FarmPolicy

August 15, 2018

Farm Bill Issues; and the Ag Economy

Farm Bill Issues

Philip Brasher reported yesterday at the FoodWatch Blog that, “It’s an axiom among many critics of U.S. farm policy that crop subsidies to grain and cotton subsidies encourage practices that are bad for the environment.  What those critics may fail to realize is that producers who take that money have to comply with restrictions on how they farm environmentally sensitive land, such as slopes that are prone to erosion. End those subsidies, or cut them so much that farmers stop taking them, and those producers will be largely free to farm how they like at a time when high commodity prices are encouraging growers to plant fencerow to fencerow.

“With Congress likely to make deep cuts in farm spending as part of a deficit-reduction plan, there’s a chance that the $5 billion in fixed, annual direct payments to growers will be slashed or replaced altogether. Conservationists are worried about what that could mean for highly erodible cropland.

“‘The end of direct payments would have a significant impact, a negative impact, on the compliance incentive,’ USDA economist Roger Claassen said at a meeting this week of the Soil and Water Conservation Society.”

Mr. Brasher added that, “How much of a difference ending direct payments would have on erosion rates isn’t clear. Land that’s subject to those restrictions accounted for 25 percent of the reduction in soil erosion that took place between 1982 and 1997. (The restrictions were put in place in 1985.) But it’s not known exactly how much of the erosion reduction would have taken place anyway.”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “I’ve spent the last two days bouncing from forum-to-forum at the Soil and Water Conservation Society meeting, discussing all the acronyms in conservation programs, erosion, nutrient runoff and just what it all means.”

When looking at the who, what, when, where and why of conservation, a Wisconsin farmer noted Tuesday, simply, ‘If practices aren’t profitable, they aren’t sustainable.’”

After additional analysis, yesterday’s DTN update stated that, “Another, somewhat related question is whether conservation compliance would improve if tied to crop insurance. Some of the considerations for that are that the bulk of direct payments go to different parts of the country than the bulk of crop-insurance subsidies, particularly premium subsidies. There also is a question of whether it is practical to make conservation compliance link to eligibility for crop insurance.

The areas where the crop insurance subsidies are the highest include the Dakotas, Minnesota and parts of Wisconsin. They get a lot more out crop insurance than direct payments.”

Meanwhile, in budget related news, House Agriculture Committee Chairman Frank Lucas (R-OK) was a guest on yesterday’s AgriTalk radio program with Mike Adams.

A summary of yesterday’s AgriTalk interview with Chairman Lucas noted that the House Ag Committee could be forced to draft and pass a 2012 Farm Bill in a matter of months if dramatic cuts are made in deficit negotiations– related audio from yesterday’s program is available here.

In part, Chairman Lucas noted that a variety of different budget related proposals have different numbers with respect to cuts in federal agricultural spending.

The talks headed up by Vice President Joe Biden, at one point, included cuts of $30 billion, and in the “Gang of Six” proposal there is an $11 billion amount being suggested.

House Budget Committee Chairman Paul Ryan’s plan, which passed the House, included total cuts of $30 billion in commodity related payments, or $48 billion in total payments, while the President’s Debt Commission last year suggested cuts of $10 billion to farm programs.

Chairman Lucas noted yesterday that, “The Paul Ryan proposal would have affected all the cuts after the conclusion of the 2008 Farm Bill, they wouldn’t have taken affect until next summer.  The budget cuts that are proposed for ag, and everything across the board, either in the Biden Group, or the ‘Gang of Six,’ or the negotiations between the Speaker and the President, whatever that number may be in ag- that’s a more immediate cut.”

Chairman Lucas indicated that if he had a choice, he would rather finish out the fifth year of the Farm Bill, “that would be easier to honor under Mr. Ryan’s budget.”

If it is the Biden Group or “Gang of Six” proposal that is ultimately agreed on, the timing of cut implementations is far less certain.  Chairman Lucas explained that he would prefer that the Agriculture Committees be able to determine where any potential cuts occur.  He also pointed out that if “dramatic” cuts in ag programs occur, it may mean writing the Farm Bill early.

With respect to developments in the debt talks, Paul Kane reported in today’s Washington Post that, “The contentious budget talks that have dominated Washington for months intensified Wednesday, prompting President Obama to say he would accept a short-term hike in the debt ceiling if it gave lawmakers time to finalize a comprehensive deal.

“Obama had pledged to veto any short-term measure, but White House spokesman Jay Carney said Wednesday that the president could accept an extension of ‘a few days’ if it allowed a long-term deficit-reduction and debt-ceiling deal to work its way through Congress.”

The Post article noted that, “The mood has changed in the past two days after the bipartisan ‘Gang of Six’ senators unveiled a plan to shave at least $3.7 trillion off the deficit. Despite the fact that the plan included new tax revenue by closing loopholes, it received a relatively warm reception in some Republican quarters.”

Today’s article added that, “By Wednesday afternoon, Senate Budget Committee Chairman Kent Conrad (D-N.D.), a leader of the Gang of Six effort, said his primary push now is for ‘an option at some point for the Senate and the House to vote on the plan we’ve put together — which is the only bipartisan plan that’s come from anywhere.’

“As the negotiations moved closer to the Aug. 2 deadline, the key obstacle to a deal remained the vehement opposition among many House Republicans to the proposals, especially ones that include higher tax revenue.”

Carl Hulse and Jackie Calmes reported in today’s New York Times that, “Speaker John A. Boehner has shown continued interest in a deal if it can be done in a way that emphasizes lower tax rates.

“But Representative Eric Cantor, the No. 2 Republican, and others like Representative Paul D. Ryan of Wisconsin, the Budget Committee chairman, warned that the most specific proposal to be made public so far — and the one that has done the most to reopen the possibility of a bipartisan accord — relied far too much for them on higher revenues to cut projected deficits.

“That plan is the one put forward Tuesday by the so-called Gang of Six, a bipartisan group of senators who worked for months to reach an agreement and whose work was lauded by Mr. Obama as a sign that a deal was possible. The plan included a net increase in government revenue of about $1 trillion over a decade.”

Carol E. Lee, Janet Hook and Naftali Bendavid reported in today’s Wall Street Journal that, “It was unclear Wednesday exactly what type of agreement would be needed to get Mr. Obama’s blessing on a temporary extension. If lawmakers can’t reach a deal in the range of $4 trillion, Mr. Obama has said he prefers one closer to $2.5 trillion. He summoned Democratic congressional leaders and the top two House Republicans to the White House Wednesday for separate meetings, but they broke up without any signs of major progress. The White House and leaders declined to discuss the sessions.”

The Journal article added that, “One measure being pursued by [Senate Leader Harry Reid (D-Nev.)] and Senate Minority Leader Mitch McConnell (R., Ky.) would give the president the authority to raise the debt ceiling by $2.5 trillion in three installments, unless two-thirds of Congress votes to block it. House Republicans came out strongly against the McConnell-Reid idea, saying it gives too much power to the president and does too little to cut spending. Some senators have also said they won’t support it.”

“Senate Budget Committee Chairman Kent Conrad (D.N.D.), a member of the Gang of Six, said he had discussed with Mr. Reid options for advancing the group’s proposal through Plan B, which calls for setting up a special committee to recommend a deficit-reduction plan. Mr. Conrad suggested Plan B could include a provision guaranteeing a vote on the Gang of Six proposal if the special committee deadlocks,” the Journal article said.

A news release yesterday from the American Soybean Association (ASA) indicated that, “The [ASA] is urging President Barack Obama and Congressional leaders to resolve the continuing impasse on raising the ceiling on the national debt.

“‘We need a comprehensive approach to reducing federal deficits and the growth of the national debt that includes all spending and that does not make disproportionate reduction in agriculture programs,’ said ASA President Alan Kemper, a soybean producer from Lafayette, Ind. ‘Such an agreement will establish budget certainty for all federal policies, including upcoming negotiations on the next Farm Bill.’”

In other policy news, veteran agriculture reporter Dan Morgan penned a recent article at the HuffPost Green Online (“Congress’s Short-Sighted Farm Policy”), which stated that, “Getting agriculture policy right was viewed as a key to pulling America out of the Great Depression of the 1930s.”

“This summer, agriculture is again center stage in the policy debate — as an inviting target for deep budget cuts. That’s unfortunate. There’s plenty of fat and waste in the farm programs, but there’s also an urgent need for a new vision of American farming in the 21st century.”

Mr. Morgan noted that, “Farming is a smaller part of the economy than in 1933 — but it’s a highly successful part. The strong economic performance of agriculture kept whole sections of the country out of the recent recession. Farmland prices, bucking national trends, have held up, buoyed by booming demand from the biofuels industry and a growing world market.

Yet farming and ranching face ‘daunting’ challenges, according to a 570-page report last year by the National Research Council, an arm of the National Academies of Science. Full-throttle output by farmers and ranchers is causing declining water tables and aquifers, soil erosion, rising greenhouse gas emissions, loss of biodiversity, chemical runoff into waterways, and compromised animal welfare and food safety.

“‘There is growing recognition and evidence of the unintended consequences of agriculture,’ the council’s report stated. Since half the land mass of the United States is in farms and ranches, the environmental implications are vast.”

Yesterday’s article indicated that, “Yet Congress, faced with deficits, appears to be moving back to the past. ‘U.S. farm policy seems to be driven by one objective at the moment: how to reduce costs,’ said David Blandford, professor of agricultural economics at Pennsylvania State.

“The Republican-controlled House recently voted to trim $100 million from the 2012 budget of the U.S.D.A. office that funds cutting edge research. Conservation programs, overseas food assistance, and incentives for sustainable farming practices also came in for deep cuts, and the 2012 spending bill eliminates a program that gives farmers incentives to deliver wood chips, grasses and other biomass materials to the biofuels industry.”

Mr. Morgan concluded his piece by stating that: “Research will be the key to future growth in food output per acre, but productivity has been slowing, says Prof. Philip G. Pardey of the University of Minnesota. Pardey notes that R&D spending on agriculture could have been doubled in 2009 merely by cutting farm subsidies 20 percent. Unless the slow down in output per acre can be reversed, Pardey warns, food prices will rise and the environment will be further stressed.

Meanwhile, the AP reported yesterday that, “Michelle Obama’s campaign against childhood obesity moved a step forward Wednesday with the announcement that Wal-Mart and other retailers plan over the next five years to open or expand 1,500 stores in areas without easy access to fresh fruit, vegetables and other healthy foods.

“‘Make no mistake about it. This is a big deal. It is a really big deal,’ the first lady said at the White House, where she was joined by executives from the national and regional retailers.”

In more specific Farm Bill developments, a news release yesterday from the House Agriculture Committee stated that, “Today, Rep. Glenn ‘GT’ Thompson, Chairman of the House Agriculture Committee’s Subcommittee on Conservation, Energy, and Forestry, held a public hearing to review energy and forestry programs within the subcommittee’s jurisdiction. This is a continuation of the series of audit hearings the Agriculture Committee is holding to review programs in advance of writing the next farm bill.”

Sarah Gonzalez reported yesterday at Agri-Pulse Online that, “Every energy program in the current Farm Bill will lose mandatory funding rights after the expiration date of the 2012 Farm Bill. At the Subcommittee on Conservation, Energy and Forestry Agricultural Program Audit on July 20, Chairman Glenn Thompson and subcommittee members led an examination of these energy programs, along with USDA forestry programs.

“‘Thirty-seven programs in the Farm Bill do not have a budget baseline beyond the expiration date of the current farm bill, including every program in the energy title,’ said Thompson. ‘Therefore, if we wish to see any of these programs continue into the future in the current form, we will be faced with the challenge of finding funding elsewhere.’

These 37 programs are allocated through 12 titles of the current farm bill, making it difficult to reallocate funding. Some of these programs, including the Biomass Crop Assistance Program and the Rural Energy for America Program, were added or expanded in the 2008 Farm Bill in an effort to make biomass production a viable option for the nation’s growers.”

(Related FarmPolicy.com audio of remarks from Chairman Thompson at yesterday’s hearing available here (MP3- 0:51).

Yesterday’s Agri-Pulse article added that, “In an effort to distinguish biomass energy programs administered by the USDA from other government programs, [Judy Canales, Administrator, Rural Business Cooperative Service] emphasized the focus many Farm Bill programs have on energy and agriculture.

“‘The Biorefinery Assistance Program differs from the Department of Energy because these technologies are all first-of-a-kind,’ she said. ‘But most importantly, there is usually some element of a relationship to agriculture. We are trying to drive private sector dollars into the rural communities, predominantly.’”

(Related FarmPolicy.com audio of the exchange on the Biorefinery Assistance Program issue with Chairman Thompson and Ms. Canales, available here (MP3- 2:07).

A FarmPoliciy.com audio replay of yesterday’s House Agriculture Subcommittee hearing is available here (MP3).

And Joseph Cooper, a senior economist with the U.S. Department of Agriculture’s Economic Research Service, recently penned an interesting commentary piece titled, “Agricultural Commodity Support and Biofuels Policy,” which stated in part that, “Agricultural commodity support in the form of direct payments and disaster assistance alone cost the U.S. government over $12.7 billion per fiscal year on average from 2003 to 2010. In addition, the federal government currently pays around 60 percent of total crop insurance premiums on behalf of insured producers. A logical expectation is that policies promoting the use of biofuels will reduce these costs because many commodity supports are lower when crop prices are high, and biofuels programs raise demand for crops and their prices. But a look at the fiscal interactions between biofuels programs and commodity supports reveals a more complex relationship. This commentary provides a brief overview of U.S. agricultural commodity support and biofuels polices, then discusses their combined effect on field crops and government expenditures.”

 

Agricultural Economy

Reuters writer Christine Stebbins reported earlier this week that, “Climate and food production is a subject that needs more study in coming years but for now even the U.S. Agriculture Department finds it almost impossible to estimate the effects of one on the other.

“‘They are very elaborate models,’ said USDA’s chief economist Joseph Glauber, referring to climate-crop forecasting in an interview on Tuesday on the sidelines of a farm lending conference at the Kansas City Federal Reserve.

“‘Take into account all the fundamentals on crops and yields. You also have to build in all this climate variability and predictions about climate variability. The range of potential outcomes is pretty large,’ Glauber said.”

Jeffrey Gettleman reported in today’s New York Times that, “The United Nations on Wednesday officially declared Somalia’s food crisis a famine in several parts of the country, with millions of people on the brink of starvation and aid deliveries complicated by the fact that Islamist militants aligned with Al Qaeda control the famine zones.”

And Jean Guerrero reported yesterday at The Wall Street Journal Online that, “Mexico’s sugar exports have more than tripled from a year ago, continuing their advance toward a forecasted record…The increase in the current season’s exports reflects the tastes of Mexico’s largest customer, the U.S. Americans have been cutting back on high fructose corn syrup and using more sugar, while in Mexico the opposite is true.”

Keith Good

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