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Farm Bill; Budget Issues; and the Agricultural Economy

Farm Bill: Hearings

Yesterday, the Senate Agriculture Committee held a hearing titled, “Opportunities for Specialty Crops and Organics in the Farm Bill.”

A news release from the Senate Ag Committee yesterday indicated that, “Michigan Senator Debbie Stabenow, Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, today said that specialty crops and organics are bright spots in the nation’s economic future, but maintained that critical support for research and risk management will be key to continuing growth in the sectors.

“‘Specialty crop and organic growers are not only helping to supply healthy products to our schools, families and communities, but these farmers are also making a major contribution to the American economy,’ Chairwoman Stabenow said. ‘Sales of U.S. specialty crops top $60 billion annually, with nearly $2 billion of those sales coming from Michigan alone. Organic sales also continue to grow, reaching nearly $29 billion in 2010.  We need to make sure these important producers are heard as the next Farm Bill is being written.’”

The release noted that, “Chairwoman Stabenow championed the development of the specialty crops title in the 2008 Farm Bill, providing specialty crop growers for the first time assistance with pest and disease prevention, organic research, and trade assistance for growers hurt by new trade deals.”

During her opening statement at yesterday’s hearing, Chairwoman Stabenow stated that, “As our panelists will tell us, producing specialty crops continues to be risky business. New and emerging pest and diseases continue to threaten the productivity of many farmers throughout the country and high input costs often mean tight margins and limited resources. Successful efforts like the Specialty Crop Block Grants and the Specialty Crop Research Initiative have been critical in helping producers manage these risks and expand opportunities.”

Committee Ranking Member Pat Roberts (R-Kansas) pointed out at yesterday’s hearing that, “My job is to make sure our growers are given adequate tools they can utilize to continue providing our families with safe, nutritious, and healthy foods, and they’re doing this under some of the most stringent government regulations with very tight profit margins,” said Roberts. “We need to look closely at all programs and determine whether they are generating the results we expected from the 2008 Farm Bill, and be very mindful of any duplication of efforts to ensure that we are using financial resources wisely.”

A variety of important issues were discussed at yesterday’s hearing; however, as the second panel of witnesses (which consisted of agricultural producers) testified, two topics of particular interest were highlighted: Planting flexibility issues for vegetable processing, and crop insurance issues.

During his opening remarks, Indiana farmer Glenn Abbett provided a general explanation of his farm and noted that, “I am here today on behalf of the American Fruit and Vegetable Processors and Growers Coalition (AFVPGC). We have come together to seek a modification of Federal law that restricts Midwestern farmers from growing fruits and vegetables on program acres” (audio– MP3- 2:16).

As background on this issue, see this brief article from USDA’s Economic Research Service (ERS), “Few Farms Participate in the Vegetable Planting Pilot Program,” (Amber Waves, March 2011), which explained that, “The 2008 Farm Act’s Planting Transferability Pilot Program (PTPP) allows program crop producers who participate in Federal commodity programs in seven Upper Midwestern States to plant selected vegetables destined for processing without violating Government payment contracts.”  (The Amber Waves article was based on these ERS reports: “Fruit and Vegetable Planting Restrictions: Analyzing the Processing Cucumber Market,” and, “An Analysis of the Planting Transferability Pilot Program’s First Year, 2009.”)

Indiana GOP Sen. Richard Lugar discussed the planting flexibility issue in greater detail with Mr. Abbett, a portion of this discussion is available here (MP3- 4:40).

Meanwhile, Sen. Lugar issued a news release yesterday, which stated that, “Sen. Dick Lugar today re-introduced the Farming Flexibility Act of 2011 which would save taxpayer dollars, create Hoosier jobs and allow farmers more flexibility while limiting the role that government plays in the farming industry.

“‘Farmers are more profitable when they make their own planting decisions based on markets as opposed to government policy,’ Lugar said.  ‘The Farming Flexibility Act of 2011 will reduce government’s role in American farming and reduce government spending by $8 million dollars over ten years while adding American jobs and supporting family farms. It is a valuable expansion of the Planting Transferability Pilot Program that was included in the 2008 Farm Bill, based on the proven benefits for American farmers, processors, and consumers.’”

Another important topic discussed at yesterday’s Senate hearing was crop insurance.

Michigan farmer Dennis Engelhard noted that specialty crop growers use crop insurance as a risk management tool, but that the program could be reviewed to protect specialty crops in the face of bad weather- audio (MP3- 0:25).

Chairwoman Stabenow brought up risk management programs at yesterday’s hearing and New York farmer Paul Bencal noted how crop insurance has worked with grapes and other specialty crops- audio (MP3- 1:21).

And Ranking Member Pat Roberts briefly pointed out yesterday that crop insurance has been cut by $12 billion in the last two Farm Billsaudio (MP3-  0:27).

For a brief overview of other Farm Bill related hearings held by the Senate Ag Committee, see this FarmPolicy summary page.

Also yesterday, a House Agriculture Committee news release stated that, “The House Agriculture Committee’s Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture, held an audit hearing to examine U.S. Department of Agriculture (USDA) research programs. This is the ninth hearing in the audit series that is designed to provide members of the committee with a greater understanding of farm policy.”

During her opening statement at yesterday’s hearing, Dr. Laurian Unnevehr, the Acting Administrator at USDA’s Economic Research Service, highlighted the importance of public agricultural research (audio– (MP3- 1:30)) and pointed to a recent ERS publication on the issue,“Public Agricultural Research Spending and Future U.S. Agricultural Productivity Growth: Scenarios for 2010-2050”.

A summary of that report noted that, “By 2050, global agricultural demand is projected to grow by 70-100 percent due to population growth, energy demands, and higher incomes in developing countries. Meeting this demand from existing agricultural resources will require raising global agricultural total factor productivity (TFP) by a similar level. The rate of TFP growth of U.S. agriculture has averaged about 1.5 percent annually over the past 50 years, but stagnant (inflation-adjusted) funding for public agricultural research since the 1980s may be causing agricultural TFP growth to slow down. ERS simulations indicate that if U.S. public agricultural R&D spending remains constant (in nominal terms) until 2050, the annual rate of agricultural TFP growth will fall to under 0.75 percent and U.S. agricultural output will increase by only 40 percent by 2050. Under this scenario, raising output beyond this level would require bringing more land, labor, capital, materials, and other resources into production.”

Also at yesterday’s hearing, Subcommittee Ranking Member Jim Costa (D-CA) asked Dr. Cynthia Clark, the Administrator of USDA’s National Agricultural Statistics Service about the quality of the agencies data- audio (MP3- 1:52).

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

For a brief overview of other Farm Bill related hearings held by the House Ag Committee, see this FarmPolicy summary page.

In other news, a series of brief updates regarding various aspects of farm and food policy were posted yesterday at The Hill’s Congress Blog.  These short and timely updates included the following entries:

– “Crop insurance protects farmers from uncertainty,” Rep. Bob Gibbs (R-Ohio).

– “Time to reduce and reform federal farm spending,” Sen. Dick Lugar (R-Ind.).

– “Farmers ready for Agriculture Committee’s tough decisions,” Rep. Marlin Stutzman (R-Ind.).

– “Food and farm bill benefits everyone,” Sen. Chuck Grassley (R-Iowa).

– “Agriculture matters: the new role of farm policy,” Rep. Mike Conaway (R-Texas).

– “Food assistance programs fight food insecurity and obesity,” Rep. Marcia Fudge (D-Ohio).

Meanwhile, a news release yesterday from USDA’s Farm Service Agency stated that, “Agriculture Secretary Tom Vilsack announced today that a high demand for guaranteed farm ownership and direct farm operating funds has prompted USDA to transfer appropriated funds between programs as authorized by law, to meet the urgent credit needs of producers, including beginning and minority farmers and ranchers.

“‘Demand is strong for direct operating loans and guaranteed farm ownership loans, while demand for subsidized guaranteed operating loans has stabilized,’ said Vilsack. ‘With these funds, we can help thousands of producers establish and maintain their family farming operations and obtain long-term credit assistance through a commercial lender.’”


Budget Issues: Debt Ceiling

With respect to federal budget issues, Jacqui Fatka reported yesterday at Feedstuffs Online that, “A bipartisan ethanol reform deal may not make it into current debt limit legislation, a vehicle that was hopeful for the ethanol industry to reduce its tax support by two-thirds and redirect the remaining one-third of savings into funding next generation biofuels and infrastructure needs to help ethanol be more competitive with oil.

Chris Thorne, spokesperson for Growth Energy, said,  ‘It is unfortunate that while seeking to negotiate a deal to raise the debt ceiling, the House of Representatives did not include the Thune-Klobuchar-Feinstein ethanol reform agreement, which would have saved American taxpayers $1.3 billion this year.’”

With respect to developments over the debt ceiling issue, Lori Montgomery reported in today’s Washington Post that, “House Speaker John A. Boehner abruptly canceled a vote on his plan to lift the federal debt limit late Thursday after failing to persuade recalcitrant conservatives to back the measure and help him avert an economy-rattling default.

“After a night of legislative chaos, with control of his caucus slipping in dramatic fashion from his grasp, Boehner (R-Ohio) yanked the bill from the House floor and prepared to make changes aimed at appealing to his tea-party-influenced right flank. Republican aides said they hoped for a Friday vote.

“But with GOP leaders unable to offer assurances that the needed support would materialize, Senate Democrats laid plans to proceed with their own debt-ceiling plan in hopes of pushing a measure through Congress by Tuesday, when the U.S. Treasury says it could begin running short of cash to pay the nation’s bills.”

Naftali Bendavid and Carol E. Lee reported in today’s Wall Street Journal that, “House Republicans and Senate Democrats planned to meet Friday morning at 10 a.m. to plan strategy. Republicans will figure out whether, and how, they can move forward.”

And Carl Hulse reported in today’s New York Times that, “The delay caught Senate Democrats off guard. Harry Reid, the majority leader, had said earlier Thursday that once the House approved its plan, he intended to immediately set it aside and move ahead with his proposal for deeper spending cuts and a longer extension in the debt limit, which would ultimately be thrown back to the House.”

Steven T. Dennis reported today at Roll Call Online that, “One potential solution Democrats and [President Barack Obama] have already said they are open to is Senate Minority Leader Mitch McConnell’s (R-Ky.) fallback plan, which would give Obama the authority to raise the debt limit on his own but permit Congress to vote on resolutions of disapproval.

One possibility is marrying the McConnell language — or something like it — to a tweaked version of Boehner’s bill, aides in both parties said.

“Senate Majority Whip Dick Durbin (D-Ill.) said the approach could work for Democrats because it would take default off the table as a practical matter.”

Carrie Budoff Brown reported last night at Politico that, “Democrats are aiming for a debt-limit compromise similar to the House Republican plan, with at least one major difference: The second vote on raising the debt ceiling would not depend on Congress passing a broader deficit-reduction package.

“The shape of this potential compromise meshes major elements of the proposals offered in recent weeks by House Speaker John Boehner (R-Ohio), Senate Minority Leader Mitch McConnell (R-Ky.) and Senate Majority Leader Harry Reid (D-Nev.), according to Democratic officials familiar with the negotiations.

Under the possible compromise, Congress could still get a second crack at voting on the debt limit within months. But rather than linking the vote to Congress approving the recommendations of a new 12-member committee — as it would be in Boehner’s bill — Democrats prefer McConnell’s proposal that allows President Barack Obama to lift the debt ceiling unless two-thirds of both chambers override his veto of a disapproval resolution, the officials said.”


Agricultural Economy

Bloomberg writer Tony C. Dreibus reported yesterday that, “Corn and soybean prices may rise on production concerns in the U.S., said Morgan Stanley Research analyst Hussein Allidina in a report today.

“Corn may reach $7.25 a bushel in the 2011-12 marketing year and soybeans might surge to $14.50 a bushel on the Chicago Board of Trade, according to the report. Wheat may rise to $8.25 a bushel, Allidina said. Heat and dryness have followed a wet spring that delayed sowing, curbing prospects for corn and soybeans, he said.

“‘We are growing incrementally more concerned over the state of the U.S. corn and soybean crops,’ Allidina said. ‘After a wet spring delayed planting in the U.S., hot, dry conditions have now descended, threatening yields.’”

Mark Peters and Tom Polansek reported today at The Wall Street Journal Online that, “Wheat fields in a key growing region of the U.S. are thriving despite a messy planting season in the spring, more evidence that the world is primed to reap a big harvest this fall.

“The results of a closely watched wheat tour that ended here [Fargo, ND] on Thursday pegged the yield for North Dakota’s upcoming wheat harvest at 41.5 bushels an acre.”

Keith Good