. 24 in Arlington, Virginia, probably will forecast an increase in U.S. corn planting to 91.281 million acres from 88.192 million, according to the average estimate in the Bloomberg News survey. Soybean planting may be little changed at 77.274 million acres, the survey showed.”

Dan Piller reported yesterday at the Green Fields Blog (Des Moines Register) that, “Pioneer Hi-Bred’s new drought resistant corn introduced this year has the potential to add up to about 125,000 acres of corn plantings, mostly in the western edge of the corn belt from Texas to the Dakotas.

“The 125,000 potential new acres thus won’t significantly alter the so-called ‘battle for acres’ for corn to gain 5 million or more new acres in plantings commodity traders say will be needed this spring to ease the tightest domestic corn stocks since the mid-1990s.”

Andrew Peaple reported in today’s Wall Street Journal that, “Global food prices hardly need another reason to rise. But talk that China may have to increase wheat imports again this year due to poor harvests has added to market jitters, with wheat prices this month around 2½-year highs. Like so many other commodity markets, those for grains may have to get used to a hungry dragon.

“Some perspective is needed. China’s wheat imports rose to 1.4 million tons in the year ending June 2010, according to the International Grain Council, up 260% from a year earlier. Corn imports could jump fourfold this year, it forecasts. Dramatic that may seem, but China still only accounts for 1% to 2% of total world imports of both commodities. By contrast, its imports account for 60% of global trade in soybeans.”

Meanwhile, Patrick Barta reported yesterday at The Wall Street Journal Online that, “The recent sharp increase in world agricultural inflation is likely to level off over the next year as growers expand production, but long-term trends still point toward historically high prices, the chief executive of global food supplier Olam International Ltd. said Wednesday.”

In related news, Liam Pleven, Carolyn Cui, and Guy Chazan reported in today’s Wall Street Journal that, “U.S. oil prices shot to $100 a barrel on Tuesday as Libyan fighting spread and oil companies further cut crude production, raising fears of a prolonged disruption to supplies.

“Oil prices later pulled back to settle at $98.10 a barrel on the New York Mercantile Exchange, up $2.68, or 2.8%. The gain follows an 8.5% rise Tuesday.

It was the first time since October 2008 that U.S. prices touched $100.”

And Gregory Meyer reported yesterday at The Financial Times Online that, “US farmland prices are surging alongside grain markets, drawing investment funds and raising worries about an incipient bubble.

“Federal Reserve banks in the US heartland report double-digit percentage increases in values last year, in some cases exceeding 1980s peaks.”

The FT article noted that, “Corn, the most widely produced US crop, has risen 85 per cent in the past year to $6.80 per bushel. ‘For cornbelt-type farmland, the market price is directly correlated to its productivity,’ said Randy Hertz, chairman of Hertz Farm Management.

“The US Department of Agriculture forecasts that farmers will plant 255m acres with eight key crops this year, a 10m-acre increase from 2010 and more than recent highs of 2008.”


The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Four industry groups last week filed a lawsuit against the Environmental Protection Agency seeking to block the agency’s recent approval of the E15 ethanol blend for model year 2001-2006 cars and light trucks. The suit was filed in the U.S. Court of Appeals for the District of Columbia by the Alliance of Automobile Manufacturers, Association of Global Automakers, National Marine Manufacturers Association and Outdoor Power Equipment Institute.”

(Note: Recall that EPA approved E15 for model year 2007 and newer cars and light trucks back in October; in November, Reuters news reported that, “Livestock producers and food industry groups filed a suit on [Nov. 9] seeking to overturn a U.S. decision to allow higher levels of ethanol in gasoline, saying it could push up food prices.” And in January, EPA okayed E15 for vehicles built from 2001 to 2006.)

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “The ethanol industry needs to quickly get behind a reform program to take to Congress, industry leaders said here [Phoenix] at the National Ethanol Conference Monday and Tuesday.

“‘We need to unite,’ Renewable Fuels Association president and CEO Bob Dinneen said in a speech Monday. ‘We need to focus our agenda. … We need to develop the technical support Congress will demand. And we need to go to Capitol Hill, speaking as one voice, educating the more than 100 new members of Congress that are new to this debate and may only have learned about ethanol from the pages of the Wall Street Journal.’

“The ethanol industry has been supported for many years by the volumetric ethanol excise tax credit known as VEETC, which reduces blenders’ taxes by $5 billion to $6 billion per year. Congress extended VEETC in December, but the extension expires at the end of 2011.”

Mr. Hagstrom pointed out that, “‘The message from that debate was unambiguous. Our industry needs to work with Congress and the administration to reform the tax incentive moving forward,’ Dinneen said.

National Corn Growers Association CEO Richard Tolman said in an interview that the four major ethanol groups — NCGA, RFA, Growth Energy and the American Coalition for Ethanol — have a discussion paper under consideration and are planning another meeting Friday to try to move it forward.

“Both Tolman and Dinneen said the groups agreed on major sections of the proposal, but not all of it. Both men declined to discuss the proposal, but other industry sources said it would most likely involve reducing the VEETC in exchange for federal help getting more flex-fuel vehicles on the road and getting gas stations to install pumps that would sell ethanol as well as other gasoline. The industry’s big challenge is no longer production, the source said, but making ethanol more accessible to American consumers and convincing them to buy it.”

Regulations: Environmental Protection Agency (EPA)

The AP reported yesterday that, “Faced with stiff opposition in Congress and a court-ordered deadline, the Environmental Protection Agency on Wednesday said it will make it much cheaper for companies to reduce toxic air pollution from industrial boilers and incinerators.

“In an overhaul of air pollution regulations, the EPA said it found ways to control pollution at more than 200,000 industrial boilers, heaters and incinerators nationwide at a 50 percent cost savings to the companies and institutions that run them. Those operating large boilers that burn renewable fuels would not be required to install some expensive technologies, and only maintenance would be required for smaller boilers. That would cost $1.8 billion less each year than the original proposal, and still avert thousands of heart attacks and asthma cases a year, the agency said.”

Ben Geman noted yesterday at The Hill’s Energy Blog that, “The Environmental Protection Agency’s changes to a highly controversial regulation to limit toxic pollution from industrial boilers won a thumbs-up from Agriculture Secretary Tom Vilsack Wednesday…’Today, EPA announced a balanced rule to ensure Americans will have cleaner air, while also retaining important energy choices such as biomass that provide heat and power to rural hospitals and schools. We will continue to work with EPA to ensure that affected owners have the information they need to comply with the new rule when it takes effect in 2014,’ Vilsack said in a statement Wednesday.”

Keith Good

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