FarmPolicy

August 21, 2019

Budget Issues (Farm Bill); Regulations; Biofuels; Trade; and the Ag Economy

Budget Issues: Political Background

Janet Hook reported in today’s Wall Street Journal that, “House Republicans plan to unveil another short-term measure Friday to keep the government operating while they negotiate over this year’s federal budget with Democrats and the White House.

“The measure is expected to extend funding for three weeks beyond March 18, the expiration for a stopgap bill that is now keeping the government funded, senior GOP aides said. Failure to pass a new funding mechanism by March 18 would trigger a partial government shutdown.

The new, short-term measure through April 8 would likely make additional cuts in spending from last year’s levels at a rate of $2 billion a week.”

And Alexander Bolton reported yesterday at The Hill Online that, “Frustrated Senate Democrats gave senior White House advisers an earful Thursday afternoon during a private meeting, telling them that President Obama needs to get more involved in the budget battle, according to Democratic sources.

“Obama dispatched his budget director, Jack Lew, and National Economic Council Director Gene Sperling to soothe the restive Democrats.”

Budget Issues: Agriculture

Secretary of Agriculture Tom Vilsack testified yesterday before the Senate Appropriations Subcommittee on Agriculture, where he noted in part that, “As we meet, Congress is in the midst of debating a continuing resolution for 2011. As the President has made clear, the administration believes that the final product should embrace the principles both of shared sacrifice and shared opportunity, to do so carefully, and in a way that reflects our values.

To prepare for this continuing resolution, I have already instructed my leadership team at USDA to prepare for a host of possibilities when it comes to future resources – and to know exactly what resources are available to them today. But it is also my hope that any funding proposals should provide USDA the time to appropriately manage any cuts so that we continue to be as effective as possible in serving our customers, the American people.”

Sec. Vilsack added that, “To maintain a strong safety net for American agriculture, we fund our guaranteed and direct loan programs for ownership and operating loans, expand the crop insurance program, and adequately fund our disaster programs under the 2008 Farm Bill. And building on the crop insurance savings that we realized last year – which carry over into this year – new changes in catastrophic policies in terms of the premium assistance will net additional savings. Also, we again propose the direct payment reforms that would impact only about 2 percent of producers, and save $2.5 billion over 10 years.”

Near the conclusion of yesterday’s Subcommittee hearing, Sen. John Hoeven (R-N.D.) discussed crop insurance in detail with Sec. Vilsack and highlighted the importance of this program to the overall safety net for farmers (audio here, MP3- 2:41).

Meanwhile, a news release yesterday from the American Soybean Association (ASA) stated that, “The [ASA] has reached out to the Chairman and Ranking Members of the House and Senate Appropriations Committees urging them to adopt a comprehensive plan for reducing deficits, and has raised concerns about disproportionate and devastating cuts to key agriculture-related programs and operating budgets for U.S. Department of Agriculture (USDA) agencies in HR 1, a new Continuing Resolution for FY-2011.

“‘The [ASA] and our soybean farmer members understand the need to address deficit spending,’ said ASA Chairman Rob Joslin, a soybean producer from Sidney, Ohio. ‘We are concerned, however, by the prospect that Congress may make disproportionate and devastating cuts to key agriculture-related programs in a new Continuing Resolution for FY-2011. The proposed reduction of $5.2 billion for these programs and budgets in HR 1 represents 22.4 percent of current-year spending, more than twice the 9.2 percent cut proposed for overall domestic discretionary spending.’”

And in other farm policy news, the Washington Insider section of DTN indicated yesterday (link requires subscription) that, “Earlier this week, Tom Zacharias, President of National Crop Insurance Services and former USDA Chief Economist and consultant Keith Collins laid out a number of relevant facts on insurance issues during a conference call with reporters. They said that while the likelihood of crop yield losses changes only slowly, the dollar loss number depends on prices as well as yields, and has cycles that can change quickly and sharply.”

The DTN item noted that, “Collins estimated the total value of crops underwritten to be $11.2 billion this year, and estimated that the premium subsidy amounts to 60 percent, or about $6.6 billion. ‘But the cost for crop insurance is tricky,’ he said. ‘It’s not really a direct cost to the government, it’s more an implicit cost.’ Net indemnities are the cost to the government, he noted.

“In budget terms, he said for 2010, USDA’s Risk Management Agency is carrying about $4 billion in total government costs. ‘The record was $7.7 billion in 2008,’ he added, noting it was ‘an all-time high — the last time we had very high prices and base prices in policies,’ Collins cautioned.

“All this adds up to a record amount of money on the line in the form of crop insurance, Collins observed. Not only are prices high, but planted acreage could climb by 8 million to 10 million acres — mainly for major crops in the Midwest, Zacharias said, but an uptick in acres covered in the South is expected as well.”

Yesterday’s update added that, “Regarding payout potential in 2011, Collins said he did not foresee heavy losses this year, but quickly hedged that comments, suggesting that, ‘… those high base prices could end up triggering payments. If a corn producer bought an 80 percent coverage policy with the base price of $6.01, he explained, that farmer could get a payment if the market price falls below $4.80 per bushel.’

“‘That farm could have a normal yield’ and if prices were to decline it could still trigger the payment. In addition, Collins noted that, ‘with low corn stocks, it doesn’t take much to cause prices to swing. If China fails to buy corn, or if there’s another such event, it could push prices down,’ he noted.”

Regulatory Issues: EPA- Greenhouse Gas Emissions

John M. Broder reported in today’s New York Times that, “A House subcommittee voted on Thursday to strip the Environmental Protection Agency of its power to regulate greenhouse gases [HR 910, “Energy Tax Prevention Act of 2011”] , chipping away at a central pillar of the Obama administration’s evolving climate and energy strategy.”

Mr. Broder pointed out that, “A parallel bill has been introduced in the Senate, although passage remains uncertain. President Obama has vowed to veto such legislation, which would undercut his administration’s policy of encouraging clean energy innovation with billions of dollars in support and rules that make it more costly for industry to keep spewing carbon dioxide.

Some coal state and oilpatch Democrats in both chambers also support the legislation, so it is not certain that the president’s allies could prevent a veto override.”

Andrew Restuccia reported yesterday at The Hill’s Energy Blog that, “The bill, authored by full committee Chairman Fred Upton (R-Mich.) and subcommittee Chairman Ed Whitfield (R-Ky.), would permanently eliminate EPA’s authority to regulate greenhouse-gas emissions from stationary sources like power plants and refineries. It also overturns a finding by EPA that greenhouse gases endanger public health and welfare.

“House Majority Leader Eric Cantor (R-Va.) said Thursday that the EPA legislation will come to the House floor within weeks.”

Regulatory Issues: The “Tailoring Rule” and the “Cow Tax”

Near the end of the markup of HR 910 yesterday at the Energy and Power Subcommittee, Rep. Lee Terry (R-Neb.) brought up current policy issues with the panel of experts regarding the EPA’s “Tailoring Rule,” and the so-called “Cow Tax.”

Rep. Terry’s inquiry (audio replay, MP3- 2:13), Went like this: “The EPA is setting the amount of CO2 that would then trigger EPA’s regulations, correct? (Answer: Correct.) Congress has not set the carbon greenhouse gas threshold that would trigger either permitting or regulating. (Answer: Correct.)

“And the Clean Air Act (CAA) has a citizen right of action, correct? (Answer: Yes.) Isn’t it frequently used by environmental groups when they disagree with the EPA’s decision on not to enforce the CAA on a particular industry? (Answer: Yes.) Or when the EPA uses their own thresholds [which] would trigger permitting or regulating? (Answer: Yes.) Okay, so even though Lisa Jackson may come here and say, ‘We have no intention to regulate feed yards of cattle or hogs,’ the reality is that the Environmental Defense Fund or Sierra Club or just an individual in collaboration with, can bring a lawsuit which would force the EPA to use a lower standard, or enforce on a particular industry, correct? (Answer: Yes, that is correct.)

So we have no certainty as we sit here today that feed lots in Nebraska aren’t going to be regulated by the EPA tomorrow despite what the Director of the EPA said in front of this Committee. (Answer: There are provisions which allow for lawsuits to be brought.) Alright.”

Rep. Terrry was referring to the “Tailoring Rule,” which was explained in an article from last May (“EPA Issues Final ‘Tailoring’ Rule for Greenhouse Gas Emissions”): “U.S. EPA today issued its final ‘tailoring’ rule for greenhouse gas emissions, a contentious policy aimed at shielding small polluters from rigid Clean Air Act permitting requirements.

EPA’s rule ‘tailors’ permitting programs to limit the number of facilities that would be required to obtain New Source Review and Title V operating permits based on their greenhouse gas emissions. EPA said the threshold would cover power plants, refineries and other large industrial plants while exempting smaller sources like farms, restaurants, schools and other facilities.”

Recall that a Wall Street Journal editorial from September 2009 explained that, “Yet the Supreme Court said nothing that would let the EPA simply decide on its own to apply the law to some unfavored business while giving others a pass. And the Clean Air Act is explicit about the 250-ton threshold. Team Obama’s real motive in ‘tailoring’ this rule is to limit the immediate economic impact of carbon limits to head off a political backlash.

But even businesses that do get a pass shouldn’t rest too easily. The green lobby will quickly sue to force the EPA to enforce fully its own rules and go after all carbon sources.”

This was the point that Rep. Terry appeared to be making yesterday: Farms and feedlots may not be subject to regulations now, but the future may be far less certain.

House Agriculture Committee Hearing- EPA Administrator Lisa Jackson

With the potentially uncertain underpinnings of the “Tailoring Rule” in mind, the Hill’s Andrew Restuccia reported yesterday that at a House Agriculture Committee hearing yesterday, EPA Administrator Lisa Jackson “laid out five myths about the agency: Myth number one: EPA will impose a so-called ‘cow tax,’ in which emissions from cows will be regulated.

“‘The truth is — EPA is proposing to reduce greenhouse gas emissions in a responsible, careful manner and we have even exempted agricultural sources from regulation,’ Jackson said.” (To listen to a portion of Admin. Jackson’s comments on the “cow tax” from yesterday, just click here (MP3- 0:43)

In his opening statement at yesterday’s hearing, House Ag Comm Chairman Frank Lucas (R-OK) indicated that, “In many instances, the agency is ignoring Congressional intent and looks to be bullying Congress. Instead of simply administering the law, EPA challenges Congress to pass legislation that gives it more authority. And, if Congress doesn’t act, it will regulate anyway.”

Ranking Member Collin Peterson (D-MN) noted that, “For me, I keep hearing that EPA is only doing what the courts are telling them to do, and I see that in some lawsuits. The problem is that many cases aren’t litigated to the point where a court makes a ruling. Instead, there seems to be a pattern of a lawsuit, followed by an EPA settlement, resulting in policy changes to comply with the settlement. This has been going on far too often and many times without adequate public disclosure.”

To listen to an exchange that Rep. Peterson had with Admin. Jackson on this issue, just click here (MP3- 2:11)

Todd Neeley reported yesterday at DTN (link requires subscription) that, “The U.S. House Committee on Agriculture took shots at the EPA during a hearing Thursday, indicating that the agency is out of touch with agriculture and relies too much on court settlements to direct policies that affect farmers.”

The article added that, “Members of the committee questioned EPA Administrator Lisa Jackson about EPA’s track record of more often settling lawsuits with environmental groups rather than challenging them in court. Multiple committee members argued those lawsuits more often result in EPA handing down regulations that hurt agriculture.”

Rep. Tim Johnson (R-IL) expressed frustration at EPA with respect to agricultural issues in his exchange with Admin. Jackson. This portion of yesterday’s hearing can be heard here (MP3- 5:40). The general themes of Rep. Johnson’s remarks were in many instances reiterated on a bipartisan basis by other lawmakers.

Mr. Neeley also pointed out yesterday at the DTN Ag Policy Blog that, “There were some tense moments between Rep. Bob Goodlatte, R-Va., and EPA Administrator Lisa Jackson during a House Committee on Agriculture hearing Thursday.

“It was just a snippet of the House Ag members who lined up to question Jackson all afternoon, but Goodlatte challenged Jackson on EPA’s action in the Chesapeake Bay region, asking whether the agency has the authority to contact individual farmers.”

Biofuels

Ben Geman reported yesterday at The Hill’s Energy Blog that, “Ethanol subsidies are coming under attack on two fronts in the Senate.

“In addition to Sens. Tom Coburn (R-Okla.) and Ben Cardin (D-Md.) floating legislation Wednesday to strip a key tax credit, Sen. Dianne Feinstein (D-Calif.) floated a somewhat different measure that also takes aim at billions of dollars’ worth of federal ethanol supports.”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “While other senators are pushing to squash the ethanol blenders’ credit and other ethanol incentives, a pair of Democratic senators have offered legislation to overhaul biofuel credits and also create a national Renewable Electricity Standard.

“Sen. Amy Klobuchar, D-Minn., and Sen. Tim Johnson, D-S.D., proposed the Securing America’s Future with Energy and Sustainable Technologies, or ‘SAFEST’ Act, which was praised by biofuels and some agricultural groups.”

Meanwhile, Bloomberg writer Kim Chipman reported yesterday that, “The U.S. Environmental Protection Agency plans to issue final rules for labeling gasoline pumps that carry a higher blend of ethanol within months, Administrator Lisa Jackson said.

“‘We expect to issue a final rule in the next few months,’ Jackson said today in testimony before the House Agriculture Committee about the EPA’s fiscal budget.”

Trade

Ian Swanson reported yesterday at The Hill Online that, “Trade tensions between the White House and Republicans burst into the public on Wednesday as Sen. Orrin Hatch (R-Utah) threatened to hold up an agreement with South Korea.

“Hatch said President Obama’s highly touted deal with South Korea, which has won support from both parties, the business community and labor groups, will not win consideration from Republicans unless it is paired with more controversial deals with Colombia and Panama.”

In a news release yesterday, Indiana GOP Sen. Richard Lugar reiterated this point as he “vowed to help block the Obama Administration’s South Korea free-trade agreement, unless the Colombia and Panama trade agreements signed by former President George W. Bush are also submitted to Congress for approval.”

Agricultural Economy

The Wall Street Journal reported today that, “U.S. government forecasters eased concerns over low grain supplies, slightly increasing estimates for global supplies of corn, wheat and soybeans, while leaving projected domestic supplies mostly unchanged.

“The U.S. Department of Agriculture in its monthly crop report still forecasts tight supplies for staple crops, yet sees inventories stabilizing as South American countries begin their harvests.”

And Reuters writer Charles Abbott reported yesterday that, “The steep rise in U.S. farmland prices creates the potential for agricultural credit problems if there is a sharp downturn in the sector, a leading U.S. financial regulator said on Thursday.”

Mr. Abbott noted that, “Chairman Sheila Bair of the Federal Deposit Insurance Corp said at an FDIC forum ‘while we don’t see a credit problem in agriculture at this time, the steep rise in farmland prices we have seen in recent years creates the potential for an agricultural credit problem sometime down the road.’

“‘We’d like to avoid that,’ she added.

“Lenders, regulators and farmers ‘need to stay attuned’ to long-term risks, Bair said at the symposium, which focused on farmland prices. If crop prices fall, farm income falls or interest rates rise, she said, ‘farm operators can find it very difficult to make ends meet and service their outstanding debt.’”

The Reuters article added that, “Joseph Glauber, the Agriculture Department’s chief economist, said comparisons to the late 1970s, when land prices soared, ‘seem unfounded’ as farmers carry lower debt-to-asset ratios now and the farm income outlook appears strong.”

Keith Good

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