FarmPolicy

October 22, 2014

Farm Bill; Ag Economy; and Regulations

Farm Bill Issues

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.”

Meanwhile, Brian Francisco reported last week at the Fort Wayne Journal Gazette Online (Indiana) that, “Congress typically takes several months to study, debate and refine the renewal of the multiyear farm bill.

“‘It was sort of a grand march,’ Sen. Richard Lugar, R-Ind., said Thursday at a farm bill ‘listening session’ at the Allen County Fairgrounds.

But the 2012 farm bill is at the mercy of a new House-Senate debt-reduction committee that this fall will recommend at least $1.2 trillion in federal spending cuts over the next 10 years.”

The article noted that, “Rep. Marlin Stutzman, R-3rd, said about the committee’s work, ‘We know it’s coming; we just don’t know how it’s going to play out.’”

And last week’s article added that, “Both [Lugar and Stutzman] preferred federal ‘safety net’ insurance over direct subsidies as a way to protect producers against drops in commodity prices.”

With respect to budget issues and the supercommittee, Rosalind S. Helderman reported in Saturday’s Washington Post that, “After months of partisan rancor over the record federal debt and spending cuts to reduce it, congressional Republicans are working to avoid the heated political warfare when Congress turns its attention to annual spending measures next month.

“Senate Minority Leader Mitch McConnell (R-Ky.) predicted a ‘normal appropriations process.’

“Even as a new bipartisan committee begins work on a difficult and potentially contentious strategy to reduce federal spending by more than a trillion dollars over the next decade, leaders of both parties have expressed optimism that there will be minimal acrimony as they work to complete a series of 12 spending bills to fund the work of federal agencies for the next fiscal year, which begins Oct. 1.”

The Post article explained that, “The appropriations measures, the most crucial work Congress must get done each year, have been stalled for months over disagreement between the parties over a total amount of spending for the year.

“But in recent weeks, House Majority Leader Eric Cantor (R-Va.), Appropriations Chairman Harold Rogers (R-Ky.) and Senate Minority Leader Mitch McConnell (R-Ky.) have each indicated that Congress should accept the $1.043 trillion funding limit set in the recent deal to raise the nation’s legal borrowing limit, and have been urging that topline number on their GOP colleagues.”

Carl Hulse reported in yesterday’s New York Times that, “Eager to avoid another round of budget brinksmanship, Congressional leaders hope that a little-noted spending agreement tucked into the debt limit deal reached this month can head off any threat of a government shutdown as the federal fiscal year draws to a close in September.

“While provisions to raise the debt limit and create a Congressional deficit reduction committee drew most of the attention in the legislation that allowed the government to narrowly avert a default, House and Senate leaders also used the measure to establish federal spending limits for the next two years.

“Lawmakers are still likely to clash over just how the money is parceled out to various agencies and the Pentagon. But members of both parties say the bipartisan compromise on overall spending makes it unlikely that an impasse will push Congress back to the brink of closing the government in a repeat of the April showdown that ended just hours before federal money ran out. The current fiscal year ends Sept. 30.”

And more specifically on the supercommittee, Josiah Ryan reported on Friday at The Hill’s Floor Action Blog that, “Sen. Tom Harkin (D-Iowa) on Thursday predicted the new deficit-cutting supercommittee will fail and suggested it will harm the economy more than it helps.

The supercommittee ‘will go no where,’ Harkin told the Des Moines Register’s editorial board on Thursday.”

In other Farm Bill developments, a news release late last week from Sen. Kirsten Gillibrand (D-NY) stated that, “As Congress begins debate over the next Farm Bill, U.S. [Sen. Gillibrand], the first New Yorker to serve on the Senate Agriculture Committee in nearly 40 years, today met with Finger Lakes Region farmers to continue her statewide listening sessions to discuss new efforts to help New York farmers and farming communities. Senator Gillibrand plans to focus on key areas of the Farm Bill that will have major influence on New York, including access to financing, new market opportunities, assistance for specialty crops, and investments in renewable energy. From dairy farms to black dirt farms, and apple orchards to vineyards, artisanal cheeses, and other specialty crops, New York farmers and communities will have a lot to gain in the next Farm Bill.”

Also note that an unofficial FarmPolicy.com transcript of Thursday’s Senate Agriculture Committee field hearing is now available.  Just click here to view the unofficial transcript.

And Meghan Grebner reported yesterday at Brownfield that, “Policy recommendations that will guide the Indiana Farm Bureau in 2012 have been set and voted on by the Indiana Farm Bureau delegation.  This past weekend, delegates from around the state discussed, voted and set policy for the next year.  Indiana Farm Bureau President Don Villwock says Farm Bill topped the discussion and he was pleased with the outcome.

“Villwock says at the top of the list was risk management products.  He says that’s what farmers have been telling him for some time… Villwock says it’s crucial that farmers have a viable crop insurance program.  Next on the prioritization list for the 2012 Farm Bill was research.”

To listen to a conversation with Don Villwock just click on this Brownfield link.

Last week, Laura Vozzella reported in the Baltimore Sun that, “Proposed federal nutritional requirements for the National School Lunch Program would allow school cafeterias to offer students no more than one cup of starchy vegetables per week.

“The proposed restrictions, which could take effect as early as fall 2012, would apply to white potatoes, corn, peas and fresh (not dried) lima beans. If the cafeteria dishes up half-cup servings of corn on Monday and half-cup scoops of peas on Tuesday, that’s it for starches for the week.

That would present a challenge for many school districts, which consider potatoes in particular a popular, filling, low-cost and, yes, nutritious, part of the lunch tray.”

 

Agricultural Economy

A Bloomberg news update from late last week indicated that, according the USDA, “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.

The all-food CPI increased 0.8 percent between 2009 and 2010, the lowest food inflation rate since 1962. Food-at-home prices increased by 0.3 percent–the lowest annual increase since 1967- -with cereal and bakery product prices declining 0.8 percent and processed fruit and vegetable prices dropping 1.3 percent. Food- away-from-home prices rose 1.3 percent in 2010, the lowest annual increase for restaurant prices since 1955.

For 2012, food price inflation is expected to abate from 2011 levels but is projected to be slightly above the historical average for the past two decades. The all-food CPI is projected to increase 2.5 to 3.5 percent over 2011 levels, with food-at- home prices increasing 3 to 4 percent and food-away-from-home prices increasing 2 to 3 percent.”

See this breakdown of numbers at the USDA’s Economic Research Service webpage for more detail: “Food CPI and Expenditures: CPI for Food Forecasts.”

Marshall Eckblad reported on Saturday at Barron’s Online that, “The U.S. beef industry is currently dealing with the effects of a severe drought concentrated in the southern U.S. Plains. Ranchers across states such as Texas and Oklahoma are liquidating their herds at historically high rates, as grazing lands and water supplies dry up. That’s expected to swell beef supplies in the near term, and keep a lid on live-cattle futures at the Chicago Mercantile Exchange—for now.

“But to the chagrin of steak lovers, the glut of beef isn’t likely to last.

Starting next year, supplies of slaughter-ready cattle should tighten, providing fuel for prices. Ranchers, who have shrunk their herds, will be left with fewer animals to sell. And since they’ve been selling off large numbers of young females, or heifers, many will have a smaller breeding herd to rebuild supplies.”

(Note that The Austin American-Statesman (Texas) recently published a series of photos related to this year’s drought).

Kathleen Masterson reported last week on National Public Radio’s All Things Considered program that, “Grain prices soared after weather damage across the Corn Belt led the U.S. Department of Agriculture to predict lower yields than previously expected earlier this month.

Some agronomists and farmers predict yields will likely be even lower because of ongoing heat and drought.”

The NPR item noted that, “Farmers across the country planted far more acres of corn this year. So, even though flooding and drought lowered yield estimates, harvest time could still bring a good-sized haul in places that avoided the worst of the weather damage, like Iowa and Nebraska.

“But the national corn yield won’t be enough to meet demand, says Iowa State University economist Chad Hart. Demand from the ethanol industry, livestock feed and export market continues to outstrip predictions, he says, and that has boosted grain prices even more.

“‘When you look last summer, we had corn prices in some cases down around $3.50 a bushel,’ he says. ‘Now we’re up in the $6- to $7-range, so we’ve seen nearly a doubling of prices over that past 15 months.’”

Last week’s radio news item added that, “The USDA report suggests that grain prices will stay elevated for the next year or so. Corn stockpiles are nearing a 15-year low, and soybean stockpiles have been tight for at least four years. And in the past few months, another player has taken a bite out of the U.S. corn market.

“‘China’s been a very early buyer of the corn crop we’re growing now,’ Hart says. ‘And that’s been something that has got the market a little worked up right now.’”

Reuters writers Sarah McFarlane and Nigel Hunt reported on Saturday that, “Agricultural land is unlikely to lose much value as the bullish long-term outlook for food demand and a strong core of buyers who are themselves farmers help protect it from the deepening economic crisis eroding values of many other assets.”

Meanwhile, Jean Guerrero reported in today’s Wall Street Journal that, “Sugar output in Central America is expected to rise during the coming season and compensate for anticipated shortfalls in Mexico, which normally supplies more than half of U.S. sugar imports.”

The Journal article explained that, “Most of Mexico’s exports go to the U.S., which has been experiencing a sugar shortage. Central American nations are covered by U.S. import quotas, so they can’t increase their shipments to the U.S. unless Washington raises the quotas.

“Earlier this month, the U.S. Department of Agriculture said it would allow imports of low-tariff or duty-free sugar one month early to deal with tight supplies. Mexico’s sugar is exempt from the quota system, covered instead by the North American Free Trade Agreement.

“‘It’s likely that [next year] the U.S. will need to import more than its traditional tariff-rate-quota minimums,’ said Jack Roney, director of economics and policy analysis at the American Sugar Alliance, a group that represents U.S. farmers, suppliers and workers.”

 

Regulations

Erik Wasson reported on Friday at The Hill’s On the Money Blog that, “The Obama administration on Friday said it will comply with Speaker John Boehner’s (R-Ohio) request for a list of planned regulations that would cost more than $1 billion to implement.

Boehner wrote to Obama on Friday demanding more information about upcoming regulations by the time Congress returns from recess. He noted that he had asked for similar data in the past but had not received it.

“Office of Management and Budget spokesperson Meg Reilly said the White House would provide Boehner with the information he requested.”

The Hill update added that, “‘A refusal by the administration to disclose proposed regulations that would have an economic cost of more than $1 billion cost would send a terrible signal to already unnerved job creators in America,’ said Kevin Smith, a spokesman for Boehner. ‘We look forward to receiving that information before Congress returns.’

But the White House also said the charge from Republicans that President Obama has massively increased federal red tape is false.

“OMB regulations chief Cass Sunstein wrote in a blog post that ‘there has been no significant increase in rulemaking under this Administration.’”

And Paul Kane reported in today’s Washington Post that, “House Republicans are planning votes for almost every week this fall in an effort to repeal environmental and labor requirements on business that they say have hampered job growth.

“With everyone from President Obama to his Republican challengers in the 2012 campaign focusing on ways to spur economic growth, House Republicans will roll out plans Monday to fight regulations from the National Labor Relations Board, pollution rules handed down by the Environmental Protection Agency and regulations that affect health plans for small businesses. In addition, the lawmakers plan to urge a 20 percent tax deduction for small businesses.”

Keith Good

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