January 22, 2020

Farm Bill; Ag Economy; and Biofuels

Farm Bill Issues

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.”

The article noted that, “However, with a looming trillion-plus-dollar debt coupled with a Congress generations removed from the family farm, Huelskamp, whose own family farm receives farm subsidies, admits some of his fellow lawmakers aren’t tuned in to what is happening in the Farm Belt.

“‘I don’t think Congress has a clue what is going on,’ he said, noting that in being one of just a dozen or so farmers represented in the House, it’s tough ‘convincing an urban Congress what is going on in rural America.’”

Ms. Bickel added that, “Direct payments are the main target, [Huelskamp] said, but noted farmers are worried Congress might cut drastically from another area that has helped them amid the lingering drought – crop insurance.”

The article also indicated that, “[Steve Baccus, president of the Kansas Farm Bureau] said direct payments – which are made regardless of whether prices fall – are popular in the South with cotton and rice farmers – crops that can be more expensive to grow. Lawmakers in those areas say fewer cuts should be taken from the direct-payment program and more from crop insurance.

“However, Midwest farmers depend on crop insurance more than those in the South – especially this year as drought, flooding and hail affected states such as Kansas.

“Baccus said he is concerned that without subsidized crop insurance, farmers wouldn’t be able to afford coverage from the private sector.

“‘The South, they’ll fight tooth and nail to keep’ direct payments, he said. ‘But we have real concerns about the cuts – primarily to the risk management programs if you are farming from Texas to Minnesota.’”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Crop insurance has often been viewed as better for northern farmers, and not so much for southern farmers. That may historically be the case, but I didn’t find that sentiment last week in Texas and Oklahoma. Farmers I spoke with who are facing historic drought were concerned about possible cuts to crop insurance and felt insurance was their safety net. I didn’t hear anyone say they would fight tooth and nail for direct payments.”

Jerod McDaniel, a farmer along the Oklahoma and Texas Panhandles told me he felt protected because he bought a little higher coverage on his crops this year, and the new combo insurance policy comes with a harvest-price option that continues to look more attractive for corn. He also tries to follow farm policy in Washington. With budget cutting, McDaniel said he more concerned that lawmakers protect crop insurance, which he sees as his biggest safety net, rather than direct payments.”

Mr. Clayton added that, “Rex Kennedy, who farms cotton near Lubbock, Texas, said the saving grace has been the crop insurance. Oddly enough, the immediate dryland crop failure may pay better than the irrigated crop that Kennedy says he keeps throwing money at with irrigation. He didn’t have to spray herbicide on that dryland and won’t have to pay to harvest. He had 65% coverage, which is about normal for the cotton producers in the area.

“The vast majority of cotton farmers on the southern Plains bought crop insurance that had a $1.23 a pound price guarantee. Those producers will live to fight another day. Added to that, producers could have gotten an extra 13 cents a pound coverage for their seeds this year as well.

When I asked Kennedy about cuts in the next farm bill, he said he would rather see crop insurance protected than direct payments as well.”

Peter Harriman reported earlier this week at the Argus Leader Online (SD) that, “Sen. John Thune and an assembly of agriculture advocates at a roundtable discussion Tuesday in Sioux Falls were in agreement that the next federal farm bill will be focused on crop insurance.

Farmers told Thune access to reasonably priced crop insurance is their safety net and is necessary to safeguard their futures.”

The article stated that, “Thune said it is the federal farm support most easy to defend when Congress and the president are looking for trillions of dollars of spending cuts.

“‘It makes sense to make this the centerpiece of ag policy,’ Thune said. ‘Insurance is more defensible than subsidies.’”

Mr. Harriman pointed out that, “Gary Duffy, president of the South Dakota Corn Growers Association, also told Thune the program to pay farmers prevented from planting a crop by weather was a matter of economic survival for farmers in flooded northeast South Dakota this year… ‘crop insurance is our number one issue,’ said Duffy. ‘It’s our safety net, and we will fight tooth and nail for it. We’ll let a lot of things go by the wayside. Not that.’”

And the AP reported yesterday that, “Sen. Pat Roberts and Kansas farm leaders toured drought-ravaged Kansas on Wednesday, witnessing firsthand the toll this summer’s unrelenting triple-digit temperatures have taken on portions of the state: Irrigated corn growing under the center pivot that’s fared so poorly it was good only to cut for silage, and dryland corn left to decompose in the field.”

The article noted that, “So far, the drought has cost Kansas $1.6 billion dollars in lost revenue, Roberts said.

“‘If there is anything we want to preserve and strengthen, it is crop insurance,’ Roberts said, adding that the tour demonstrates why farmers need a farm safety net.”

Recall that the Senate Agriculture Committee is holding a hearing in Wichita, Kansas today titled, “Looking Ahead:  Kansas and the 2012 Farm Bill.”

Meanwhile, Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “Sen. Charles Grassley, R-Iowa, hopes the debt-cutting super committee will rely on the agricultural panels when it comes to deciding how much money to cut from farm programs. The agriculture committee and other committees that oversee various areas of the government will have until Oct. 14 to provide guidance to the super committee that was established as part of the recent congressional agreement to raise the federal debt ceiling.  ‘I would hope that they (super committee members) would rely on where we think that money ought to come from,’ Grassley said today.

“However, Grassley has an idea of one way the super committee could save money, and  it’s not a proposal that has ever gone over well with the agriculture committees either in the Senate or the House. He has long pushed the idea of tightening limits on how much individual farms can receive in crop subsidies. He’s had a hard time selling the idea in Congress because of resistance from farm organizations.”

With respect to the super committee and federal budget issues, Jackie Calmes reported in today’s New York Times that, “The Congressional Budget Office sharply reduced its projection of total deficits over the next decade after the recent deficit-reduction deal between President Obama and Congress, yet it warned on Wednesday that the extension of Bush-era tax rates and other policies would more than offset those savings.

The report from the nonpartisan budget office underscores the high stakes for a special 12-member Congressional committee created to figure out by December how to achieve up to $1.5 trillion of the $2.4 trillion in maximum 10-year savings promised by the deal.”

The Times article stated that, “The budget office, in its annual summer snapshot of the nation’s fiscal health, projected annual deficits from the 2012 fiscal year, which begins Oct. 1, through 2021 totaling $3.5 trillion. That is just over half of the $6.7 trillion shortfall it forecast in March.

“About two-thirds of the difference reflected projected savings from the bipartisan deficit deal; the rest was due to technical and economic revisions. The lower deficits would leave the nation’s accumulated public debt at $14.5 trillion in 2021, or 61 percent of the gross domestic product — a level that many economists consider the maximum level of debt that is sustainable in a growing economy.”

Damian Paletta reported in today’s Wall Street Journal that, “Sen. Patty Murray (D., Wash.) and Rep. Jeb Hensarling (R., Texas), said in a statement Wednesday they are ‘engaging in serious discussions to determine what set of rules will govern the committee’s operation.’

“The committee’s challenging task is complicated by the deteriorating economic outlook.”

Humberto Sanchez reported yesterday at Roll Call Online that, “The two leaders of the newly created Joint Committee on Deficit Reduction set a bipartisan tone Wednesday as they look to staff up the panel and decide on a meeting schedule.

“Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas), who were tapped earlier this month by Congressional leaders as co-chairmen of the panel, said in their first joint communiqué that they ‘have been working together to ensure that the committee we help build is given every opportunity to succeed.’”

The article explained that, “Under the recently enacted law that established the 12-person committee, which is charged with identifying $1.5 trillion of deficit reduction over 10 years, the panel must hold its first meeting by Sept. 16. The law also stipulates that the two co-chairmen ‘acting jointly’ will hire the committee’s staff director. With less than a month to go before the first meeting, the two leaders have a short period of time to hire staff and set the ground rules for the panel.”

Erik Wasson reported yesterday at The Hill Online that, “Murray spokesman Eli Zupnick said it has not been decided yet whether the supercommittee will in fact convene before Congress returns after Labor Day.”

The article added that, “Panel member Rep. Fred Upton (R-Mich.) said this week he was studying the Bowles-Simpson plan and the work of the Senate Gang of Six.”

And Reuters writers Kevin Drawbaugh and Richard Cowan reported yesterday that, “The heads of a U.S. Congress deficit ‘super committee’ said on Wednesday most members were reviewing budget-balancing studies of recent years in a sign the panel was unlikely to try to reinvent the wheel.

“‘Most of the committee members are reviewing the deficit reduction work that many others have engaged in over the past several years,’ said a joint statement from Democratic Senator Patty Murray and Republican Representative Jeb Hensarling.”

The Reuters article pointed out that, “The committee has a $2 million budget and will use that to hire staff and hold hearings, the location and frequency of which is still up in the air.”


Agricultural Economy

Bloomberg writer Whitney McFerron reported yesterday that, “A yearlong drought from Kansas to Texas has created the driest conditions on record for farmers preparing to plant winter wheat, dimming crop prospects for a second straight year in the U.S., the world’s largest exporter.

“Dry weather already has cut output of hard, red winter wheat, the most common U.S. variety, by 22 percent from 2010, government data show. If drought persists into the planting months of September and October, next year’s harvest will be even smaller, and prices on the Kansas City Board of Trade may jump 50 percent to $13 a bushel, said Dan Manternach, a wheat economist with researcher Doane Advisory Services in St. Louis.

“In Texas, where agriculture losses from the drought were a record $5.2 billion, soil moisture is so depleted that plants may not emerge from the ground without more rain, Texas A&M University said in a report yesterday. Kansas, Texas and Oklahoma were the biggest growers of winter wheat in 2010 and supplied 28 percent of all wheat varieties produced in the U.S.”

Yesterday’s article noted that, “Southwest and south-central Kansas, a region that includes Sumner County, the biggest wheat producer, had the least precipitation on record in the first seven months of this year, said Mary Knapp, the state climatologist. July was also the hottest on record for the region, she said.

“Only about 4.3 inches of rain fell in southwest counties from Jan. 1 to July 31, Knapp said by telephone from Manhattan, Kansas. The region needs about 9.4 inches of rain to break the drought and rebuild subsoil moisture, she said.”

The Bloomberg article added that, “In Texas, the biggest winter-wheat grower after Kansas last year, 99.9 percent of the state is suffering from drought, according to the University of Nebraska Lincoln’s U.S. Drought Monitor. The one-year drought is the most severe on records going back to 1895, according to a report from state climatologist John Nielsen-Gammon.

After losing non-irrigated crops this year, including cotton and corn, farmers ‘have good reason to worry that they won’t make a winter-wheat crop either’ in 2012, Texas A&M’s AgriLife Extension Service said in a report yesterday.

Oklahoma has had the driest 10-month period on record, and July was the hottest ever for the state, according to the Oklahoma Climatological Survey.”



Daniel Looker reported yesterday at Agriculture Online that, “Senator Tom Harkin (D-IA) told the American Coalition for Ethanol [ACE] Wednesday that he’ll continue to work for passage of a bill that would expand ethanol’s access to markets.

“It won’t be easy.

“Harkin acknowledged growing ethanol opposition in Congress, especially in the House of Representatives.”

Mr. Looker added that, “Harkin told ACE that he expects opponents of the ethanol industry to try to weaken the Renewable Fuel Standard 2 in the 2007 energy law. The RFS2 requires the use of ethanol and other biofuels, ramping up to 36 billion gallons used by 2022.”

Dan Piller reported yesterday at the Green Fields Blog (Des Moines Register) that, “The status of the U.S. as an importer of crude oil has been well-documented over the last three decades. But suddenly the U.S. has emerged as an exporter of ethanol.

“The U.S. Department of Energy reported the phenomenon, which is a switch from as recently as 2008 when the U.S. was importing ethanol from Brazil. Read the DOE report here.

“The EIA reports that ethanol exports, primarily to Europe and Brazil, have risen from less than 20 million gallons per month last September to 120 million gallon per month this summer.”

Keith Good

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