FarmPolicy

August 15, 2018

Farm Bill; Ag Economy; and Biofuels

Farm Bill Issues

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Soybean and corn growers on Capitol Hill this are pleading with lawmakers to let the House and Senate Agriculture Committees make the cuts needed in USDA’s budget as part of the farm-bill process.”

However, yesterday’s update noted that, “Cuts in the appropriations process could take $2.6 billion out of USDA’s Fiscal Year 2012, and the long-term understanding is that agriculture could take $30 billion over 10 years in commodity cuts and $18 billion over 10 years in conservation — and potentially more in both categories. That’s apparently what’s been sitting on the table at the White House in these drama-filled talks over the deficit and debt ceiling.”

“Arizona Republican Jeff Flake has been on the hunt ever since he came to Washington. He issued a news release Tuesday announcing the ‘Reducing the Deficit through Eliminating Agriculture Direct Payment Subsidies Act,’ or REAPS Act, H.R. 2487, ‘which would eliminate agriculture direct payments subsidies completely and permanently,’ Flake stated.

“Going through the farm-bill process, the House and Senate Ag Committees might look to take a slice off direct payments, then shift the savings to crop insurance. Flake just wants to bag the whole program and hold up the pelt,” the DTN item said.

In an article regarding federal subsidy programs, Ron Nixon reported in today’s New York Times that, “The subsidy programs are as varied as warehouses that allow farmers to store cotton and peanuts at government expense until prices rise and an estimated $100 million tax break for owners of Nascar racetracks. Various private and government studies show that nearly $1.8 trillion over the next five years could be saved by eliminating or reducing spending on some of the subsidies.

“‘You can’t blame the survival of these programs on just Democrats or Republicans, it’s both,’ said Representative Jeff Flake, Republican of Arizona, who has proposed cutting several of the programs. ‘But if we can’t cut small programs worth millions of dollars that benefit a few, how are we going to make serious cuts and get this country on the right track?

“A close look at two programs highlights the age-old politics protecting government spending. The peanut and cotton storage program, which costs $1 million a year, has repeatedly survived cuts thanks to bipartisan support. Under the program, the government picks up storage costs for cotton and peanut farmers when they defer selling crops until prices rise. The peanut storage credits have been around since 2002. The cotton subsidy dates to the 1990s.”

The Times article noted that, “President George W. Bush tried to eliminate the storage credits in 2008, specifically mentioning them when he vetoed the farm bill. But his veto was overridden by a bipartisan coalition of rural lawmakers who supported farm programs and legislators from urban areas who backed food stamp and school nutrition programs.

The Obama administration has twice tried to kill the storage program, but the National Cotton Council and the American Peanut Shellers Association, as well as lawmakers from cotton and peanut producing states like Georgia and Florida, teamed up to save it.

“The program’s biggest champion has been Representative Sanford D. Bishop Jr., Democrat of Georgia, whose district has many of the state’s nearly 3,000 peanut farmers. Mr. Bishop, a member of the Appropriations Committee, has for five years blocked efforts to cut the program, taking to the floor last month to denounce amendments to eliminate the credits.

“‘I’m in favor of making the necessary cuts needed to reduce our debt,’ he said in an interview. ‘But it shouldn’t be made off the backs of farmers, the people who produce our food.’”

And in news developments regarding the talks over the debt ceiling, Lori Montgomery reported in today’s Washington Post that, “President Obama prepared Thursday to bring bipartisan talks over the debt to a close, as Senate leaders worked across party lines to craft an alternative strategy to raise the nation’s $14.3 trillion debt limit and avert a government default.

“‘It’s decision time,’ Obama told congressional leaders after meeting at the White House for a fifth straight day. Obama gave Republicans until early Saturday to tell him whether any of three options for trimming the federal budget would win GOP support.”

The Post article noted that, “A breakthrough in the White House talks looked unlikely, however, leaving the Senate framework as the chief option for raising the debt limit before Aug. 2, when the Treasury will be unable to pay its bills without additional borrowing authority.

That deadline loomed ever larger Thursday, as China, the U.S. government’s largest foreign creditor, called on U.S. policymakers to take action to protect the interests of investors. Federal Reserve Board Chairman Ben S. Bernanke warned that failure to raise the debt ceiling would amount to ‘a self-inflicted wound’ that would cause ‘a very severe financial shock’ to the global economy. And Treasury Secretary Timothy F. Geithner told lawmakers that they are running out of time.”

Today’s article added that, “The ticking clock spawned a day of high political theater on Capitol Hill, as lawmakers grew increasingly nervous about the lack of movement in the House. Many conservative Republicans continued to deny claims of impending calamity, and Democrats unleashed an unusually harsh and personal attack against the man they view as the biggest impediment to compromise, House Majority Leader Eric Cantor (R-Va.).

“Senate Majority Leader Harry M. Reid (D-Nev.) said Cantor ‘shouldn’t even be at the table’ in the White House talks, where Cantor has eclipsed House Speaker John A. Boehner (R-Ohio) as the voice of the GOP in demanding unprecedented spending cuts while rejecting Democratic calls for fresh tax revenue.”

Mark Landler and Robert Pear reported in today’s New York Times that, “The president said he might summon the leaders to the White House over the weekend if there was no progress; he has scheduled a news conference for Friday morning to argue his case publicly. On Capitol Hill, leaders of both parties were focused increasingly on a proposal by the Senate Republican leader, Mitch McConnell of Kentucky, that could provide a way out of the stalemate on the debt limit.”

The Times article indicated that, “Earlier in the day, Mr. Boehner also expressed some support for the compromise floated by Senator McConnell. It also drew favorable comment from the Senate majority leader, Harry Reid, Democrat of Nevada, and the House minority leader, Representative Nancy Pelosi, Democrat of California.

“Mr. McConnell’s proposal would establish a joint committee of Congress, with lawmakers from both parties and both chambers, to identify ways of reducing budget deficits and the resulting need for more federal borrowing.”

Carol E. Lee and Janet Hook reported in today’s Wall Street Journal that, “Mr. McConnell’s plan will have its first test Friday when House Republicans hold a caucus meeting. They rejected the idea when he proposed it Tuesday without spending cuts attached, prompting Mr. Boehner to declare that it couldn’t pass the chamber.

“On Thursday, Mr. Boehner opened the door to Mr. McConnell’s proposal. ‘What may look like something less than optimal today, if we’re unable to get an agreement, it might look pretty good a couple weeks from now,’ Mr. Boehner said.”

In more detailed reporting regarding the McConnell proposal, David Rogers reported yesterday at Politico that, “As outlined by McConnell, Congress would temporarily surrender its power to approve any increase in the debt ceiling. Instead, lawmakers would authorize more than $2.5 trillion in new borrowing authority for the Treasury to be implemented in three increments of $700 billion this month, $900 billion in the fall and the final $900 billion next summer.

“The president would be required in each case to list corresponding savings. But under the new rules of the road, Congress could only stop each increase by adopting a veto-proof resolution of disapproval.

“That hands the power to one-third of each chamber, an infuriating prospect for many House Republicans. And in the Senate, McConnell candidly admits that he would have little chance then of prevailing since the GOP begins with just 47 votes.”

Meanwhile, a news release this week from Sen. Dick Durbin (D-IL) stated in part that, “‘It is important that the current deficit [negotiations] still focus on a Farm Bill that will keep American farm land among the most productive in the world,’ said Durbin.”

For more on federal debt issues, see this recent paper, “Restoring the Nation’s Economic Vitality,” by Luther Tweeten, Emeritus Chaired Professor at The Ohio State University.

In other developments, a news release yesterday from the House Agriculture Committee stated that, “Today, Rep. Jeff Fortenberry, Chairman of the House Agriculture Committee’s Subcommittee on Department Operations, Oversight, and Credit, held a hearing to examine the U.S. Department of Agriculture (USDA) Farm Service Agency’s (FSA) loan programs. The audit hearing was a part of the House Agriculture Committee’s ongoing effort to provide oversight of current spending to ensure that programs are being delivered effectively while minimizing waste, fraud, abuse, and duplication. This is the fifth audit hearing in the series.”

A FarmPolicy.com audio replay of yesterday’s hearing is available here (MP3).

At yesterday’s hearing, Chairman Fortenberry (R-Neb.) highlighted the need for credit within the context of the uniqueness of the agricultural industry (related audio– MP3- 1:19), while USDA Farm Service Agency (FSA) Administrator Bruce Nelson provided an overview of FSA loan programs (related audio– MP3- 2:05).

In response to a question from Subcommittee Ranking Member Marcia L. Fudge (D-OH) that dealt with city farm projects (rooftop gardens, indoor gardens), Administrator Nelson stressed that FSA loans are available to all farmers and are not generally allocated based on “rural” considerations but are potentially available for city related operations as well (related audio– MP3- 1:34).

For more on the issue of “city” agriculture and food deserts, see this recent USA Today article titled, “Programs cropping up across USA to address ‘food deserts.’”

Also yesterday, the Senate Agriculture Committee held a hearing titled, “Growing Jobs in Rural America.”

A news release yesterday from the Sen. Ag Committee stated that, “Michigan Senator Debbie Stabenow, Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, today said that bio-based manufacturing and energy efficiency efforts in rural areas will be key in creating jobs and growing the rural and national economy. Noting that 16 million Americans have jobs because of agriculture, Chairwoman Stabenow called the rural economy a bright spot and underscored the potential for a manufacturing boom in the bio-based sector – where innovators and entrepreneurs are processing American grown agriculture products for use in manufactured goods and displacing the need for foreign petroleum.”

Chairwoman Stabenow’s opening statement from yesterday’s hearing can be viewed here.

Illustrating the potential for growth and development in the biobased product sector, Dennis Hall, the Assistant Director at the Ohio BioProducts Innovation Center, provided an interesting overview of biobased products at yesterday’s hearing (related audio– MP3- 3:49).

During the discussion portion of yesterday’s hearing, Chairwoman Stabenow highlighted job creation issues in remarks with Bruce Graham, the CEO of Indiana Statewide Association of Rural Electric Cooperatives, Inc., and Zac Stewart, the Owner of Ambient, LLC- (audio clip– MP3- 3:21).

And South Dakota GOP Senator John Thune briefly highlighted budget and spending issues within the context of the next Farm Fill as it relates to program funding for research on biobased products at yesterday’s Ag Committee hearing (related audio– MP3- 1:09).

In other policy related news, Bloomberg writer Molly Peterson reported yesterday that, “Nestle SA (NESN) and Kellogg Co. (K) will stop marketing some foods to children after 2013 unless sugar, sodium and fat are reduced under new industry standards that aren’t as stringent as a U.S. proposal.

“The Council of Better Business Bureaus in Arlington, Virginia, unveiled voluntary nutrition criteria today setting a 350-calorie limit for main dishes marketed to kids younger than 12, and capping child-targeted cereals at 10 grams of added and naturally occurring sugar combined. Kellogg’s current sugar standard is 12 grams for cereals advertised to children.

“A U.S. plan recommends tougher benchmarks than industry and covers ads to those younger than 18. The Obama administration is trying to cut a child obesity rate that’s almost tripled since 1980 to 17 percent, or 12.5 million Americans, the Centers for Disease Control and Prevention said. U.S. consumers spend about $147 billion a year on obesity-related medical costs, with Medicare and Medicaid covering 42 percent.”

 

Agricultural Economy

Dan Piller reported on Wednesday at The Des Moines Register Online that, “A heat wave for up to two weeks beginning Friday could mean less corn to harvest, contrary to the adage Iowans have passed along for generations.

“Corn doesn’t like it hot, especially during mating.”

Mr. Piller explained that, “Corn plants are putting out male tassels and female silks this week. Next week, pollination will create the kernels that are the heart of the corn crop, which could bring in a record $17 billion to Iowa this year.

“Agronomists and meteorologists agree that 86 degrees is the best condition for corn reproduction. Instead, the tassels and kernels will get temperatures averaging 95 degrees or more.”

The Register article added that, “Pollination problems cause smaller ears with fewer kernels, which shows up as smaller yields at harvest. That could be the hiccup that many have feared since before planting began in April.

“The amount of U.S. corn is expected to shrink to 15-year lows by late summer, reduced by a smaller crop last year and record demand from ethanol plants and other countries. A smaller-than-expected crop could cut profits for ethanol producers, livestock producers and other users of corn.”

 

Biofuels

The Wall Street Journal editorial board noted today that, “Today’s pop quiz: What happens if the government mandates the consumption of a product that doesn’t exist? Naturally, the Environmental Protection Agency has decided to punish the gasoline refiners because they can’t buy a type of alternative fuel that no one is making. Consumers will be punished too.

The 2007 energy bill vastly increased the volume of corn ethanol that must be blended into gasoline, though it also included mandates for cellulosic ethanol. These are the second-generation fuels made from stocks like switchgrass or the wood chips that George W. Bush invoked in his 2006 State of the Union. At the time, no such fuels were being produced on a commercial scale, but cellulosic producers and the green lobby assured Congress they were just about to turn the corner, and both the Bush and Obama Administration furnished handsome subsidies.

“The EPA set the 2011 standard at six million gallons. Reality hasn’t cooperated. Zero gallons have been produced in the last six months and the corner isn’t visible over the next six months either.”

The Journal opinion item added that, “In its wisdom, Congress decided that some companies should be penalized if the targets aren’t met. But they’re not the companies that importuned the government for mandates and corporate welfare. They’re the U.S. oil refiners that make gasoline, which will end up buying six million cellulosic waivers by year’s end at $1.13 a pop. That’s $6.78 million in higher costs at the pump, in return for nothing.

“That might not be much in the scheme of things, though late last month the EPA proposed a 2012 mandate that will fall somewhere between 3.55 million and 15.7 million gallons. Barring a miracle, cellulosic producers won’t hit even the lower end, refiners and the driving public will continue to pay for the mistake, and the mandate will continue to ratchet up annually. Perhaps the EPA can also find someone to tax for the lack of unicorns.”

Keith Good

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