Tom Polansek and Ian Berry reported in today’s Wall Street Journal that, “Evidence that U.S. farmers planted far more corn than expected this growing season sent corn prices plunging and sparked speculation that upward pressure on food prices may be coming to an end.
“The U.S. Agriculture Department said Thursday surveys conducted during the first two weeks of June found farmers had planted 92.3 million acres of corn, the second most since World War II after 93.5 million acres in 2007.
“As recently as June 9, USDA officials had guessed that excessive rain and widespread flooding this spring limited farmers to 90.7 million acres. But a separate USDA report also found supplies were bigger than expected in early June, signaling relief for food companies, livestock producers and consumers.”
The Journal writers noted that, “Corn futures for July delivery tumbled to 9.9% to $6.29 a bushel after falling as low as $6.15. Even with Thursday’s drop, corn prices remain high, up 78% from a year ago, before agriculture markets surged on a series of weather-related woes from Russia to South America.
“December corn fell 30 cents a bushel, the exchange’s daily trading limit for that contract, to $6.205 a bushel, and analysts widely expect the contract to fall sharply again on Friday.”
Today’s article added that, “Economists continue to warn that supplies of the nation’s biggest crop will remain unusually low for at least a year. Also, the corn crop is in its early stages and much could happen before it is harvested later this year.”
“Adding to uncertainty about the acreage situation, the USDA said Thursday it plans to resurvey results in Minnesota, Montana and the Dakotas. States such as North Dakota, which the USDA currently says increased corn acres by 12.2% from a year ago, has been battered by record flooding recently.
“Some economists believe the USDA is overestimating corn acres, and that rain-related planting delays in several states won’t allow farmers to produce a large enough crop to rebuild supplies to more comfortable levels.”
University of Illinois Agricultural Economist Darrel Good indicated yesterday at the FarmDocDaily Blog (“USDA Reports Sink The Corn Market”) that, “Planted acreage of corn in 2011 is estimated at 92.3 million acres, about 100,000 more than revealed in the March Prospective Plantings report and about 1.5 million above the average trade guess. While corn acreage was below intentions in areas of delayed planting, acreage was well above intentions in several western Corn Belt states where planting was more timely. Acreage harvested for grain is forecast at 84.9 million acres. The difference between planted and harvested acreage of 7.4 million is larger than normal, reflecting acreage lost to flooding, but the difference is not as large as expected. Using the yield forecast of 158.7 bushels in the WASDE report released earlier this month, the harvested acreage forecast implies a 2011 crop of 13.474 billion bushels, 219 million larger than projected consumption during the 2011-12 marketing year. Taken together, the estimates of June 1 stocks and 2011 acreage imply a more abundant supply situation than has been anticipated.”
Reuters writers Charles Abbott and Christine Stebbins reported yesterday that, “U.S. corn stockpiles are far larger than thought and a bumper harvest is on the way, the government said, in reports on Thursday that alleviated worries of a global food shortage and sent corn prices tumbling by record amounts.”
Bloomberg writers Whitney McFerron and Jeff Wilson reported yesterday that, “Increased U.S. acreage ‘helps to ease the global grain supply shortage on paper,’ said Michael Swanson, a senior agricultural economist at Wells Fargo & Co. in Minneapolis. ‘Physically, we have to harvest those acres and have good growing weather the remainder of the season.’”
The AP noted yesterday that, “A bigger crop doesn’t guarantee lower food prices. A drought or flood could limit the size of the harvested crop.”
In other news, DTN writer Todd Neeley reported yesterday (link requires subscription) that, “As the Missouri River continues to rise and officials begin to tally up the damage to agriculture, there is concern that the flood waters could continue to be a factor next spring.
“The U.S. Army Corps of Engineers is racing the clock to release enough water from Gavins Point dam near Yankton, S.D., in time for waters to recede and repairs to be made on levees in Iowa, Missouri, Nebraska and South Dakota.”
Mr. Neeley explained that, “As of June 27, the Corps continued to release about 160,000 cubic feet per second from Gavins Point dam, according to the Missouri River Mainstem Reservoir Bulletin Tuesday — more than twice the amount of the previous record release in 1997. As of Wednesday, the reservoir remains at about 1,207 feet, or just three feet below the spillway gate.
“According to a Reuters story this week, Cargill estimated that as many as 2.5 million crop acres will be lost to Missouri River flooding and rain. State officials contacted by DTN said it was too early to tell.
“Reports of flood and heavy rainfall losses are at odds with USDA figures in the June 30 acreage report.”
Meanwhile, the U.S. Drought Monitor continues to show dry conditions in Texas and throughout much of the Southeast.
From a global perspective, Jude Webber and Leslie Hook reported earlier this week at The Financial Times Online that, “It might sound perverse for a Chinese company to go halfway round the globe to grow soya and other crops on unproductive land in a dry corner of Argentina.
“Yet that is what Beidahuang Group, a state-owned farm company based in the north-eastern Chinese province of Heilongjiang, is doing in the Patagonian province of Río Negro.
“If it works, the Inter-American Development Bank-backed farming project will spread irrigation technology and expand the frontiers of Argentina’s chief cash crop out of the traditional soya belt in exchange for helping China lock in food supplies for its fast-growing population.”
NASS (USDA’s National Agricultural Statistics Service)
Regarding the dissemination of recent USDA reports, a news release from NASS on June 24 stated that, “News media reports containing information from today’s Quarterly Hogs and Pigs report were inadvertently distributed up to 15 minutes in advance of the scheduled 3:00 pm ET release. The Agricultural Statistics Board is investigating the situation to prevent any future occurrences.”
This incident was followed by a NASS news release yesterday, which stated that, “News media reports containing information from today’s Acreage, Grain Stocks and Rice Stocks reports were inadvertently released at 8:28 am ET, 2 minutes ahead of their scheduled release time. This event was caused by a failure of the Agricultural Statistics Board’s telecommunications control switch, which is in the process of being replaced.”
Farm Bill Issues
An UNOFFICIAL FarmPolicy.com TRANSCRIPT of Tuesday’s Senate Agriculture Committee Hearing, “The State of Livestock in America,” is now available- click here to download a searchable PDF copy of this week’s hearing.
Yesterday, Iowa GOP Senator Chuck Grassley was a guest on National Public Radio’s Talk of the Nation program (“Growers Nervous As Washington Eyes Farm Subsidies”), where he was asked: “Are you now accepting the political reality, direct payments are over?”
In part, Sen. Grassley stated that, “Yeah, but remember, direct payments is just one of about four various ways that farmers are helped in this safety net.”
On the issue of crop insurance, Sen. Grassley noted that, “Anyway, the flood or the crop insurance has already contributed $6 billion, cut a year ago. So I don’t know whether you can cut that much more because I think the federal government would rather have an insurance program than anything else in the safety net because it gives farmers the incentives to manage their own risk as opposed to the political exigencies that go on here in Washington – are you going to get disaster payments or not?
“So I think we ought to promote crop insurance to a greater extent that we have, do away with direct payments, but then don’t forget that you also have what you have counter-cyclical payments, which is a new word for target prices. When prices get below $2.10 a bushel for corn, then – and hopefully they never get that low because it costs $4 a bushel just to raise a bushel of corn. But if they get that low, counter-cyclicals would pay in.”
In other developments, a program announcement yesterday from USDA’s Risk Management Agency (RMA) stated that, “[RMA] Administrator William Murphy today announced a change in qualification requirements for farmers in ‘prairie pothole states’ who want to obtain prevented planting insurance. The change is intended to assist farmers who have experienced difficulties due to excessive moisture in their fields over recent years. Beginning with the 2012 crop year, a crop must be grown on the acreage at least one of the previous four years if a farmer wishes to qualify. The states of Iowa, Minnesota, Montana, North Dakota and South Dakota are covered by the change. All other policy provisions must also be met.
“‘The requirement to be able to bring an insured crop to harvest in one of four years improves program integrity,’ said Administrator Murphy. ‘It also helps to meet the needs of farmers in the Prairie Pothole region, where some acreage has not been available to plant since the 2008 crop year due to flooding and excessive moisture conditions.’”
A separate report yesterday from USDA’s Economic Research Service (ERS) also highlighted issues associated with the Prairie Pothole Region: “Grassland to Cropland Conversion in the Northern Plains: The Role of Crop Insurance, Commodity, and Disaster Programs.”
And with respect to nutrition issues, ERS released a report yesterday titled, “The Effect of Food and Beverage Prices on Children’s Weights.” An ERS overview of this report indicated that, “One factor that may be important in explaining rising childhood obesity is food prices. This report explores the effect of food prices on children’s Body Mass Index (BMI) using data from the Early Childhood Longitudinal Study, Kindergarten Class of 1998-99 (ECLS-K) and the Quarterly Food-at-Home Price Database. On average, higher prices for soda, 100 percent juices, starchy vegetables, and sweet snacks are associated with lower BMIs among children. In addition, lower prices for dark green vegetables and lowfat milk are associated with reduced BMI. The effect of subsidizing healthy food may be just as large as raising prices of less healthy foods.”
In broader developments regarding negotiations over the debt ceiling, discussions that could likely have an impact on farm program spending, Ian Swanson reported yesterday at The Hill Online that, “Senate Republicans revolted against the White House Thursday as the fight over raising the debt ceiling turned sharply more bitter and bled into other issues.
“Just one week after House Majority Leader Eric Cantor (R-Va.) left talks led by Vice President Biden, negotiations to reduce deficits appear to be in ruins.
“GOP senators on Thursday sniped from the floor at President Obama’s lack of leadership and sought to stop any progress in the chamber.”
The Hill article noted that, “Sen. Pat Roberts (R-Kan.) joked that Obama should pop a Valium to calm down before talking with Congress about a deficit deal, while Senate Minority Leader Mitch McConnell (R-Ky.) invited Obama to meet the Senate GOP and hear for himself that a deficit-reduction package with tax increases had no chance of winning approval from 60 senators.”
Damian Paletta reported in today’s Wall Street Journal that, “The Obama administration believes congressional leaders must agree to a deficit-reduction deal by July 22 in order to raise the government’s borrowing limit in time to avoid a default in early August, according to Democratic officials with knowledge of the negotiations.
“The government needs a week or two to write and pass the necessary legislation and take the steps necessary to avoid missing a payment. ‘We’re down to the wire,’ one official said.”
Kimberly A. Strassel took up the issue of farm related payments and the debt talks in a hard-hitting column in today’s Wall Street Journal.
In her weekly Potomac Watch column, Ms. Strassel stated that, “Democrats and Republicans may still be far apart on a deal, but note what they do agree on. The Joe Biden-led debt talks appear to have identified about $1.3 trillion in cuts, including this jaw-dropper: a reduction in farm subsidies.
“Think about that. For decades, the House and Senate agriculture committees have been the last redoubts of congressional bipartisanship, liberals and conservatives united in beating back any outside attempts to cut off tens of billions annually for price supports, crop insurance, weather assistance, conservation handouts and nutrition programs. The last real stab at reform was the mid-1990s Freedom to Farm bill. Most of the changes were obliterated by subsequent bailouts and new spending.
“A new crop of House spending reformers, combined with soaring commodity prices, is finally putting this ag gusher under the spending microscope, while votes like the recent Senate one to chop ethanol are rocking ag defenders back on their heels. In an attempt to get ahead of the issue, [House Ag Committee Chairman Frank Lucas (R-Oklahoma)] has rushed to start work on a 2012 farm bill, promising that the current ‘fiscal climate’ will make this legislation different (honest!). Every ‘program in every title will be on the table,’ he promises, aided by what he’s billing as agricultural program ‘audits’ to root out ‘waste, fraud and abuse.’”
(Note that an UNOFFICIAL FarmPolicy.com TRANSCRIPT of the first audit hearing held by the House Ag Committee is available here.)
Ms. Strassel added that, “Enter the debt-ceiling opportunity. While specifics of the Biden talks are scarce, word is that as much as $34 billion in farm spending is on the block, and that a good portion of the mandatory ag cuts would be specified in the deal itself. Put another way, agriculture spenders would be presented with a fait accompli—a first. Just as notable, they’d be presented with a debt deal that would require an up-or-down vote, with no room for procedural tricks.”
Today’s Op-Ed column concluded by saying, “Farm members like Mr. Lucas are right that the budget cannot be balanced on the back of farmers alone. Then again, many in Congress now understand that the budget cannot be balanced until they take on sacred federal spending cows like ag spending. Here’s one golden opening.”
Richard E. Cohen reported yesterday at Politico that, “Senate Republicans on Thursday blocked the Finance Committee from meeting to consider action on three trade agreements that have gained bipartisan Senate support.
“Miffed that President Obama and Senate Democrats have insisted on including extension of trade adjustment assistance with the three trade deals, Republicans informed Finance Chairman Max Baucus (D-Mont.) of their last-minute decision to boycott the meeting. They also have sought to block other legislation because of their unhappiness over the Senate’s failure to consider the long-overdue budget resolution for next year.
“While Republicans held a press conference in the Capitol to explain their absence as the committee was scheduled to convene, Finance Democrats met in their hearing room across the street to attack the GOP empty chairs. Senate rules require at least one minority-party member for the Finance Committee to have a quorum.”
To listen to a portion of remarks delivered yesterday by Finance Committee Chairman Baucus at yesterday’s Committee gathering, just click here (MP3- 2:27).
Comments made at the same meeting by Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) can be heard here (MP3- 1:56).
Elizabeth Williamson reported in today’s Wall Street Journal that, “Republicans boycotted a key Senate hearing Thursday on three pending free-trade deals amid a political row over whether to renew a 50-year-old program that helps workers who lose their jobs as a result of trade agreements.
“The fight over the Trade Adjustment Assistance program threatens a deal negotiated this week by the Obama administration and congressional leaders to start moving toward ratification of trade-opening deals with South Korea, Colombia and Panama. The government estimates the deals could generate $13 billion in new exports.
“Known as the TAA, the program has emerged as a new rallying point for GOP budget hawks in the broader war over federal spending. Adding to their frustration, the TAA is a federal entitlement program, and cannot be eliminated without a change in law.”
The Journal article pointed out that, “At the GOP press conference, Sen. Orrin Hatch (R., Utah), the top-ranking Republican on the Senate panel, said that the steps that had led to TAA being linked to the trade deals ‘has been so noxious that we cannot in good faith attend…and pretend as though everything is fine and dandy.’
“The Senate Finance Committee will likely reconvene next week, after July 4, to resume consideration of the trade deals. House leadership aides say the House will take up the next step in ratifying the agreements, though the TAA element remains divisive.”
The GOP Members of the Senate Finance Committee also sent the President a letter yesterday that “laid out their position that the three trade agreements with South Korea, Panama and Colombia, and TAA should be ‘debated and considered in the Senate on its merits.’”
John W. Miller and Evean Ramstad reported in today’s Wall Street Journal that, “The U.S. is debating whether to ratify free-trade deals with South Korea, Panama and Colombia, but competitors are leaping ahead.
“A trade agreement between South Korea and the European Union will enter into force Friday, creating an estimated $30 billion in new trade of goods and services annually, potentially taking away market share from U.S. companies by eliminating 98.7% of duties between the EU and South Korea.”