FarmPolicy

April 24, 2019

Farm Bill Issues; Ag Economy; Trade; and Biofuels

Farm Bill Issues

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 Register article indicated that, “‘In the past, policy drove money,’ Vilsack said. ‘This time, the financial framework of the budget will drive the farm programs.’”

The weekend update added that, “Vilsack acknowledged that the future of direct payments is endangered. The payments have put $15.4 billion into the hands of Iowa farmers since 1996, but budget constraints and an era of high commodity prices and farm incomes raise questions about their need.”

A brief portion of the Secretary’s remarks from Friday on the Farm Bill safety net can be heard here (MP3- 2:42), while the Secretary’s entire presentation is available at this Brownfield link.

Ken Anderson reported on Saturday at Brownfield that, “Agriculture Secretary Tom Vilsack says a lot of Congressmen and women may be surprised at how little is actually spent on farm programs.

“‘I think it’s important for people to recognize—you could do away with all the farm programs and you’re not going to solve the budget problem,’ Vilsack says. ‘I think there’s a misunderstanding that somehow the farm programs are as large as some of these other issues.’”

The AP reported on Friday that, “Crop insurance, research and export promotion should be among the top priorities in the next federal farm bill, say spokesmen for North Dakota agricultural groups, who are bracing for cuts in federal spending.

“‘We’ll have less resources to work with,’ said Shane Goettle, state director for U.S. Sen. John Hoeven, R-N.D. ‘It’s very important that we’re communicating solidly what the priorities for the farm bill will be, because those … will dictate what has to give, and what has to be preserved.’”

The article stated that, “The U.S. Agriculture Department provides an assortment of crop insurance policies, which offer compensation if crops are damaged by drought, insects, excessive rain, disease and other problems. Several speakers among the 60 people who attended the forum said it was critical that federal crop insurance options be maintained and improved.”

Meanwhile, Rick Plumlee reported yesterday at The Wichita Eagle Online that, “Farm income is up nationally, and grain prices are high. The economy is down, and Congress is in a cutting mood. So expect the folks in Washington to try to take a sharp knife to federal farm subsidies, which totaled more than $15 billion nationally and nearly $1 billion in Kansas in 2010.

“Farmers and agriculture groups are grimacing. Farm subsidy opponents are grinning.

The direct-payment program is expected to be the main target. Most farmers are resigned to losing at least some of that, but they’re also dead set on retaining another possible target, the federal 59 percent subsidy for crop insurance.”

The article explained that, “Nationally, net farm income is expected to be up nearly 20 percent to $94.7 billion in 2011, according to the U.S. Department of Agriculture [note that ERS will be updating its Farm Income and Costs forecast on August 30th.] Corn hit a record high of a shade under $8 a bushel in June; wheat and soybeans approached the record highs set in 2008. Wheat was going for $7.93 a bushel at the Garden Plain Co-op on Friday.

“While this year’s severe drought will take a bite out of farm incomes in Kansas, Oklahoma and Texas, the farm bill is all about the big picture and what’s happening across the country.”

The article stated that, “Crop insurance accounted for about a third of all farm subsidies in Kansas and the U.S. in 2010. Most farmers carry policies that pay 65 to 70 percent of the grain’s price.

Without it, farmers say they wouldn’t be able to rotate in some crops, such as higher-risk corn and soybeans. They would have to play it safe and raise mostly wheat.”

Mr. Plumlee added that, “Mike Pompeo, the congressman from Wichita, sees a ‘rethinking’ about direct payments and thinks Congress will move more toward boosting such programs as crop insurance.”

And a Daily Republic (Mitchell, SD) article from Saturday included comments from South Dakota GOP Senator John Thune, who stated in part that, “[I] think the biggest bulls-eye right now is on direct payments, which go out no matter what production or prices are — payments that farmers get every year. Southern states are more dependent upon that — the rice growers, the cotton growers and so forth. I think most of our producers here would be willing to forgo direct payments if they thought the investments are going to be made in the crop insurance program…But I think the crop insurance program is based upon, there’s some federal support for it, but it’s also something that farmers are paying premiums for. And so you’ve got this (operating) in a lot of ways more like an insurance program. And that’s the direction I think we ought to go in.”

With respect to dairy issues, House Agriculture Committee Ranking Member Collin Peterson (D-Minn.) indicated in an Op-Ed on Friday that, “It has been nearly three years since the combination of declining milk prices and escalating input costs devastated the dairy industry. Many producers were forced out of business while others just barely managed to survive.

The dairy safety net did not work in 2009 and it won’t work if similar events occur now. Current dairy programs are not keeping pace with the challenges facing today’s industry. In fact, the current levels of support will actually decrease in September of next year.

I recently put forward a discussion draft of proposed dairy reforms that I believe will offer better protection, create stability and inspire growth in the dairy sector. The dairy industry can be a very diverse and divided industry, and for the first time I have seen agreement that the current system is hurting American dairy producers. We can’t let this opportunity pass us by.”

McClatchy writer Curtis Tate reported on Friday that, “While milk prices have rebounded since 2009, feed prices have stayed high, and farmers now are just breaking even, though many of them remain heavily in debt.

“Thousands of farmers, from Vermont and Pennsylvania to Idaho and California, have exited the dairy business, according to industry numbers. According to the U.S. Department of Agriculture, there were 65,000 dairy farms in 2009, a decline of 33 percent from 2001. Despite the decline in the number of farms, milk production rose 15 percent in the same period.”

The article indicated that, “Rep. Collin Peterson, D-Minn., the ranking member of the House of Representatives’ Agriculture Committee, outlined last month a draft proposal to help dairy farmers, including overhauls to price supports.”

In other Farm Bill related developments, Patrick McGeehan reported in Saturday’s New York Times that, “Federal officials on Friday rejected Mayor Michael R. Bloomberg’s proposal to bar New York City’s food stamp users from buying soda and other sugary drinks with them.

The decision derailed one of the mayor’s big ideas to fight obesity and poor nutrition in the city. Mr. Bloomberg and the city’s health commissioner, Dr. Thomas A. Farley, were quick to criticize the ruling by the United States Department of Agriculture as a disservice to low-income residents.

“Dr. Farley, who said he was ‘very upset’ by the decision, said that it ‘really calls into question how serious the U.S.D.A. is about addressing the nation’s most serious nutritional problem.’”

The article noted that, “In October, city and state officials proposed a two-year experiment to see if the prohibition would reduce obesity among people who buy their groceries with food stamps. Dr. Farley said that about 57 percent of adults in the city and 40 percent of the children in its public schools were overweight or obese, and that obesity was especially rampant in low-income neighborhoods. Limiting consumption of sodas and other drinks with high sugar content, he argued, could help reverse that trend.

“But in a letter to a New York State official, an administrator of the food stamp program in Washington said the city’s proposed experiment would have been ‘too large and complex’ to implement and evaluate.”

And Katie Zezima reported in yesterday’s New York Times that, “Farmers in pockets of the country say the number of farmers’ markets has outstripped demand, a consequence of a clamor for markets that are closer to customers and communities that want multiple markets.

Some farmers say small new markets have lured away loyal customers and cut into profits. Other farmers say they must add markets to their weekly rotation to earn the same money they did a few years ago, reducing their time in the field and adding employee hours.”

And on the issue of regulation, news release Friday from Senator Pat Roberts (R-Kansas) stated that, “In an effort to educate President Obama on his administration’s own proposed rules, [Sen. Roberts] Ranking Member of the Senate Committee on Agriculture, Nutrition and Forestry, today sent a letter to the president outlining directives and regulations the administration has proposed or has in development that would affect farmers and ranchers in rural America.

“The letter comes following a town hall meeting the president hosted in Illinois on August 17. During the meeting a farmer expressed concerns over proposed regulations impacting dust pollution, noise pollution and water runoff. The president answered the man by telling him he shouldn’t believe everything he hears.”

In news developments regarding the Congressional super committee, Humberto Sanchez reported on Friday at Roll Call Online that, “The Republican and Democratic co-chairmen of the newly created Joint Committee on Deficit Reduction are in talks to ramp up the panel, but significant logistical decisions remain unresolved, Congressional aides said.”

“Items under discussion include naming a staff director, what other staff will be needed, where the group will meet and the timing of the meetings — as well as whether it will meet in public or behind closed doors.”

Scott Wong and Manu Raju reported on Friday at Politico that, “The 12 members of the panel are scattered across the country in their home districts, meeting with constituents and raising money in the runup to the 2012 elections — a set of circumstances that will make meeting before Labor Day unlikely.

“Moreover, the co-chairmen, Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas), are still trying to hire staff, including the key role of staff director.

The slow start only feeds critics claims that the committee faces a nearly impossible task.”

Dave Levinthal reported on Saturday at Politico that, “Lobby shops and their clients are fast realizing that a full frontal assault on Congress’s budget-slashing supercommittee may not be a fruitful strategy — particularly as some committee members and senior congressional staffers suggest that K Street won’t be terribly welcome at their negotiating table.”

The article explained that, “The gang of 12’s business is hardly standard congressional fare, its members tasked with achieving at least $1.2 trillion in mandatory budget savings during the next 10 years. And they must do so post-haste, with a Nov. 23 deadline to present their bill and recommendations looming.”

“The deficit committee’s decisions will prove critical to the defense, health and agriculture sectors in particular, given that it probably will eye cutting government programs and resources dear to them,” the Politico article noted.

Speaking yesterday on the CBS Face the Nation program, Mark Zandi, chief economist for Moody’s Analytics referenced the super committee, noting that:  “‘We can see what damage that has done,’ he said of the debt-limit debate. ‘So we can’t go through that again. They have to get it together. And they have to come to terms and do it by the end of November.’”

 

Agricultural Economy

Sandra Ward reported on Saturday at Barron’s Online that, “The prices of corn and soybean meal have rocketed since late last year and are expected to remain high for much of next year because of continuing low crop yields. At the same time, chicken prices are near all-time lows on weak demand from the crucial restaurant and food-service industry, which represents two-thirds of the industry’s sales, as penny-pinching consumers pull back on dining out.

“Worse, there’s a glut of chicken on the market as the industry heads into the fall, typically a slack season for the industry as folks put away their grills for the winter. Chicken producers, pumped up by record profits in 2010 and a highly profitable 2009, boosted production levels last fall and have only started to cut back. Result: Inventory in cold storage in June was up 100 million pounds from a year earlier, or 13%.

It’s a perfect storm roiling the industry, and it’s likely to continue into 2012. Already, three small, closely held chicken processors have declared bankruptcy this year. And there is real concern that deeper production cuts will be necessary to stem the losses.”

The article pointed out that, “Pilgrim’s Pride CEO Bill Lovette has called it an ‘unprecedented time’ for the chicken industry. In reporting a 22% earnings drop for the second quarter, Tyson CEO Donnie Smith said, ‘The next few months will be very challenging.’ He forecast a likely loss in his chicken segment in the fourth quarter.

Conditions are so dire that the Agriculture Department agreed last week to help reduce the glut by buying an extra $40 million of chicken, in addition to the $100 million it typically spends each year to supply the national school-lunch program.”

 

Trade

The Wall Street Journal editorial board opined on Saturday that, “President Obama says he wants to get the U.S. economy growing, so here’s a tip that may help: In order for Congress to ratify free-trade agreements, the White House must first send the signed deals to the other end of Pennsylvania Avenue.

“On his three-state tour in the Midwest this week, Mr. Obama repeatedly told audiences that the Korea, Colombia and Panama free-trade deals would all be law by now if not for an obstructionist Congress. Passing the deals is something Congress ‘could do right now,’ he said.

“Except that’s not true. Congress can’t pass the agreements ‘right now’ because it doesn’t have them. They are still sitting on the President’s desk. Seriously.”

 

Biofuels

Reuters reported on Friday that, “The Energy Department said on Friday it has offered a conditional commitment for $133.9 million in loan aid to Abengoa Bioenergy for a cellulosic ethanol plant in Kansas.

“The Abengoa project is expected to convert about 300,000 tons of corn crop waste into about 23 million gallons (105 million liters) of ethanol per year.”

Keith Good

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