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Farm Bill; Ag Economy; and Trade

Farm Bill: Policy Ideas

DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “Senate Budget Committee Chairman Kent Conrad is developing a crop revenue guarantee program that would make payments to crop farmers who experience ‘shallow revenue losses’ in their whole farm incomes due to reduced yields, quality and prices, top Conrad budget aide Jim Miller said in an interview with DTN on Thursday.

“The program being crafted by Conrad, D-N.D., would combine the programs and budget for the Average Crop Revenue Election program known as ACRE, the countercyclical program, and the Supplemental Revenue Assistance program known as SURE. The plan also assumes that direct payments would be reduced 50%, Miller said.

Miller said direct payments could be cut by halving either the acreage or the payment, but that replacing them ‘would require a transition.’”

Mr. Hagstrom added that, “The new program would become effective for the 2013 crop year. SURE, a disaster program in the 2008 farm bill, expires today, (Sept. 30). But Miller said Conrad’s proposal would extend SURE for all crops for 2012 and extend the other four disaster programs in the 2008 farm bill from 2012 to 2021, but with some changes, and establish a disaster program for specialty crops.

“The new Conrad proposal ‘results in less program and payment duplication, reduces program complexity, [and] is more defensible to the public [because] it pays only those who have suffered a loss,’ said Miller, who served as Agriculture undersecretary for farm and foreign agricultural services until early this year when he rejoined Conrad’s staff.”

The DTN article pointed out that, “Conrad has not received a budget score from the Congressional Budget Office, Miller said, but believes there will be an ‘adequate’ amount of money for the new program from the cuts, and that agriculture would still be able to contribute to deficit reduction.

“Conrad has said that President Barack Obama’s proposal to cut $33 billion from agriculture over 10 years is too high, but that he would not object to cutting $14 billion to $15 billion, the amount that congressional aides have estimated would be cut if the super committee in charge of deficit reduction cannot come up with a proposal that can pass Congress and the alternative of cutting $1.2 trillion over 10 years is imposed.”

Friday’s article added that, “Conrad told DTN on Sept. 20 that he believes the Senate Agriculture Committee should pass his proposal and send it to the super committee by Oct. 14, the deadline for authorizing committees to present proposals. Miller did not comment further on Conrad’s plans to move his proposal forward.

“To be eligible for the payments under Conrad’s plan, farmers would have to experience a 10% loss and buy crop insurance or enroll in the non-insured crop disaster assistance program. Payments would not be based on the level of insurance purchased.

“Farmers can get crop insurance on up to 75% of their crops, and the Conrad proposal would cover the next 15% of losses.”

Meanwhile, American Soybean Association President Alan Kemper spoke with Brownfield’s Julie Harker late last week about that organization’s 2012 Farm Bill ideas, “Risk Management for America’s Farmers” program, or “RMAF,” a replay of that conversation is available here.

And an article posted recently at the High Plans Journal Online stated that, “The American Sheep Industry Association recently shared with the members of the Senate Agriculture, Nutrition and Forestry Committee and the House of Representatives Agriculture Committee the industry’s priorities for the next farm bill.

“‘The industry’s provisions in the farm bill are very modest in the scope of agriculture spending but provide the only risk management available for America’s sheep producers,’ commented Peter Orwick, ASI executive director. ‘The industry priorities essentially extend the programs each as authorized in the 2008 farm bill.’”

Diana Crawford reported on Friday at the NewsChannel 10 Online (KFDA- Amarillo, Texas) (link includes video report) that, “In an effort to cut into America’s deficit, President Obama plans to take $8 billion from the crop insurance program.

“Crop insurance helps farmers sustain themselves when they lose large portions of crops, but this assistance could be in jeopardy.

Crop insurance is farmer, Dale Artho’s best tool to manage risk. His risk is the weather, something he faces each year when he plants his livelihood.”


Farm Bill: Opinion

The Kansas City Star editorial board opined on Saturday that, “In the summer debt ceiling deal, Congress set up a ‘supercommittee’ to find $1.2 trillion in additional budget cuts over the next decade. The panel began work — and so did the lobbyists. Among the most energetic are those defending farm subsidies.

“The wholesale elimination of the nation’s agricultural programs won’t happen. Yet it should be possible to push through two important reforms: Terminate annual cash payments and create an effective income cap to curtail subsidies for wealthy farmers.”

The Star opinion item noted that, “That isn’t all the supercommittee could do. It should cut the ethanol program, which costs billions and diverts 40 percent of the corn crop to fuel production, boosting prices for consumers.”

And an editorial posted yesterday at The New York Times Online stated that, “The [super] committee has only one option, Speaker John Boehner said a few days ago: cutting domestic spending and social-insurance programs, including Medicare and Social Security. Representative Jeb Hensarling of Texas, the co-chairman of the committee, said the president’s plan was ‘undermining the work’ of the group.

“The opposite is true. Mr. Obama identified $570 billion in detailed cuts to mandatory spending programs over 10 years. If committee members actually looked at the plan, instead of dismissing it, they would find scores of useful proposals for savings: $31 billion in agriculture subsidies; $18.6 billion in Postal Service reform, including ending Saturday delivery; $27.5 billion in increased fees charged to lenders by Fannie Mae and Freddie Mac; $42.5 billion in higher health premiums and pension contributions for federal and military workers; $135 billion in less generous Medicare payments to drug makers.”


Farm Bill: Supercommittee

Reuters writers Richard Cowan and Tim Reid reported on Friday that, “Democrats want tax hikes to be the first item negotiated in ‘super committee’ deficit-reduction talks, trying to force Republicans to confront an issue at the heart of this year’s budget fights, sources told Reuters.

“The tough stance by Democratic members of the powerful 12-member congressional panel reflects the party’s wariness that Republicans might try to sideline the issue of revenue increases in the negotiations.”

The article indicated that, “If Democrats hold firm to their demand for taxes to be discussed first, that could make it hard for the committee to make the tight November deadline. Congress is due to vote on the panel’s recommendations by December 23.”

Ron Nixon and Eric Lichtblau reported in today’s New York Times that, “The disconnect between the lawmakers’ words and deeds reflects the political hurdles that Congress and the White House face as they look to cut at least $1.2 trillion from the national debt.

Talk of cutting tax breaks to raise money and reduce the debt has become a mantra in Washington, but it threatens sacred ground: such breaks are a favorite tool among both Republicans and Democrats to reward supporters and economic interests in their home states.”

The article added that, “The 71,000-page tax code has become loaded with dozens of obscure but economically valuable tax breaks. Nascar racetrack operators can speed up their write-offs for improvements to their facilities; makers of toy wooden arrows pay no excise tax; and Eskimo whaling captains get a charitable deduction of up to $10,000 for hunting blubber.

“Multibillion-dollar operations like oil refineries, Hollywood productions and hedge funds have all profited. And there is little sign that the lawmakers who helped write the breaks into the tax code are willing to back away from them.”

Meredith Shiner reported today at Roll Call Online that, “With the question of taxes bedeviling every effort this year to achieve a major deal on the deficit, at least one member of the super committee is pushing revenue changes that he thinks could actually make it to the president’s desk.

“Since Democrats on the Joint Committee on Deficit Reduction insist that any cuts to entitlements such as Medicare or Social Security be paired with comparable revenue increases, Rep. Chris Van Hollen told Roll Call that he has begun exploring proposals to revise the tax code to produce revenue in ways that Republicans might also be able to support.”

Today’s article noted that, “According to sources, Van Hollen has been talking to super committee Republicans, including House Ways and Means Chairman Dave Camp (Mich.) and Sen. Rob Portman (Ohio), about provisions in last year’s Bowles-Simpson plan for deficit reduction, which would cut tax expenditures and reform deductions to bring in more revenue, especially from the highest-earning Americans. The Bowles-Simpson plan came from the president’s commission on deficit reduction.”

And Manu Raju and John Bresnahan reported yesterday at Politico that, “A month into the supercommittee’s term, Senate Republicans are telling K Street that they don’t believe the powerful deficit-cutting panel can reach a ‘grand bargain’ agreement, sources familiar with the negotiations say.

“In a closed-door meeting with Republican lobbyists late last week, senior policy advisers representing both Senate Minority Leader Mitch McConnell (R-Ky.) and his chief deputy, Jon Kyl (R-Ariz.), who sits on the special deficit panel, said the issue of tax increases may be an insurmountable obstacle in the secretive talks.”


Agricultural Economy

Gregory Meyer reported on Friday at The Financial Times Online that, “Grain markets tumbled after the US government suggested a year of elevated prices was starting to curb demand.

“A total of 1.13bn bushels of corn sat in US grain warehouses and farm bins on September 1, well above dire ‘pipeline’ levels forecast earlier. Wheat stocks of 2.15bn bushels also surpassed analyst expectations.

“The larger corn supplies, measured at the start of the harvest, mean that the US Department of Agriculture may raise estimates of the inventories left over at the end of next summer, currently pegged at an uncomfortably low 672m bushels, or just 5.3 per cent of annual demand.”

(Friday’s Grain Stocks report from USDA is available here, while an analysis of the report by University of Illinois Agricultural Economist Darrel Good was posted on Friday at farmdocdaily, “Corn and Wheat Stocks Exceed Expectations.”)

The FT article noted that, “‘This is good news,’ said Joseph Glauber, USDA chief economist. ‘For a while it seemed like every report suggested an ever-tightening situation. This has helped a little bit.’

“But he warned: ‘This is still a very tight market we’re talking about.’”

Mr. Meyer added that, “Input costs have begun to take a toll on consumers, particularly the livestock and poultry industries that feed their animals a mix of grain and soyabeans. Friday’s report indicated demand for corn feed was ‘extremely small’ in the three months to September, said Darrel Good of the University of Illinois.”

Liam Pleven and Tom Polansek reported in Saturday’s Wall Street Journal that, “The new data shocked farmers, traders and analysts, who have frequently been caught off-guard by USDA reports in recent years. It also underscores how difficult it is to measure the nation’s enormous agricultural output. The U.S. produced 38% of the world’s corn last year…[F]riday’s surprise echoed a similar sequence of events a year ago, when the department pegged inventories at 1.708 billion bushels, 23% above the forecast issued in early September, sending grain prices down.”

And Reuters writer Karl Plume reported on Friday that, “For the first time in 40 years, U.S. corn exporters are not out-selling the rest of the world.

“Domestic ethanol is sucking up record crops. Emerging suppliers like Brazil and Ukraine are taking export share, while traditional exporters like Argentina move to open new markets. And consumers worldwide are looking to save every penny, cutting shipping costs or using other types of feed.

After supplying four out of every five kernels of corn traded internationally in the mid-1990s, U.S. market share was projected to shrink to 45 percent this season, with U.S. dominance particularly hard hit in the past 10 years.”

In other news, Jack Nicas reported in today’s Wall Street Journal that, “A summer of record flooding along the Missouri River is leaving a band of destruction—broken roads, drowned farmland and condemned houses—through the nation’s midsection.

“The country’s longest river is still flooded near Kansas City, but upstream it has receded into its banks as the Army Corps of Engineers slows its releases of water from six giant reservoirs. Those lakes had filled to capacity in May and then discharged their water at more than twice the record rate from mid-June into September.

“In recent weeks, thousands of people in the Dakotas, Nebraska and Iowa have re-entered their waterlogged homes after months of evacuation. The lucky ones are able to move back, while others are simply evaluating the destruction and planning the recovery that lies ahead. So far, the federal government has no estimate for the cost of the flood’s overall damage.”

The Journal article noted that, “Homeowners aren’t the only ones hurting. The corps estimates its infrastructure on the Missouri suffered $750 million to $1.3 billion in damage. In Iowa, an estimated 250,000 acres, or 0.8%, of the state’s farmland flooded.”



Elizabeth Williamson reported in today’s Wall Street Journal that, “President Barack Obama could send trade pacts with South Korea, Colombia and Panama to Congress for approval early this week, setting the stage for final passage of the agreements in mid-October after five years of political combat.”

Ms. Williamson explained that, “White House and congressional negotiators neared agreement last week on the process for passing the three agreements along with a scaled-back version of the Trade Adjustment Assistance, or TAA, program, which provides extended unemployment benefits to workers displaced by globalization. Arguments over TAA’s cost and effectiveness had stalled progress for months.

“House Speaker John Boehner (R., Ohio) wants to move the three deals and the TAA bill in tandem, an aide said Sunday. The White House, having weathered setbacks with the GOP on other initiatives, is said to be seeking a clear commitment on the process for passing the four pieces of legislation.

Once the president sends the agreements to Congress, the White House loses leverage over that process. After months of wrangling, the concern is that the House will first pass the free-trade deals, then amend the TAA bill, resulting in a program so weak the White House and Democrats can’t accept it.”

Today’s article pointed out that, “Mr. Obama could forward the legislation to Congress as soon as Monday, people familiar with the process say. Committee hearings could begin as soon as Wednesday, said those people. House Ways and Means Committee Chairman Rep. Dave Camp (R., Mich.) has said he will work to pass the trade agreements and TAA as soon as they arrive.

“White House economic czar Gene Sperling, Senate Finance Committee Chairman Sen. Max Baucus (D., Mont.) and Mr. Camp, who are the chairmen of the two congressional committees with jurisdiction over trade, forged a deal on passing TAA that paved the way for this week’s progress. The White House had refused to submit the agreements if Congress didn’t renew the program.

Once the deals are submitted by the president, Congress has 90 days to approve them. Both the White House and Republican leaders are keen to pass the Korea pact by mid-October, when South Korean President Lee Myung-bak arrives for a state visit. A congressional source said passage of the four bills before the Oct. 13 visit would be ‘tough, but close.’”

Scott Wong reported last night at Politico that, “Congress hasn’t had much to celebrate in a year dominated by bitter spending battles and partisan dysfunction. So lawmakers from both parties are heralding the pending passage of a major free-trade package as a victory — and a sign that Washington isn’t entirely broken.

“Yet bridging the political divide between business and labor over three stalled trade deals has been a rare feat of bipartisanship. And it’s not necessarily a harbinger of greater compromise to come.

“In fact, some say — save for a possible deal to cut the deficit this year — the trade package may be the last significant bipartisan effort until after the 2012 elections.”

Keith Good