The U.S. Department of Agriculture’s Economic Research Service (ERS) updated its Farm Income and Costs: 2011 Farm Sector Income Forecast yesterday, and stated that: “Net farm income is forecast at $103.6 billion for 2011, up $24.5 billion for a rise of 31 percent from 2010. Net farm income reflects income from production in the current year, whether or not sold within the calendar year, and is a measure of the increase in wealth from production [related graph].”
The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Witnesses at last week’s Senate Agriculture Committee field hearing [unofficial transcript] repeatedly stressed the need to retain and strengthen crop insurance provisions in federal law when Congress drafts the next farm bill. During the field hearing in Wichita, Kan., state farmers and agricultural leaders said crop insurance had been vital to the continuing operation of many farms, citing this year’s devastating drought as evidence of the need for adequate risk management tools.
“Other witnesses urged the panel to continue direct payments to selected landowners in spite of the difficulty in justifying those payments when farmers have both good crops and good prices. Direct payments are made to eligible landowners regardless of the crops grown on the land, the price those crops fetch in the market or even if the land is left idle. The annual cost of the program is approximately $5 billion.”
The update noted that, “Committee Chairman Debbie Stabenow, D-Mich., told the audience that the panel has a pressing deadline to meet, the Oct. 14 date by which it is to provide recommendations for farm program budget cuts to the Joint Select Committee on Deficit Reduction (aka, the super committee). In her prepared remarks, Stabenow noted that the Agriculture committee ‘must make some tough decisions, or someone else will do it for us.’
“Stabenow’s anticipated approach to drafting the 2012 farm bill now appears to be in line with that of her House counterpart, Agriculture Committee Chairman Frank Lucas, R-Okla. The question is whether the super committee will accept the recommendations of the two Agriculture chairmen or go in a separate direction.”
A news release on Friday from the National Cotton Council (NCC) stated that, “The National Cotton Council believes that sound farm policy is essential to the economic viability of the cotton industry. The combination of the marketing loan, Direct Payments (DP) and Counter-cyclical Payments (CCP), as structured in the 2008 Farm Bill, has served the cotton industry extraordinarily well and, in recent years, has required minimal federal outlays.
“However, it is clear that future deficit reduction efforts will place unprecedented pressure on the existing structure. The Budget Control Act reinforces the severe funding constraints facing not only U.S. cotton, but all of agriculture. Deficit reduction will lower the baseline funds available to upland cotton, and simply downsizing the current program structure would likely undermine the effectiveness of the programs to the extent that alternatives must be evaluated to ensure growers have access to the most effective safety net.
“The cotton industry faces another unique challenge. As part of developing new farm legislation, the U.S. cotton industry must work with Congress and the Administration to resolve the longstanding Brazil WTO case and remove the threat of imminent retaliation against exports of U.S. goods, services and intellectual property.”
The NCC release added that, “In order to respond to the challenge of designing the most effective safety net with reduced funding, and to make modifications that will lead to the resolution of the Brazil case, the industry recommends an adjustment to the current program, which will result in strengthening growers’ ability to manage risk by making an affordable revenue-based crop insurance program available for purchase. By making modest enhancements to existing products, the program would provide an effective tool for growers to manage that portion of their risks for which affordable options are not currently available.
“The revenue-based crop insurance safety net would be complemented by a modified marketing loan that is adjusted to satisfy the Brazil WTO case. In the opinion of the U.S. cotton industry, this structure will best utilize reduced budget resources, respond to public criticism by directing benefits to growers who suffer losses resulting from factors beyond their control, and build on existing crop insurance program, thus ensuring there is no duplication and offering the potential for program simplification.”
DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Kansas farmers and agribusiness people offered a unified theme Thursday that crop insurance provides the strongest safety net and deserves more protection from federal budget cuts than other farm-bill programs such as direct payments.
“A field hearing by the Senate Agriculture Committee in Wichita offered Chairwoman Debbie Stabenow, D-Mich., a chance to see drought’s effects on Kansas farmers and hear people involved in Kansas agriculture offer their thoughts on what the next farm bill should offer farmers and ranchers. A hotel ballroom was packed with more than 400 people from across the state for the hearing that lasted more than three hours.”
Amy Bickel reported earlier this week at The Hutchinson News Online (Kansas) that, “Traveling Kansas for his listening tours the past few weeks, Tim Huelskamp knows all to well the conditions that plague his Big First district…[w]ith temperatures soaring above 100 degrees and little rainfall coming from the sky, even the center-pivots can’t keep some corn from burning in the field.
“Times like these make farm subsidies like crop insurance even more important, the freshman congressman said.”
Farm Bill Issues: Budget- Super Committee Analysis
Ron Hays reported yesterday at the Oklahoma Farm Report Online that, “The Chairman of the House Ag Committee, Frank Lucas, is spending this week making multiple stops in his vast Third Congressional District as he holds Town Hall Meetings. The first of those meetings this week was held Tuesday morning in Clinton, Oklahoma, and Chairman Lucas spent a few minutes before the start of the Meeting with Farm Director Ron Hays as they talked about the budget reductions that will be decided upon this fall by the Super Committee- and how they relate back to the 2012 farm bill.
“Congressman Lucas told the Radio Oklahoma Network that he was spending a good bit of his August communicating with Collin Peterson, the ranking minority member of the Committee, in an effort to develop a unified strategy in what might be proposed to the Super Committee when it comes to spending cuts to programs within the jurisdiction of the House Ag Committee. Lucas says that the Committee will be attempting to decide what to recommend to the Super Committee, if anything, by mid October.
“Lucas says that if the Super Committee would decide to pick and choose programs and make the decision in their package to eliminate them, that would demand a response from the Committee- and it might mean that the House Ag Committee would have to expedite the writing of the 2012 Farm Bill in order to provide a different looking safety net if certain elements were eliminated by the dozen members of Congress that are a part of the Super Committee. For example, Lucas says that if the members decide they want to totally eliminate Direct Payments- that would throw off the balanced nature of the Safety Net as we currently know it- and would take away the only support available to some producers who need it in order to have the resources to keep farming.”
To listen to the entire discussion between Chairman Lucas and Ron Hays (about six minutes), just click here.
Recall that earlier this month, FarmPolicy.com spoke with House Ag. Committee Ranking Member Collin Peterson about super committee issues, a transcript of that conversation is available here.
Dan Piller reported on Saturday at The Des Moines Register Online that, “U.S. Secretary of Agriculture Tom Vilsack told an Iowa State Fair audience Friday that he hopes the next farm bill will preserve conservation programs that have been a part of federal farm legislation since the 1930s. But the former two-term Iowa governor said economics makes continuation of conservation efforts uncertain.
“‘There was less interest by farmers in the last round of CRP signups,’ Vilsack said, referring to the voluntary Conservation Reserve Program where farmers idle land in return for government payments.
“‘In an era of high commodity prices and high costs, farmers are under more pressure.’”
“The rising values were driven by strong crop, livestock and milk prices which spurred farmers and investors to buy land, the bank said. Low interest rates have also boosted demand [related graph].
“‘The combination of higher revenues for crop and livestock production has been an impetus for the significant increases in agricultural land values seen this year in the district,’ the Fed said in its quarterly newsletter, adding ‘demand for farmland remained strong from both farmers and investors.’”
At a stop on the White House Rural Bus tour in Atkinson, Illinois yesterday, President Obama held a town hall meeting and was asked about a variety of issues, including a specific question about biofuels from an 11 year old, who inquired: “I was wondering, what are you going to do to keep [my grandpa’s] ethanol plant running?”
In response, President Obama stated that, “I think those of you know that when I was a state senator, when I was a United States senator, I was a strong supporter of biofuels. I continue to be a strong supporter of biofuels. Tom Vilsack, as our Agriculture Secretary, continues to be a strong supporter of ethanol and biofuels.
“I will say that the more we see the science, the more we want to find ways to diversify our biofuels so that we’re not just reliant on corn-based ethanol. Now, we can do more to make corn-based ethanol more efficient than it is, and that’s where the research comes in. And there are some wonderful research facilities in our own University of Illinois system that have done a lot to advance the science on this.”
The President added that, “But the key going forward is going to be, can we create biofuels out of switchgrass and wood chips and other materials that right now are considered waste materials? And part of the reason that’s important is because, as I think most farmers here know, particularly if you’re in livestock farming, right now the costs of feed keep on going up and the costs of food as a consequence are also going up. Only about 4 percent of that is accounted for by corn being diverted into ethanol, but as you see more and more demand placed on our food supplies around the world — as folks in China and folks in India start wanting to eat more meat and commodity prices start going up, it’s going to be important for us to figure out how can we make biofuels out of things that don’t involve our food chain.
“And so hopefully your grandfather, with his ethanol plant, is starting to work with our Department of Agriculture to find new approaches to the biofuel industry. But this is a huge area of support. This is another example of where we’ve got to make sure that our budget continues to invest in basic research, and that costs money. And if all we’re doing is cutting and we’re not thinking about investments, then over time we’re going to fall behind to countries like Brazil, where they’ve already got a third, I think, of their auto fleet operates on biofuels. Well, that’s — there’s no reason why we should fall behind a country like Brazil when it comes to developing alternative energy. I want to be number one in alternative energy, and that’s good for the farm economy.”
(An audio replay of yesterday’s exchange is available here, MP3- 3:48).
Farm Bill Issues: Budget- Super Committee Analysis
Carol E. Lee and Janet Hook reported yesterday at The Wall Street Journal Online that, “President Barack Obama is considering recommending that lawmakers on a deficit committee back new measures to stimulate the lagging economy, people familiar with White House discussions said Tuesday.
“The plan Mr. Obama is considering also would recommend the congressional committee come up with a package that reduces the federal budget deficit by much more that its mandate of $1.5 trillion over the next decade, a senior administration official said, through changes in the tax code and social safety-net programs.”
“Bankers canvassed by the Federal Bank of Kansas City also predicted a slowdown in purchases of tractors and other equipment after farmers upgraded their machinery at the end of last year, though the land values that have underpinned investment continue to rise [related graph].
“Farm income [related graph] and capital spending fell for the first time in three quarters, according to the Kansas City Fed survey, a move that could temper expectations that U.S. farmers would have a record level of financial firepower to spend on new equipment, fertilizer and seeds.”
Farm Bill Issues: Budget- Super Committee Analysis
Rosalind S. Helderman reported in yesterday’s Washington Post that, “The 12 congressional lawmakers appointed last week to the new, high-stakes deficit reduction panel will convene next month amid super-partisan pressures that have blocked past efforts at bipartisan compromise on debt reduction. Skepticism that they will reach a mutually acceptable agreement is running high.
“But in their early public comments since receiving the assignment, several of the lawmakers appointed to the panel have sounded unexpectedly eager to find common ground — and to avoid taking the kind of rigid stands that would be difficult to rescind once negotiations begin.”
Farm Bill Issues: Budget- Super Committee Roster Complete
Robert Pear and Jennifer Steinhauer reported in today’s New York Times that, “The House Democratic leader, Nancy Pelosi, rounded out the membership of a powerful new deficit-reduction panel on Thursday by appointing three of her top lieutenants who have led opposition to cuts in Social Security, Medicare and Medicaid.
“The new appointees are Representatives Xavier Becerra of California, the vice chairman of the House Democratic Caucus [related statement]; James E. Clyburn of South Carolina, the assistant House Democratic leader [related statement]; and Chris Van Hollen of Maryland, the senior Democrat on the Budget Committee [related statement].
“In announcing her picks, Ms. Pelosi said the new panel, the Joint Select Committee on Deficit Reduction, must find ways to stimulate economic growth and create jobs.”
Farm Bill Issues: Budget- Super Committee Takes Shape
Following Tuesday’s super committee announcement by Senate Majority Leader Harry Reid (D-Nev.), yesterday, both Senate Minority Leader Mitch McConnell (R-Ky.) and House Speaker John Boehner (R-Ohio) announced their choices to fill six additional seats on the 12 member panel that has been charged to come up with $1.5 trillion in budget savings over the next decade. The “super committee,” which is officially called the Joint Committee on Deficit Reduction, will be complete when House Democrat Leader Nancy Pelosi (D-Calif.) makes her three choices known, a decision that is due by August 16.
Debt Downgrade and the Economy: General Background- Federal Reserve Board Statement
Diane Swonk explained yesterday at the Economic Minds Blog that, “In an unprecedented move, the Federal Open Market Committee (FOMC) signaled that it might hold its zero-interest-rate policy until mid-2013, the longest period it has ever officially committed to any policy. The FOMC also opened the door to changes in both the composition and the size of its balance sheet, which will now likely include a third expansion in the form of large-scale asset purchases (such as Treasury bonds), also known as QE-III. This comes on the heels of the G-7 (Group of Seven most industrialized countries) pledge to do whatever is necessary, after Standard and Poor’s downgraded the credit quality of U.S. Treasuries from AAA to AA+ over the weekend.
“The announcement effect of the Federal Reserve’s bold move today was somewhat blunted, however, by the large number of dissenters to the decision. The Presidents of the Dallas, Minneapolis and Philadelphia Federal Reserve Banks all took particular issue with the extension to the zero-interest-rate policy until mid-2013.”