FarmPolicy

April 20, 2019

Farm Bill; Ag Economy; Regulations; and Biofuels

Farm Bill Issues

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.”

With respect to the supercommittee, Wall Street Journal columnist Gerald F. Seib indicated today that, “We now have it from no less an authority than the chairman of the Federal Reserve: Washington’s dysfunction isn’t merely embarrassing. It’s actually harming the American economy.

Ben Bernanke, in a high-profile speech Friday, looked back at this summer’s chaotic negotiations over a deficit-cutting deal and concluded that a repeat of that mess could ‘seriously jeopardize’ the willingness of the world to park money in the U.S.

“Ah, but life is full of second chances, and this fall Washington gets one. That deficit-cutting deal struck in August created a congressional supercommittee and ordered it to come up with a second round of deficit cuts by late November. If you want to be an optimist—and are willing to risk sounding naïve—there actually are reasons to think this effort can work better than the summer’s follies.”

Mr. Seib stated that, “On its face, this supercommittee wouldn’t seem to have a much better chance at comity and compromise than any of the various messy efforts to arrive at the original deal, which narrowly averted a government default. The committee’s partisan and ideological divides are quite stark.”

However, Mr. Seib added that, “Look deeper, though, and the supercommittee seems reasonably well-positioned to come up with a sane consensus without a repeat of the summer’s destabilizing brinksmanship. For starters, its members, while an ideological mishmash, all are close to Congress’s top leaders. Some are members of the Republican and Democratic leadership teams.

“That means that, unlike the so-called Gang of Six senators who set off on a freelance deficit-cutting exercise earlier this year, this committee starts with the blessing of Congress’s leaders, who hold a direct and personal stake in a successful outcome. Congressional aides predict plenty of back-channel communication between the committee and congressional leaders along the way.”

Today’s Journal item stated that, “Some of the panel’s ideologically disparate members have shown they actually know the art of the deal. Ohio Republican Sen. Rob Portman, for example, is a trusted conservative, but one who learned how to get a budget through a divided Congress while he was running the White House budget office five years ago. Rep. James Clyburn of South Carolina had a 95% rating from the liberal Americans for Democratic Action last year, but Republicans in a budget group Vice President Joe Biden led earlier this year gave Mr. Clyburn high marks for seeking spending-cut compromises.

“And crucially, members from both sides suggest they’re open to creative ways—starting with curtailing business and personal tax credits and closing big tax loopholes—to bridge the divide over ‘revenues.’

“Beyond that, congressional leaders built the committee with rules designed to pave the way to passage. The committee can pass a plan with merely a simple majority, meaning that a single member of either party tipping to the other side can be enough to close a deal. That creates incentives on both sides to find a broader consensus.”

Meanwhile, Dee Vaughan, the current president of the Southwest Council of Agribusiness and the former president of the National Corn Growers Association, penned an editorial item that was posted yesterday at the Southwest Farm Press Online titled, “The Lone Star State is unfortunately exceptional.”

Mr. Vaughan stated that, “Texas is an exceptional state, and most Texans will be happy to explain why that’s so.  Unfortunately, for this year, that term also applies to the bone-dry conditions we’ve seen unfold over the last 12 months.  Texas, it seems, is locked in what weather experts call ‘an exceptional drought,’ something many parts of the state haven’t experienced since the Dustbowl era.”

Yesterday’s opinion item indicated that, “At times like this, with droughts here in Texas and historic flooding elsewhere, it’s not difficult to comprehend the inherent risks we face in agriculture.  Luckily, Congress recognized long ago that in order to ensure a stable and safe food supply for the country, we need farm policies in place to serve as a safeguard against damaging weather or wild market fluctuations.

Agriculture groups from throughout the state—representing banks, farm input providers, wheat, corn, cotton, rice and sorghum growers—gathered in Lubbock recently to discuss the future of farm policies.  The consensus of those of us in the room was that one of the most important of those policies — and the one that most farmers believe serves agriculture the best — is crop insurance.

Crop insurance is a great example of a public-private partnership that combines the strengths of both sectors and greatly amplifies the amount of good done by a modest government investment.  For skeptics who thought that the flexibility and efficiency of the free market could never be combined with the universality and affordability of the public sector, this policy proves them wrong.  Crop insurance was purchased for more than 80 percent of U.S. principal crop acreage in 2010, with 256 million acres under policies worth $80 billion in total coverage.”

In other policy related news, Peter Harriman reported on Friday at the Argus Leader Online (South Dakota) that, “A series of long, harsh winters, wet springs and the loss of Conservation Reserve Program grassland appears poised to steal some luster from South Dakota’s signature autumn activity.

The Department of Game, Fish and Parks’ annual pheasant brood survey shows a 46 percent decline from last year in the number of pheasants counted per mile on the 107 rural routes annually surveyed by GF&P.

The decline from the 10-year average is 41 percent.”

Mr. Harriman pointed out that, “With corn selling for about $7 a bushel after going for less than half of that a few years ago, farmers also could be less inclined to offer commercial hunting on their land, [Mark Kuipers, who owns Kuip’s Hardware, which caters to hunters in the fall, and is active in the Platte Pheasants Forever chapter] suspects.

“‘Say you take 20 or 30 acres of corn and let it stand for pheasant hunting. At $7 a bushel, it doesn’t take a lot to figure out that averages out to an expensive hunt, especially if we get a snowstorm and you can’t get it out late in the year.’

“‘It takes quite a bit to farm for pheasants. The way prices are, it’s hard to say if it’s worth it,’ he said.”

 

Agricultural Economy

The AP reported yesterday that, “A scorching drought in the southern Plains has caused hay prices to soar, benefiting farmers to the north but forcing many ranchers to make a difficult choice between paying high prices or selling their cattle.

“Ranchers in much of Texas, Oklahoma and even Kansas are having to pay inflated prices for hay and then shell out even more to have it trucked hundreds of miles from Iowa, Missouri, Nebraska or South Dakota. Their only other options are to reduce the size of their herds or move cattle to rented pastures in another state.

“‘It’s pretty ugly,’ said Don Davis, who raises grass-fed beef on his ranch about 75 miles northwest of San Antonio.”

Bloomberg writers Elizabeth Campbell and Joseph Richter reported yesterday that, “The worst U.S. crop conditions since the dust bowl era of the 1930s are tightening domestic supplies of cotton and boosting prospects for a rebound in prices that fell more than any other commodity this year.

“Withering fields in Texas, the largest U.S. grower, led Governor Rick Perry, a Republican presidential candidate and the son of a cotton farmer, to ask supporters to pray for rain to end a ‘monster drought’ shrinking cattle herds and killing crops. Cotton futures in New York may rise as much as 15 percent by the end of December to $1.20 a pound, the median of 17 estimates in a Bloomberg survey of analysts showed.”

Meanwhile, Des Moines Register writer Dan Piller reported yesterday that, “Dry weather dropped crop conditions again this week, with the U.S. Department of Agriculture lowering its good to excellent rating for Iowa’s corn crop from 63 percent last week to 59 percent for the week ended Sunday.

“Nationally, the good to excellent rating fell from 57 percent last week to 54 percent on Monday.”

Yesterday’s USDA report also indicated that the U.S. soybean rating fell from 59 percent good to excellent to 57 percent.

University of Illinois Agricultural Economist Darrel Good explained yesterday (“Early Price Peak for Corn and Soybeans?”) that, “The 2011-12 corn and soybean marketing years will be characterized by the need to reduce consumption of both crops.  The magnitude of those needed reductions are not yet known and the prices needed to make those cuts will depend on the strength of underlying demand.

“Based on the most recent USDA projections and the assumption that year ending stocks need to be maintained at or above 5 percent of consumption, corn use would need to be reduced by only about 30 million bushels, or 0.2 percent, during the year aheadSoybean consumption would need to be reduced by 122 million bushels, or 3.7 percent.  The actual reductions needed will depend on the final consumption estimates for the 2010-11 marketing year, the magnitude of old crop inventories on September 1, and the size of the 2011 harvest.

Unfolding evidence suggests that the 2011 U.S. corn crop could be smaller than the initial projection of 12.914 billion bushels.  Preliminary certified acreage data released by USDA’s Farm Service Agency (FSA) suggests that planted acreage fell short of the NASS estimate of 92.282 million acres.  In addition, weather conditions since late July in conjunction with early harvest results and yield survey results suggest that the U.S. average yield may be below the initial USDA forecast of 153 bushels.  The USDA will release new production forecasts on September 12 and October 12.  The final FSA acreage data, along with any additional information from the monthly NASS surveys, will be incorporated in the October production forecast.  History also suggests that the October yield forecast will be reasonably close to the final estimate.  The corn market is clearly expecting a substantial reduction in the forecast of 2011-12 marketing year corn supplies.”

Yesterday’s update indicated that, “Depending on the size of the 2011 harvest and the size of the old crop inventories at the beginning of the 2011-12 marketing year, weaker demand may not be sufficient to ration supplies.  The market is currently reflecting expectations that higher corn and soybean prices will also be required to limit consumption.  The market response to prospects for smaller supplies suggests that a ‘short crop’ price pattern for corn and soybeans may unfold during the year ahead.  Such a pattern would point to a price peak very early in the marketing year and then declining prices as the year progresses as evidence of slowing consumption unfolded.  Elements for a decline in the rate of consumption may already be in place.  The number of cattle in feedlots, for example, is currently high due to drought conditions in the southwest.  Feedlot numbers will likely decline over the coming yearThe profitability of poultry, milk, and hog production is being reduced by current price relationships.  The ethanol blender tax credit is due to expire at the end of 2011 so that ethanol production above the mandated level will require favorable blending margins.  Still, there is a lot of uncertainty about demand for U.S. corn and soybeans.  These uncertainties include corn demand from China and the size of the upcoming South American crops.

While a lot of unknowns persist, it now appears that smaller supplies will push corn and soybean prices even higher in the short run, with prices peaking early in the marketing year and moving erratically lower into the winter.”

And Bob Meyer reported yesterday at Brownfield that, “While there is a lot of damage, the general consensus is it could have been a lot worse. East coast farmers are just beginning to assess the damage from Hurricane Irene, while crops are flattened and roads are flooded, the loss to livestock seems to be minimal.

“The North Carolina Department of Agriculture reports a lot of corn and tobacco crops are flattened. Power was lost to a number of the large poultry and hog facilities in the state. Smithfield Foods says some of their grower’s farms had minor structural damage but thanks to back-up generators, all hogs were being fed and watered. Perdue Farms says a number of their poultry operations on the Delmarva Peninsula were using generators. Delaware Agriculture Secretary Ed Kee says there was one broiler house in the peninsula which lost several thousand chickens to flooding.”

The Brownfield item noted that, “Floodwaters are also the main problem facing Vermont dairy farmers. Lindsey Worden, communications manager for Holstein Association USA, based in Brattleboro, Vermont told Dairy Herd Network the farms on high ground are OK, ‘Anyone in low lying areas, or located near a stream or river are very likely in trouble.’

 

Regulations

Ben Geman reported yesterday at The Hill’s Energy Blog that, “House GOP leadership on Monday outlined plans to delay or kill a suite of environmental rules in coming months, signaling an expansion of legislative and political attacks against regulations that business groups call burdensome.

“House Majority Leader Eric Cantor (R-Va.), in a memo to GOP members, outlined a legislative schedule for thwarting ‘job-destroying’ regulations that includes a number of Environmental Protection Agency rules.”

Yesterday’s update added that, “[Cantor] expects to bring up legislation the week of Sept. 19 that requires new interagency analysis of the cumulative effects of many EPA rules.”

Seung Min Kim added yesterday at Politico that, “Cantor also promised to schedule a vote for three pending free-trade agreements with Panama, Colombia and South Korea, but said he’s waiting for President Barack Obama to submit them to Congress.”

 

Biofuels

Dan Piller reported yesterday at the Green Fields Blog (Des Moines Register) that, “The Iowa congressional delegation, Gov. Terry Branstad and Iowa Secretary of Agriculture Bill Northey have made a joint statement against attempts by members of the Texas and Oklahoma congressional delegations to ban the newly-approved 15 percent ethanol blend.

“The proposed ban, attached to appropriations riders, would limit the amount of ethanol that can be blended in standard automobile engines to ten percent.

“The U.S. Environmental Protection Agency earlier this year, after a long delay, approved the so-called E15 ethanol blend for automobiles and light trucks from the model year 2001 and younger.”

Mr. Piller added that, “The Executive Director of the Iowa Renewable Fuels Association, Monte Shaw, said ‘this blatant attack on consumer freedom and energy security will not go unchallenged and will not become law.’

“Branstad said the E15 ban, attached to appropriations bills by Reps. John Sullivan of Oklahoma and Michael Burgess of Texas, ‘make no sense.’

“U.S. Sen. Tom Harkin said the amendments were done ‘by those that are at the beck and call of the big oil companies.’”

Keith Good

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