FarmPolicy

September 16, 2014

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.”

Mr. Hagstrom explained that, “A well-placed congressional aide told DTN that the committee staffs are ‘still finalizing a few things,’ but that the bill should be released this week, possibly Wednesday. But another key aide said he was unaware that the bill had moved that close to resolution, even though members are under intense deadline pressure.

“In addition, House Agriculture Committee ranking member Collin Peterson, D-Minn., told reporters Tuesday that the leaders had gotten a score from the Congressional Budget Office that was over the amount that can be spent, according to the super committee requirements.”

The DTN article noted that, “Meanwhile, USDA Chief Economist Joe Glauber said Tuesday that most of the programs under consideration would be likely to be categorized as trade-distorting under WTO rules.

“The ‘shallow loss’ revenue program would probably be categorized as a product-specific trade distorting subsidy in the amber box, disaster aid would be non-product specific in the amber box, direct payments linked to the cost of production would be amber box and the new dairy program could be categorized as green or amber or put in the mid-distorting blue box depending on how it is finally constructed, Glauber said.”

“Commodity prices have been so high and price-related subsidy payments have been so low that the United States is way below its allowed level of $19.6 billion per year in trade-distorting subsidies, Glauber said. Tying program payments to actual losses would raise the potential for higher outlays under trade distorting payments in the future, he said, but he also noted that agriculture committee staffers working on the new bill have been very conscious of the WTO implications of the proposals and have frequently sought his opinion on them,” the DTN article said.

David Rogers reported last night at Politico that, “Is the supercommittee’s flu contagious, infecting all of Congress with more angst than answers?

“So it seems these days as once-promising farm bill talks — tied to the deficit panel — bounce about like flotsam on the ocean.”

Mr. Rogers pointed out that, “In the case of the farm bill, the challenge has been not only to write a package that will save $23 billion over the next 10 years but also to complete this task in time to catch the supercommittee train — if it leaves the station next week.

“House Agriculture Committee Chairman Frank Lucas hails from the landlocked state of Oklahoma, but listen to him describe the emotions of the moment:

“‘This is like the ocean — you pitch up, and you pitch down and you pitch up. And right now, we are on the upside of a wave,’ Lucas told POLITICO. ‘The devil’s in the details here, but I am more optimistic now than I have been in several days.’”

The Politico article added that, “Twenty-four hours before, the outlook appeared much darker given fresh cost estimates from the Congressional Budget Office showing that the commodity title in the draft farm bill was at risk of overshooting the spending target by as much as $7 billion to $8 billion over 10 years. The chief culprit was the Senate’s insistence on a more generous structure for a new revenue insurance program for farmers, and as a result, Lucas and Agriculture Committee leadership have been pitted against powerful Senate Democrats from Great Plains wheat country.

“Senate Budget Committee Chairman Kent Conrad of North Dakota and Finance Committee Chairman Max Baucus of Montana are most prominent. Baucus’s clout as a member of the supercommittee adds to the intrigue, and commodity groups have always calculated that their safest course is to wrap the farm bill into the deficit package so as to avoid floor amendments.”

Mr. Rogers noted that, “The revenue insurance concept in the draft bill builds on the current crop insurance program and would add an extra layer of protection against shallow losses not covered by a farmer’s individual policy.

“Thus, a producer might buy coverage for up to 75 percent of his losses, and the new plan would add a 12-point band of 76 percent to 88 percent, for example. Those losses would be judged on a countywide standard — an approach that is easier to administer and guards against abuse. But for Great Plains states, where counties are bigger and the weather and soil conditions more hazardous than the Midwest Corn Belt, this is a less attractive outcome.

Thus, Conrad and Baucus have pressed for a more individualized, farm-based standard rather than the countywide approach. But as the CBO numbers showed, the costs of the revenue program would jump to about $24 billion and put in jeopardy other safety-net provisions if the committee is to meet its spending targets.”

Meanwhile, a news release from Rep. Jeff Flake (R-AZ) earlier this week stated that, “[Rep. Flake] today urged the Joint Select Committee on Deficit Reduction to reject proposals allowing the reauthorization or creation of new Farm Bill programs and entitlements in the Committee’s recommendations for deficit reduction.

“‘The Supercommittee is tasked with finding ways to reduce the federal deficit, not to add to our fiscal woes with more bloated agriculture programs,’ said Flake.”

A paper released yesterday by Kansas State Agricultural Economist G. A. (Art) Barnaby, Jr. (“Do Administrative Costs Count in The Farm Bill?”) stated that, “Press reports are suggesting a Farm Bill will have multiple commodity program options. This will increase the administrative cost for implementation of a commodity program. Given the size of the proposed cuts in commodity programs, a complicated program with ‘large’ administrative costs may (will?) approach the point where administrative costs exceed the benefit to farmers. Farm level loss adjustments and multiple program options, etc. will add to the administrative cost of the Commodity Title.”

Dan Wheat reported on Tuesday at the Capital Press Online that, “Direct payments likely will be eliminated, Conservation Reserve Program acreage likely will decline over time and everything else is still up in the air for the new farm bill.

“That’s what Bob Stallman, president of the American Farm Bureau Federation, predicted Nov. 15 at the Washington Farm Bureau annual convention at the Yakima Convention Center.

“Commenting on negotiations among congressional agricultural committee leaders on a new farm bill, Stallman said progress is difficult and that no one is happy with the way things are proceeding. Nutrition, conservation, research and crop support programs are all areas of major discussion and it’s difficult to get agreement, he said.”

The article added that, “Corn, soybean and wheat growers support the so-called shallow loss system covering small losses but only relatively small amounts of producers’ losses in major events, he said.

Cotton and peanut farmers want even different programs and the Farm Bureau is pushing its Systematic Risk Reduction Program giving growers greater coverage in the event of big losses, he said. The same program should be in place for all so the marketplace drives farmers’ decisions, not government programs, he said.”

With respect to dairy issues, National Milk Producers Federation President & CEO Jerry Kozak was a guest on yesterday’s AgriTalk radio program with Mike Adams.  To listen to their discussion from yesterday, which included Farm Bill issues and the Foundation for the Future plan,  just click here.

Meanwhile, Marc Heller reported yesterday at the Watertown Daily Times Online (New York) that, “Members of the congressional ‘supercommittee’ crafting farm policies for the next five years have received $3.7 million in campaign contributions from agribusiness interests since 2001, a nonprofit group reported Tuesday.

“The report by the MapLight organization, which examines the influence of money on politics, shows that milk and dairy producers gave $311,091 in that time period, trailing crop production, forest products, tobacco, sugar producers and livestock.”

 

Supercommittee Issues

Naftali Bendavid and Janet Hook reported in today’s Wall Street Journal that, “One week before Congress’s deficit-cutting supercommittee hits its deadline, and with signs of stalemate increasing, lawmakers Wednesday grappled with the consequences of possible failure.

“Some lawmakers pushed to water down automatic budget cuts that kick in if the panel fails, especially those that would hit the Pentagon. The group has until Wednesday to find a way to reduce deficits by $1.2 trillion over the next decade.

“Others said if the panel deadlocks, Congress should vote on an earlier $4 trillion deficit-cutting plan proposed by the president’s fiscal commission.  Still others noted that if committee members fail to reach a deal, they might suggest a smaller package of several hundred billion dollars that includes the sale of government assets, with the remainder to come from automatic cuts.”

Alexander Bolton reported yesterday at The Hill Online that, “Democratic and Republican members of the Senate’s Gang of Six say they could put together a large deficit-reduction package quickly if the supercommittee misses its Nov. 23 deadline.

“Even if the supercommittee reaches its mandate to find at least $1.2 trillion in savings, lawmakers say more needs to be done.

Gang of Six members say they have almost completed drafting legislation that would implement the deal the group reached this summer. They say they are holding back for now to avoid treading on toes.”

A news release yesterday from Budget Committee Chairman Kent Conrad (D-ND), a member of both the “Gang of Six” and the President’s Fiscal Commission, indicated that, “[Sen. Conrad] joined forces today with a bipartisan group of close to 150 lawmakers from both the House of Representatives and Senate to urge members of the Joint Select Committee on Deficit Reduction to ‘go big.’”   A replay of a related press event on this development from yesterday is available here.

But Jake Sherman and Manu Raju reported yesterday at Politico that, “In sum, all the maneuvering seemed to paint a picture of confusion, panic and blame-passing as Congress, with approval ratings in the gutter, attempts to patch up yet another fiscal mess.

“On a day when the national debt surpassed $15 trillion, the six Democrats and six Republicans on the supercommittee met separately in tense closed-door meetings and strategized with congressional leaders. In phone calls and personal meetings, Republicans discussed proposals old and new a half-dozen times — and each side struggled to coalesce around plans that could pass bipartisan muster, or be used to maximize political cover.”

Nonetheless, Meredith Shiner and John Stanton reported today at Roll Call Online that, “Facing charges that they had not responded to a more-than-week-old plan from Republicans, super committee Democrats disclosed that on Friday they had agreed to many of the pieces of the GOP’s most recent proposal.

“According to Democratic aides familiar with the talks, Democrats on the Joint Committee on Deficit Reduction offered to accept pieces of the GOP framework proposed last week by Sen. Pat Toomey (R-Pa.). The Republicans had offered $401 billion in new revenues and $876 billion in spending reductions, including $275 billion in health entitlement savings — figures Democrats said Wednesday they were prepared to agree on.

But Democrats proposed four major changes: no increase in the Medicare retirement age; no change in the way the consumer price index is calculated; no permanent extension of Bush-era tax cuts; and consideration of some of President Barack Obama’s jobs proposals, including unemployment benefit insurance, a payroll tax holiday and infrastructure projects.”

Russell Berman reported yesterday at The Hill Online that, “Republicans on Wednesday signaled they would consider higher tax revenues to win a supercommittee deal if Democrats offer deeper cuts to entitlement spending.

“Rep. Jeb Hensarling (Texas), a conservative Republican who is the co-chairman of the deficit supercommittee, walked back a statement he made Tuesday on television, when he said Republicans ‘have gone as far as we feel we can go’ by offering to raise $250 billion in new tax revenues.”

In other budget developments, the AP reported earlier this week that, “The U.S. Department of Agriculture said Tuesday it will abandon portions of a sweeping antitrust rule proposed for meat companies if Congress does not provide money for enforcement.

“A Congressional committee voted late Monday to strip funding for the measures in a spending bill the full Congress is expected to approve by the end of this week.”

The article indicated that, “The reforms would have changed how poultry companies pay chicken farmers and made it easier for ranchers to sue meat packers over antitrust violations. The USDA proposed the reforms in response to an order in the 2008 farm bill that it beef up its antitrust rules. But the agency went much further than Congress had asked.

USDA spokeswoman Courtney Rowe told The Associated Press that if the bill passes, the USDA will be forced to abandon the reforms.”

And a news release yesterday from the National Farmers Union [NFU] stated that, “[NFU] sent a letter today to all members of Congress expressing concerns with the Fiscal Year 2012 (FY 2012) agriculture appropriations language in the conference committee report for H.R. 2112.”

 

Agricultural Economy- Land Values

Yesterday’s Commodity News for Tomorrow Email news summary (CME Group, Dow Jones News), stated that, “The sharp rise in U.S. farmland values are becoming an increasing concern, a top regulator overseeing the nation’s largest network of agricultural lenders said.

“‘This environment warrants extreme caution by all parties involved,’ said Leland Strom, head of the Farm Credit Administration.

“Strom’s remarks, at a conference hosted by the Federal Reserve Bank of Chicago to discuss farmland values, came after Federal Reserve banks in Chicago and Kansas City both reported farmland values jumped 25% from a year earlier in the most recent quarter.”

Yesterday’s update added that, “Although Strom didn’t say there was a farmland bubble, his remarks show growing concern since March, when he said a correction in prices was likely, but that there was no bubble. On Thursday he noted extreme volatility in crop values, which is adding to the concern.

“‘These are unprecedented times, these are unprecedented values,’ Strom said.

“But several presenters at the Chicago Fed conference detailed data indicating that farmland values are in line with the underlying strength in the farm economy. Farmers are in a strong financial position, and loan-to-asset ratios are low, they said.”

Keith Good

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