FarmPolicy

July 25, 2014

Farm Bill; Ag Economy; Biofuels; and Regulations

Farm Bill Proposals, Budget Issues

DTN Ag Policy Editor Chris Clayton reported on Friday that, “With a new proposal from a bipartisan group of senators, the fight over the farm safety net and commodity program survival is shifting from direct payments to the permanent disaster program.

“Possible policy options are coming in quickly as the congressional super committee begins its work to cut the rate of growth of the federal debt over the next decade. The House and Senate Agriculture Committees have less than one month to offer proposed budget cuts as part of the process. It’s becoming more evident that the super committee process will translate into writing the next farm bill.”

Friday’s article explained that, “The latest plan comes from Sen. Sherrod Brown, D-Ohio, Sen. Dick Durbin, D-Ill., Sen. Richard Lugar, R-Ind., and Sen. John Thune, R-S.D., with Brown and Thune taking the lead in crafting the package. The plan would consolidate several farm-bill programs into a new program. The bill is titled The Aggregate Risk and Revenue Management Act of 2011 or ‘ARRM.’”

More specifically, Mr. Clayton pointed out that: “The ARRM program would eliminate direct and counter-cyclical payments, as well as SURE. In its place would be the ARRM program, which would overhaul the Average Crop Revenue Election program. ARRM would pay based on planted acres, not a formula using base acres. Further, USDA crop-reporting districts for crop insurance would help bring yield triggers closer to the farm. A price guarantee would be set based on the last five years of farm revenue. Landowners also would not have to sign on to the program as they are required to do now under ACRE.

“Like the corn growers’ plan, the senators’ program would effectively work for shallow losses not covered by crop insurance. The ARRM payment would be capped at 15% of the farm-revenue guarantee. Thus, a farmer’s loss is better protected based on buying for a better crop-insurance policy and the ARRM payment filling in beyond that.

“Further, the senators’ propose eliminating the restrictions on planting fruits and vegetables on program land, though the ARRM program would not pay for losses from ineligible crops.”

With respect to cost, the DTN article stated that, “The Congressional Budget Office scored ARRM at costing just under $28.5 billion over 10 years, saving $19.8 billion compared to current programs. It would go from the 2013 to 2017 crop years.”

The big difference between ARRM and a concept by Senate Budget Chairman Kent Conrad, D-N.D., is the SURE program. Conrad told DTN earlier this week he is preparing a farm-bill plan that would combine the countercyclical program, the Average Crop Revenue Election program, as well as SURE. Conrad not only advocates renewing SURE and the other disaster aid programs, but also making them retroactive to Oct. 1, the date after the current programs expire. Conrad did not like the proposed cuts in crop insurance.”

A news release Friday from the National Corn Growers Association indicated that, “The National Corn Growers Association today applauded the bipartisan work of Sens. Sherrod Brown (D-OH), John Thune (R-SD), Dick Durbin (D-IL) and Dick Lugar (R-IN) to introduce legislation that will create the Aggregate Risk and Revenue Management (ARRM) Program.  The bill is designed to simplify, consolidate and streamline existing commodity programs that were authorized as part of the 2008 farm bill.”

An article posted on Friday at Agri-Pulse Online included links to background and fact sheets that contained details on the proposed AARM program.

In other developments, a recent editorial in the Minneapolis Star-Tribune supported the proposed cuts in agricultural spending contained in the executive branch budget plan from last Monday: “His [President Obama] newly announced deficit plan calls for $33 billion in agricultural subsidy cuts over the next decade.

That’s significantly more than the $9.7 billion in savings he proposed after taking office in 2009 by placing income limits on money paid out. The new, more-aggressive proposal is the better plan — one that a deficit-minded Congress should get behind.”

Meanwhile, a news release Friday from the House Committee on Agriculture- Democrats stated that, “U.S. House Agriculture Committee Ranking Member Collin C. Peterson, D-Minn., and Rep. Mike Simpson, R-Idaho, today introduced The Dairy Security Act of 2011. The legislation will replace current, outdated dairy programs with new risk management tools addressing the realities of today’s dairy industry, such as rising input costs and a growing export market.

“‘If we have another crisis like we had in 2009, when milk prices dropped and input costs skyrocketed, I fear we could lose half our dairies. The dairy safety net did not work then and it won’t work if similar events occur now. Producers cannot wait for another crisis or a new farm bill for Congress to fix the broken dairy safety net,’ Peterson said. ‘Feedback from all sectors of the diverse dairy industry has been instrumental in drafting this bill and I look forward to continuing these conversations, as well as working with other members of Congress to advance dairy reform.’”

The release, which contained links to more details on the legislation, also noted that, “The Dairy Security Act of 2011 consists of three main components – a Dairy Producer Margin Protection Program, a Dairy Market Stabilization Program and reforms to the Federal Milk Marketing Order system.”

An audio replay of a news conference on the new dairy proposal with Rep. Peterson is available here.

And a news release Friday from the National Milk Producers Federation (NMPF) stated that, “The [NMF] is giving its full support for a new bill introduced today in the House of Representatives that would make broad improvements in dairy policy.”

The update pointed out that, “‘We are thankful for Congressman Peterson’s diligent attention this issue, as well as his commitment to real reform, and we look forward to working with him and Congressman Simpson to get this bill passed,’ [Jerry Kozak, President and CEO of NMPF] added. The bill reflects the changes endorsed this week by NMPF to its initial ‘Foundation for the Future’ proposal to reform dairy policy.”

Marc Heller reported on Saturday at the Watertown Daily Times (NY) that, “If enacted, Mr. Peterson’s bill would impose new controls on farmers’ tendency to overproduce when milk prices are high and replace a government milk subsidy with a margin insurance program that protects farmers from a combination of low milk prices and high feed costs.

“But Mr. Peterson backed off an earlier proposal, never formally introduced as legislation, for a mandatory supply management program that could have reduced farmers’ milk payments when their farms were most profitable and productive. That aspect of the plan will now be voluntary, kicking in only for farmers who buy into the new margin insurance program.”

Mr. Heller added that, “North country producers would lose some key programs that protect them when milk prices are low, but gain new protections that take feed prices into greater account. The new program will save the government about $167 million during the next five years, the Congressional Budget Office estimated.”

In other news, a program announcement made on Friday by USDA’s Risk Management Agency stated in part that, “The U.S. Department of Agriculture’s (USDA) Federal Crop Insurance Corporation Board of Directors has approved the Trend-Adjusted Actual Production History (APH) Yield Option insurance plan for corn and soybeans to be available starting with the 2012 crop year for select states and counties.

“The Illinois Corn Marketing Board developed the plan along with financial consulting company integrated Financial Analytics and Research (iFAR). The plan allows policyholders with qualifying APH databases in eligible counties to elect to have their APH yield adjusted based on their county’s historical yield trend. APH yields are used to determine crop insurance coverage guarantees.”

And with respect to the supercommittee, Jackie Calmes and Jennifer Steinhauer reported in today’s New York Times that, “As if expectations were not low enough for the special Congressional committee charged with writing a deficit-reduction deal, they seem to be falling by the day as the two parties harden their positions on spending and taxes.

“Last week began with contradictory markers from President Obama and Speaker John A. Boehner. Mr. Boehner reiterated that Republicans would oppose any tax increases, and then Mr. Obama, newly aggressive, warned that he would veto any measure that would trim Medicare benefits without also raising taxes on the wealthy.”

Today’s article added that, “The week ended with the Republican-controlled House and the Democratic-controlled Senate at an impasse over a routine but essential measure for financing government operations for the new fiscal year (which will start on Saturday), with Republicans demanding more spending cuts to offset domestic disaster aid. Some Republicans have pushed for even deeper short-term cuts than were agreed to in August in the deal to raise the federal debt ceiling.

“Against that backdrop, few in Washington see a politically realistic way for the 12 members of the joint House-Senate deficit committee, six from each party, to meet their mandate to identify at least $1.2 trillion in deficit reductions over 10 years. People in both parties worry that the panel, which plans to meet privately this week, could fall far short of that goal or deadlock altogether, with potentially damaging economic consequences.”

The Times article stated that, “Should the parties stand their ground on taxes and entitlement programs, the committee could avert total failure with a package of several hundred billions of dollars in spending cuts identified in past bipartisan negotiations, including reductions in farm subsidies and federal employee retirement programs.”

During his press briefing on Friday regarding dairy issues, Rep. Collin Peterson (D-Minn.) was asked about the potential interplay between the supercommittee and the Farm Bill; his comments on this issue can be heard here (MP3- 2:19).

In other budget developments, Rosalind S. Helderman reported in today’s Washington Post that, “With time running out, Congress returns Monday to try to pass a short-term funding measure to avert a government shutdown and avoid yet another market-rattling showdown over the federal budget.

“The Democratic-led Senate, which on Friday blocked a GOP House measure to fund the government through Nov. 18, will vote late Monday on its own version of the bill.”

The Post article explained that, “The Senate bill includes dollars for disaster relief without an offsetting spending cut elsewhere that the House GOP demands.

It is not clear how the dispute will be resolved.”

Naftali Bendavid reported in today’s Wall Street Journal that, “Congress was scheduled to be off this week, but lawmakers must stay in Washington because they made no progress over the weekend in settling a dispute over spending that threatens a possible government shutdown.

“Despite promises to work together following a public backlash against the bickering that consumed much of the summer, Republicans and Democrats face the reality that disaster aid could run out Tuesday and the government could partially shut down beginning this weekend unless they strike a deal quickly.”

 

Agricultural Economy

Dan Piller reported on Saturday at The Des Moines Register Online that, “Thanks to white-hot commodity markets, farmers are poised to pull in the richest cash harvest in Iowa’s history — more than $20 billion.”

The article noted that, “The good times make farmers a political target amid growing budget deficits, and they worry that the general public has forgotten that corn sold for less than $3 per bushel as recently as 2005, and that agriculture endured a severe depression a quarter century ago.”

The Register article pointed out that, “Farmland prices — the best measure of the capital base of Iowa agriculture — are up 34 percent in the last year to a record $6,477, according to a report earlier this month by the Iowa Farm and Land Realtors Institute.”

Mr. Piller indicated that, “Beyond the anticipated cuts to farm programs, ethanol producers are girding for the loss of the 45-cent-per-gallon tax credit for their biofuel, plus assaults on the federal mandate that will require oil companies to blend almost 15 billion gallons of ethanol with gasoline next year.

“Ethanol is no longer a quirky sidelight in Iowa. The state’s 41 plants consume almost 60 percent of the 2.4 billion bushels of Iowa-grown corn.”

“Food processors already have warned of higher costs at the supermarket, which could have further implications during the 2012 political year.”

On the issue of food prices, a Bloomberg update from Friday reproduced a USDA update detailing forecasts for percentage changes in annual food prices.  The update stated that, “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 upward for 2011.”

Andrew Johnson Jr. reported in today’s Wall Street Journal that, “Reduced production of soybeans in the U.S. and expectations that South America’s crop won’t make up for the shortfall could push inventories to historic lows by next summer, boosting prices.

“U.S. soybean prices have been mostly stagnant this year, masking a decline in U.S. production. Farmers increasingly favor planting more-lucrative crops such as corn, which yields a larger crop per acre, making the grain more profitable at current prices.”

The Journal article added that, “Goldman Sachs in a recent report predicted soybean prices will rally over the next 12 months as production struggles to keep pace with demand. The bank cited competition for land from other crops and the potential for poor weather in South America as the main threats.”

 

Biofuels

Todd Neeley reported on Friday at the DTN Ag Policy Blog that, “The Renewable Fuels Association has come out swinging against a proposal by Reps. Bob Goodlatte, R-Va., and Jim Costa, D-Calif., to waive a portion of the Renewable Fuels Standard when the corn stocks-to-use ratio falls below a certain level.

“According to a story from Reuters Friday, the legislation would reduce the ethanol mandate by 25% when the corn stocks-to-use ratio is projected to be less than 7%. It would reduce the RFS by 50% when the ratio is 5% or less. The RFS for 2011 is 12.6 billion gallons, with production expected to hit around 13.5 billion gallons.

“According to RFA Communications Director Matt Hartwig, setting an arbitrary number for the corn stocks-to-use ratio would result in an arbitrary number for the RFS. An arbitrary number would provide less market certainty for ethanol producers.”

Meanwhile, Philip Brasher penned an article yesterday that explored issues associated with funding assistance related to blender pumps.  The interesting article is available here, “Installation lags for blender pumps.”

 

Regulations

Ben Geman and Pete Kasperowicz reported on Friday at The Hill’s Energy Blog that, “The House on Friday approved legislation that would set up an interagency committee charged with assessing the impact of Environmental Protection Agency rules on U.S. economic competitiveness, and also delay two EPA rules until several years that analysis is complete.

“Democrats railed against the bill throughout debate on Thursday and Friday, saying it represents the latest attempt by Republicans to advance an anti-environment agenda. But Republicans said the bill would not block any rule indefinitely, and that some economic assessment of EPA rules is needed in light of the increasing frequency of these rules under the Obama administration.

“The partisan split over the so-called TRAIN Act — Transparency in Regulatory Analysis of Impacts on the Nation, H.R. 2401 — was seen in the 249-169 mostly party-line vote for the bill. It was supported by 19 Democrats, some of whom come from coal-producing states that have recoiled against various environmental rules.”

And Senator Susan Collins (D-Maine) penned an Op-Ed in today’s Wall Street Journal titled, “The Economy Needs a Regulation Time-Out,” while the Journal editorial board opined today that, “The Environmental Protection Agency claims that the critics of its campaign to remake U.S. electricity are partisans, but it turns out that they include other regulators and even some in the Obama Administration. In particular, a trove of documents uncovered by Congressional investigators reveals that these internal critics think the EPA is undermining the security and reliability of the U.S. electric power supply.”

Keith Good

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