FarmPolicy

August 20, 2014

Farm Bill; Ag Economy; Animal Ag; Biofuels; Trade; and Regulations

Farm Bill: Budget- Unwinding Weekend Developments, Farm Spending Implications

Carol E. Lee and Janet Hook reported on Friday at The Wall Street Journal Online that, “The White House and congressional leaders begin a crucial weekend of negotiations on a deficit-reduction deal under a cloud of dour economic news and mounting political pressures on both sides, casting doubt on how significant an agreement they can achieve.

“President Barack Obama and House Speaker John Boehner (R., Ohio) are battling opposition from within their own parties to their decision to strive for a plan that would reduce the deficit by $4 trillion over 10 years, in part by curbing entitlement spending and rewriting the tax code to boost revenue.

“The two men surprised many in Washington this week by aiming for such an ambitious bargain, rather than a smaller package of roughly $2 trillion the White House and Congress had pursued for weeks. Although many Republicans and Democrats say they applaud the goal in theory, they also express doubts about reaching it given the major compromises it would require from both parties heading into an election year.”

By Saturday night, Major Garrett reported at National Journal Online that, “There’s no deal and evanescent hopes in Washington—largely over-wrought to begin with—of a mega deal that wrestled with all of the country’s toughest spending and tax issues have been snuffed out.

“On the eve of what some thought was a make-or-break White House meeting Sunday, House Speaker John Boehner has pulled the plug—telling President Obama, Wall Street, global bond markets, skittish consumers and pummeled job-seekers Washington can’t go long. It’s time for a mini-deal, one Obama doesn’t want and other House GOP leaders have resisted.”

Carl Hulse reported in yesterday’s New York Times that, “The decision was a major reversal for Mr. Boehner, a veteran Congressional deal-maker who along with Mr. Obama had been the major advocate for seeking a far-reaching deal that would have combined a debt limit increase with substantial spending cuts, significant changes in social programs like Medicare, Medicaid and perhaps Social Security, and as much as $1 trillion in new revenues. Following a secret meeting between the two last weekend, Mr. Obama went public with his own call for a broad package.

“The White House, in its own statement, followed Mr. Boehner’s announcement with the suggestion that the president would try to change Mr. Boehner’s mind in their Sunday session.”

Scott Wilson and Lori Montgomery reported yesterday at The Washington Post Online that, “Talks among President Obama and congressional leaders Sunday evening failed to break a partisan stalemate over how to raise the federal borrowing limit, leaving the politically charged negotiations in limbo three weeks before the administration says the country will begin to default.”

Carol E. Lee, John D. McKinnon and Naftali Bendavid reported in today’s Wall Street Journal that, “Officials from both parties said the leaders didn’t make any major progress toward reaching a deal that could win support from conservatives opposed to tax increases and liberals opposed to Medicare cuts.

Mr. Obama plans to host the same leaders again Monday and hold a news conference.”

Carrie Budoff Brown and David Rogers reported yesterday at Politico that, “During the meeting [yesterday], Obama challenged the Republican leaders’ contention that a deal worth about $2.5 trillion would face a smoother path in the House, reminding them that they had said it would be difficult. He told the Republicans that if they think it’s easier to pass a smaller package, then they need to return Monday with a plan for how they would do it, according to the third Democratic official.”

The article added that, “But Biden and Obama disagreed with the Republicans that the Biden talks had produced any kind of ready-made agreement. They told Republicans that they wouldn’t be able to take all the spending cuts without balancing them out with revenue increases, sources said.”

And Peter Nicholas and Lisa Mascaro reported today at the Los Angeles Times Online that, “Budget experts said the Biden group identified much of the low-hanging fruitcuts to agriculture subsidies and federal pensions, along with some new fees — and predicted that achieving a final package would remain difficult, especially without new revenue sources.”

An update last week at the National Sustainable Agriculture Coalition Blog stated that, “As has been widely reported, the Biden-led negotiations had tentatively agreed on at least $600 billion in cuts over the next ten years to mandatory benefits and subsidies, including about $34 billion in farm bill commodity subsidy cuts.”

Elizabeth Bewley reported yesterday at The Tennessean Online that, “The [farm] subsidies are a prime target because their opponents include lawmakers from both parties, experts say. Conservatives blast them as an example of government intrusion into free markets, and liberals say they encourage environmentally hazardous overfarming.”

Hal Bernton reported in Saturday’s Seattle Times that, “Farm subsidies nationally are under renewed scrutiny as the Obama administration and Congress negotiate federal budget cuts in advance of an Aug. 2 deadline for raising the federal debt ceiling.”

An editorial item posted yesterday at Tampa Bay Online opined that, “And if Congress is poised to make changes to Medicare, Medicaid and even Social Security, it is inconceivable that agriculture would not share in the sacrifice. Thus members of both parties seem prepared to reduce farm giveaways.”

Bob Cusack reported on Saturday at The Hill Online that, “The White House and leaders in Congress have been looking at a range of options to cut government spending, including closing tax loopholes, slashing farm subsidies and boosting healthcare deductibles.”

The Hill article added that, “Changing the ethanol tax credit is a wildcard. A proposal this week offered by Sens. John Thune (R-S.D.) and Amy Klobuchar (D-Minn.) was hailed this week by affected stakeholders, but the bill would appear to violate the [Americans for Tax Reform] pledge. It remains unclear if that plan will make its way into the final deal.”

In other farm policy related developments, Rachael Gray reported late last week at the Garden City Telegram (Kansas) that, “The economy in southwest Kansas may not be as strong in 2011 in light of crop loss during this year’s wheat harvest and a predicted weak fall harvest due to severe drought conditions.”

The article noted that, “Rebecca Davis, director of the U.S. Department of Agriculture’s Risk Management Agency in Topeka, said that as of last week, Kansas farmers have insurance claims on more than 308,000 acres of land. Farmers have claimed more than $39 million in wheat indemnities, which is up from $33 million the previous week.  ‘It’s about $5 million a week it’s been jumping,’ she said.”

Loren Genson reported on Saturday at the Chillicothe Gazette (OH) Online (“Sen. Brown hears local farmers’ concerns on tour”) that, “Tony Anderson, a Fayette County soybean farmer, said he wasn’t able to finish getting his crops in the ground until July 1. He said he’s about a month behind schedule because of the wet spring season.

“‘That crop insurance is so important to someone like me, especially this year,’ he said.

Several corn farmers agreed and said safety nets such as the crop insurance programs are important in keeping small farmers operating during years with especially dry or rainy weather.”

Meanwhile, Lyndsey Layton reported in yesterday’s Washington Post that, “The food and advertising industries have launched a multi-pronged campaign to squash government efforts to create voluntary nutritional guidelines for foods marketed to children.

“Calling themselves the Sensible Food Policy Coalition, the nation’s biggest foodmakers, fast-food chains and media companies, including Viacom and Time Warner, are trying to derail standards proposed by four federal agencies. The U.S. Chamber of Commerce has also lent its lobbying muscle to the effort.

“The guidelines are designed to encourage foodmakers to reduce salt, added sugars and fats in foods and drinks targeted to children. If their products did not meet the standards, foodmakers following the guidelines would refrain from advertising them to children.”

The Wall Street Journal editorial board also highlighted this issue over the weekend.

 

Agricultural Economy

Tom Polansek, Ian Berry and Scott Kilman reported in Saturday’s Wall Street Journal that, “A Chinese buying spree for U.S. corn is putting on display the ability of Beijing to reshape grain markets as well as the cost of food globally.

“China this past week bought 540,000 metric tons of U.S. corn for delivery after August, according to the U.S. Department of Agriculture, more than the 500,000 tons the agency forecast that nation would buy in an entire year. The news drove corn prices higher on Thursday and Friday, to settle at about $6.75 a bushel, giving new life to the market after a three-week slump.

“Now, traders believe that China is on the brink of buying millions of metric tons of U.S. corn, which would shatter the USDA forecast and keep U.S. grain supplies tight even as farmers tend to what is expected to be a record-large corn crop.”

The Journal article added that, “The Chinese ‘are on the cusp, we believe, of needing a whole lot more corn than they can produce,’ said David C. Nelson, a global strategist at Rabobank, a lender and investment banker to many of the world’s biggest food concerns.

A flurry of other big sales of U.S. corn, to so-called unknown destinations that will be disclosed by the USDA later, is fueling such speculation that much more is heading China’s way.”

Bloomberg writer Sungwoo Park reported on Saturday that, “South Korea, the world’s third- biggest corn buyer, plans to secure more farmland overseas to grow crops such as corn and wheat and secure a stable supply amid surging food prices.

“The North Asian nation wants to secure a total of 380,000 hectares of overseas farmland by 2018, the agriculture ministry said in an e-mailed statement today, without giving a comparative figure. That area can produce about 1.38 million tons of corn, wheat and soybeans, or about 10 percent of the nation’s annual imports of the three major crops, it said.”

Meanwhile, Robert Jensen and Nolan Miller indicated in an opinion item from yesterday’s New York Times that, “Consider this paradox: according to conventional wisdom, hunger is supposed to decline as a country’s wealth increases. Yet in China and India, hunger appears to be growing even as incomes increase at phenomenal rates.

“There are a few possible explanations: unequal distribution of wealth, inefficient or indifferent governments and aid agencies, and recent increases in world food prices. While these factors may play a role, at least part of the answer may be much simpler: we are measuring hunger incorrectly.”

The authors noted that, “Imagine you are a poor consumer in a developing country. You have very little money in your pocket, not enough to afford all the calories you need. And suppose you have only two foods to choose from, rice and meat. Rice is cheap and has a lot of calories, but you prefer the taste of meat. If you spent all your money on meat, you would get too few calories. You might do this every so often, but usually you would spend almost all of your money on rice; when faced with true hunger, taste is a luxury you can’t afford.

But suppose you had a bit more money. You would probably add some meat to your diet, because now you can afford to do so while still getting the calories you need. You might even like meat so much that you start to switch away from rice even if you haven’t quite met your complete calorie needs, as long as you aren’t too far below.”

The Op-Ed added that, “Now think about the two approaches to measuring hunger. Researchers taking the standard approach would add up all the calories in the rice and meat you ate and declare you hungry if that total was less than your caloric need, regardless of the choices you made.

“In the staple-calorie-share approach, however, they would look at the first case and say that since you were choosing to get almost all of your calories from rice, you must not be getting enough to eat; otherwise you would have switched to meat. But looking at the second case, they would say that since you are now eating some meat, you must be getting enough or nearly enough calories; otherwise, discomfort would cause you to seek more calories via rice. Thus, the decline in the share of calories from rice reveals that the person has had enough to eat.”

 

Animal Agriculture

An editorial posted on Saturday at the Sacramento Bee Online stated that, “The second news item of note was the surprising truce reached between the Humane Society of the United States and the U.S. egg industry over chicken cages. Both sides compromised, the Humane Society backing off its claim that any cages are inhumane and producers agreeing to larger spaces with amenities. The J.S. West Co. already had moved in that direction to comply with Proposition 2.

“This settlement could standardize egg production across the country, so California isn’t at a disadvantage against other states. While we have some concern about the precedent for other ag industries, this settlement is a plus for the egg industry.”

 

Biofuels

The Wall Street Journal editorial board stated on Saturday that, “Under the compromise brokered by Minnesota Democrat Amy Klobuchar and South Dakota Republican John Thune, both farm-state Senators, the 45-cent per gallon tax credit for blending ethanol into gas would expire this month. On paper it was supposed to end for good in December, though until recently no one took that seriously, so this counts as progress. California’s Dianne Feinstein, who was also in on the talks, succeeded in striking the import tariff—54 cents a gallon—on foreign ethanol…But the industry will still enjoy a mandate that consumers buy its product every time they pull up to the pump.”

With respect to the import tariff, Samantha Pearson reported yesterday at The Financial Times Online that, “Royal Dutch Shell is gearing up to become the biggest exporter of ethanol to the US, investing heavily in its joint venture in Brazil as global oil companies battle for control of the Latin American country’s sugarcane fields.

“Under pressure to reduce the US deficit, lawmakers in Washington are preparing to scrap ethanol subsidies and tariffs – a move that would open up the country to cheaper imports while putting the spotlight on Brazil as the world’s only other leading producer of the biofuel.

“Raízen, Shell’s new joint venture in Brazil, plans to invest $7bn over the next five years to more than double its annual production of ethanol from 2.2bn to 5bn litres in a bid to meet this growing US demand.”

However, Paul Kiernan reported in today’s Wall Street Journal that, “To Brazilian sugarcane producers who have long wanted to export ethanol to the U.S., news that Congress may finally tear down trade barriers protecting U.S. fuel from competition comes at a bad time.”

The article noted that, “But Brazil’s current sugarcane harvest is expected to decline for the first time in many years, and, with heavy demand pressure coming from both domestic drivers and global sugar consumers, experts doubt there will be any ethanol left over to ship abroad.

“‘The irony of it all is that precisely when the U.S. looks ready to reduce tariffs on ethanol imports, Brazil structurally is not in a position to reap the potential benefits,’ said Christopher Garman, a Brazil analyst at Eurasia Group.”

 

Trade

Reuters writer Doug Palmer reported yesterday that, “President Barack Obama appears headed toward a fight with Republicans over a long-delayed trade deal with U.S. ally South Korea, even though both sides say they want it to pass Congress.

Obama administration officials say no deal has emerged to ease passage of an agreement that supporters contend would create tens of thousands of jobs and help the White House aim of doubling U.S. exports in five years.”

The article added that, “The administration still hopes something can be found, the aide added.

“The sticking point is a worker retraining program the White House wants approved along with the Korea pact but which Republicans oppose as they push for broad spending cuts.”

 

Regulations

Greenwire writer Jeremy P. Jacobs reported last week at The New York Times Online that, “Facing what appears to be stiff opposition from Senate Democrats as a deadline closes in, House Republicans are trying a new legislative tactic to advance legislation that would exempt pesticide users who spray over water from obtaining a permit under the Clean Water Act: They’ve tacked it on to an appropriations bill.”

The article explained that, “The bill has already passed out of two House committees with some bipartisan backing and earned the support of all the chamber’s Republicans and 57 Democrats in a 292-130 March floor vote. The Senate Agriculture, Nutrition and Forestry Committee also approved the bill in a voice vote last month, but Sen. Ben Cardin (D-Md.) and Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.) have put a hold on the measure.

“House Republicans say adding the legislation to the appropriations bill is an effort to get it through the Senate as a court-ordered Oct. 31 deadline for the new permits approaches.”

Andrew Restuccia reported on Friday at The Hill’s Energy Blog that, “Republicans on a panel of the House Energy and Commerce Committee on Friday approved legislation that would require additional analysis of the costs of Environmental Protection Agency (EPA) regulations.

“The Energy and Power subcommittee approved the legislation on a voice vote, over the objection of most Democrats on the panel.”

Keith Good

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