FarmPolicy

October 24, 2014

Farm Bill; Ag Economy; Biofuels; Regulations; Climate; Trade; and Budget Issues

Farm Bill Issues

The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., is predicting that the budget eventually approved by the Senate will be more generous than the one introduced in the House by Budget Committee Chairman Paul Ryan, R-Wis., and passed by that chamber before the last congressional recess.

Stabenow said flatly that she ‘won’t accept’ the $180 billion in cuts to agriculture over the next decade that that are included in the House bill. The House-planned reductions would work out to $50 billion lopped off agricultural spending and another $130 billion in cuts to food and nutrition programs. Stabenow called the Ryan plan a ‘disincentive’ for agriculture.”

The DTN item added that, “The Senate has yet to put forward its budget proposal for fiscal 2012 and beyond, and it will come as little surprise to anyone when there are numerous differences between the spending proposals of the Republican-dominated House and the majority Democratic Senate. In the past, such differences often were resolved by splitting the difference between the two sides. The presence this year of so many fiscal conservatives in both chambers plus the horrid state of the U.S. deficit and national debt will make that meet-you-in-the-middle type of compromise exceedingly difficult to achieve.”

The Wednesday edition of the Red River Farm Network’s Agriculture Today program included interesting comments from House Ag Committee Ranking Member Collin Peterson (D-Minn.) about executive branch perspective on farm policy.

During Wednesday’s program, Rep. Peterson indicated that the executive branch could benefit from an additional voice on agricultural issues from inside the White House much like the Clinton Administration did when former Arkansas Congressman Marion Berry served as an advisor on agricultural issues.  This kind of perspective is currently lacking, Rep. Peterson noted.  To listen to Rep. Peterson’s comments on this issue from the Agriculture Today program, just click here (MP3- 1:23).

 

Agricultural Economy: Weather Issues

David Bennett reported earlier this week at the Delta Farm Press Online that, “This spring, fears of rising rivers and the reality of a blown levee have tormented farmers and residents in southeast Missouri.

“Rep. Jo Ann Emerson, whose constituents make up Missouri’s 8th congressional district, is keen to see the region back on its feet as quickly as possible.”

The update quoted Rep. Emerson as saying, “We have the Washington office working (to) make sure our producers are able to get compensated with crop insurance. It seems that’s working out based on what Agriculture Secretary Tom Vilsack has told me.”

“He’s [Sec Vilsack] told me [Rep. Emerson] this will be treated as a ‘natural’ disaster not a ‘man-made’ one. All the producers who had crop insurance will be able to process claims – obviously within the particular restrictions of their own policies. … But they’ll be eligible to receive remittances from their crop insurance.

“Those who purchased crop insurance for yet-to-be-planted acres will (receive) the ‘prevented planting’ payments they are eligible for within the restrictions of their own policy.”

The AP reported yesterday that, “Blasting open a levee and submerging more than 200 square miles of Missouri farmland has likely gouged away fertile topsoil, deposited mountains of debris to clear and may even hamper farming in some places for years, experts say.

“The planned explosions this week to ease the Mississippi River flooding threatening the town of Cairo, Ill., appear to have succeeded — but their effect on the farmland, where wheat, corn and soybeans are grown, could take months or even years to become clear. The Missouri Farm Bureau said the damage will likely exceed $100 million for this year alone.”

The article pointed out that, “It’s still not clear how much damage the intentional flooding will cause and how farmers will be compensated for losses to the land and roughly 100 houses scattered through the area. Experts said the extent of the damage can’t be accurately assessed until the floodwaters recede, and that likely will take months.”

Joe Barrett and Jeffrey Ball reported in today’s Wall Street Journal that, “With a record-busting crest heading south on the Mississippi River, communities in Arkansas and Mississippi braced for flooding Thursday even as water levels dropped near where a third and final hole was blasted in a Missouri levee.”

“The Corps has said it might need to operate three additional floodways in Louisiana as the high water moves south. All open with gates, however, so the Corps won’t need to set off any more explosions,” the Journal article said.

And Katharine Q. Seelye reported earlier this week at The New York Times Online that, “While tornadoes and floods have ravaged the South and the Midwest, the remote western edge of the Oklahoma Panhandle is quietly enduring a weather calamity of its own: its longest drought on record, even worse than the Dust Bowl, when incessant winds scooped up the soil into billowing black clouds and rolled it through this town like bowling balls.

“With a drought continuing to punish much of the Great Plains, this one stands out. Boise (rhymes with voice) City has gone 222 consecutive days through Tuesday with less than a quarter-inch of rainfall in any single day, said Gary McManus, a state climatologist. That is the longest such dry spell here since note-keeping began in 1908.

“The Dust Bowl of the 1930s, caused in part by the careless gouging of the earth in an effort to farm it, created an epic environmental disaster. Experts say it is unlikely to be repeated because farming has changed so much.”

 

Agricultural Economy: Food and Commodity Prices

Caroline Henshaw reported in today’s Wall Street Journal that, “Global food prices hovered near record highs in April as a rise in cereals prices was offset by declines in sugar and rice, and the United Nations’ food body warned weather problems in the world’s top grain exporters could keep prices high next year as well.

“The Food and Agriculture Organization’s food-price index, which tracks a basket of commodity prices, averaged 232 points last month, little changed from March but still 36% higher than the same time the year before. The index hit 236 points in February, the record high in real and nominal terms since the FAO started monitoring prices in 1990.

“Grain prices climbed sharply in April, with the FAO’s cereal-price index rising 5.5%, led by an 11% gain in the price of corn and a 4% increase in wheat. Prices are now 71% higher than the same time last year after a series of weather problems slashed global output and sent markets soaring.”

Bloomberg writer Rudy Ruitenberg reported yesterday that, “Corn has almost doubled in the past 12 months on speculation that more planting in the U.S., the world’s largest grower, won’t be sufficient to rebuild global stocks. Wheat surged 57 percent over the same period and soybeans gained 39 percent as flooding ruined crops in Canada and Australia and drought reduced harvests in Russia and Europe.

Of the grains, corn ‘is the most worrisome,’ [Abdolreza Abbassian, a senior economist at the FAO] said in a statement. ‘We would need above-average, if not record, yields in the U.S.,’ however, ‘plantings so far have been delayed considerably due to cool and wet conditions on the ground,’ he said.”

Meanwhile, Graham Bowley and William Neuman reported in today’s New York Times that, “The extreme volatility of commodities prices and the unpredictability that comes with it is increasing the cost of doing business for everyone.”

The Times article stated that, “Arcane to the layman, commodities futures are essential to many businesses, like food manufacturers and fuel suppliers, which use them to help set prices and predict costs for items as varied as corn flakes, blue jeans and mocha lattes. Farmers use them to decide which crops to plant. And they keep the wheels of industry turning smoothly by acting like insurance policies to hedge the risks inherent in buying and selling raw ingredients.

“But when prices move erratically, it increases the cost of buying the futures and options that protect companies against such changes. Those added costs find their way to the grocery store and the shopping mall.”

Today’s article stated that, “Much of the fluctuation is caused by economic supply and demand. Stockpiles of goods like cotton, corn and coffee are at historically low levels, setting markets on a hair trigger. Demand for many commodities is rising as developing countries like China and India become wealthier and buy ever more food and oil.

“But other factors, like investor concerns about a weak dollar, oil disruptions in the Middle East and changing perceptions of the global economy, have also fed rapidly changing prices.”

 

Biofuels

David Shepardson reported yesterday at The Detroit News Online that, “A House committee questioned the slow development of advanced biofuels like cellulosic ethanol.”

The article indicated that, “Many government-supported cellulosic biorefineries have been stalled, in or delayed, including a project in Michigan’s Upper Peninsula.”

Mr. Shepardson noted that, “Rep. Lee Terry, R-Neb., questioned why more progress hasn’t been made on cellulosic ethanol.

“‘In the last five years it doesn’t seem like we’ve made a lot of progress,’ I would have expected mass production by now,’ he asked. ‘What’s the hold up? What’s the problem?

“At the same time, corn-based ethanol production and government subsidies have come under attack by some in Congress and others who argue that diverting so much corn into gas tanks raises food prices and feed prices for livestock.”

An update posted yesterday at USDA’s Economic Research Service included this interesting chart and noted that, “Increased ethanol production has created a new source of demand for corn that affects prices, acreage allocations, exports, and the livestock sector. Corn prices rose in tandem with ethanol production, resulting in higher incomes from corn production. Although costs for users of corn such as livestock producers, the food industry, and foreign buyers increased with ethanol production, other factors, such as low global stocks, droughts, exchange rates, policy responses by some major trading countries, and rising incomes in some countries such as India and China have also contributed to price increases, especially during the 2006-08 period.”

Meanwhile, a news release from USDA yesterday stated that, “Agriculture Secretary Tom Vilsack announced today the establishment of the first Biomass Crop Assistance Program (BCAP) Project Area to promote the production of dedicated feedstocks for bioenergy. This project will help spur the development of next-generation biofuels and is part of Obama Administration efforts to protect Americans from rising gas prices by breaking the nation’s dependence on foreign oil.”

With respect to biodiesel, an update posted yesterday at the FarmDocDaily Blog (University of Illinois) stated that, “The consumption of soybean oil in domestic biodiesel (methyl esters) totaled 2.021 billion pounds during the 2008-09 marketing year (October 2008-September 2009). Consumption during the 2009-10 marketing year declined to 1.681 billion pounds. The decline reflected the failure to extend the $1.00 per gallon biodiesel blenders’ tax credit for calendar year 2010. As indicated in the red columns in figure 1, consumption of soybean oil in methyl esters declined to very low levels in November and December of 2010. The Census Bureau has provided estimates of the consumption of all soybean oil in methyl esters since October 2006. Monthly consumption peaked at 376.2 million pounds in August 2007 and accounted for 20 percent of total consumption of U.S. soybean oil. Consumption in December 2010 was only 53.7 million pounds, accounting for 3.4 percent of total soybean oil consumption that month.

The blenders’ tax credit was re-instated beginning in January 2011 and a rebound in consumption of soybean oil in methyl esters has been expected.”

 

Regulations

An update posted yesterday at AgWired stated that, “Kansas Senator Pat Roberts, ranking member, Senate Agriculture Committee, addressed the Animal Agriculture Alliance Stakeholders Summit. He spoke to a number of issues that included the farm bill and burdensome and troubling government regulations.”

The update noted that, “[Sen. Roberts] says that talking to farmers and ranchers around the country right now they don’t even bring the farm bill up. They’re most interested in regulations which he says they’re dealing with bill by bill.”

A short interview with Sen. Roberts, as well as an audio replay of his remarks at yesterday’s summit, has been posted at AgWired.

Robin Bravender reported yesterday at Politico that, “Senate Republicans are pushing a plan to morph the Energy Department and the EPA into one giant agency.

“A bill introduced Thursday by Sen. Richard Burr (R-N.C) would combine the DOE and the EPA into a new agency called the Department of Energy and Environment. Burr’s effort has the backing of 15 GOP co-sponsors.”

 

Climate Change

Justin Gillis reported in today’s New York Times that, “Global warming is already cutting substantially into potential crop yields in some countries — to such an extent that it may be a factor in the food price increases that have caused worldwide stress in recent years, researchers suggest in a new study.”

The Times article stated that, “Wheat, rice, corn and soybeans account for the majority of calories consumed by the human race, either directly or as meat from animals raised on grains. Because demand for these grains is inflexible and rising, the losses from climate change probably accounted for price increases of about 6 percent in the four major commodities, the study’s authors found.

“At today’s grain prices, that calculation implies that climate change is costing consumers, food companies and livestock producers about $60 billion a year.”

 

Trade

Reuters writers Doug Palmer and Richard Cowan reported yesterday that, “The U.S. House of Representatives hopes to pass long-delayed free-trade agreements with Colombia, South Korea and Panama by August, House Speaker John Boehner said Thursday.

“‘We can move pretty quickly but it’s going to take help by the president as well,’ Boehner told reporters.”

Meanwhile, U.S. Trade Representative Ron Kirk was a guest on yesterday’s AgriTalk Radio program with Mike Adams; to listen to their discussion on trade issues, just click here.

 

Budget Issues

David Wessel and Damian Paletta reported yesterday at The Wall Street Journal Online that, “GOP leaders and the White House are discussing a deal that would enact strict deficit targets and some spending cuts to win Republican votes for lifting the ceiling on how much the federal government can borrow.

“The deal would defer contentious decisions about Medicare, Medicaid and taxes until after the 2012 elections.”

The Journal article explained that, “[House Budget Committee Chairman Paul Ryan's] outline is strikingly similar to those administration officials have been using privately, an indication that any compromise is likely to include the elements he described:

“[C]uts or limits on so-called mandatory spending, such expenses for farm subsidies, food stamps, federal employee retirement, student loans and housing subsidies that don’t require yearly appropriations.”

Anna Palmer and Steven T. Dennis reported yesterday at Roll Call Online that, “Republican and Democratic House leaders offered few specifics Thursday about their first debt limit meeting with Vice President Joseph Biden but said they are optimistic and see areas of commonality with each other.

“Majority Leader Eric Cantor said there was ‘general agreement that things have got to change’ and that spending cuts and other budgetary reforms are necessary.”

Keith Good

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