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Farm Bill; Trade; Ag Economy; Regulations; and Senate Procedures

Farm Bill Issues

A Reuters news article posted yesterday at DTN (link requires subscription) reported that, “The Senate Agriculture Committee may suggest up to $33 billion in budget cuts, primarily from crop subsides, as its share of government-wide belt-tightening, a panel member said on Tuesday.

“House and Senate committees face a deadline of Friday to submit recommendations to the 12-member ‘super committee’ that is charged with proposing at least $1.2 trillion in cuts over the next decade.

“There have been suggestions to cut agriculture by at least $15 billion while President Obama proposed $33 billion.”

The article pointed out that, “Iowa Senator Charles Grassley told reporters ‘right now, there is a real possibility’ of a bipartisan agreement among Agriculture Committee members. He said it would involve cuts of $20 billion to $33 billion, including elimination of the $5 billion a year direct-payment subsidy.

In its place, the government would adopt revenue assurance as the central pillar of U.S. farm supports. A government-run program would shield grain, cotton and oilseed growers from ‘shallow’ losses caused by low prices or poor yields. Crop insurance would cover large losses.

Revenue assurance is widely mentioned as the possible foundation for the 2012 farm law. Groups representing corn, soybean, cotton and dairy producers have proposed versions of revenue assurance for inclusion in the law. They say their proposals will cost less than current subsidies.”

Yesterday’s Reuters article added that, “Two issues for farm-state senators are whether to require growers to practice land stewardship as a condition of eligibility for crop insurance and whether to cut public nutrition programs along with crop subsidies. Nutrition programs, such as food stamps and school meals, will account for 75 percent of Agriculture Department spending in the future.”

University of Illinois Agricultural Economist Gary Schnitkey indicated yesterday at the farmdocdaily blog (“Simulated ARRM Payments Compared to Actual Commodity Program Payments, 1995 to 2010”) that, “Senators Brown, Thune, Durbin, and Lugar recently released a Farm Bill proposal entitled the Aggregate Risk and Revenue Management (ARRM) program.  If enacted, the ARRM program would replace Direct Payments, Counter-cyclical, Marketing Loan, Average Crop Revenue Election (ACRE), and Supplemental Revenue Assistance Payments (SURE) programs with ARRM. ARRM is a revenue program designed to make payments in years of low revenue. In this article, simulated payments from ARRM from 1995 through 2010 are compared to actual commodity program payments that occurred during that period.

Figure 1 shows simulated ARRM payments and actual commodity program commodity payments stated on a per acre base. Payments are for an example farm in McLean County, Illinois that currently devotes two-thirds of its acres to corn and one-third to soybeans. ARRM payments are averaged over corn and soybean production. Actual commodity payments come from a variety of programs including Production Flexibility Contract payments, Agricultural Marketing Transition Assistance payments, Marketing Loss Assistance payments, Counter-cyclical payments, Marketing Loan and Deficiency payments, Direct Payments, and ACRE payments. Some of the programs for which payments are shown in Figure 1 no longer exist.”

Dr. Schnitkey pointed out that, “Simulated ARRM payments are less than actual commodity program payments. Over the 1995 through 2010 period, actual commodity payments average $42 per acre while simulated ARRM payments are $11 per acre, 75 percent less than actual commodity program payments. These declines are significant and are larger than may be gained from the perspective of Congressional Budget Office baselines. CBO estimates indicate that ARRM would save $20 billion over ten years from total outlays for current commodity programs of about 60 billion, yielding a reduction of 33 percent. This difference between the two is due to two reasons. First, some of the payments in Figure 1 come from programs that no longer exist. Second, programs such as Counter-cyclical and Marketing Loan programs that made large payments historically are not projected to make large payments in the future because of a significantly different price environment.

“Simulated ARRM payments occurred in 1998, 1999, 2000, 2001, and 2005. Net returns were low these years, as illustrate in Figure 2. Figure 2 shows net returns averaged over corn and soybean production, where net returns equal crop revenue less non-land costs less average cash rent. As can be seen, ARRM payments would have occurred when net returns were negative on cash rent farmland and would have brought returns nearer break-even levels.”

Meanwhile, a news release yesterday from the National Cotton Council stated that, “Texas cotton producer Jimmy Dodson told a Farm Foundation forum audience today that risk management tools, particularly crop insurance, ‘are extremely important to cotton producers.’ Dodson, chairman of the National Cotton Council’s American Cotton Producers, Dodson was a participant in a panel discussion on ‘The Future Role of the Federal Government in Agricultural Risk Management’ held at the National Press Club.

“Dodson said that in many parts of the Cotton Belt, ‘purchasing adequate crop insurance is often a requirement for securing financing for production costs. In today’s environment, we do not see that requirement changing. As such, it is our hope that crop insurance products can be enhanced to further protect producers from events beyond their control.’”

And a news item posted yesterday at Land O’Lakes Online indicated that, “Land O’Lakes has issued a statement commending Senator Richard Lugar (R-IN) for including provisions of Foundation for the Future in a farm bill proposal recently introduced with Rep. Marlin Stutzman (R-IN).

“This language includes U.S. dairy policy reforms advocated by the National Milk Producers Federation (NMPF) and supported by Land O’Lakes and others in the dairy industry. The reforms are intended to provide America’s dairy producers, including Land O’Lakes members, a more secure future after several economically challenging years.

“‘These proposals have the potential to dramatically improve the approach to dairy policy and foster a more economically viable and secure future for dairy producers,’ said Chris Policinski, President and CEO of Land O’Lakes.”

Julie Harker reported yesterday at Brownfield that, “So, what’s the Farm Bill worth to our nation? That’s the question Iowa Soybean and Illinois Soybean Associations attempted to answer, in a study released this week in partnership with Informa Economics.

Carol Balvanz, policy director for Iowa Soybean, tells Brownfield as they looked at the rhetoric in Washington, DC and other places about what needed to be CUT from the next Farm Bill, Iowa and Illinois farmers sat down and decided that maybe lawmakers needed to hear more about the return on investment from the Farm Bill. More specifically, she says, what the value is in the ability of a nation to provide for all of its principle food needs.”

To listen to a Brownfield interview with Carol Balvanz, just click here.

In news regarding the supercommittee, Andrew Restuccia reported yesterday at The Hill’s Energy blog that, “The top Democrat on the House Energy and Commerce Committee plans to urge members of the deficit-reduction ‘supercommittee’ to adopt proposals aimed at making homes more energy efficient, bolstering clean energy exports and funding state safe drinking water programs.

“Rep. Henry Waxman (D-Calif.), the ranking Democrat on the Energy panel, will press supercommittee members to adopt three energy bills that Democrats steered through the House in the last Congress, according to a draft letter obtained by The Hill.”

And in other budget related news, Naftali Bendavid and Carol E. Lee reported in today’s Wall Street Journal that, “The Senate on Tuesday blocked President Barack Obama’s $447 billion jobs bill, highlighting the confrontation between Republicans and a president who has been traveling the country exhorting Congress to pass the measure.

“The vote was 50-49 in favor of the bill, which needed 60 votes to move forward. Democratic leaders worked hard to keep enough of their members on board to garner a simple majority, though the victory was largely symbolic.

“Rejection of the bill opens a new phase in the political battle over job creation, with the White House and Congress now planning to break up the legislation and try to pass parts of it in an effort to show they accomplished something to battle joblessness.”



Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “The House Tuesday evening approved the rule governing debate on three free trade agreements (FTA), and a bill reauthorizing reducing import duties and a program aimed at helping workers who lose their jobs to trade.

“The rule was approved in a 281-128 vote, with nearly 50 Democrats supporting it, and members of the House were expected to begin debating the trade deals as early as tonight. The House and Senate are both expected to approve FTAs with Colombia, Panama and South Korea on Wednesday.”

A news update yesterday from the House Agriculture Committee stated that, “This week during The Ag Minute [MP3], Chairman Frank Lucas discusses the economic boost the trade agreements with Colombia, Panama, and South Korea will provide to rural communities. The agreements will put America’s farmers and ranchers in a better position to compete globally, expand U.S. exports, create jobs, and bring much-needed income to communities across rural America.”

And Reuters writer Doug Palmer reported yesterday that, “A Senate panel on Tuesday backed long-delayed trade pacts with South Korea, Colombia and Panama that are expected to boost U.S. exports by about $13 billion a year, paving the way for final approval.

The full Senate and House of Representatives are poised to approve the agreements on Wednesday, just nine days after President Barack Obama sent them to Congress. Obama has said they would help support tens of thousands American jobs.”

In other trade developments, Michael Crittenden and Bob Davis reported in today’s Wall Street Journal that, “The U.S. Senate voted Tuesday to pass legislation targeting China’s management of its currency, the yuan, underscoring U.S. frustration with one of its largest trading partners.

“Although the bill is unlikely to become law, the Senate debate has kept a public focus on the currency issue as the two countries remain at odds over China’s control of the yuan. In recent days, the Chinese central bank has intervened in currency markets to drive up the value of the yuan against the dollar, a development in line with U.S. goals.”

Felicia Somnez reported in today’s Washington Post that, “The Senate approved the measure on a bipartisan 63 to 35 vote. Voting ‘yes’ were 46 members of the Senate Democratic caucus, as well as 17 Republicans. Voting ‘no’ were 30 Republicans and five members who caucus with Democrats. Two members — Sen. Tom Coburn (R-Okla.), who was recovering from surgery, and Sen. Jeanne Shaheen (D-N.H.), who was on her way back to Washington — did not vote.”

Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “The vote poses an immediate quandary for House Republican leaders, who have so far dismissed the bill as a recipe for starting a trade war between the U.S. and China, just when the world is looking for the countries to work together to help maintain global economic growth.

“It is also a headache for President Obama, who is cool to a bill that will complicate his administration’s work with China on an array of issues. Obama has also suggested that the bill, if passed, could run foul of international trade rules and lead to retaliatory tariffs on U.S. exports, hurting the businesses and workers the legislation is designed to protect.”


Agricultural Economy

Tom Polansek reported in today’s Wall Street Journal that, “Grain prices surged as Russia said it planned to limit exports, renewing concerns about the country that roiled markets by banning sales last year.

“The news from Russia fed traders’ nervousness as they looked ahead to Wednesday’s U.S. government crop report. Recent reports from the U.S. Department of Agriculture have whipsawed agriculture commodity markets.”

The Journal article pointed out that, “Corn futures have dropped since the start of September on concerns over demand amid economic uncertainty. Further declines came after a Sept. 30 government report showed larger-than-expected U.S. grain inventories, causing corn prices to fall to their lowest level of the year: $5.725 a bushel for December delivery.”

Cheri Zagurski and Katie Micik reported yesterday at DTN (link requires subscription) that, “Just slightly more than half of the nation’s soybean crop had been harvested by Oct. 9, according to USDA’s weekly Crop Progress report, five percentage points ahead of the five-year average.”

The DTN article added that, “Corn harvest at 33% complete is one percentage point ahead of the five-year average and 12 percentage points ahead of last week.”

A news release yesterday from the International Food Policy Research Institute stated that, “Growing demand for biofuels, extreme weather and climate change, and increased financial activity through commodity futures markets are the main causes of high and volatile food prices, according to the 2011 Global Hunger Index report, The Challenge of Hunger: Taming Price Spikes and Excessive Food Price Volatility. These challenges are exacerbated by historically low levels of grain reserves, export markets for staple commodities that are highly concentrated in a few countries, and lack of timely, accurate information on food production, stock levels, and price forecasting, which can lead to overreaction by policymakers and soaring prices.”

Meanwhile, Reuters writer Peter Murphy reported yesterday that, “Brazil will play a bigger role in the global cotton supply in the coming years with a dramatic surge in output and rising exports of the fiber to its top trade partner China, a sector official told Reuters.

“The Latin American country’s production of the fiber shot up to 1.96 million tonnes in 2011 from 1.2 million tonnes the year before, according to official data. Recent heavy capital investments signal these higher levels could be here to stay.”

And an update posted yesterday at the Money & Company Blog (Los Angeles Times) reported that, “After searingly hot weather devastated the summer crop of Runner peanuts, the variety mostly used to make peanut butter, raw peanuts that cost about $450 a ton in 2010 now cost $1,150 a ton, according to USDA figures.

The crunch will affect the 90% of U.S. households that consume peanut butter — Americans eat about 1.5 million pounds of peanut products annually. The industry, according to the National Peanut Board, contributes more than $4 billion to the domestic economy each year…High prices are expected to trickle down to consumers soon.”

In other news, the AP reported today that, “Tony the Tiger and Toucan Sam can rest easy. Government officials fine-tuning guidelines for marketing food to children say they won’t push the food industry to get rid of colorful cartoon characters on cereal boxes anytime soon.

“Allowing the brand icons from popular cereals to remain untouched is one of the concessions officials say they are likely to make as they work to convince food companies to curb junk food marketing to children.”



A recent news update from the House Energy and Commerce Committee stated that, “On Friday, October 14, the Subcommittee on Energy and Power will hold a hearing on ‘H.R. 1633, the Farm Dust Regulation Prevention Act of 2011.’ The bill, introduced by Rep. Kristi Noem (R-SD), provides immediate relief to farmers and rural areas by preventing EPA from imposing more stringent dust standards for one year from the date of enactment. The bill also provides flexibility for states, localities, and tribes to regulate ‘nuisance dust’ while still maintaining protections for public health and welfare. A background memo and witness list will be posted here as they become available.”


Senate Procedures

Manu Raju reported yesterday at Politico that, “Look past the procedural squabbling and Republican wailing over Harry Reid’s rules change and the chamber faces a simpler question: Will the 51-vote majority be a new norm in the Senate?

“For a generation, the chamber has used — many would say abused — the filibuster, setting a threshold of 60 votes for doing virtually anything. In these divisive times in Washington, that means almost nothing substantive can get through the Senate. So Reid’s move last week to change Senate rules and override the parliamentarian on a simple majority has senators abuzz over what else can be changed by 51 votes and where each party will draw the line.

“While the actual change amounted to a relatively minor tweak of Senate floor procedures, the tactics Reid used to force through a rules change by 51 votes — rather than 67 votes — could be replicated by future majorities. That means if future majorities believe Senate minorities are unfairly abusing Senate rules, they’ll be more apt to find ways to bypass the 60-vote requirement. And that could have enormous implications for major national laws — like health care reform — which could suddenly face a simple majority for repeal if Republicans take control of the Senate.”

Keith Good