FarmPolicy

August 20, 2019

Farm Bill; Agricultural Economy; Biofuels; and Budget Issues

Farm Bill Issues

Tom Quaife reported yesterday at the Dairy Herd Network Online that, “Expectations for the next Farm Bill will ride on one major issue: The national debt, which now stands at $14.38 trillion.

“‘All of the oxygen in Washington is being breathed up by this problem,’ U.S. Rep. Jeff Fortenberry (R-Neb.) told those attending the National Dairy Producers Conference in Omaha on Monday.”

Yesterday’s update added that, “It may not be the best time for agriculture to be making its case to Washington.

“For instance, congressmen are seeing headlines that chronicle high crop prices. ‘It leads to the thought process in Congress that all farmers are rich,’ said Mary Kay Thatcher, director of public policy for the American Farm Bureau Federation.”

Mr. Quaife indicated that, “And, since 76 percent of the agriculture department is tied to nutritional programs, such as food stamps and subsidized school breakfasts and school lunches, it’s yet to be seen if the remaining 24 percent will bear the brunt of the cuts. Agricultural journalist Jerry Hagstrom pointed out that the nutrition programs have helped gain the votes of urban and suburban congressmen in past Farm Bills.

“Hagstrom and others at Monday’s meeting agreed it would be best for agriculture if a new Farm Bill comes up for a vote in 2012 rather than having it delayed into 2013. ‘Farmers are more likely to get a better bill in an election year,’ he said. President Obama would like to sign a bill before going out to campaign in crucial farm states like Iowa, Indiana and Michigan, according to Hagstrom.”

Carah Hart reported yesterday at Brownfield that, “Agriculture is expected to have more program funding cuts in the 2012 federal budget.”

“‘It’s very tough to know what Congress will choose to do as they try to hit the targets in front of us. If you look at the basic farm programs there’s two of those who have most of the expected spending over the next ten years- the crop insurance program and direct payments. So we expect there will be a lot of pressure in those programs as we go forward,’ says [Pat Westhoff, co-director of the Food & Agricultural Policy Research Institute at the University of Missouri].

Ron Hays reported yesterday at the Oklahoma Farm Report Online that, “The Chief of the Natural Resource Conservation Service says he doesn’t mind the tightening federal budget, as he believes that it gives him opportunity to refocus on the highest priorities in the conservation arena that need to be worked on. Dave White was in Oklahoma City as he spoke to the National Watershed Conference. He says there are programs that have duplication and need to be streamlined. And he tells us in an exclusive interview that he would like to take current resources and dedicate more people out into the field.”

To listen to a clip from Mr. Hays’ interview with Dave White, just click here (MP3- 1:02), while yesterday’s full interview can be heard here.

Meanwhile, Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “Farmers are bracing for cuts in subsidies and one program that could go over the side is one that compensates farmers for crop losses that aren’t covered by insurance.

“When Congress created the disaster program in 2008 it was supposed to eliminate the need for emergency disaster programs that lawmakers typically passed during election years to aid farmers who had lost crops to droughts or floods.

But the program hasn’t helped farmers as much as some wanted, and in other cases, most notably Iowa, has made payments to farmers who had a good year.”

Yesterday’s article stated that, “Bob Stallman, the president of the American Farm Bureau Federation, said today that growers aren’t happy with the program and that it’s not a priority for his group at a time when Congress is looking to cut farm spending.

“Farmers are willing to rely instead on Congress passing temporary ‘ad hoc’ disaster bills, he said. Spending on such bills typically is added to the budget deficit rather than being taken from the farm bill.

“‘It’s going to be very difficult to get away from ad hoc disaster assistance, because that’s driven by the emotions and politics of the moment,’ Stallman said.”

Mr. Brasher added that, “Farmers have complaints about the 2008 program, known by the acronym SURE, including that they don’t receive payments until after the year they had a loss.

“The program was sweetened with more funding from the 2009 stimulus bill but that only attracted more criticism.”

Recall that in an interview with FarmPolicy.com last week, Sen. Ag. Comm. Chairwoman Debbie Stabenow (D-Mich.) indicated that on the issue of a “standing” disaster program in the next Farm Bill: “Well, we, again, have to look at everything on the table, and we have very tough choices to make. But I think having a standing disaster assistance program is important.”

And Chris Clayton provided more detail with respect to the SURE program yesterday at the DTN Ag Policy Blog, noting in part that, “The Farm Service Agency provided me with a little bit of information about the Supplemental Revenue Assistance Program, or SURE, and how it will work even though SURE is set to end Sept. 30.”

 

Agricultural Economy: U.S. Weather Impacts, Grain Supply and Prices

Christine Hauser reported in today’s New York Times that, “The swollen Mississippi River, already spilling over into wide areas of the Mississippi Delta, has dealt the South a heavy economic blow that is seeping into every possible corner of the region’s commercial and agricultural life.

“From Tennessee to Louisiana, the arteries and tributaries that normally supply the lifeblood of trade and business to the communities along the river’s banks are now paralyzing them. The engorged river has disrupted waterway commerce, delaying barge traffic and forcing some cargo to be trucked overland. Grain elevators, a crucial link to the nation’s grain exports, have been swamped. Early corn and soybean plantings on delta farms are submerged.

“Like the very nature of water, the trickle-down effects of the historic flooding are leaving no corner untouched. Retail gasoline prices, already at two-year highs, and food prices could rise in the region because of supply disruptions.”

The article added that, “In Yazoo County, Miss., John Phillips, a 61-year-old farmer, said thousands of acres of his cotton and corn crops had been destroyed. ‘In our area in the south delta, it is a widespread and very economically devastating disaster,’ he said in a telephone interview, as he tried to run a pump. He said his annual revenue would be reduced by 40 percent because it was too late to replant.”

Meanwhile, the AP reported yesterday that, “This could be a critical week for [Minnesota] state farmers, running late with spring planting due to wet fields but have a chance to catch up thanks to good weather forecast for the next few days.

“Cool weather and frequent rain combined to limit planting again last week, when only three days were rated suitable for fieldwork, the report said. Several experts say Minnesota farmers who don’t get their corn planted in the coming week or two may switch to shorter-season varieties, which don’t yield as much, or plant more acres with soybeans, which don’t need to be planted as early as corn but aren’t quite as profitable at current prices.”

And the latest Livestock, Dairy, and Poultry Outlook report from USDA’s Economic Research Service (ERS) noted in part yesterday that, “A variety of weather events have affected livestock and meat production at all levels. Floods and wet, cold spring weather in the North Central region and mid- Mississippi River drainage areas have slowed corn planting and other field activities, raising concerns about availability and prices of feed grains in 2012. The cold weather has also adversely affected meat demand for outdoor grilling. Continued drought across the South and Southwest has affected pastures and is at least partially responsible for an increase in beef cow slaughter. Fires fueled by high winds have also devastated some southern rangelands” (at page three of the ERS report).

Tom Polansek reported in today’s Wall Street Journal that, “Grain prices surged as persistent rains fueled worries that farmers won’t plant as much corn and wheat as they had planned.”

The Journal article explained that, “In Ohio alone, farmers have planted just 7% of the corn crop, compared with an average of 70% for this time of year. The state saw its wettest April on record. Farmers may give up on planting this spring unless the weather clears up because late-planted crops often produce less grain.”

Corn planting, in particular, in drawing attention because farmers need to harvest a big crop next fall to rebuild stockpiles, which are projected to reach a 15-year low this year,” the Journal article said.

In other commodity news, Javier Blas reported yesterday at the Financial Times Online that, “Last year this time, the world was heading towards a bumper wheat harvest and the agribusiness industry was anticipating low prices. But bad weather during the northern hemisphere’s spring and summer – notably a drought in Russia – devastated the crop, sending prices to the highest since the food crisis of 2007-08 and triggering a surge in food inflation.”

Mr. Blas noted that, “Could the world face another short crop and high prices again?

The US Department of Agriculture is certainly not of that view.

It forecasts a strong rebound in global production to 670m tonnes, up from last season’s 648m. Others, however, are far less optimistic on the back of dry weather in northern Europe and southern US.”

Reuters news reported yesterday that, “Drought in much of Europe looks set to continue with little relief for parched farmland until June at the earliest, forecasters say,” while Bloomberg noted yesterday that, “France had its second-hottest April since 1900 and one of the driest since 1953, according to the Agriculture Ministry. Soils in the country’s northern half, which grow 80 percent of French wheat, were the driest in 50 years at the end of April, the Environment Ministry said yesterday.”

Edward Wong reported in yesterday’s New York Times that, “A severe drought along the Yangtze River region in central China has rendered nearly 1,400 reservoirs in Hubei Province temporarily unusable, devastated farm fields and made drinking water scarce, according to a report on Monday by Xinhua, the state news agency.”

And Bloomberg writer Luzi Ann Javier reported yesterday that, “Global food prices are set to extend gains as production struggles to keep pace with demand, said Rabobank Groep and Armajaro Trading Ltd., potentially pushing up costs for Tyson Foods Inc. and Kellogg Co.”

The Bloomberg article noted that, “‘The world cannot afford any crop problem this year, anywhere,’ Steve Nicholson, a commodity procurement specialist at International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri, said last month. ‘Without a cushion of inventories, any production hiccup in the northern hemisphere this year will be catastrophic.’”

 

Biofuels

A news release yesterday from the Food and Agriculture Organization (FAO) of the UN stated that, “As interest in bioenergy production continues to grow, FAO is promoting the use of a new methodology designed to help policymakers weigh the pros and cons of investing in the sector.

“FAO’s ‘Bioenergy and Food Security (BEFS) Analytical Framework’ was created to help governments evaluate the potential of bioenergy as well as assess its possible food security impacts.”

The release added that, “[The framework] consists of a series of step-by-step evaluations that seek to answer critical questions regarding the feasibility of bioenergy development and the impacts on food availability and household food security. Social and environmental dimensions are also considered.”

A news release yesterday from the Renewable Fuels Assoc. stated that, “Based on what they describe as a ‘bottom-up’, data-driven, statistical approach,’ researchers at Michigan State University have concluded that biofuel production in the United States through 2007 ‘probably has not induced any indirect land use change.’ The research, conducted by MSU scientists Seungdo Kim and Bruce Dale, is discussed in a paper that will be published in the next issue of the journal Biomass and Bioenergy . The paper was made available online May 13 for a fee.”

And Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “It’s not all the ethanol industry wanted, but a bill introduced by Sen. Charles Grassley could still help increase the number of pumps selling higher blends of the biofuel. That’s the view of Ron Lamberty, vice president of market development for the American Coalition for Ethanol.

“Grassley’s bill would rewrite a tax credit that has received relatively little use because of restrictions imposed by the Internal Revenue Service, Lamberty said. Under IRS rules, the 30-percent credit applies to the portion of the pump that dispenses ethanol, not the cost of the entire pump. Grassley’s bill would allow stations to get a credit toward the full value of the new pump.

“No more than 3 percent of the 110,000 service stations now have ethanol pumps, and those locations are concentrated in the Midwest.”

 

Budget Issues

Naftali Bendavid and Danny Yadron reported in today’s Wall Street Journal that, “Negotiations among a group of senators seeking a deficit-reduction deal threatened to collapse Tuesday as a key lawmaker pulled out, endangering what many in Washington had considered the best chance for a comprehensive, long-term budget agreement this year.

“‘I’m not going to bang my head against a wall anymore,’ said Sen. Tom Coburn (R., Okla.) in an interview. ‘They’re just over for now.’ He added, ‘I’ve got other things I want to be doing.’

“The bipartisan talks, which had been underway about six months, hit an impasse about two weeks ago, participants said. Mr. Coburn would not say what prompted him to leave, but a person familiar with the talks said the immediate issue was Medicare cuts.”

The Journal article noted that, “Focus now turns to separate talks led by Vice President Joseph Biden designed to reach a deal that would pave the way for a congressional vote to raise the debt limit before Aug. 2. That’s when the Treasury Department estimates the government, which hit its $14.29 trillion borrowing limit Monday, will begin defaulting on its obligations.”

Alexander Bolton and Erik Wasson reported yesterday at The Hill Online that, “[Senate Democratic Whip Dick Durbin (Ill.)] predicted Monday that the group [the remaining five Senators] would hold a ‘make or break’ meeting this week.

“The possible end of the Gang of Six came the same day as new signs of the deep divisions among Senate Democrats over taxes.”

The Hill article noted that, “[Senate Budget Committee Chairman Kent Conrad (D-N.D.)] said Tuesday that he has no immediate plans to mark up a budget. ‘I’ll say something later — not today, probably,’ Conrad said. ‘There are a lot of conversations under way.’

“Senate Finance Committee Chairman Max Baucus (D-Mont.) cast doubt on whether Conrad’s effort will succeed. ‘I don’t know there is going to be a Conrad budget,’ he said.

“Conrad responded to strong criticism from liberals on the Budget Committee last week by presenting a draft budget plan to colleagues with a 50-50 mix of spending cuts and tax increases.”

Keith Good

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