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Farm Bill; Ag Economy; Trade; Biofuels, and Budget

Farm Bill Issues

Jennifer Steinhauer reported in Saturday’s New York Times that, “When it comes to spending cuts, members of Congress like to say that ‘everything is on the table.’ Except, generally, food. But now federal farm subsidies, long decried by policy makers as wasteful and antiquated but protected by powerful political interests, appear to be in serious danger.

“This week, Representative Paul D. Ryan, Republican of Wisconsin and the chairman of the House Budget Committee, told reporters, ‘We shouldn’t be giving corporate farms, these large agribusiness companies, subsidies. I strongly believe that.’

“His budget proposal would take $30 billion out of the farm program over the next decade.”

The Times article noted that, “A confluence of factors have lined up against the farm programs. While the rest of the economy remains largely stagnant, commodities prices and farm incomes have remained at a protracted high. The House Agriculture Committee, while still dominated by farm state members, is now peppered with freshmen who view cuts to these programs as an essential part of the broader attack on the federal deficit, the centerpiece of their campaigns.”

“What is more, some subsidies have placed the nation in violation of trade agreements, and members from both sides of the aisle have questioned why, with biofuel mandates creating such demand for ethanol, the government needs to subsidize it.”

Later, Ms. Steinhauer pointed out that, “‘The scrutiny of farm programs is stronger than ever,’ said Chuck Conner, president of the National Council of Farmer Cooperatives. ‘It’s not that farmers don’t want to participate in deficit reduction, but at the same time, we hope people appreciate that all other federal programs have skyrocketed, which is why we are in this mess, and farm subsidies have not.’”

The Times article indicated that, “Farmers and their advocates insist that the subsidies have been demonized and overstated.

“‘Every time you read an article saying Congress better be looking at farm programs I am scratching my head,’ Mr. Conner said. ‘When people think of the U.S.D.A. budget they think of farm programs, but it is really more a rounding error.’”

In an opinion piece in today’s New York Times on budget issues, the paper’s editorial board stated that, “Farm subsidies for rich farmers can go but not food stamps and Head Start.”

With respect to the trade aspect of farm subsidies, an editorial posted yesterday at The Wisconsin State Journal stated that, “Our federal government has paid $150 million since last summer to cotton growers in — get this — Brazil.

“Why? Because the foreign payments allow our federal government to continue spending even more — nearly $900 million last year — on subsidies to cotton farmers here in the United States.”

The opinion item added that, “A safety net for farmers during bad times makes sense, given the volatility of markets. But farmers have been enjoying one of their best runs in years. Net farm income is projected to hit $95 billion this year — a 20 percent increase. And most of the direct payments from the federal government go to big operations, not small family farmers.

“[Rep. Ron Kind (D-Wis.)] and the rest of Wisconsin’s congressional delegation should help roll back and cap direct payments farmers get for growing — or not growing — crops. They also should scrutinize disaster insurance that encourages farming marginal land because producers know they’ll get checks even when drought or flood destroys their crops.”

Meanwhile, Tom Steever reported on Friday at Brownfield that, “The chairman of the Senate Agriculture Committee says that in view of the federal deficit and current high commodity prices, there needs to be a credible debate for an effective farm safety net in the next farm bill. Senator Debbie Stabenow (D-Mich.) is quick to point out that strong commodity prices are weighed against farmers’ high input costs. But she says it’s important that the story of production agriculture be told.

“‘We all know in the context of what we’re dealing with right now that we’re going to have to make some changes as it relates to direct payments, but having said that, we have to have a strong farm safety net, so there’s a lot of support for increasing crop insurance,’ Senator Stabenow told farm broadcasters gathered this week on Capitol Hill.

Stabenow says there’s a lot of support for strengthening crop insurance and expanding the number of commodities that it covers. She also gets comments in favor of simplifying the ACRE program, which had few enrollments the last crop year, despite encompassing features that Stabenow says make sense.”

(Note: For more information on the ACRE program, see this update from last week, “Why Every Farmer Should Consider ACRE,” by University of Illinois Agricultural Economist Gary Schnitkey, as well as this update, “The ACRE Program Decision for 2011,” from Friday by University of Illinois Agricultural Economist Nick Paulson.  Both updates were posted at the FarmDocDaily Blog).

With respect to crop insurance and the Farm Bill, Sue Roesler reported yesterday at The Prairie Star Online (Great Falls, Montana) that, “Affordable federal crop insurance, along with a strong farm program safety net were two of the main concerns among farm groups regarding upcoming farm bill discussions.

“Farm groups and members of the Agriculture Advisory Committee in North Dakota, met with U.S. Sen. Kent Conrad, D-N.D., in Mandan April 20.”

The article stated that, “[Terry Weckerly of the North Dakota Grain Growers Association] emphasized bankers require producers to have crop insurance in place before they will make loans. Good crop insurance is the number one vital necessity for the next farm bill, he added.

Scott Tewksbury, Independent Community Banks of North Dakota, echoed Weckerly’s comments on crop insurance.

“‘Federal crop insurance is our chief concern,’ he said, adding that without it, farms don’t have the collateral to receive loans.”

On the issue of conservation, a Minneapolis Star Tribune editorial from Saturday stated that, “[T]he nation already spends billions on agricultural subsidies. Congress needs to better align these financial incentives to achieve sediment reduction and other conservation goals.”


Agricultural Economy: Weather Impacts

Ryan Dezember reported in Saturday’s Wall Street Journal that, “Poultry breeder Terry Smith’s hilltop chicken houses lie in ruins. Thousands of birds are dead. Hundreds of thousands of dollars worth of equipment has been lost.

“When a tornado met the metal buildings, ‘it was an explosion,’ Mr. Smith recalled.

“Similar scenes played out across northern Alabama last week as the most destructive storms in decades swept across the Southeast. In addition to a death toll that stood at 329 people Friday and left thousands homeless, Alabama’s nearly $3 billion-a-year poultry business, the largest segment of an agricultural industry that dominates the state, was dealt a crippling blow.”

The Journal article explained that, “Last year, Alabama churned out 1.04 billion chickens, or about 12% of total U.S. production, ranking the state behind only Georgia and Arkansas, according to the U.S. Department of Agriculture.”

“The state’s latest count of confirmed chicken deaths is nearly 3.2 million. ‘That’s only what we’ve been able to identify,’ said John McMillan, Alabama Agriculture Commissioner. ‘There’s going to be a lot more.’

“Lost birds are only a part of the problem. Widespread power outages have shut down feed mills, processing plants and rendering facilities, which turn offal, feathers and other by-products into protein meal that is fed to the next generation of broilers, disrupting a tightly coordinated production cycle.

“‘It may take up to a year to smooth this thing out, maybe more,’ said Guy Hall, who heads the Alabama Farmers Federation’s poultry division.”

Tom Polansek reported in Saturday’s Wall Street Journal that, “Kansas is on track to harvest a below-average wheat crop as a severe drought parches the country’s top producer of bread wheat.

“A tour of hundreds of wheat fields by food producers, government officials and members of the media this week found the state’s crop has been stressed significantly and will continue to deteriorate unless rain falls in the next two weeks. The crop was in worse shape than many participants had predicted, as damage was more widespread than expected.”

Meanwhile, Campbell Robertson reported in Saturday’s New York Times that, “All eyes in the delta are on the Mississippi River and the bulge of water it is carrying southward, pushing back its tributaries into the towns along its banks, sending residents scattering toward higher ground and setting records all along the way.”

“Unlike in the 1927 flood, the levees along the Mississippi are not causing the greatest concern, officials and river watchers say. The anxiety is in the backwater, the tributaries that are carrying water from the heavy rains down to the Mississippi. The river is not only too high to take any more water, but is also pushing its own water up into the tributaries — and wherever else it can go,” the Times article explained.

The article added that, “Andy Prosser, the public relations director of the Mississippi Department of Agriculture and Commerce, said that he expected more than 500,000 acres of cropland to be flooded throughout the delta if current projections hold. As for the total number of acres inundated, including cropland, forest and even towns, ‘we’re looking at over a million,’ Mr. Prosser said.”

Thomas Frank reported recently at USA Today Online that, “The federal government’s deliberate flooding of 130,000 acres of farmland in Missouri this week could cost taxpayers several hundred million dollars because of extensive, possibly permanent damage to farmland.

“A wide swath of prime farmland in southeastern Missouri is likely to be ruined by fast-moving floodwaters, generating costs that go well beyond insurance coverage for lost crops, Missouri Farm Bureau President Blake Hurst says. ‘The water is going to scour a channel and deposit dozens of feet in sand drifts,’ he says.”

Joe Barrett and Jeffrey Ball reported in today’s Wall Street Journal that, “A myriad of interests lay claim to the Mississippi: It drains all or parts of 31 states and two Canadian provinces, lies at the heart of the most productive agricultural lands in the U.S. and serves as a major conduit of interstate trade. Control of the river is all the more critical at a time when global demand has driven grain prices sharply higher.”


Agricultural Economy: Food Security

Reuters news reported on Friday that, “The world has to take swift action to halt the steady rise in food prices and step up its commitment to sustainable agriculture, U.S. Secretary of State Hillary Clinton said on Friday.

“‘We must act now, effectively and cooperatively to blunt the negative effect of rising food prices,’ she said in a speech to the United Nations food agency in Rome.

Rising food prices have become highly sensitive around the world after fuelling protests that toppled the rulers of Tunisia and Egypt earlier this year, with unrest spreading across North Africa and the Middle East.”



David Jessop, the Director of the Caribbean Council noted in an Op-Ed from yesterday that, “On April 29, the so called Doha Development Round of the World Trade Organisation all but died. Its demise went almost unremarked, with little or no media interest, and with few to publicly question the enormous amount of time, intellectual effort and money that has gone into the process since it first started in November 2001 in Doha.

“At the end of last Month, the WTO’s Director General, Pascal Lamy, made clear at an informal meeting of the WTO’s Trade Negotiations Committee – the body that oversees all of the many topics in the Round’s negotiations – there were blockages in almost every key negotiating arena.

“Although the WTO Director General said that he would report back to the next meeting of the full membership on 31 May as to how to respond, it had been apparent for many months to almost all Ambassadors, experts and Observers in Geneva that no political will exists to bring a comprehensive trade round to a conclusion.”

The update noted that, “What happens now is far from clear as no Government has yet been prepared to call in public for an alternative or less ambitious approach to the comprehensive multilateral trade agreement that was envisaged.”



Philip Brasher reported on Saturday at the Des Moines Register Online that, “Imagine filling up the car on a fuel that isn’t made from oil but doesn’t have the drawbacks of corn ethanol, including its lower energy content and ability to damage older cars or gas pumps.

“Such fuels could be made from the same sources as ethanol, including corn and corncobs as well as straw, trees and other abundant types of biomass. But these fuels would be synthetic versions of today’s gasoline, diesel and jet fuel. Unlike ethanol, a renewable version of gasoline could be used in any amount in today’s engines, filling stations and pipelines.

The prospect of these fuels is coming up in a debate over the direction of the government’s biofuel policy as Congress is slashing spending to reduce the budget deficit.”

Mr. Brasher pointed out that, “On one side is a collection of small companies, some backed by the oil industry, that are developing the non-ethanol biofuels. Those companies say that the government’s subsidies for ethanol are unfairly favoring what they see as an inferior fuel.

On the other side is the ethanol industry, which is eager to expand its potential market and wants the government to guarantee loans for ethanol pipelines, subsidize installation of ethanol pumps at service stations and require automakers to equip cars and trucks to run on ethanol.”

The Register article added that, “What’s needed is more government assistance for all biofuel sectors, said Matt Hartwig, a spokesman for another ethanol trade group, the Renewable Fuels Association. ‘We ought not to be fighting about dividing up the existing pie. We need to figure out ways to make that pie bigger.’

But increasing biofuel subsidies will be difficult to do as Congress struggles with reducing the budget deficit. Lawmakers are also expressing frustration with the slow pace of development of alternatives to corn ethanol, a product that is drawing more and more criticism because of its effect on prices for feed grains and some foods.”

Meanwhile, Jeff T. Wattrick reported on Friday at MLive.com that, “U.S. Senator Debbie Stabenow, speaking at a gas station in Southfield this morning, announced plans to introduce legislation that would repeal oil subsidies and force federal leaseholders to drill for oil or risk losing their lease.

“‘We need to stop oil companies from padding their profits with taxpayer dollars, increase domestic drilling, get tough on market manipulators, and continue to promote clean energy that reduces our dependence on foreign oil and creates jobs in Michigan,’ said Stabenow.”


Budget Issues

Carl Hulse reported in today’s New York Times that, “Linking two of the politically volatile issues of the moment, Senate Democrats say they will move forward this week with a plan that would eliminate tax breaks for big oil companies and divert the savings to offset the deficit.

“With high gas prices and rising federal deficits in the political spotlight, senior Democrats believe that tying the two together will put pressure on Senate Republicans to support the measure or face a difficult time explaining their opposition to voters whose family budgets are being strained by fuel prices.

President Obama and some top Congressional Democrats have said they want to take some of an estimated $21 billion in savings from ending the tax breaks and steer it to clean energy projects. But the Senate’s Democratic leadership is calculating that using it to cut the deficit instead makes it a tougher issue politically for Republicans who are trying to burnish their conservative fiscal credentials.”

In other budget news, Washington Post writers Paul Kaneand and Philip Rucker reported over the weekend that, “Senior Republicans said Friday that they are committed to a controversial overhaul of Medicare and will continue to support it as part of their deficit-reduction plan despite strong White House opposition.

“The late-afternoon proclamation came at the end of a confusing week in which several GOP leaders publicly acknowledged that the most ambitious aspects of the plan would never be enacted, creating the impression they were distancing themselves from the politically unpopular proposal less than three weeks after pushing rank-and-file Republicans to vote for it.

“House Speaker John A. Boehner (R-Ohio), House Majority Leader Eric Cantor (R-Va.) and four other leading Republicans said they remained committed to transforming Medicare into a program that would have seniors use federal funds to purchase insurance on the private market. And they said the proposal remains a part of the ongoing talks on raising the federal debt limit.”

Reuters news reported yesterday that, “Despite suspicions that the ‘Gang of Six’ is doomed, this bipartisan group of senators looking to mediate the budget battle could be key to Vice President Joe Biden’s long-range deficit-control efforts.”

“The Obama administration and Congress are desperately searching for a bipartisan deficit-reduction deal. Getting one would clear the way for critical legislation to increase the government’s borrowing authority.”

The Reuters article noted that, “Lately, the spotlight has shone on what’s being called the ‘Group of Six Plus One’ to save the day: Biden, three senators and three leading members of the House of Representatives.

“They carry plenty of political heft and the ability to whip rank-and-file members of Congress into supporting a potential deal to enact a wide range of spending cuts.”

Keith Good