FarmPolicy

April 24, 2019

Farm Bill; Ag Economy; Regulations; and Biotech

Farm Bill Issues

The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Budget concerns and the looming crisis over the debt limit dominate conversations in Washington now as the White House budget meetings become increasingly prominent in each news cycle. An important development so far this week was the announcement of additional detail about the administration’s position.”

“In an indirectly related policy development this week, Agriculture Secretary Tom Vilsack told the press that the administration favors basing farm programs on producer need, and intends to push that approach for future program cuts. ‘I think, frankly, many farmers understand and appreciate that there has to be change,’ Vilsack said.

“Discussions on the debt ceiling and spending issues that are underway right now have included ag spending, Vilsack observed. ‘It’s no secret that they’re talking about that, absolutely. And what they’re talking about I think is a change in the direct-payments system,’ he said. And, he indicated that many of the discussions about cutting back farm programs are merely ‘catching up to where the president was in 2009.’

“‘The president suggested that there be limitations on who receives this, that the help should go to folks who need it the most,’ Vilsack explained. ‘It doesn’t necessarily need to go to people who have off-farm income of a half a million dollars, they’re going to be able to probably weather the storm. Or folks who have fairly large operations who’ve diversified and have farm income that is substantially higher than what most Americans experience. They may not need the help, so you target it.’”

Yesterday’s DTN item added that, “As for other operations that would not be eligible under the administration’s position, Vilsack commented that for ‘those larger operations, a risk-management tool, crop insurance for example, is needed that allows them to essentially purchase the coverage, purchase the protection. So there are going to be changes in the structure, there’s no question about that.’

“Still, the debate on subsidies shouldn’t be just limited to farm subsidies, Vilsack said. ‘I’d like to see the debate broadened into subsidies to all industries.’ So, it is increasingly clear that the current budget debates are taking many forms, and have the capacity to change government substantially — and that much of the fight is less about total amounts to cut spending over time and more about priorities concerning what to protect and how. The administration says it is fighting to target tax subsidies broadly, with exceptions limited to well defined needs. Republicans are convinced that tax subsidy cuts should be off the table.”

Meanwhile, Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Following up on its ethanol report Monday, FAPRI [the Food and Agricultural Policy Research Institute at the University of Missouri] released a report Wednesday examining what would happen if direct payments were eliminated.

Effectively, the report states that savings from direct payments might be relatively minimal in the long run for farm programs because there would likely be a dramatic spike in enrollment in the Average Crop Revenue Election program as a result of eliminating direct payments.”

Mr. Clayton explained that, “If direct payments are eliminated and there isn’t a rush to ACRE, there would be a 10-year budget savings of about $41.7 billion from FY 2012 to 2012.

“Yet, if everyone jumped into the ACRE program, assuming it stayed as is, then the budget savings over 10 years would likely fall to about $18.9 billion, FAPRI stated.

“Right now, Congress and the Obama administration are looking at finding $30 billion in savings from commodity programs, largely through cuts in direct payments. It’s possible that the White House Office of Management and Budget, and the Congressional Budget Office would examine the FAPRI report and be forced to recalculate how savings might be achieved.”

Yesterday’s DTN update added that, “The reduction in farm-program payments would result in lower farm income and land values. Depending on how many farms are enrolled in ACRE, net-farm income would decline by range of $1.9 billion to $3.2 billion per year.

“Ag land values decline an average of 1.8 percent to 2.7 percent relative to current projections over the next decade.”

On the broader issue of the debt negotiations, Steven T. Dennis reported today at Roll Call Online that, “Senate Democrats are trying to hit Minority Leader Mitch McConnell (R-Ky.) where it hurts — at the racetrack.

“Sen. Jeff Merkley (D-Ore.) plans to go to the Senate floor Thursday and call for eliminating the $126 million in tax breaks for the horse-racing industry that McConnell secured in the 2008 farm bill [for more background, see page 48 of this report]. Democrats are dubbing it the ‘Bluegrass Boondoggle’ and are spotlighting it as part of their broader offensive to pressure Republicans to agree to eliminate corporate tax breaks in any bipartisan debt deal.

“‘There should be no sacred cows, and there should be no sacred horses,’ Merkley said in an interview. ‘This is just one example of the special favors for the well-connected that need to be reviewed as we deal with our deficit.’”

The Roll Call article indicated that, “[The direct jab at McConnell] also comes as President Barack Obama moved aggressively Wednesday to put pressure on Republicans to agree that increased revenues have to be part of any deal to cut the deficit and increase the debt limit. Obama said he didn’t think Republicans could sustain their opposition to including revenue in a debt deal.”

Carol E. Lee and Janet Hook reported in today’s Wall Street Journal that, “President Barack Obama made the case Wednesday for ending certain tax breaks for ‘millionaires and billionaires’ in a deal to keep the U.S. government from defaulting on its debt, sharpening his tone with just weeks left for Democrats and Republicans to reach an agreement.

“Republicans responded by repeating their opposition to any tax increases, saying they would hurt the fragile economy.

Although the two sides appeared deadlocked, their differences are smaller than the partisan rhetoric suggests.”

The Journal article added that, “Until now, Republicans have largely set the boundaries of the debate. They demanded deep spending cuts in exchange for a vote to raise the debt ceiling, forcing Mr. Obama to propose a framework for a long-term, deficit-reduction plan. Mr. Obama has had to get more involved in the issue since bipartisan talks led by Vice President Joe Biden fell apart last week over an impasse on taxes.

On Wednesday, the president appeared to be responding to considerable frustration among members of his own party that Republicans have proven more effective in sticking to their principles. House and Senate Democratic leaders have told the president in private meetings over the last week that they would not accept a package that only included spending cuts.”

Mark Landler reported in today’s New York Times that, “By all accounts, the round of negotiations steered by Mr. Biden made significant progress in identifying spending cuts and revenue-generating items. But with the Aug. 2 deadline looming for the expiration of the government’s borrowing authority, the partisan maneuvering on both sides has increased.

“Senate Republicans have talked about a short-term increase in the debt ceiling, betting that the White House will accept spending cuts, with no tax increases, rather than face two votes on the issue before the 2012 election. Mr. Obama is taking aim at tax policies that benefit the rich as a way to pressure Republicans. Asserting that chief executives and hedge fund managers are paying the lowest tax rates since the 1950s, before he was born, the president, casting the issue in populist terms that some conservatives said veered into class warfare, said they could afford to pay more.”

In addition, Reid J. Epstein reported yesterday at Politico that, “Failure to raise the nation’s debt ceiling would deal a ‘severe shock’ to world financial markets still struggling to recover from a worldwide recession, the International Monetary Fund said Wednesday.”

And in other budget related developments, Alexander Bolton reported yesterday at The Hill Online that, “Senate Budget Committee Chairman Kent Conrad (D-N.D.) announced Wednesday that Democrats had finally reached an agreement on a budget plan.

“His announcement came as the leadership met with President Obama to inform him that their members had unified around a message for the debt-limit showdown.

“Conrad’s proposal, which he said he plans to introduce as soon as next week, would cut more than $4 trillion from the deficit, a greater reduction than what Obama’s fiscal commission had recommended.”

Recall that the fiscal commission recommendations from December included provisions that would reduce overall agricultural spending by $1 billion annually, or $10 billion.

 

Agricultural Economy

Bloomberg writers Luzi Ann Javier and Chanyaporn Chanjaroen reported yesterday that, “The global agriculture supply situation has worsened and a failure to boost food production fast enough to meet demand may lead to shortages, said investor Jim Rogers, chairman of Rogers Holdings.

“‘We’ve got to do something or we’re going to have no food at any price at times in the next few years,’ Rogers said in a Bloomberg Television interview with Rishaad Salamat today in Singapore. ‘I still own agriculture. If I found something to buy, I would buy it.’

Rogers joins former United Nations Secretary General Kofi Annan, the UN Food & Agriculture Organization and the World Bank, in highlighting the need to boost global food production and address issues pushing prices higher. Group of 20 farm ministers agreed last week to increase agriculture output, set up a crop database and limit export bans to tackle what French President Nicolas Sarkozy calls the ‘plague’ of rising food prices.”

Meanwhile, Bloomberg writers Jeff Wilson and Whitney McFerron reported yesterday that, “U.S. corn farmers were unable to plant on soggy or flooded fields from Arkansas to North Dakota this year, signaling tighter grain stockpiles even after rising demand for livestock feed and ethanol sent prices surging.

“The U.S. Department of Agriculture may cut its planting forecast tomorrow [today- Thursday] to 90.629 million acres, according to a Bloomberg News survey of 31 analysts. That’s less than the 92.178 million that farmers predicted in a government survey three months ago and would be the USDA’s biggest such reduction from the March forecast since 1995.

“Parts of the Ohio River Valley and North Dakota had triple the normal rainfall in the past 90 days, Mississippi River floods were a record in May, and millions of Midwest acres were inundated with water. While prices slumped in the past few weeks as drier weather improved conditions, late planting means fields are more susceptible to heat and frost damage before the harvest in September.”

Mark Peters reported yesterday at The Wall Street Journal Online that, “Corn prices jumped amid worries that upcoming estimates from the U.S. will show that grain supplies remain tight.

“The Department of Agriculture is expected to say Thursday that U.S. corn inventories were 23% lower as of June 1 compared with this time last year. Two separate reports are set to be released, with estimates for grain plantings as well as stockpiles.

“Grain crops around the world have struggled with patchy rains and the kind of weather that results in poor yields, deepening worries about global food prices.”

Also yesterday, USDA’s National Agricultural Statistics Service (NASS) released its monthly Agricultural Prices report, which stated that, “The corn price, at $6.58 per bushel, is up 28 cents from last month and $3.17 above June 2010 [related graph]; The soybean price, at $13.30 per bushel, increased 10 cents from May and is $3.85 above June 2010 [related graph]; and, “The June all wheat price, at $7.85 per bushel, is down 31 cents from May but $3.69 above June 2010 [related graph].”

With this background in mind, earlier this week, USDA’s Economic Research Service (ERS) released a report titled, “Why Have Food Commodity Prices Risen Again?

An ERS summary of the report stated that, “The report describes the factors that have contributed to the large and rapid increase in agricultural prices during the past year. The report focuses particularly on food commodity prices—which have risen 60 percent since June 2010.”

In other news, Ken Anderson reported Tuesday at Brownfield that, “The bull market in Midwestern farmland showed no signs of abating last week, as bidders paid over $11,000 per acre for tillable land in Mason County, Illinois.

“The auction was conducted in Mason City, Illinois by Murray Wise Associates.  A spokesman says four tracts making up 364 acres of the most productive land sold for 4.01 million dollars—or more than $11,016 per acre.”

A news item earlier this month from Purdue University indicated that, “A Purdue agricultural economist expects Indiana farmland values to keep rising this year, continuing a trend that has seen them increase by 270 percent since 1985.

Farmland increased in value by 12 percent last year. In June 2010, the average price for an acre of land in Indiana was $4,419. With the strong prices in place since last fall, Craig Dobbins expects values to increase significantly.”

 

Regulations

A news release Tuesday from Kansas GOP Senator Pat Roberts stated that, “[Senator Roberts] introduced a bill today that would exempt those who transport agricultural products from a costly regulation that stifles their ability to quickly and effectively carry out business.

“‘Eliminating this endorsement is a common sense way to provide more flexibility for these industries that are already weighed down with too many needless regulations,’ said Roberts. ‘This is just another example of an overly burdensome regulation that needs to be eliminated, and I will continue my fight to review and repeal other oppressive regulations that negatively affect agriculture and our economy.’

“The bill will exempt all class A commercial driver’s license holders who are custom harvesters, agriculture retailers, agriculture business employees, agriculture cooperative employees, or agriculture producers from the requirement to obtain a hazardous material endorsement under part 383 of title 49 of the Code of Federal Regulations, while operating a service vehicle carrying diesel fuel in quantities of 1,000 gallons or less if the tank containing diesel fuel is clearly marked with a placard reading, ‘Diesel Fuel.’”

A news release Monday from Senator Kent Conrad (D-ND) stated that, “[Sen. Conrad] is pressing the Environmental Protection Agency (EPA) to ease a confusing and overly burdensome rule affecting thousands of North Dakota farmers and ranchers.  In a letter today to EPA Administrator Lisa Jackson, the Senator calls for an extension of the compliance deadline for the Oil Spill Prevention, Control and Countermeasure (SPCC) rule. The federal regulation mandates that agricultural producers have a plan in place to prevent oil spills and better protect water resources on farming operations.

“‘The SPCC rule is confusing and compliance under the EPA’s timeline is putting an added burden on North Dakota’s family farmers and those all across rural America,’ Senator Conrad said. ‘We are asking the EPA to seek additional conversations with the agricultural community to create a regulation and a timeline that makes sense for all parties involved.’”

 

Biotech

Chris Clayton reported yesterday at DTN that, “The U.S. risks losing its edge in crop production advances if it does not streamline regulations for approving new crop traits, many researchers and biotech crop advocates said at the 2011 BIO convention Wednesday.

“BIO is the lead lobbying group for biotechnology in crops and other areas such as health care.

While the U.S. has two decades of successful biotech crop development, the unknowns of the regulatory structure when bringing a new biotech trait to a crop have only grown more complex and more expensive over time, even though researchers know far more about plant genetics when developing useful traits, said Roger Beachy, former director of the National Institute for Food and Agriculture at USDA.”

Mr. Clayton noted that, “Rules and regulations adopted in the 1980s by EPA and USDA are still being used for regulatory approvals of biotech traits today, Beachy said. Yet the science of genetic engineering has advanced and become more established.

“‘How do those rules and regulations made 20 years ago fit with what we know about the science of genetics and genetic engineering and stability of genes and the impact of those traits on the environment?’ Beachy said.

“Most of the litigation lately against biotech crop approvals involves the National Environmental Policy Act (NEPA). A redefinition of the role NEPA plays in agriculture is needed because the technology is not inherently dangerous, Beachy said. Agriculture should actually fall outside the NEPA law, he added.”

A news release Tuesday from the House Agriculture Committee stated that, “This week during The Ag Minute [MP3], guest host, Rep. Timothy V. Johnson discusses how advances in agricultural science and technology will be the key to increasing food production for a growing global population. Biotechnology has proven to be an essential tool in meeting the challenge of increasing our safe and affordable food supply. New biotech crops can continue to help meet the growing demand for food by increasing production on each acre of land while simultaneously reducing inputs, such as fuel and fertilizer, for each bushel of food produced.”

Keith Good

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