FarmPolicy

February 21, 2019

Farm Bill; Ag Economy; Regulations; and Biofuels

Farm Bill: Budget Developments- Political Notes

John D. McKinnon and Carol E. Lee reported in today’s Wall Street Journal that, “Democrats have floated ideas that could raise tax revenues by some $400 billion over the next decade as they negotiate deficit reductions with Republicans, according to people familiar with the plan, posing the most contentious issue as talks reach a critical stage this week.

Republican leaders say they want no tax increases in the deal, though some say they can accept ideas for generating additional revenue along with broader tax changes.

Democrats say significant tax increases are required for fairness, to offset the deep cuts to government services that will make up the bulk of deficit reduction.”

The Journal article noted that, “One key question is what kinds of revenue measures Republicans might accept. A second is whether they will approve steps that raise the overall amount of tax revenue the government collects, or insist that new revenue additions be offset by tax cuts elsewhere.

“Both sides agree that a deficit-cutting deal is required to win the votes needed in Congress to raise the nation’s borrowing limit and avoid a default on government debt. Administration aides say an agreement must be reached by July 22 to give Congress time to draft legislative language and pass a bill ahead of Aug. 2, when the Treasury Department estimates that without a debt-ceiling increase the government will lose the ability to pay all its bills.”

Also today, The New York Times editorial board opined that, “Congressional Republicans have opened a new front in the deficit wars. In addition to demanding trillions of dollars in spending cuts in exchange for raising the nation’s debt limit, they are now vowing not to act without first holding votes in each chamber on a balanced budget amendment to the Constitution.

“The ploy is more posturing on an issue that has already seen too much grandstanding. But it is posturing with a dangerous purpose: to further distort the terms of the budget fight, and in the process, to entrench the Republicans’ no-new-taxes-ever stance.”

The Times added that, “What is needed is enactment of a thoughtful deficit-reduction package, to be implemented as the economy recovers. If politicians respect the voters enough to tell them the truth, the voters may reward them at the polls.”

And on the issue of elections, Jennifer Steinhauer reported in today’s New York Times that, “Just when freshman House Republicans have finally learned their way to the Cannon Caucus Room, how to vote on a motion to proceed and which commissary serves the best tuna sandwiches, someone back home — worse, someone from their own party — wants to take it all away…It is miles to go before the 2012 Congressional races begin in earnest, but already some of the 87 freshmen who helped the Republicans win back the House last year are bracing for a challenge from within the party. At least half a dozen potential primary challengers to freshmen are considering a run, and there is heated chatter about more.

“In some ways, the freshmen are responsible for their own predicament. Many won their seats after successfully challenging establishment Republicans in primaries, proving that a combination of gumption and the right political climate could overcome the advantages of incumbency.

“Now, to some of the impatient and ideological voters who sent them to Washington to change things, the new House members may be seen as the establishment, and they face the disconcerting prospect of immediately defending themselves in the political marketplace.”

Today’s article pointed out that, “In many states, Republicans control the once-a-decade process of redrawing Congressional districts, and they are maneuvering to make marginal districts more Republican-friendly. That is meant to shore up incumbents, but it can also make a district more attractive to Republican newcomers.”

An Associated Press article yesterday from Illinois highlighted a separate developing issue with respect to Congressional redistricting in some jurisdictions: More traditionally urban districts expanding into rural areas.

The article indicated that, “Surrounded by fields that grow corn, soybeans, melons and potatoes, this tiny rural village is 65 miles from Chicago but light years away from the big city. Still, St. Anne and a lot of the farm country around it has now been dragged into the metropolis as part of an ambitious political strategy focused on the 2012 national elections.

“A new census-based political map drawn by the state’s Democratic-controlled Legislature, and signed into law by Democratic Gov. Pat Quinn, has taken swaths of suburban and rural Illinois and added them to the districts of veteran Chicago Democrats such as U.S. Rep. Jackson Jr., who could be St. Anne’s next representative.

“The move was one of the boldest by the national political parties this year as they sought to benefit by changing political boundaries.”

The article noted that, “The new map should help Democrats and hurt Republicans in Illinois in 2012, and boost the Democrats’ hopes for retaking control of the U.S. House. But it’s creating an awkward situation for some of the people who live in these rural areas, who could soon find themselves represented by officials who live in a very different universe.

“‘He’s a long way from home, isn’t he?’ said Scott Rigsby, a former warehouse worker who lives in the village of some 1,300 people, referring to Jackson’s political base on Chicago’s industrial South Side. For a hamlet that goes by the motto of ‘preserving a rural life,’ Rigsby said, ‘We’re way too far away for him to have his own personal finger on this town.’”

 

Agricultural Economy

A news release from Sen. Kent Conrad (D-ND) Friday stated that, “In wake of reports that North Dakota’s farmers face more than $1 billion in prevented planting losses this year, Senator Kent Conrad is making farm families aware of agricultural assistance programs and urging impacted producers to apply for federal aid.

“‘Flooding across our state has left many farm families with massive damage. Flood waters have made it impossible to plant on millions of acres.  North Dakota farmers must now rely on the safety net of the federal crop insurance program, its prevented planting provisions and other disaster assistance programs in the 2008 Farm Bill,’ Senator Conrad said.  ‘I urge producers  to contact their insurance agents to make sure they make a timely claim for damages.  As we write the 2012 Farm Bill, I am working to ensure that these programs remain in place, so these families will continue to be protected in the event of another disaster.’

“According to an analysis performed by North Dakota State University’s Department of Agribusiness and Applied Economics, the direct financial impact to North Dakota’s farmers of prevented planted acres in 2011 is estimated at $1.1 billion.”

The release added that, “Senator Conrad was the architect of the 2008 Farm Bill’s disaster assistance program, which has provided thousands of North Dakota farm and ranch families with assistance when weather-related disasters wreaked havoc on their crops.”

In other news regarding flooding impacts, Cameron McWhirter reported in today’s Wall Street Journal that, “Historic flooding this year carried an estimated 60 million cubic yards of sediment down America’s largest river system, transforming the winding lower Mississippi into a dangerous obstacle course for large commercial ships and raising transportation costs.

“Shippers of grain, oil, coal and other commodities now want the Army Corps of Engineers to spend an additional $95 million on dredging to fix the problem. Mother Nature’s timing couldn’t be any worse, with record floods hitting just as the federal government is seeking ways to save money. The Corps budget this year has allocated less to dredging than last year.

“The Mississippi River is a major thoroughfare for commerce, ferrying key American exports, including grain, corn and soybeans, and imports such as steel, rubber and coffee. A third of the nation’s oil comes up the river to refineries in Louisiana.”

The Journal article added that, “So far the White House, locked in a showdown with Republicans on next year’s budget, says only that it is reviewing the situation. ‘The administration has not made a determination about whether a supplemental funding request is necessary,’ said Meg Reilly, an Office of Management and Budget spokeswoman.”

Meanwhile, an Economic Research Service update from Friday noted that, “Total agricultural production expenses are forecast to rise sharply in 2011, due to changes in both price paid for inputs and the quantity of inputs used. Prices for all crop-related inputs are expected to rise in 2011, while acres planted to principal crops are forecast to rise to 326 million acres, a 3-percent increase over 2010. Expenses for several crop-related expenses are expected to show some of the sharpest changes this year. After steady increases between 2002 and 2008, fertilizer expenses dropped roughly 10 percent in both 2009 and 2010. In 2011, fertilizer expenses are forecast to resume their climb, going up 14 percent.”

In a more global context, the AP reported late last week that, “Pope Benedict XVI denounced speculation in commodities markets Friday and demanded a global response to high food prices based on solidarity, not profit.

Benedict told delegates of the U.N. Food and Agriculture Organization that access to food is a basic human right that must be guaranteed. He said it’s urgent to develop economic models that aren’t just based on profit but take into account the ‘human dimension.’”

Tom Orlik reported in Saturday’s Wall Street Journal that, “A shortage of pigs is set to push China’s consumer price index to a new high, and means a respite from inflationary pressure may be several months away.

“The official data on inflation in June will not be published until July 15. But the early signs are that it will show the CPI popping above 6% year on year. That is way above the government’s target of 4%, and earlier forecasts by many investment bank economists, who started the year predicting a peak of around 5%.

The proximate cause, once again, is food prices. End-June prices for pork, China’s favorite meat, are up 67% year on year. Lu Ting, China economist at Bank of America, says pork alone will contribute 1.6 percentage points to June’s CPI. This is not the first time pork prices have pushed China’s inflation index to worrying levels. In February 2008, a similar pork shortage sent prices soaring, the main factor behind inflation jumping to 8.7%.”

The Journal article explained that, “Record high corn prices in China, mainly as a result of growing demand for animal feed, have reduced profit for pig farmers. A ratio of 6:1 in the price of pork to corn is the minimum for farmers to break even. The number has hovered just above that level for much of the last year, and only moved significantly higher in the last month.

A fall in international corn prices—under way since mid-June—should help alleviate cost pressures. But even as higher pork and lower corn prices improve incentives for farmers, pigs conceived today won’t come to market until the first quarter of 2012. That means China’s high inflation could be more persistent than investors expect.”

In an item posted yesterday at The Wall Street Journal Online, Christine Di Domenico, an associate professor of economics at the EM Lyon Business School in France noted that, “While the recent surge in oil prices added an estimated quarter of a percentage point to euro-zone inflation, experts are warning that the agricultural crisis threatens to increase overall inflation levels in Europe by another half a percentage point. There are fewer droughts than oil shocks, but their economic impact tends to be much worse…France has, perhaps, been hit the worst by the drought. As the world’s second-largest agricultural exporter, and the European Union’s leading agricultural power, the country has a proud heritage of agricultural autonomy. But cattle and crop farmers are facing serious cash-flow problems as they deal with plummeting yields and exorbitant costs to feed their herds. The situation is compounded by rising energy costs, and many are left with crippling losses.

“The French government has, to its credit, been responsive to the problem. The state-owned railway operator, SNCF, is subsidizing the transport of cattle feed, the country’s banks are helping with solvency concerns by giving borrowers some leeway, insurance companies are postponing client payments until the situation improves, and the government has just injected €800 million ($1,162 billion) in funds into the agricultural economy, bringing the 2011 single farm payment forward.”

 

Regulations

Late last week, Ron Arnold penned an opinion item that was posted at The Washington Examiner Online regarding the issue of Environmental Protection Agency and farm dust regulation- “A huge political storm is stirring over farm dust.”

And the AP reported on Friday that, “A federal judge has rejected the government’s attempt to delay a lawsuit seeking protections for imperiled sage grouse across the West in a case with sweeping implications for grazing, oil and gas drilling, and residential construction.

“With the order from Judge B. Lynn Winmill in Idaho, the 11-state sage grouse case is shaping up as an early test of an Obama administration proposal to settle endangered species claims on hundreds of plants and animals.”

The article explained that, “The Interior Department wants to prolong until 2015 its decision on whether the birds should receive Endangered Species Act protections. That’s under a pending settlement with two wildlife advocacy groups in a separate federal court case in Washington, D.C.

“However, Winmill said in his late Thursday ruling that a third group, Western Watersheds Project, can proceed with its lawsuit calling for more immediate measures to stop the bird’s decline. Winmill turned down the government’s request to suspend the case.”

The article added that, “A lawyer for several farming groups attempting to intervene in the Idaho case said hitting industries with new restrictions to help the birds even more would be ‘the last thing we need with this economy.’

“‘It really seems the intent of the environmental groups is to bring on a full listing of the species, which would result in grazing restrictions throughout the region,’ said Brandon Middleton with the Pacific Legal Foundation in Sacramento, Calif.”

 

Biofuels

Denise Ross reported last week at The Daily Republic Online (South Dakota) that, “The fate of ethanol tax breaks, near-term and long-term, is wrapped up in a pitched battle over spending on Capitol Hill, and Sen. John Thune, R-S.D., wasn’t promising he could strike a deal on Wednesday.

“‘We’re getting closer, we have been for a long time. Unfortunately, the goal posts seem to be moving all the time,’ Thune told reporters in a conference call.

“Thune and Sen. Amy Klobuchar, D-Minn., have been negotiating a deal with Sen. Dianne Feinstein, D-Calif., an ethanol opponent. But Thune sounded weary and said intense work has been going into negotiations for months.”

The article stated that, “The Thune-Klobuchar-Feinstein deal would reflect a bill co-sponsored by Thune that would trade an early end to the blender’s tax credit in exchange for money to put ethanol pumps at gas stations and more money to spur advanced biofuels, such as cellulosic ethanol. Money also would go to reduce the deficit. Feinstein has said she wants the ethanol deal rolled into a much bigger vote on raising the debt ceiling.”

The article added that, “Meanwhile, on Capitol Hill, the ethanol tax breaks once popular due to the promise of a domestic energy source are now being characterized as wasteful. While the budget battle is intensely partisan, ethanol support and opposition breaks down along geographic lines.

“This has put Thune in the position of fighting to maintain some form of federal ethanol subsidies, while also pushing to curb deficit spending and cut the federal debt.”

Keith Good

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