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Farm Bill; Biofuels; Ag Economy; and Trade

Farm Bill (and CFTC) Issues

The AP reported this morning that, “Republicans have quietly maneuvered to prevent a House spending bill from chipping away at federal farm subsidies, instead forging ahead with much larger cuts to domestic and international food aid.

“The GOP move will probably prevent up to $167 million in cuts in direct payments to farmers, including some of the nation’s wealthiest…[T]he annual bill to pay for food and farm programs next year would cut food aid for low-income mothers and children by $685 million, about 10 percent below this year’s budget.

“The farm subsidy cuts won bipartisan approval in the House Appropriations Committee two weeks ago, but as debate on the House floor began Tuesday, Republicans turned to a procedural maneuver to drop that language.”

Today’s article noted that, “Rep. Frank Lucas of Oklahoma, the Republican chairman of the House Agriculture Committee, won an agreement from party leaders to strike the cuts in direct payments if just one member objected on the floor. Some Democrats hope to force a vote but aren’t sure they will be able to.”

The AP article noted that, “Direct payments to farmers have been a frequent target of fiscal conservatives and other critics of farm programs because they are paid regardless of crop price or yield. They have survived for years, along with tens of billions annually in other subsidies for farmers [related graph], because a powerful coalition of farm state lawmakers in both parties has protected them.”

“Rep. Jeff Flake, R-Ariz., wrote the subsidy cut language. Farmers can now make as much as $750,000 annually and still receive subsidies, but Flake’s amendment would lower the threshold for some to $250,000, saving about $20 million annually. Another Flake amendment would have dipped into direct payments to pay a $147 million annual payment the United States makes to Brazil as a settlement in a World Trade Organization dispute over cotton subsidies,” the AP article explained.

“Rep. Rosa DeLauro, D-Conn., won an amendment in the Appropriations Committee version that would shift the Brazil money to the Women, Infants and Children program. It, too, can be axed through a parliamentary challenge approved by the GOP leadership-controlled Rules Committee.

“DeLauro, [Rep. Jim McGovern (D-Mass.)] and other Democrats argued on the House floor Tuesday that the cuts to in food aid programs are reckless and should be restored. Republicans responded that the Women, Infants and Children program is flush with reserves and said the cuts will not decrease participation in the program.”

To listen to a clip from Rep. DeLauro who spoke on the House floor yesterday regarding WIC and the Brazil cotton case, just click here (MP3- 2:51).

Also yesterday, House Appropriations Agriculture Subcommittee ranking member Sam Farr (D-CA) indicated on the House floor that the vote on the spending bill was about values and noted that some Members received millions of dollars in farm subsidy payments- audio here (MP3- 0:32).

A separate AP article from yesterday pointed out that, “The agriculture measure is the third of 12 annual spending bills funding the day-to-day operations of the government for the budget year beginning Oct. 1.”

Erik Wasson reported earlier this week at The Hill’s On The Money Blog that, “The White House on Monday criticized deep GOP-backed cuts to agriculture programs but stopped short of a veto threat.

“A statement of administration policy released Monday laid out numerous objections to the agriculture spending bill, including that it would lead to hundreds of thousands of people being cut off from the Women, Infants and Children and Commodity Supplemental Food Programs, which both help low-income people get nutritional food.”

Meanwhile, Deborah Solomon and Jamila Trindle reported in today’s Wall Street Journal that, “On Tuesday, House Republicans proposed cutting the CFTC’s 2012 budget by 15% from its current level and 44% from what President Barack Obama requested.”

The Journal article indicated that, “U.S. regulators, behind schedule in finalizing key rules mandated by last year’s financial-regulatory overhaul, agreed to delay a host of new requirements scheduled to hit the $600 trillion derivatives market next month.

“The move offers temporary relief to banks, companies and investors who have worried their use of derivatives—sometimes-complex financial products used to hedge risk or speculate for profit—could run afoul of regulation. Certain parts of the Dodd-Frank financial law automatically take effect July 16, though regulators have yet to issue final rules in affected areas.

On Tuesday, the Commodity Futures Trading Commission offered a six-month reprieve.”

In more specific budget related matters on federal spending and the debt ceiling, David Rogers reported yesterday at Politico that, “Robust, strongly felt exchanges marked White House budget talks Tuesday as the focus turned back onto discretionary spending and the huge divide still between House Republicans and the Obama administration’s domestic agenda.

“‘We’re down to the real tough stuff right now, everybody is in the room… everybody’s still in the game,’ Vice President Joe Biden told reporters as he left the Capitol after the more than two hour meeting.

“And in short hallway exchange with POLITICO, House Majority Leader Eric Cantor (R-Va.) used similar language to describe what he said was a ‘very robust’ discussion but also a sense of urgency that doesn’t allow either side to walk away.”

Mr. Rogers explained that, “Even as the talks were under way on the Senate side of the Capitol, the often-emotional debate on the House floor testified to the political stakes, as Republicans called up a $17.25 billion agriculture appropriations bill making deep cuts from nutrition programs, as well as the Commodity Futures Trading Commission—a major enforcer of new financial market reforms enacted last year by Democrats.

“‘This is morally indefensible. Don’t do this. …We can do better,’ said Rep. Jim McGovern (D-Mass.) in a doomed attempt to block action on the bill. And stretching into the night, top Democratic leaders joined in the floor debate alongside a chorus of House Black Caucus members condemning the cuts in aid to pregnant women and infant children.”

Damian Paletta and Carol E. Lee reported in today’s Wall Street Journal that, “The Biden group wants their framework to be completed well before Aug. 2, when Treasury officials say the government could begin defaulting on its financial obligations. But so far the White House and Republicans remain far apart on what to do with key issues such as taxes and entitlement programs like Medicare.”

The article added that, “Federal Reserve Chairman Ben Bernanke warned all sides not to play ‘brinksmanship’ with the debt ceiling, and to conduct the deficit-reduction talks separately. ‘In debating critical fiscal issues, we should avoid unnecessary actions or threats that risk shaking the confidence of investors in the ability and unwillingness of the U.S. government to pay its bills,’ Mr. Bernanke said Tuesday.”

Lori Montgomery reported yesterday at the Washington Post Online that, “If a plan emerges by July 1, Biden said, Obama and congressional leaders will have ample time to hammer out final concerns and set a legislative path for what is likely to be a complicated and contentious measure, packed with unprecedented changes to long-protected programs such as farm subsidies and pensions for federal workers.”

Also yesterday, 133 organizations signed a letter to President Obama, House John Speaker Boehner and Senate Leader Harry Reid, which stated that, “The 133 undersigned organizations write to express our strong opposition to any deficit reduction package that would disproportionately impact U.S. farmers and ranchers and rural America. We are extraordinarily concerned about the depth and timing of cuts to agricultural policies reportedly being considered for inclusion in legislation to increase the debt limit.

“We are deeply concerned about any requirement that cuts be implemented for 2012, effectively reneging on commitments already made to and relied upon by producers and their lenders under the 5-year 2008 Farm Bill. Furthermore, we strongly believe that any policy decisions or mandated cuts ought to be determined by the congressional committees of jurisdiction and made in the context of the 2012 farm bill.

The current record droughts, flooding and other natural disasters clearly illustrate the unique risks producers face and underscore just one of many reasons behind the need for strong, consistent farm policy which is in serious jeopardy if the reported depth and timing of cuts contemplated by negotiators are accurate.”

The letter noted that, “In fact, we may have been the only sector to step forward, despite our having already been cut three times in the past six years, most recently with significant cuts to crop insurance.”

Meanwhile, a press release yesterday from the House Agriculture Committee stated that, “This week during The Ag Minute [MP3], Chairman Frank Lucas discusses President Obama’s newly established White House Rural Council and questions its intended purpose of creating jobs and economic growth in rural communities given the administration’s track record. Instead of adding another layer of bureaucracy to an already bloated government, Chairman Lucas argues that a better use of our resources would be for the administration to focus on job-creating initiatives that are already in play such as acting on the pending free trade agreements.”

In other news, the AP reported this morning that, “The Los Angeles Unified School District is taking a stand against child obesity, becoming the nation’s largest school system to stop serving sugar-laden flavored milk.

The school board on Tuesday voted to eliminate chocolate and strawberry milk from schools as of July 1.”

And a news release yesterday from the USDA’s Risk Management Agency stated in part that, “Heavy rainfall and flood conditions across the upper Midwest and Northern Plains have slowed or stopped planting in many areas this spring. In addition, many closed drainage basins (such as Devils Lake in North Dakota) continue to rise, with water flooding more and more cropland acres in these areas. Because of the situation, the USDA Risk Management Agency has received requests from state officials to make an exception to the policy provisions for prevented planting for producers in affected areas.

“While Federal crop insurance provides prevented planting coverage for weather events occurring within the insurance period, coverage is unavailable for events occurring outside the insurance period. Many farmers have benefited from prevented planting coverage during this wet spring. However, acreage which is flooded due to weather events occurring outside the insurance period, such as rains in previous crop years which leave wet conditions on the land continuously, is not eligible for prevented planting coverage. William Murphy, Administrator of the Risk Management Agency, reminds individuals facing such situations that the Federal Crop Insurance Act does not offer prevented planting coverage in these cases.”



Darren Goode reported yesterday at Politico that, “The Senate on Tuesday rejected, 40-59, a symbolic attempt to strike ethanol tax subsidies as Democrats are working on a deal to hold at least one vote on ethanol next week.

“The amendment from Sen. Tom Coburn (R-Okla.) fell well short of the necessary 60 votes to invoke cloture and limit debate. Five Democrats supported the amendment and 12 Republican ethanol backers, largely from the Midwest, opposed it.”

Mr. Goode added that, “Senate Majority Leader Harry Reid (D-Nev.) told reporters this afternoon he will hold an ethanol vote by June 24 as part of a deal with Sen. Dianne Feinstein (D-Calif.), who had initially co-sponsored Coburn’s amendment.

“It is unclear whether there will be a vote only on the amendment from Feinstein or whether an additional vote on an alternative measure, like the one offered from Sen. John Thune (R-S.D.) and Amy Klobuchar (D-Minn.), will be allowed.

Feinstein tried to get Coburn to withdraw his amendment shortly before the vote, noting objections by Democratic leaders over the process by which he secured Tuesday’s vote.”

Related audio from Sen. Feinstein and Sen. Coburn on the Senate floor yesterday before the vote on the amendment is available here (MP3- 4:32).  In the clip, Sen. Feinstein noted that, “I believe if it weren’t for the process, we would have 60 votes- that’s my belief.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “Sen. Dianne Feinstein, D-Calif., said ethanol enjoys the ‘triple crown’ of federal protections with a tax credit, a tariff and a mandate under the Renewable Fuels Standard. Feinstein called the loss a ‘process vote’ and argued ethanol opponents would have won if it were just on the merits of Coburn’s plan.”

A statement from Sen. Coburn regarding the ethanol vote was also released yesterday.

Philip Brasher reported yesterday at the Green Fields Blog that, “Senate Democratic leaders agreed to hold another vote on Coburn’s proposal as well as other ethanol-related bills by the end of next week, said an aide to Majority Leader Harry Reid, D-Nev. An industry supporter, Minnesota Democrat Amy Klobuchar, said talks were underway among senators on a compromise plan to continue the industry’s government support at a reduced rate.”

Carl Hulse reported in today’s New York Times that, “Ethanol backers said an end to the subsidy would drive up the price of fuel and make the nation more reliant on imports. ‘We shouldn’t be fighting each other over domestic energy sources,’ said Senator Charles E. Grassley, Republican of Iowa, who called his colleague’s proposal misguided and out of touch.”

Russell Berman reported yesterday at The Hill’s Energy Blog that, “House Speaker John Boehner (R-Ohio) said Tuesday that ‘changes are on their way’ to the ethanol subsidy program but he declined to weigh in on a bill to scrap the tax credit before it expires at the end of the year.”

Bloomberg writers Richard Rubin and Kathleen Hunter reported today that, “‘We’re in a transition period’ on biofuels policy, said former Representative Larry Combest, a Texas Republican and founder of Combest, Sell and Associates, a Washington lobbying firm that represents agricultural interests. ‘Some groups that have been traditional supporters of renewable fuels are looking for other ways the money can be expended. Even people who are strong supporters are asking: Where can we go from here?’”

Meanwhile, Marilyn Geewax noted Monday at an NPR News Blog that, “But in a speech [Monday] at the National Press Club in Washington, Agriculture Secretary Tom Vilsack defended ethanol, saying it helps create jobs for poor people in rural areas. The former Iowa governor said that instead of worsening the budget deficit, the ethanol industry is helping boost economic growth. Eliminating subsidies could hurt the nation’s balance sheet because it could ‘limit our capacity to grow our way out of the deficit,’ he said.”


Agricultural Economy

Tom Polansek reported yesterday at The Wall Street Journal Online that, “U.S. corn futures tumbled as supply concerns eased on favorable growing weather and federal data showing the upcoming crop is in better-than-expected shape.

“Corn prices hit record highs last week, yet prices have pulled back this week as the outlook for supplies brightened. The U.S. Department of Agriculture, in a weekly report released after Monday’s market close, said 69% of the domestic corn crop was in good to excellent condition, up two percentage points from the previous week and slightly above the five-year average.”

An update yesterday at the FarmDocDaily Blog by University of Illinois Ag Economists Scott Irwin and Darrel Good noted that, “The USDA’s weekly Crop Progress report released on June 13th indicated that corn planting progress had caught up to the normal level of 99 percent by June 12. Some caution is warranted in interpreting the planting progress numbers. First, planting progress always catches up to the average pace since planting is eventually completed. Planting progress this year caught up to the average pace very late in the season, underscoring the fact that a much larger than average percent of the crop was planted after the optimum date for maximizing yield potential. Yield potential is reduced in a non-linear fashion with lateness of planting, with yield penalties increasing for later planting dates. Figure 1 depicts that relationship for Illinois based on estimates from research here at the University of Illinois by Emerson Nafziger. Yield penalties become very large for corn planted after mid-May. The yield penalty for corn planted in early June, around 25%, is especially striking.”

Yesterday’s update noted that, “The second point about planting progress is that planting always reaches 100 percent, but the question is 100 percent of how many acres? Early planting progress reports reflect the percentage of acreage intended for planting. Intended acreage may change later in the planting season as cropping plans are altered by weather and timeliness of planting.”



Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) was a guest on yesterday’s AgriTalk Radio Program with Mike Adams.  In part, the two discussed trade agreements with Colombia, Panama and South Korea, as well as Trade Adjustment Assistance.

To listen to a portion of yesterday’s AgriTalk program, just click here (MP3- 2:48).

Dan Molinksi and Elizabeth Williamson reported in today’s Wall Street Journal that, “Colombian lawmakers passed legislation they hope will open the floodgates of trade with China, where the government plans two high-level trade missions over the next three months, as a long-delayed U.S. trade deal with the South American nation stalls in Congress.”

Keith Good