FarmPolicy

May 21, 2018

Farm Bill; Ag Economy; and Trade

Farm Bill: Budget Concerns

The AP reported on Saturday that, “Farm groups are rushing to save government subsidies they’ve long received.

“President Barack Obama and lawmakers have targeted $30 billion or more in agriculture spending cuts as they try to negotiate a deficit-reduction deal.”

The article explained that, “Budget negotiators are looking at three pots of agriculture money:

“—direct payments, which are subsidies that farmers get regardless of what they grow.

“—crop insurance, which helps farmers in the event of losses.

“—conservation money, which pays farmers to protect environmentally sensitive land.”

Saturday’s article noted that, “A new farm bill isn’t due until next year but could be pushed up if lawmakers are forced to find immediate savings. A budget deal could dictate the terms of the cuts or leave it up to the congressional agriculture committees.

“The chairman of the House Agriculture Committee, Rep. Frank Lucas, R-Okla., says he hopes negotiators will tell lawmakers exactly how much they want cut from the farm budget and let the agriculture committees hash out the details.

“Negotiators are looking at reductions of $30 billion to $35 billion over 10 years, which amounts to a more than a 15 percent cut from the three programs.”

The AP item noted too that, “Rep. Collin Peterson of Minnesota, the top Democrat on the committee, says such large cuts would make it almost impossible for Congress to write a new farm bill and figure out how to protect producers from a downturn. ‘It’s a mess is what it is,’ he said.”

Dan Looker reported late last week at Agriculture.com that, “[National Corn Growers Association] members spent Wednesday afternoon and Thursday morning this week visiting members of the House and Senate to ask that ag committees be allowed to decide how farm programs will be cut.  Some worry that farm programs will on the chopping block in any deal to raise the debt ceiling. Protecting crop insurance is high on their list.”

Meanwhile, Claire Courchane reported on Thursday at The Washington Times Online that, “For budget hawks, federal farm-subsidy programs have long been a huge but elusive target, but critics say the time might finally be right to reap a harvest of savings by cutting payments to farmers as lawmakers gear up for a massive fight next year on a new long-term farm bill.

“The federal deficit crisis, combined with a new class of House GOP lawmakers who have shown a willingness to attack sacred spending cows throughout the budget, has changed the equation on Capitol Hill.”

The article pointed out that, “The building debate of the next farm bill, which must be passed in 2012, is far from Congress’ first attempt to strip subsidies. Republicans in the mid-1990s launched an ambitious drive to wean farmers from guaranteed crop subsidies and other federal programs, with very limited success.

“‘We tried to move away from farm programs in the mid-‘90s, and people were willing to sign on to that since the commodity prices of farm products were pretty good,’ said Bruce Jones, an agricultural economist at the University of Wisconsin. ‘Reversal of market conditions led to the price of grains falling, and then farmers started hurting.’”

And Ben Botkin reported yesterday at The Times-News Online (Twin Falls, ID) that, “But now, the Farm Bill’s pending renewal comes amid a growing chorus both in Congress and the public to pare back federal spending — in agriculture and elsewhere.”

The article added that, “Dick Rush, Idaho director of the USDA’s Farm Service Agency, said one needs only to look at natural disasters that hit farms throughout the country to see the need for farmers to have a safety net.

“‘I think one of the arguments we hear about is: ‘Farms are prosperous right now; prices are up. Why would they need any support?’’ he said. ‘And I think those kinds of disasters demonstrate to me why this business is so risky and sort of epitomizes the concept of a safety net. … It doesn’t matter what the price of wheat is at. If you don’t get a crop, you don’t get anything.’”

In a broader look at the debt ceiling negotiations, Janet Hook and Damian Paletta reported in today’s Wall Street Journal that, “With few signs of movement over the weekend on negotiations to raise the federal borrowing limit, Senate leaders are planning this week to unveil a back-up plan that would force more budget wrangling before the end of the year.

Washington seems rudderless just two weeks before an Aug. 2 deadline for Congress to increase the $14.29 trillion borrowing authority or risk having some government bills go unpaid. White House budget director Jacob Lew used the word ‘Armageddon’ three times on Sunday talk shows, saying a default could lead to a financial crisis that would send interest rates rising and drive up the cost of credit for all Americans.

Senate officials worked through the weekend to iron out details of the back up plan by Senate Majority Leader Harry Reid (D.,Nev.) and Senate Minority Leader Mitch McConnell (R.Ky.), who hope by mid-week to introduce the bill to give the president new powers to raise the debt limit. It would postpone resolution of the government’s long-term fiscal challenges by creating a special new committee of Congress to draft a plan to reduce the federal budget deficit.”

The Journal writers added that, “First, however, the House is expected to approve a bill Tuesday embodying conservatives’ favored budget policies. The bill would cut government spending by $2.4 trillion over 10 years, set stringent caps on future spending and raise the government’s debt limit on condition that Congress separately passes a constitutional amendment mandating a balanced budget. The Senate is expected to reject the bill midweek.

With those largely symbolic votes behind them, lawmakers will head into the endgame of the struggle that has dominated Capitol Hill for months. The two sides have been trying to come up with a deficit-reduction package that Republicans and some Democrats say must be approved before the debt ceiling can be increased.”

David Rogers reported last night at Politico that, “Turning right with a vengeance, Republicans will bring to the House floor Tuesday a newly revised debt-ceiling bill that is remarkable for its total absence of compromise at this late date, two weeks before the threat of default…Indeed, much of the deficit-reduction legislation signed by Reagan would not qualify under the new tea-party-driven standards.”

Zachary A. Goldfarb reported in today’s Washington Post that, “[T]he White House will continue to push for as big a deal as possible to cut the deficit, which would include spending cuts and changes to entitlements as well as increases in tax revenue.

“On NBC’s ‘Meet the Press,’ [Jacob Lew, Obama’s budget director] said he hoped the Republicans could compromise with Obama on a big deal. But he did not express optimism. ‘The question is: Do we have a partner to work with?’ he asked.

“Informal talks between the White House and Congress over the weekend did not appear to move the two sides significantly closer to a big deal. Leaders face an Aug. 2 deadline to raise the federal debt ceiling or face a potentially damaging government default on its obligations. They say they need to get a piece of legislation underway by week’s end to clear procedural barriers and raise the debt ceiling in time.”

Eric Lipton reported yesterday at The New York Times Online that, “Top Republican lawmakers and the Obama administration’s budget director predicted Sunday that an agreement would be reached before the federal government defaults on its debt in early August, but both sides continued to squabble over the details of competing proposals, offering little evidence that a deal was at hand.”

 

Farm Bill: Dairy

Marc Heller reported on Saturday at the Watertown Daily Times (New York) Online that, “House Democrats took a first step this week toward reworking the safety net for dairy farmers, drafting a package of reforms modeled after a proposal from farmer-owned bargaining cooperatives.

A lobbying group for dairy processors, however, opposed key provisions, and the House Agriculture Committee’s Republican chairman was lukewarm at best.

“The measure from Rep. Collin C. Peterson, D-Minn., includes an insurance program to protect farmers’ profit margins, as well as a ‘market stabilization’ plan to discourage farmers from boosting milk production or expanding their farms. It ends the Milk Income Loss Contract program, which pays farmers a government subsidy when market prices for milk fall below $16.94 per 100 pounds of milk.”

The article noted that, “The most contentious element is the market stabilization plan, which would reduce farmers’ milk payments when markets signal that overproduction may loom — such as when profit margins are tight and farmers want to produce more milk. Farmers would be paid on a declining percentage of their production at those times.”

“Mr. Peterson modeled the proposal closely after a plan called Foundation for the Future crafted by the National Milk Producers Federation, representing farmer-owned cooperatives. The NMPF praised his proposal and announced a series of community meetings around the country to promote it with farmers.”

A news release Friday from the National Farmers Union (NFU) indicated that, “[NFU] has formed a subcommittee of its Board members to examine the organization’s dairy policy. Since it has become evident that dairy legislation could move in the U.S. House of Representatives prior to the 2012 Farm Bill, Board members will evaluate where organizational policy overlaps and is supportive of the proposed legislation. The subcommittee is also tasked with suggesting adjustments to the legislation that would be needed to gain support from NFU’s grassroots membership.”

 

Agricultural Economy

Dow Jones news reported on Friday that, “U.S. agricultural lenders issued more operating loans in the second quarter versus a year ago as farmers grappled with rising fertilizer, fuel and feed costs, the Federal Reserve Bank of Kansas City said Friday.

“Non-real-estate farm loan volumes jumped 14% in the second quarter from a year ago, the bank said. The average size of short-term operating loans jumped 36%, driven by the rising input costs.”

A news release Friday from USDA stated that, “The U.S. Department of Agriculture (USDA) reminds farmers and ranchers in states across the country that USDA offers a variety of resources for those affected by recent extreme weather, including floods, drought, fires and tornadoes.”

And Alex Prud’Homme noted in yesterday’s New York Times that, “In the South, 14 states are now baking in blast-furnace conditions — from Arizona, which is battling the largest wildfire in its history, to Florida, where fires have burned some 200,000 acres so far. Worse, drought, unlike earthquakes, hurricanes and other rapid-moving weather, could become a permanent condition in some regions.

Climatologists call drought a ‘creeping disaster’ because its effects are not felt at once. Others compare drought to a python, which slowly and inexorably squeezes its prey to death.”

Reuters writer Sam Nelson reported yesterday that, “The bellwether new-crop Chicago Board of Trade (CBOT) December corn futures contract has been extremely volatile and no letup from that pattern is expected this week as the U.S. bread basket boils while the crop tries to reproduce.”

High heat forecast for this week in the U.S. grain belt at a time when the corn crop begins to pollinate and set yields could roil the market. Traders caution the market could plunge if forecasts for cooler and wetter weather surface.”

In other news, Dan Piller reported on Saturday at The Des Moines Register Online that, “Livestock and food producers are again taking on biofuels as a reason for high costs.

“The supply and demand report from the U.S. Department of Agriculture last week was a milestone, showing that for the first time more corn will be used for ethanol production than to feed livestock.

“The USDA report showed just a 24-day supply of corn going into the 2011 harvest, which in turn set off another round of price increases for corn that already were double what they were in mid-2010.”

Mr. Piller indicated that, “The National Chicken Council and food manufacturers such as General Mills and Nestle have publicly fingered ethanol as a factor in rising food costs.”

Note that the most recent Feed Outlook report from USDA’s Economic Research Service pointed out that, “As corn-based fuel ethanol production has risen over the past decade, there has been interest in the volume of distillers’ grains produced. Distillers’ grains are a by- product from dry-mill ethanol plants and can be used in livestock rations, particularly by ruminants such as beef and dairy cattle. Since most of the expansion in fuel ethanol production has been in corn-based dry mill plants, production of distillers’ grains has shown a rapid expansion as well.

Figure 7  provides an indicator of the growing importance of distillers’ grains by showing estimates of the amount of corn utilization that produces distillers’ grains from dry mill fuel ethanol production. Calculations are based on data provided in Hoffman and Baker, Market Issues and Prospects for U.S. Distillers’ Grains Supply, Use, and Price Relationships, USDA-ERS Outlook Report No. FDS-10K- 01, December 2010.”

Meanwhile, the AP reported last week that, “[W]hen 430 acres of Michigan cornfields was auctioned last summer, it was [Braden] Janowski, a brash, 33-year-old software executive, who made the winning bid. It was so high — $4 million, 25 percent above the next-highest — that some farmers stood, shook their heads and walked out. And Janowski figures he got the land cheap.

“‘Corn back then was around $4,’ he says from his office in Tulsa, Okla., stealing a glance at prices per bushel on his computer. Corn rose to almost $8 in June and trades now at about $7.”

The article added that, “A new breed of gentleman farmer is shaking up the American heartland. Rich investors with no ties to farming, no dirt under their nails, are confident enough to wager big on a patch of earth — betting that it’s a smart investment because food will only get more expensive around the world.

“They’re buying wheat fields in Kansas, rows of Iowa corn and acres of soybeans in Indiana. And though farmers still fill most of the seats at auctions, the newcomers are growing in number and variety — a Seattle computer executive, a Kansas City lawyer, a publishing executive from Chicago, a Boston money manager.

The value of Iowa farmland has almost doubled in six years.”

From a global perspective, Michael Wines reported in Saturday’s New York Times that, “Some nations have strategic oil reserves. Some keep grain reserves. China has both, and something others have somehow overlooked: a national pork reserve.

“And with the price of pig meat up 38 percent in major cities since the start of the year, the government is about to open its floodgates.

China’s Commerce Ministry said Friday that it planned to release part of the central government’s 200,000-metric-ton stash of frozen pork onto the market, following earlier releases from pork reserves held by cities and at least 11 provinces trying to cap rising food prices.”

 

Trade

A report posted last week at Hoosier Ag Today Online stated that, “Agriculture Secretary Tom Vilsack expects to see the Free Trade Agreements between the United States and South Korea, Colombia and Panama, and the Trade Adjustment Assistance program approved by Congress. He expects passage before Congress begins the August recess. He says, ‘Our sincere hope is that it is done; the sooner the better.’”

Keith Good

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