FarmPolicy

April 23, 2014

Federal Reserve Beige Book: Observations on the Ag Economy

Today the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions.  Commonly referred to as the “Beige Book,” the report included the following observations with respect to the U.S. agricultural economy:

Fifth District- Richmond- “Recent weather conditions allowed farmers to make steady progress in harvesting and small grain planting throughout most of the District. The corn harvest was nearing completion in Virginia and was winding down in Maryland, with farmers in those states saying that yields remained mostly good. The cotton harvest was getting into full swing in North Carolina and was ahead of schedule in South Carolina. In addition, the apple harvest was completed in Maryland and nearly completed in Virginia. Farmers in the District were harvesting their early soybean crop, which was reported to be in fair-to-good condition. Small grains had been planted and were off to a good start in much of the District.”

Sixth District- Atlanta- “Contacts reported strong overseas demand for proteins and related feeds. Farm land values in the District were mixed; crop land values changed slightly, while pasture land declined in some areas. To varying degrees, drought conditions persisted in much of Georgia, Alabama, Louisiana, and the panhandle of Florida. In Georgia, Louisiana, Mississippi and Tennessee cotton harvesting was ahead of the five-year average, while Alabama was slightly below the average.”

Seventh District- Chicago- “The corn and soybean harvests were running ahead of pace in the District, though yields were coming in below trend. For the District as a whole, more bushels of corn were harvested than a year ago, but soybean production was down. Crop storage on farms increased, as many farmers are expecting to sell their crops for higher prices in the future. This higher farm storage has led to relatively lighter supplies at grain elevators for this time of year, and end users, including ethanol plants, faced the prospect of higher prices. Corn, soybean, and cattle prices were up from early October, while milk and hog prices were down. With the exception of soybeans, these prices were up from last year, boosting farm incomes. There was another surge in farmland values and cash rental rates for the District.”

Eighth District- St. Louis- “Winter wheat planting was ahead of its 5-year average completion rate in the Eighth District states, while the fraction of winter wheat crops rated fair or better was over 90 percent in all states except Mississippi. Monthly output of commercial red meat for September 2011 increased by 3.6 percent compared with September 2010. However, the total live weight and number of chickens slaughtered decreased by over 4 percent between August and September 2011.”

Ninth District- Minneapolis- “Agricultural conditions remained generally strong. Farm financial conditions were very strong due to high commodity prices. Prices for hogs, cattle, turkeys and eggs increased in October; prices for corn, soybeans and wheat declined, but remain substantially above their year-earlier levels. The harvest went quickly, thanks to recent dry weather. District corn production was roughly even with 2010; however, soybean production was down more than 12 percent. Wheat production was down dramatically in some areas of the District.”

Tenth District- Kansas City- “Agricultural activity varied across the District in October and early November. Northern portions of the District, which received ample summer precipitation, reported above average corn and soybean yields at harvest and the majority of Nebraska’s wheat crop emerged in good condition. In contrast, drought conditions severely cut crop production in the District’s southern regions, with Kansas and Oklahoma winter wheat crops in fair or poor condition. Robust export demand continued to boost crop and livestock prices. Farm income rose in areas with bumper harvests, while crop insurance was expected to mitigate losses in cases of poor yields or crop failure. Strong farm income boosted farm loan repayment rates and trimmed demand for operating loans. With rising farm income and strong demand from both farmers and non-farm investors, District farmland values posted another record high, with the strongest gains in the northern Plains.”

Eleventh District- Dallas- “The District remained in drought, although severity lessened slightly in parts of Texas and New Mexico that received some rain in recent weeks. Planting of winter wheat continued at a fairly normal pace but the crop was in poorer condition than last year due to very low soil moisture. Livestock sell-offs continued at a slower pace, as many producers have already liquidated much of their herds. Grain prices fell slightly over the reporting period, largely due to lower export demand. By contrast, cattle prices were higher than six weeks ago and beef exports remained very strong.”

Keith

Budget and the Farm Bill; Crop Insurance; Ag Economy; and Trade

Budget and the Farm Bill

The AP reported yesterday that, “The White House refused to say Tuesday whether President Barack Obama would agree to payroll tax cuts if they add to the nation’s deficit, as the top Senate Republican predicted lawmakers eventually would reach an agreement to prevent taxes from increasing on 160 million Americans.

“The tax cut is set to expire at the end of the year, raising taxes by about $1,000 on the average household unless Congress and Obama act. As the deadline approaches, political support is building for at least continuing the tax cut — and thereby heading off a politically bruising tax hike. But the holdup remains on how to offset the cost.

“Obama spokesman Jay Carney said the president prefers that lawmakers find a way to pay for the cuts that does not add to the federal debt.”

The AP article explained that, “Obama included the extension and expansion of the payroll tax cuts in the jobs bill he released in September. In pressuring Republicans to get behind that bill, Obama has been emphatic that every single provision, including the extension of the payroll tax cut, will be offset somewhere else so the enormous federal debt will not worsen.”

Yesterday’s article added that, “Republicans said that to pay for the extension, GOP leaders would consider using some of the savings discussed by Congress’ failed supercommittee, which tried to reach a bipartisan deal on deficit reduction.

That included savings from agriculture assistance, federal asset and broadcast spectrum sales, civil servants’ retirement benefits, and higher fees charged by Fannie Mae and Freddie Mac to guarantee mortgages, plus fees levied by the Transportation Security Administration.”

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Crop Insurance; Budget & Farm Bill; Ag Econ; Trade; and Senate Ag Committee Hearing

Crop Insurance Developments

Linda H. Smith reported yesterday at DTN (link requires subscription) that, “Midwest corn and soybean growers could see savings of $2 to $3.50 an acre on their crop insurance premiums next year after USDA’s Risk Management Agency re-rated the two crops using a new formula.

RMA on Monday announced the results of re-rating states actuarially, using a 20-year rolling average (currently 1990 through 2010).

“‘On average, these new rates should reduce corn farmers’ rates by 7% and soybean farmers’ by 9%,’ said RMA Administrator Bill Murphy. Given most Midwest farmers pay between $30 and $50 an acre for crop insurance, they could see savings of $2 to $3.50 per acre. A few states such as Texas and Pennsylvania will see modest increases because of their loss experience.”

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Budget and Farm Bill Issues; Ag Economy; Climate Meeting; and Trade

Budget and Farm Bill Issues

Josh Gerstein reported yesterday at Politico that, “The supercommittee’s failure may have unleashed a round of doom and gloom over the past week about Washington’s ability to tackle the debt problem. But Sen. Chuck Schumer (D-N.Y.) struck a sunnier note Sunday, saying he believes Republicans and Democrats could agree to a major deficit-reduction package next year.

“‘We have a good chance of actually getting the big package, big deficit reduction in 2012,’ Schumer said on NBC’s ‘Meet The Press’, repeatedly billing his own analysis as ‘a contrarian view.’

“‘The knives … are over our heads. The Bush tax cuts expire in 2013. Sequestration goes into effect in 2013. Now that seems a year and a month away, but as we get closer and closer and closer, the pressure on both parties to come together in the middle — provided we don’t remove one of those knives, like taking defense off the table — is going to be stronger and stronger,’ Schumer said.”

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Budget and Farm Bill Issues; Ag Economy; and Climate Change

Budget and Farm Bill Issues

Erik Wasson and John T. Bennett reported on Wednesday at The Hill’s On the Money Blog that, “The supercommittee’s failure is widely expected to punt critical decisions on taxes and spending to the lame-duck Congress in December 2012, which could end up being one of the busiest ever.

“At the top of the list are the Bush tax rates now set to expire at the end of the next year.

Efforts to cancel or mitigate the $1.2 trillion in automatic cuts triggered by the failure may also be decided in the lame-duck.”

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Farm Bill; Ag Economy; and Trade

Farm Bill: Post Supercommittee, A Less Certain Path

Gregory Korte reported today at USA Today Online that, “A bipartisan congressional ‘supercommittee’ announced Monday it was unable to propose $1.2 trillion in deficit cuts. By its inaction, the 12-member panel failed to defuse the trigger mechanism on a budget bomb that will automatically cut defense spending starting in 2013.

Now the full Congress has a year to come up with offsetting cuts, or President Obama says he’ll implement the backup plan mandated by law, which also includes an equal amount of cuts in domestic spending.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “The Joint Select Committee on Deficit Reduction’s failure to come up with a proposal into which a new five-year farm bill could have been incorporated means farm programs will be subject to across-the-board cuts at the same time Congress is struggling to write a new five-year bill in regular legislative order.

“House Agriculture Committee ranking member Collin Peterson, D-Minn., has said that agriculture programs would be cut about $15 billion over 10 years, an amount that is less than the $23 billion that the House and Senate Agriculture committee chairmen and ranking members told the supercommittee they would accept in exchange for writing a new farm bill.

But the $15 billion cut will be much more concentrated in crop subsidies, conservation programs and crop insurance than if the agriculture leaders’ new farm bill had been accepted. And on top of that, the pressure not to reduce defense spending as much as the debt ceiling bill requires might mean that there will be pressure for an even bigger cut to agriculture programs.”

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Supercommittee Falters, Farm Bill Implications

Categories: Audio /Budget /Farm Bill

Supercommittee: No Agreement

Janet Hook and Naftali Bendavid reported in today’s Wall Street Journal that, “Congress’s special deficit-cutting committee bowed to reality Monday and called it quits, with both sides having concluded it was easier to swallow failure than any of the possible compromise deals offered.

“Because the Joint Select Committee on Deficit Reduction couldn’t come to an agreement, $1.2 trillion in automatic spending cuts are on track to begin in 2013, with roughly half coming from the Pentagon.

That clears the way for a yearlong legislative battle over whether to block those cuts or to replace them with another broad deficit-reduction plan. Republicans—including the chairman of the House Armed Services Committee—already are moving to void or reduce the defense cuts, but President Barack Obama Monday immediately threatened to veto such an effort [statement, video replay].”

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Supercommittee: Elusive Deal; and Farm Bill Implications

Categories: Audio /Budget /Farm Bill

Supercommittee: Elusive Deal- Weekend Developments- Saturday

Jennifer Steinhauer and Robert Pear reported in Saturday’s New York Times that, “Just 72 hours before a deadline to present Congress with a plan to cut $1.2 trillion from the nation’s deficit, members of a joint Congressional committee remained at a deep impasse on Friday after Democrats rejected a new Republican proposal devised with the help of Speaker John A. Boehner.

The Times article explained that, “Despite time running out on the committee created by the summer agreement to raise the federal debt limit, negotiations were in disarray, with Republicans and Democrats even disputing what precisely divided them. One panel member said that he still had slim hope for a deal but that it would take an extraordinary development to end the stalemate and avoid a series of automatic cuts in 2013 that would reduce federal services and make substantial reductions in Pentagon spending.

“Seeking to reach at least a partial accord, Republicans made their six Democratic counterparts on the committee an offer that would get to roughly half of its goal — a retreat for an earlier plan with cuts in spending and revenue increases — but Democrats rejected it out of hand as inadequate. Democrats said the proposal was unbalanced because it was overly dependent on spending cuts with only a small amount of new revenue.”

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Farm Bill and Supercommittee Issues

Categories: Budget /Farm Bill

Farm Bill

David Rogers reported yesterday at Politico that, “Congress gave final approval Thursday to a $182 billion domestic spending bill which marks a first down payment toward the August debt accords and rare return to some semblance of regular order for the tattered appropriations process.

“The action came as House-Senate farm bill negotiators signaled they were near agreement on a five-year plan that will meet deficit-reduction targets and can be added to whatever budget package is reported from the joint supercommittee next week.

“‘I think we will be wrapping things up today,’ Sen. Debbie Stabenow (D-Mich.), chairwoman of the Senate Agriculture Committee told POLITICO. ‘We’re not ready to give details, but I think we actually have something that is very fair for all regions.’”

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Trade Issues- Asia Pacific: A “Seamless Regional Economy”

Categories: Trade

Jennifer Epstein reported today at Politico that, “As President Barack Obama arrived in Bali, Indonesia, for two international summits, the White House on Thursday announced trade deals amounting to tens of billions of dollars for U.S. companies to sell aircraft and machinery to the Asia-Pacific region.

“Since the president embarked on his international trip late last week, he’s repeatedly stressed that the growing region is key to U.S. economic development and job creation.

“While at the Asia-Pacific Economic Cooperation summit in Honolulu over the weekend, the president said it’s his ultimate goal to create a ‘seamless regional economy’ in the Pacific. The region, he said, is ‘a top priority because we’re not going to be able to put our folks back to work and grow our economy and expand opportunity unless the Asia Pacific region is also successful.’”

Meanwhile, Bloomberg news reported yesterday that, “U.S. Agriculture Secretary Tom Vilsack said that Tran-Pacific Partnership discussions need to be as ambitious and aggressive as possible in opening markets. Vietnam has an opportunity to exercise significant leadership in the negotiations, he said. Vilsack spoke in a briefing at the Hanoi University of Agriculture today.

“On Trans-Pacific Partnership discussions:

“‘The challenge here is for all of us engaged in this dialogue to be as ambitious and as aggressive as possible in terms of our willingness to lower tariffs and supports so that we do have a free flow of goods and services, and have that flow done in a fair and reasonable way.’”

The Bloomberg update added that, “On U.S. farm groups and TPP [Trans-Pacific Partnership] :

“‘I think the farm commodity groups that I have talked to are very supportive of the Trans-Pacific Partnership, as well as multilateral and bilateral trading opportunities. I think that’s most recently displayed in the passage of three free trade agreements in Congress that were passed with the assistance of farm groups.  I think farm groups generally in the United States see trade as a positive and are always encouraging greater opportunities and they see TPP as an opportunity.’”

And David Bennett reported yesterday at the Delta Farm Press Online that, “A burgeoning trade relationship with Vietnam is largely due to USDA programs promoting U.S. agriculture. On Wednesday morning, Agriculture Secretary Tom Vilsack spoke to reporters from Vietnam following a day of meetings with government officials and trade ‘cooperators.’

“Vietnam, responsible for around $1.4 billion to $1.5 billion in agricultural exports, ‘is growing at a fairly significant rate. It’s now (the United States’) fifteenth (ranked) trading partner.’”

For more on Vilsack’s trip click here and here.

Keith Good

Farm Bill; Supercommittee; and, Land Values

Farm Bill

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “Coalitions of northern and southern growers issued competing statements Tuesday on the structure of new programs that farm leaders on Capitol Hill are considering.

“Also Tuesday, a key Agriculture Department official said that the demise of direct payments and the creation of new commodity programs may mean the United States will have to notify the World Trade Organization that more of its farm programs should be classified in the amber box of trade-distorting payments.”

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Farm Bill; Supercommittee Issues; Ag Economy; and Trade

Farm Bill

Erik Wasson reported yesterday at The Hill Online that, “Lawmakers on the House and Senate Agriculture committees are trying to write a new five-year farm bill through the supercommittee process.

“The legislators are using the supercommittee to avoid what would be a more public, election-year debate in 2012, when the current farm bill expires and new legislation would be scheduled for writing, according to critics of the effort.”

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Farm Bill; Budget Issues; Trade; and Regulations

Categories: Budget /Farm Bill /Trade

Farm Bill

Reuters writer Charles Abbott reported yesterday that, “The U.S. farm law being written by agricultural leaders in Congress would boost support rates for some crops and may remove caps on how much money growers collect in subsidies.

“Three agricultural sources said that crops grown in the Midwest and Plains — corn, soybeans and wheat — would be covered by one subsidy plan, while cotton and rice, grown in the South, each would have a separate program.

“This three-track plan is designed to shore up support from a broader number of farm-state lawmakers for a new approach to farm policy.”

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More on Trade- Japan (TPP)

Categories: Trade

Jennifer Epstein reported on Saturday at Politico that, “President Barack Obama announced Saturday that a group of Pacific Rim nations reached the ‘broad outlines of an agreement’ on a key trade partnership and warned Iran that the U.S., Russia and China would work together to counter its attempts to develop its nuclear capability.

“As Obama kicked off a trip to Asia with a three-day stop in Hawaii to attend events associated with the Asian-Pacific Economic Cooperation summit— which he and first lady Michelle Obama are hosting — he made the case for greater U.S.-Asian cooperation. His administration is framing the trip as another way to push the president’s jobs message, as he urges Asian powers to open their markets to American products.”

The Politico article added that, “After [the] Trans-Pacific Partnership meeting, Obama said that though there are still ‘details to be worked out’ for the trade agreement, the framework is in place for a deal. The White House and the U.S. Trade Representative’s office, meanwhile, released fact sheets [PDF download] and other information [PDF download] about the agreement, known as the TPP.

The officials working on the TPP have set ‘an aggressive timetable’ to complete the deal by the end of 2012, deputy national security advisor for international economic affairs Mike Froman told reporters Saturday. The leaders in the partnership see it setting a standard for future agreements, perhaps first with Japan.”

The article went on to explain that, “Japan has asked to join the TPP talks, but U.S. trade representative Ron Kirk said Friday that ‘Japan must be prepared to meet the TPP’s high standards for liberalizing trade and to address specific issues of concern to the United States regarding barriers to agriculture, services and manufacturing trade, including non-tariff barriers.’

“Talks with Japanese Prime Minister Yoshihiko Noda and the leaders of any other countries interested in joining the TPP could begin in parallel with the current negotiations, Froman said. ‘On one hand, we’re putting a lot of emphasis and energy around an ambitious timetable for the trade negotiators; on the other hand, beginning these consultations with new entrants, and to determine whether — what is necessary for them to meet the standards of TPP and address outstanding trade issues with the TPP countries.’”

Ms. Epstein pointed out that, “In a readout of the meeting, Press Secretary Jay Carney said that the president ‘welcomed’ Japan’s interest in joining the TPP and stressed that ‘all TPP countries need to be prepared to meet the agreement’s high standards, and he welcomed Prime Minister Noda’s statement that he would put all goods, as well as services, on the negotiating table for trade liberalization.’ Obama said he’s asked Kirk to begin the domestic process for Japan to join the group, which includes consultations with Congress and interest groups.”

However, Mitsouru Obe reported in today’s Wall Street Journal that, “Japan’s prime minister hoped for praise at the weekend summit of Asian-Pacific leaders here for his bold pledge to join a U.S.-led free-trade pact—but his government instead got into a tangle with the Obama administration over just how far he had promised to go, and drew skepticism abroad and at home about the gesture.”

The Journal article indicated that, “The day after Yoshihiko Noda made his announcement in Tokyo, his aides were scrambling in Hawaii to limit the extent that Japan was willing to negotiate, criticizing the White House for overstating Mr. Noda’s promise.

“The unusual public disagreement between the two allies had been prompted by a White House news release that said Mr. Noda had told Mr. Obama during a bilateral session here that ‘he would put all goods, as well as services, on the negotiating table for trade liberalization.’”

Today’s Journal article pointed out that, “That triggered a release from the Japanese foreign ministry denying that Prime Minister Noda made such a remark in the summit meeting. Instead, Japanese officials have said Japan would enter the talks to learn the terms necessary but hasn’t promised to negotiate over every contentious issue.”

Meanwhile, The Washington Post editorial board noted on Saturday that, “And so Prime Minister Yoshihiko Noda’s decision to join talks on establishing the Trans-Pacific Partnership (TPP), a broad, U.S.-backed ­Asia-Pacific free trade agreement, represents not only a potentially historic change in Japan’s global role but also a promising development in U.S.-Japan relations.

“Yes, it is easy — and far from inaccurate — to characterize Mr. Noda’s decision as a tentative one, easily thwarted or undone. Negotiating the elimination of tariffs between the United States, Japan and other potential TPP countries, such as Australia, New Zealand, Vietnam, South Korea and Chile, will be complex — more complex with Japan involved. Though Japan’s exporters see TPP as an opportunity they cannot afford to miss, Mr. Noda faces resistance from the powerful lobby representing Japan’s protected, inefficient farm sector.

“This is why U.S. Trade Representative Ron Kirk emphasized that Japan must be prepared to meet ‘high standards’ of liberalization and to address U.S. concerns over non-tariff barriers. Domestic U.S. automakers are already sounding some of the same alarms about Japanese protectionism that they raised over the South Korea free trade agreement.”

The Wall Street Journal editorial board noted today that, “Prime Minister Yoshihiko Noda’s announcement Friday that Japan will join the Trans-Pacific Partnership talks is a huge potential boost to global free trade. If successful, the deal will encompass countries accounting for 35% of the world economy, making it a template for future World Trade Organization agreements.

“The biggest winner will be Japan, if it can find the political will to follow through.”

The Journal stated that, “Imported rice [in Japan] faces a 778% tariff, which has shielded farmers from market pressure to consolidate their small plots. The average farm is less than two hectares worked by a 66-year-old farmer. The farm lobby opposes change, but young people aren’t taking over the farms.”

Also note that on Friday, the National Pork Producers Council stated in a news release that, “The National Pork Producers Council today welcomed Japan’s announcement that it would like to join the Trans-Pacific Partnership (TPP) multi-lateral trade talks…Japan is the No. 1 market for the U.S. pork industry, which in 2010 exported $1.65 billion of pork to the Asian nation and which in the first nine months of this year has shipped $1.44 billion.”

Keith Good

Farm Bill; Budget Issues; Ag Economy; and Trade

Farm Bill Issues

DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “Senate Agriculture Committee Chairman Debbie Stabenow huddled with several farm state senators on the Senate floor Thursday while committee staff made themselves available in a room off the Senate floor to answer questions as the Veterans Day weekend approached.

“Stabenow, D-Mich., her staff and House Agriculture Committee Chairman Frank Lucas, R-Okla., have been working on a new farm bill proposal to send to the super committee in charge of deficit reduction, which must finalize its bill by Nov. 23. The House has been out of Washington this week, but will be in Washington next week. Stabenow, Lucas, Senate Agriculture Committee ranking member Pat Roberts, R-Kansas, and House Agriculture ranking member Collin Peterson, D-Minn., have told the super committee they would agree to a cut of $23 billion in agriculture programs over 10 years, but they want to rewrite the farm bill in the super committee bill because it would not be subject to amendment or filibuster.”

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Farm Bill; Agricultural Economy and Trade

Farm Bill Issues

Daniel Looker reported yesterday at Agriculture.com that, “One of the reasons there is still no farm bill to offer to the deficit trimming Super Committee in Congress is that members of the ag committees still haven’t seen a written draft of the bill.

“That’s the view of Roger Johnson, National Farmers Union President, who spoke with Agriculture.com by telephone Thursday from the National Association of Farm Broadcasters conference in Kansas City.

“‘Members aren’t going to vote for something until they see it written, and they shouldn’t,’ Johnson said. Nor would his group, and probably most other farm groups, endorse the legislation without seeing it, he added.”

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