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Farm Bill; Ag Economy; Regulations; and Biofuels

Editor’s Note:  The original version of this update mischaracterized this document from today’s Washington Post as “the Boenher plan,” actually, it is the “Reid” plan.

Farm Bill- Budget Issues

Paul Kane reported in today’s Washington Post that, “President Obama and House Speaker John A. Boehner escalated their battle over the national debt on Monday, pressing their arguments in a pair of prime-time television addresses as Congress remained at a loss over how to keep the United States from defaulting next week for the first time.

“The challenge facing any plan for reducing the debt was underscored when a new Republican proposal to raise the ceiling on federal borrowing was met Monday with misgivings by some conservatives and skepticism by many GOP freshmen. That called into question whether Boehner (R-Ohio) could even get his own caucus to back his approach.

“As Boehner tried to rally support for his two-step plan [CORRECTION: the link to this document is Sen Reid’s plan] to cut $3 trillion in spending, Senate Majority Leader Harry M. Reid (D-Nev.) offered a strikingly similar proposal for increasing the debt limit before the Aug. 2 deadline. The two leaders, however, remained bitterly divided over Boehner’s demand to hold another vote next year to further expand the government’s borrowing authority.”

The Post article noted that, “Reid’s measure faces its own hurdles because Republicans criticize some of his savings as accounting tricks. So Reid continued private talks with Senate Republicans in an effort to modify Boehner’s package to make it more palatable to Obama, who has previously said he would veto any proposal that provided only a short-term increase in the debt ceiling.

Both plans call for deep reductions to federal agencies over the next decade, and neither would immediately require increased tax revenue or deep cuts to entitlement programs, such as Medicare.”

Today’s article added that, “Boehner’s plan includes an immediate increase in the debt ceiling of up to $1 trillion, paired with $1.2 trillion in spending cuts over the next decade. A new bipartisan committee of 12 lawmakers would be directed to come up with an additional $1.8 trillion in deficit savings and send its recommendations to Congress for fast-track approval without any amendments allowed.”

The Reid bill includes upfront spending cuts that would exceed the size of the proposed increase in the debt ceiling. This approach, too, would create a 12-member committee to produce a broad strategy for reducing the deficit by the end of the year.”

If the Boehner bill passed the House, Senate Democrats might use the legislation as the basis for raising the debt ceiling. They were continuing Monday to work with Minority Leader Mitch McConnell (R-Ky.) on ways to modify the proposal, Democratic aides said. If the Boehner measure failed, Senate Democrats would push for their own measure,” the Post article said.

With respect to agriculture, a summary of the Reid proposal, which was endorsed yesterday by the White House, included a proposed cut of,  “$10-15 Billion In Agricultural Reforms.”

Recall that the President’s Debt Commission plan included $10 billion in proposed cuts for agriculture, while the “Group of Six” proposal contained $11 billion in cuts to agricultural spending.  Previous news reports noted that up to $30 billion in reductions had been discussed as part of negotiations in the past, and the House passed budget included $48 billion in farm related cuts.

The House plan [CORRECTION: this Washington Post link goes to the Reid plan] identified in today’s Washington Post article, contained a section at page 84 titled, “Subtitle C—Farm Programs,” which included language that would amend the 2008 Farm Bill, and specifically indicated that: SEC. 261. DEFINITION OF PAYMENT ACRES.

(a) IN GENERAL.—Section 1001(11) of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8702(11)) is amended—

(1) in subparagraph (A)— (A) by striking ‘‘subparagraph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’; and (B) by striking ‘‘and’’ at the end;

(2) in subparagraph (B), by striking the period at the end and inserting ‘‘; and’’; and

(3) by adding at the end the following: ‘‘(C) in the case of direct payments for the 2012 crop year, 59 percent of the base acres for the covered commodity on a farm on which direct payments are made.’’.

And on page 85, similar language stated: (b) PAYMENT ACRES FOR PEANUTS.—Section 1301(5) of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8751(5)) is amended—

(1) in subparagraph (A)— (A) by striking ‘‘subparagraph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’; and (B) by striking ‘‘and’’ at the end;

(2) in subparagraph (B), by striking the period at the end and inserting ‘‘; and’’; and

(3) by adding at the end the following: ‘‘(C) in the case of direct payments for the 2012 crop year, 59 percent of the base acres for peanuts on a farm on which direct payments are made.’’.

Meanwhile, Carl Hulse and Jackie Calmes reported in today’s New York Times that, “The Democratic-led Senate and Republican-led House on Monday barreled toward a showdown on competing plans to cut spending and raise the debt limit as a resolution to the intensifying crisis remained farther from sight just one week before a possible federal default.

“With President Obama trying to employ the power of the presidency to force an agreement, House and Senate leaders said votes could occur as early as Wednesday on competing proposals to slash spending in exchange for increasing federal borrowing authority that the Treasury Department says will be exhausted Aug. 2, raising the prospect that federal bills will go unpaid.”

The Times added that, “The back and forth began when House Republicans rolled out a two-stage deficit reduction plan that would allow the $14.3 trillion federal debt limit to rise immediately by about $1 trillion in exchange for $1.2 trillion in spending cuts, and tie a second increase early next year to the ability of a new bipartisan Congressional committee to produce more deficit reduction measures.

“Mr. Reid dismissed the House Republican plan as a ‘nonstarter’ and said Republicans were essentially trying to embarrass Mr. Obama in the middle of the 2012 election year by forcing another debt limit showdown. He said Democrats would not go along with any plan that did not guarantee a debt limit increase through next year.”

Today’s article noted that, “Democrats countered with a $2.7 trillion menu of spending cuts and an increase in the debt limit through 2012. Neither plan would require any new revenue.

“The approach assembled by Mr. Reid quickly received the president’s endorsement. Over the next 10 years, it would cut $1.2 trillion from federal agency budgets and wring savings from recurring programs like agriculture subsidies.”

And Major Garrett reported last night at National Journal Online that, “Washington may have become, as President Obama said on Monday, a place where ‘compromise has become a dirty word,’ but in the context of the menacing debt-limit crisis there was a far dirtier word he didn’t utter.

Veto.”

Mr. Garrett explained that, “While Obama warned House Speaker John Boehner not to turn Americans into ‘collateral damage,’ he did not vow to veto the bill Boehner’s now pushing to lift the debt ceiling by $1 trillion (good for six months). Boehner’s two-step process would impose $1.2 trillion in spending cuts and establish a select congressional commission to propose an additional $1.8 trillion in savings by Thanksgiving.

If Republican leaders were sifting through Obama’s speech for one word it was ‘veto.’ Its absence gives Obama, Boehner, and the Senate room to maneuver if, as now appears likely, Boehner’s bill squeaks through the House and arrives in the Senate as a viable, though less-than-optimal, alternative to default.”

In other Farm Bill related news, Acting Deputy Administrator for Farm Programs Juan Garcia was a guest on yesterday’s AgriTalk radio program with Mike Adams where he discussed details the Farm Service Agency’s response to drought in Kansas, Texas and Oklahoma.

 

Agricultural Economy

An update posted yesterday at Bloomberg stated that, “In 2011, the Consumer Price Index (CPI) for all food is projected to increase 3 to 4 percent. Food-at-home (grocery store) prices are forecast to rise 3.5 to 4.5 percent, while food-away-from-home (restaurant) prices are forecast to increase 3 to 4 percent. Although food price inflation was relatively weak for most of 2009 and 2010, cost pressures on wholesale and retail food prices due to higher food commodity and energy prices, along with strengthening global food demand, have pushed inflation projections for 2011 upward.”

Cheri Zagurski reported yesterday at DTN (link requires subscription) that, “The belief that recent extremely high temps would accelerate corn development and help a lagging crop catch up to average levels seems to have proven true in this week’s USDA Crop Progress report.

Corn silking increased 30 percentage points in the last week, moving from 35% silked to 65% silked. The average is 69%. In addition, 9% of the crop is now reported in the dough stage, compared to zero last week and a 12% average.”

The DTN article noted that, “The heat didn’t seem to help soybeans development quite as much as it did corn’s. Sixty percent of the soybeans are blooming compared to 40% last week and a 68% average. Sixteen percent of the soybeans are setting pods, compared to zero last week and a 27% average.”

Corn was rated 62% in good to excellent condition, compared to 66% last week.  Soybeans this week were also rated 62% good to excellent compared to 64% last week.

Meanwhile, Sudarsan Raghavan reported in today’s Washington Post that, “The displaced first began coming through Dolo [Somalia], just a few miles from the Ethiopian border, in March. Now, the trickle has become a flood. The new arrivals clutch small bags of clothes and other meager possessions. Their children are thin, some emaciated. Almost every child appears small for his or her age. But they are the fortunate ones: They have survived their journeys, at least for now.

Somali refugees, fleeing the worst famine in a generation, wait to sign up for emergency World Food Program aid in the border town of Dolo.”

Today’s article noted that, “To get here, many have walked scores of miles, some more than a hundred. Almost everyone has passed bodies of mothers, children and the elderly — anyone too weakened by hunger to escape with their lives.

Tens of thousands of Somalis, mostly women and children, are on the move, fleeing the worst famine in a generation in this Horn of Africa nation. Resilient Somalis have endured two decades of civil war and two consecutive seasons of failed rains. Now, after their livestock and crops have died, and with their babies suffering from malnutrition and food prices skyrocketing, they have given up any pretense that they can survive on their own.”

 

Regulations

Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “House Republicans on Monday made no secret that their Department of the Interior, Environmental Protection Agency (EPA) and Related Agencies spending bill is designed to trim back the EPA, which they said is a huge creator of uncertainty in an already uncertain environment for business and job creation.

“The overall bill, H.R. 2584, cuts spending by about 7 percent, but the EPA could be cut by 18 percent. Republican supporters of the bill said these cuts are justified, in part because the EPA received stimulus money that pumped up its budget. But they also made it clear on the House floor that it’s time to rein in the agency.”

 

Biofuels

Reuters writer Tom Doggett reported yesterday that, “The great promise of a car fuel made from cheap, clean-burning prairie grass or wood chips — and not from expensive corn that feeds the world — is more mirage than reality.

“Despite years of research, testing and some hype, the next-generation ethanol industry is far from the commercial success envisioned by President George W. Bush in 2006, when he pledged so-called cellulosic biofuels would be ‘practical and competitive’ by 2012.”

The article indicated that, “Instead the only real alternative to traditional gasoline is ethanol made from corn, a fuel environmentalists say is not green at all because of the energy-intensive nature of modern farming.

“Critics say it is a failure of government policy, not science, that the U.S. is still so dependent on corn for its biofuels. Washington has backtracked on cellulosic ethanol production targets and failed to provide assurances to investors that the sector would be subsidized over the long term.

“While there are dozens of pilot and demonstration cellulosic ethanol projects around the country, the groundwork for the first commercial plants is only now getting underway.”

Keith Good