Georgina Gustin reported last week at the St. Louis Post-Dispatch Online that, “Farmland values have doubled over the past decade, as commodity prices have soared and net incomes along with them. In some areas of the Midwest, farmland values have jumped as much as 25 percent in the past year. Auctions, which have become a preferred method of buying and selling land, are turning into spectacles.
“‘You have two people who want a piece of land, and they start fighting over it,’ said Mike Duffy, professor of economics at Iowa State University. ‘We had a sale in northwest Iowa, and it went for $16,750 an acre.’
“That figure was a record for Iowa, where farmland values are among the highest in the Midwest. Farmland owners, in fact, are sitting on some of the most attractive investments around.”
Jim Spencer reported late last week at the Minneapolis Star-Tribune Online that, “The farm subsidy payments that have been worth billions to Minnesota farmers could soon give way to a far less costly program of expanded crop insurance.
“The far-reaching change is outlined in a bipartisan plan expected to be submitted next week to the congressional deficit committee examining ways to cut federal spending, Minnesota Rep. Collin Peterson told the Star Tribune.”
DTN Political Correspondent Jerry Hagstrom reported yesterday that, “While leaders of the Senate and House agriculture committees fend off criticism that no farm bill is necessary when farmers are so prosperous, they and their staffs — particularly their staffs — are expected to work through the weekend to try to complete a farm bill proposal for the super committee in charge of deficit reduction by Tuesday.
“Criticisms are coming because of the current farm incomes and some of the behind-closed-doors nature of sending a bill through the super committee. Those complaints prompted Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., to state the new yet-to-be-unveiled program amounts to real reform.
“‘We are undertaking a monumental shift in federal farm policy — one that saves billions of taxpayer dollars by ending payments to farmers who don’t need them,’ Stabenow said in an email. ‘U.S. farm policy should be based on risk management and only help farmers when they are in distress, facing events such as natural disasters or sudden drops in price.’”
Ron Smith reported earlier this week at the Southwest Farm Press Online that, “Congressman Frank Lucas, chairman of the U.S. House of Representatives Committee on Agriculture, would rather forego passing a hurry-up farm bill that jeopardizes the well-being of rural America and take his chances fighting for a better program next summer.
“‘I will not be a part of legislation that’s bad policy,’ Lucas said during a telephone hook-up to the Texas Ag Forum, meeting recently in Austin.”
The AP reported yesterday that, “Lawmakers working on the next Farm Bill need to find an effective way to provide aid to farmers affected by natural disasters, increase funding for agricultural research and continue important conservation programs, U.S. Agriculture Secretary Tom Vilsack said Monday.
“The former Iowa governor spoke to about 100 workers who make farm equipment at a John Deere plant in Ankeny, telling them programs funded through the massive spending bill also must be streamlined and simpler to understand.” [Note: A complete transcript of the Secretary’s remarks can be found here].”
DTN Ag Policy Editor Chris Clayton reported on Friday that, “The American Farm Bureau Federation sent a letter to lawmakers Friday describing the pitfalls of the ‘shallow loss’ farm-bill proposals that have dominated talks about cutting farm programs.
“Though Farm Bureau President Bob Stallman’s letter to members of the House and Senate expressed skepticism for a major overhaul in the current safety net, Farm Bureau also pitched its own new proposal that would work as a disaster program for farmers. This latest proposal from Farm Bureau would function similar to a county or regional crop-loss plan.
“With political pressures of a farm-bill written in haste during the Super Committee process, Farm Bureau’s letter reflects that not all farmers are comfortable breaking away from the traditional safety net and relying more heavily on crop insurance. Further, Farm Bureau leaders are concerned about the structure of a shallow-loss farm program that could lead to double dipping in crop insurance and the commodity safety net.”
Josiah Ryan reported today at The Hill’s Floor Action Blog that, “An amendment offered by Sen. Tom Coburn (R-Okla.) to prohibit payments of subsidies to persons with an average income over $1 million, cleared the Senate Thursday night by a vote of 84-15.
“Coburn argued forcefully to his colleagues, who were seated at their desks for the series of rapid-fire votes, that such payments from a government that is running in the red were preposterous.
“‘We had 2,705 people in this country who had adjusted gross incomes in excess of $2.5 million last year who got farm payments,’ said Coburn. ‘[R]ather than taxing millionaires, the first thing we ought to do is quit giving them subsidies.’”
Editor’s Note: Yesterday’s FarmPolicy report has been updated to include the following correction: “The bill backed by Durbin, Brown, Thune and Lugar would create a program to protect farmers of major crops including corn, wheat, rice, soybeans and cotton from ‘shallow losses,’ providing income during periods of long-term price declines or extended weather disasters. The plan ‘is not your grandpa’s farm policy,’ Brown said in an e-mailed statement.
“‘Our proposal saves billions of taxpayer dollars by consolidating four existing farm programs into one that is tied to the market’ so farmers receive assistance only when they need it, he said. It would also end government controls on sugar, which the sponsors estimate cost Americans $4 billion a year in higher food costs.”
Farm Bill Issues
DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “The American Soybean Association, the National Corn Growers Association and the National Farmers Union are sending Congressional agriculture leaders a letterformally stating their support for a ‘revenue-based risk management program’ to replace parts of the existing farm safety net.
“Meanwhile, a key crop insurance lobbyist is saying that any new program should not be ‘duplicative’ of crop insurance in a way that would lead farmers to reduce their coverage.
“The letter from the corn and soybean groups and the Farmers Union to the chairmen and ranking members of the House and Senate agriculture committees appeared to be a reaction to a letter the American Farm Bureau Federation sent to members of the agriculture committees on Tuesday, charging that a safety net that covers ‘shallow losses’ could lead to farmers engaging in risky decision making.”
Sixth District- Atlanta- “Drought conditions persisted in much of Georgia and parts of Alabama. High livestock feed costs were pressuring poultry producers but were being successfully passed on by cattle producers. Corn prices remained elevated and cotton prices paid to farmers increased modestly since the last report, although cotton futures prices have declined somewhat further in recent weeks. Agriculture contacts continued to report concerns over labor shortages and production issues that they tied to recently passed immigration laws in some states.”
Seventh District- Chicago- “Harvest conditions varied across the District. Some parts were experiencing a slower-than-usual harvest due to late planting or fall rains that degraded crop quality. Other portions of the District were experiencing a fairly normal harvest. Corn and soybean yields appeared to be lower and more variable than a year ago. Nonetheless, yields were adequate to replenish inventories to levels that eased worries about shortages. Inventories also were boosted over the summer by lower exports and reduced usage of crops for livestock feed. Corn and soybean prices did back off during the reporting period; however, a sizeable portion of the crop had been sold prior to this decline. Lower prices for feedstocks provided relief to livestock operators. Prices for milk and hogs declined while cattle price rose; all three remained above the levels of a year ago. Farmland values and cash rental rates continued to rise in the District.”
Eighth District- St. Louis- “The rates of completion for the cotton, soybean, and rice harvests in the District states were behind their 5-year average. In contrast, the corn harvest was at least 5 percent ahead of schedule in the majority of the District’s states. The fraction of corn, soybean and sorghum crops rated in fair or better condition declined by at least one percent in most states since the previous report. The fraction of pastures in fair or better condition increased or remained unchanged in most states, except Illinois and Missouri.”
Ninth District- Minneapolis- “Ninth District farmers are expecting smaller harvests this year, but prices remain elevated. An early frost in late September may reduce corn and soybean yields around the District. Recent dry weather has been a boon to wheat harvesters, but overall wheat production in District states is expected to be about 15 percent lower than last year, according to U.S. Department of Agriculture estimates. Prices for corn, soybeans, wheat, dairy products, poultry and hogs fell slightly since the last report; cattle prices increased recently. In spite of these recent declines, prices for many District agricultural commodities remained well above their year-earlier levels.”
Tenth District- Kansas City- “Agricultural conditions continued to vary across the District. Northern portions of the District, which received ample rain, expected bumper crops, while crops in the southern portions of the District continued to suffer under drought conditions. Most of the corn and soybean crops in Nebraska were rated in good or better condition as harvest began, while Kansas expected yields well below average due to drought. Winter wheat planting was delayed in some areas of Oklahoma as farmers waited for rain, but planting was on schedule in Kansas and Nebraska. Despite recent downturns in crop prices, farm income expectations remained strong. Robust export demand supported livestock prices, but high feed costs trimmed profit margins. Farm loan demand remained weak as capital spending slowed further and some producers paid cash for higher input costs. District contacts indicated that prices of farmland sold at auction continued to post record highs.”
Eleventh District- Dallas- “Drought in the Eleventh District remained severe during the reporting period, particularly in Texas where more than 85 percent of the state is in exceptional drought. Already poor grazing and stock water conditions deteriorated further, forcing many ranchers to sell off part or all of their herds. The drought caused low yields and record-high abandonment rates for some crops, including cotton. Export demand for beef continued to grow while the volume of exports for most crops was lower than six weeks ago. There was growing concern about continued drought conditions and the negative impact of low soil moisture on 2012 crop production.”
(Note: A correction was made to this update on Wednesday afternoon- see red strike through text below).
Farm Bill Issues
James Politi reported yesterday at The Financial Times Online that, “The most senior US lawmakers responsible for agricultural policy are seeking to limit any cuts to farm spending to $23bn over the next 10 years, in a rare bipartisan push to influence negotiations within a special deficit reduction committee of Congress.
“The move highlights acknowledgement by both Republicans and Democrats that government support for American farmers is bound to be curtailed at a time when the agriculture sector is posting record profits while the rest of the economy is struggling.”
Bloomberg writers Alan Bjerga and Derek Wallbank reported yesterday that, “Spending on agriculture, rural development and nutrition should be cut by no more than $23 billion over 10 years, leaders of the U.S. House and Senate farm panels told the supercommittee charged with reducing the federal deficit.
“Specific recommendations on what to cut, including possible reductions in farm subsidies, will be provided by Nov. 1, according to a letter today from the House and Senate agriculture committees to the congressional deficit panel.
DTN Political Correspondent Jerry Hagstrom reported on Friday morning that, “While farm and other interest groups are continuing to press their cases, the chairmen and ranking members of the House and Senate agriculture committees are scheduled to send the super committee in charge of deficit reduction a letter today [Friday] stating they will support a reduction of $23 billion in farm-bill spending over 10 years in exchange for changing farm programs within the bill that the committee is supposed to produce, a key Senate source told DTN.
“Another Senate source said that while the letter is scheduled to be sent, the four leaders — Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., Senate Agriculture ranking member Pat Roberts, R-Kan., House Agriculture Committee Chairman Frank Lucas, R-Okla., and House Agriculture Committee ranking member Collin Peterson, D-Minn. — had not yet agreed to a final number.
Reuters writer Charles Abbott reported yesterday that, “U.S. farm subsidy cuts of $23 billion would be tied to the creation of a new crop subsidy system under a plan being discussed by Agriculture Committee leaders in Congress, farm lobbyists said on Thursday.
“The proposal would end the $5 billion-a-year direct payment subsidy. It would endorse a revenue-assistance program to shield growers from ‘shallow losses’ from poor yields or low market prices as the new basis for the U.S. farm program.
“Leaders of the House and Senate agriculture committees aimed to outline the plan in a letter on Friday to the congressional ‘super committee’. That 12-member panel is charged with finding $1.2 trillion in government-wide cuts.”
Driven by worrying levels of U.S. debt, Congressional authorizing committees, including Agriculture, face a deadline tomorrow for submitting policy proposals to the Joint Select Committee on Deficit Reduction.
Meanwhile, policy makers and producers are preparing to make changes in agricultural budget allocations and programs in the European Union- a chief U.S. competitor.
Like here in the U.S., price volatility appears to be a concern of some agricultural producers in the EU.
David Jolly reported in Thursday’s New York Times that, “European Union officials on Wednesday proposed major changes to its expensive and contentious system of farm supports, calling for a cap on the amount that individual farms can receive and toughening environmental standards, but leaving the overall budget of the program unchanged.
“‘The effectiveness of our current policy has eroded,’ Dacian Ciolos, the European agriculture commissioner, said in Brussels. ‘Payments are based on a multitude of systems based on historical references that have lost their relevance and weakened by a lack of credibility and transparency with the public. We have to change the paradigm.’
“The proposed changes to the Common Agricultural Policy, whose budget is €56 billion, or $77 billion, set up what will very likely be months of confrontation between nations led by Britain, which argue that the current arrangement leads to unfair subsidization of farmers, and agricultural nations like France, which are relatively happy with things as they are.”
Mr. Jolly explained that, “Negotiations on the proposals, which need the backing of member states and the European Parliament, could be held through 2013.
“Pointing to some of the elements of the existing system that have invited the most withering criticism, Mr. Ciolos emphasized that aid would go only to those actively tilling their fields, saying, ‘I seriously doubt that the airports and golf courses need farm income support.’”
John W. Miller and Caroline Henshaw reported in today’s Wall Street Journal that, “Farm subsidies are paid out of the European Union’s budget but managed by its 27 member states. The subsidies make up two-fifths of the EU annual budget and are hotly debated when the EU writes its budget every seven years. The tenuous state of the region’s economy has heightened those tensions.
“The priorities in the plan are ‘food security, sustainable use of natural resources and growth,’ said Dacian Ciolos, the EU’s agriculture commissioner.
“Mr. Ciolos’s proposal will raise CAP spending by about €15 billion overall in 2014-2020, a move lawmakers say represents a cut of up to 15% in real terms.”
The Journal article added that, “The coming debate in the European Parliament and among the EU’s 27 governments promises to be an intense lobbying battle. Already, farmers are taking aim at the plan, which they say puts too much emphasis on environmental protection and doesn’t recognize that farms are for-profit businesses that must be unburdened by regulation.”
Reuters writer Charlie Dunmore pointed out yesterday that, “Critics of the bloc’s common agricultural policy (CAP) had urged the European Commission to take advantage of high global food prices and cut the huge subsidies it pays to farmers in a reform of the policy from 2014.
“But against a backdrop of increasing market volatility, resource scarcity and climate change, the Commission had already rejected calls for subsidy cuts, and said the reform should refocus spending on the threats facing EU farmers.”
Joshua Chaffin reported yesterday at The Financial Times Online that, “In an interview with the Financial Times, Mr Ciolos pointed to the extreme volatility of world prices as a factor that justified continued high subsidies.
“‘The market orientation decided more than 10 years ago is a very good thing, but now we have to imagine a new instrument in order to deal with price volatility and the increase in world demand,’ he said, warning that those forces could ‘destabilize our agricultural system if we are not able to adapt.’
“Mr Ciolos’ proposals mark the beginning of what will be one of the most contentious debates in Brussels over the next 18 months. While the UK has long called for the dismantling of the CAP, arguing that its maze of subsidies are wasteful and distort competition, France has defended it as a cornerstone of Europe’s post-war prosperity.”