Continuing Resolution: Political Background
David Rogers reported on Friday at Politico that, “Threats of a government shutdown next week had all but disappeared by late Friday as Democrats reacted favorably to a Republican plan [related bill] that would keep agencies operating past Mar. 4 while making a first down payment toward a larger budget deal.
“The two-week peace is only temporary but gives House and Senate leaders through March 18 to try to resolve conservative demands for more than $60 billion in spending cuts, all concentrated in the second half of this fiscal year.
“A first installment of $4 billion in savings would be part of the deal now and Republicans have said they will insist on $2 billion more in cuts for each additional week the talks continue past the new deadline. The novel approach is one devised by Speaker John Boehner (R-Ohio), trying to keep pace with his large freshman class while avoiding the same sort of shutdown that so hurt Republicans in the 1990’s when they confronted then President Bill Clinton.”
Friday’s article added that, “About $2.7 billion of the proposed savings would come from rescinding unspent funds, such as water projects and local economic initiatives, earmarked by past Congresses. The remaining third, or $1.24 billion, is attributed to eight terminations, impacting broadband loan subsidies and various smaller education programs, as well as $650 million from a general spending account financed through the highway trust fund.”
Lori Montgomery and Paul Kane pointed out in Saturday’s Washington Post that the proposed cuts include: “An additional $29 million would be saved by eliminating an Agriculture Department program that helps farmers get access to high-speed Internet service. Republicans said this program has been littered with ‘abuses’ and duplicates efforts elsewhere in the government.”
Jennifer Bendery reported yesterday at Roll Call Online that, “Signaling hope that Congress can avert a government shutdown, Senate Budget Chairman Kent Conrad said Sunday that House Republicans’ two-week spending proposal is ‘acceptable’ while lawmakers negotiate a longer-term plan.
“‘It is acceptable to me to have $4 billion in savings in a two-week package, sure,’ the North Dakota Democrat said on CNN’s ‘State of the Union.’”
But Naftali Bendavid reported in today’s Wall Street Journal that, “Passage of the short-term deal this week would set off a two-week period in which House Republicans and Senate Democrats would try to bridge a $57 billion gap in their spending plans for the rest of fiscal 2011. Comments by both sides Sunday suggested they were no closer to an agreement on that measure.
“Senate Budget Committee Chairman Kent Conrad (D., N.D.) said on CNN’s ‘State of the Union’ program that making steep budget cuts during fragile economic times is risky. ‘Does it make sense to do? I don’t believe it does,’ he said.”
“House Speaker John Boehner (R., Ohio), speaking to a convention of the National Religious Broadcasters in Nashville, Tenn., stressed the government’s dire financial status.”
With respect to the executive branch, Abby Phillip reported on Saturday at Politico that, “As the March 4 deadline looms for a government shutdown, President Barack Obama warned Capitol Hill lawmakers not to ‘allow gridlock to prevail,’ urged them to resolve the partisan stalemate and compromise on a short-term federal budget.”
Meanwhile, The New York Times editorial board stated yesterday that, “In a recent report, economists at Goldman Sachs estimated that the House cuts would reduce economic growth by 1.5 percentage points to 2 percentage points in the second and third quarters of 2011. That would devastate employment. As a rule of thumb, each percentage point drop in growth means a loss of 1.2 million jobs.”
However, The Wall Street Journal editorial board pointed out on Saturday that, “More spending didn’t create jobs, but now we’re told spending cuts will destroy jobs.”
Continuing Resolution: Agriculture, Regulations, and Biofuels
A Memorandum released on Friday by Sen. Tom Harkin (D-IA) stated that, “Late last week the U.S. House of Representatives passed budget legislation covering the remainder of fiscal year 2011 and making severe cuts in funding to address a broad range of our nation’s critically important priorities and needs in the areas of food, agriculture, and farm conservation. If enacted, this budgetary onslaught would seriously impair efforts to improve the quality of life in rural communities; to ensure safe food for American consumers; to conserve soil, enhance water quality, restore wildlife habitat; and to spur economic growth and create jobs. The budget proposal passed by the House is thus especially detrimental to Iowa.”
On separate CR issue, Greenwire writer Gabriel Nelson reported on Friday at The New York Times Online that, “Farm groups and members of Congress are jumping the gun in their efforts to stop U.S. EPA from making its air pollution rules tougher on dusty rural areas, the agency’s second-in-command said yesterday.
“The stopgap spending bill passed by the House last week included an amendment, sponsored by Rep. Kristi Noem (R-S.D.), that would prevent EPA from updating the national air quality standards for coarse particles. It was a pre-emptive strike, meant to stop the agency from following through on a set of recommendations from staffers that were seen by farming groups as a threat to rural areas.”
The Greenwire piece added that, “The Noem amendment, which passed 255-168, has indeed caught EPA’s attention, but the agency doesn’t agree with the criticism. Claims that EPA is planning to create onerous new rules for farm dust aren’t based on reality, Deputy Administrator Bob Perciasepe said.
“‘Of course, we’ve had a coarse particle standard for many, many decades, and many places have done remarkable things, including the Central Valley of California, to comply with those,’ he said during an event in Washington. ‘But we have not proposed any different standard.’
“‘The key is, in order to get the certainty, we’ve got to move forward with the process,’ he added in response to the amendment, which would block EPA from reviewing the standards. ‘And in order to move forward with the process, people have to have discussions that are not based on what might happen, but what is actually, really happening.’”
On CR issues associated with biofuels, Ben Geman reported on Friday at The Hill’s Energy Blog that, “Ethanol and farm industry trade groups are pressing the Senate to reject House-passed legislation that aims to thwart use of higher levels of ethanol in gasoline.
“The Renewable Fuels Association, the National Corn Growers Association, Growth Energy and four other groups sent a letter Friday to Senate lawmakers that bashes fiscal year 2011 spending legislation the House approved last week.
“‘Despite the logic of fostering energy independence through a robust ethanol industry, the House of Representatives adopted amendments as part of H.R. 1 that would undermine significant investments in rural communities. Those investments have created American jobs, strengthened national security and helped grow our rural economy through the increased production and use of ethanol,’ the letter states.”
In a related article, Ken Black reported on Friday at The Times-Republican Online (Marshalltown, IA) that, “Echoing comments Sen. Charles Grassley made earlier in the week, Rep. Tom Latham, R-Iowa, sees a fundamental shift on ethanol policies that could have very negative consequences for Iowa.
“During a stop in Marshalltown, Latham noted in the House of Representatives there were votes on amendments to prohibit the U.S. Environmental Protection Agency to mandate a switch from a 10-percent ethanol blend to a 15-percent ethanol blend. At the same time, there was also a vote that would have helped gas stations fund transition to other pumps to support different blends of ethanol.
“‘Both of those amendments to stop these things won overwhelmingly,’ Latham said. ‘It’s a new world.’”
On Friday, USDA released its Grains & Oilseeds Outlook, which stated in part that, “Corn ending stocks for 2011/12 are projected 190 million bushels higher than the current year projection, but at 865 million 2011/12 carryout will remain historically low, especially in light of record expected usage. The stocks-to-use ratio is projected at 6.4 percent, up marginally from the 5.0 percent projected for 2010/11. With the continuation of the currently tight supply and demand situation through the 2011/12 marketing year, the season-average farm price is projected at a record $5.60 per bushel, up $0.20 from the midpoint of the projected range for 2010/11” (at page seven).
Friday’s report added that, “U.S. soybean ending stocks for 2011/12 are projected at 160 million bushels, up 20 million from the level projected for 2010/11. The ending stocks-to-use ratio of 4.8 percent would mark the fourth consecutive year with the ratio below 5 percent. With a low stocks-to-use ratio and high soybean oil and corn prices projected for the 2011/12 marketing year, the season-average farm price for soybeans is projected at $13.00 per bushel, up from the $11.70 midpoint of the 2010/11 projected range” (at page nine).
For wheat, USDA indicated that, “The stocks-to-use ratio for 2011/12 is projected at 28.3 percent, down 4.7 percentage points from the current year projection, and well below the 48.4 percent ratio in 2009/10. The 2011/12 season-average farm price is projected at a record $7.50 per bushel, up $1.80 from the midpoint of the projected range for 2010/11. This is well above the 2008/09 record of $6.78 per bushel” (at page five).
The Chicago Tribune editorial board pointed out late last week that, “The American Midwest could be ground zero for the next political shockwave. With grain stockpiles at such alarmingly low levels, U.S. farmers will plant fence row-to-fence row this spring. But even a bumper crop won’t be enough to fill all the world’s empty bins. And the Farm Belt may not deliver: Our last major drought struck in 1988. Some forecasters consider another one overdue.
“Given the precarious balance between supply and demand, any significant crop failure would force immediate changes in U.S. ethanol policy. In the coming year, absent any reform, 5 billion bushels of corn will go into ethanol — more than double the amount we’ve slated for export to hungry customers abroad. If prices skyrocket and food riots break out in impoverished parts of the world, it’s hard to imagine Americans putting all that corn into their gas tanks.”
Tom Polansek reported in Saturday’s Wall Street Journal that, “Corn for May delivery briefly hit the 30-cent limit the Chicago Board of Trade places on one-day price rises before settling up 25.5 cents, or 3.7%, at $7.22 a bushel. Soft, red winter wheat futures soared 3.7% to $8.1125 a bushel and soybean futures gained 3.4% to close at $13.75 a bushel.”
John Ydstie reported yesterday on NPR’s “Weekend Edition” program that, “Sharp increases in food prices helped spark the political upheaval gripping northern Africa and the Middle East. Bad weather in key growing regions was among a confluence of factors driving prices to record levels, a U.N. analyst says. But the price spikes are giving U.S. farmers an incentive to boost production.”
The NPR item stated that, “[Abdolreza Abbassian, a senior economist for the United Nations’ Food and Agriculture Organization] says many factors have contributed to the upward pressure on food prices. There’s demand for more varied diets in emerging economies like China. And crops are being diverted for use in biofuels like ethanol.”
Meanwhile, John Parker stated in the Feb. 24 edition of The Economist that, “An era of cheap food has come to an end. A combination of factors—rising demand in India and China, a dietary shift away from cereals towards meat and vegetables, the increasing use of maize as a fuel, and developments outside agriculture, such as the fall in the dollar—have brought to a close a period starting in the early 1970s in which the real price of staple crops (rice, wheat and maize) fell year after year.”
Kelly Evans noted in today’s Wall Street Journal that, “Still, food stockpiles remain historically tight, and that will keep upward pressure on prices even if the next harvest is bountiful.”
In related news, Luca Di Leo reported on Friday at the Real Time Economics Blog (Wall Street Journal) that, “A report being conducted for the world’s Group of 20 leading economies points to supply not keeping up with demand as the main factor behind price increases in wheat, sugar, cotton, metals, oil and other commodities.”
Friday’s “All Things Considered” program on NPR highlighted how generally higher commodity prices are benefiting the U.S. rural economy (“What Recession? It’s Boom Time For Nebraska Farms”) and stated that: “During recent years in America’s Corn Belt, the average price for a bushel of corn has doubled to $6. The price leap has been similar for soybeans and wheat. Economist Ernie Goss of Creighton University in Omaha told NPR’s Robert Siegel, ‘If states were stocks, I’d be selling California and buying Nebraska, Iowa, South Dakota, North Dakota and Kansas.’”
And Marc Keller reported yesterday at the Watertown Daily Times (NY) Online that, “Skyrocketing feed prices will stretch dairy farmers this year, but higher milk prices will prevent the sort of financial bloodbath that hit producers in 2009, a government economist said Friday.”
Robert Pore reported on Friday at The Grand Island Independent Online (NE) that, “While [Neb. GOP Sen. Mike Johanns] said he expects farm commodity prices to remain high, that will produce more pressure on lawmakers to cut Farm Bill programs even further as direct payments and other commodity safety net programs will not be needed due to continued higher crop prices.
“The rub, though, is that the share of the Farm Bill that actually goes to programs helping producers will get smaller, Johanns said.
“He said many people believe Farm Bill funding goes primarily to producers. But, in reality, the producers’ share is small and is projected by the Congressional Budget Office to get even smaller for the 2012 Farm Bill.”
The article added that, “Johanns and producers at the Burwell meeting expressed caution about cutting crop insurance programs in the 2012 Farm Bill, which provides immediate protection to farmers whose crops have suffered from a weather disaster. The senator said that crop insurance programs have been reduced by $6 billion over 10 years, with $4 billion being used for debt reduction and $2 billion reinvested in conservation programs, according to CBO projections for 2012 Farm Bill spending.”
And Rachael Gray reported late last week at The Garden City Telegram (KS) that, “[Sen. Ag Comm. ranking member Pat Roberts (R-KS)] said making crop insurance more available is one of his ‘top priorities.’”
Also with respect to crop insurance, Feedstuffs reported on Friday that, “Agriculture Secretary Tom Vilsack announced today that USDA will soon seek proposals to study the feasibility of providing crop insurance to producers of biofuel feedstocks, including corn stover, straw and woody biomass. These feasibility studies, funded by the Risk Management Agency (RMA) will join research efforts already underway for energy cane, switchgrass and camelina.”
And Howard Weiss-Tisman reported on Saturday at the Brattleboro Reformer (VT) that, “Rep. Peter Welch, D-Vt., continued his listening tour of Vermont farms Friday with a stop at Walker Farm, where the Congressman met with farmers, nutritionists, chefs and program directors for local food initiatives.
“As a new member of the House Agriculture Committee Welch scheduled a series of meetings to meet with people involved with farming and local food across Vermont.”
The AP reported on Friday that, “Environmental groups failed to show that seed plants for sugar beets genetically modified to withstand the popular weed killer Roundup would cause irreparable harm, a federal appeals court said Friday in overturning an injunction that called for the destruction of the plants.
“The 9th U.S. Circuit Court of Appeals in San Francisco said it disagreed with a federal district court decision last fall granting the injunction against the planting of the seed plants, also called stecklings.
“‘We conclude the district court abused its discretion in granting a preliminary injunction requiring destruction of the steckling plants,’ the court wrote. ‘Plaintiffs have not demonstrated that the … plants present a possibility, much less a likelihood, of genetic contamination or other irreparable harm. The undisputed evidence indicates that the stecklings pose a negligible risk of genetic contamination, as the juvenile plants are biologically incapable of flowering or cross-pollinating before February 28, 2011, when the permits expire.’”