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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.”

The DTN article added that, “‘We reviewed our methodology because grower groups said we were letting the bad years have too much weight, and we agreed,’ said Shirley Pugh, RMA spokesperson. The new methodology should better capture actual results with today’s hybrids, she said.

“A few months ago, RMA also announced it will make trend yield adjustments to corn and soybean yields in 2012. In effect, this addresses some of the yield drag that corn growers in particular complained about. The combination of these two actuarial changes should give Corn Belt farmers more bang for their insurance buck.”

Reuters news reported yesterday that, “U.S. corn and soybean growers will pay lower rates from crop insurance in 2012 — down by an average 7 percent for corn and 9 percent for soybeans, the federal overseer said on Monday.

“The U.S. Agriculture Department’s Risk Management Agency said the lower premium rates were a result of updated methodology for setting rates. Administrator Bill Murphy said premium rates will more accurately reflect risks under the revisions.

“The USDA pays 60 cents of each $1 in crop insurance premiums. Crop insurance subsidies were forecast for $7 billion in the fiscal year that ended on Sept. 30.”

The Reuters article pointed out that, “‘Our farmers have historically paid more than their fair share of crop insurance premiums and we are pleased to see this is finally coming to an end,’ said Gary Niemeyer, president of the National Corn Growers Association [related news release].

“But the Illinois Corn Growers Association said corn rates were still too high, compared with losses. It said ‘over-payments have accrued to crop insurance companies as profit.’”

Yesterday’s article added that, “An industry trade group, National Crop Insurance Services, said growers ‘should pay fair premium rates, based on sound actuarial methods and principles’ but it had questions about the new procedures.”

A news release yesterday from the Crop Insurance and Reinsurance Bureau (CIRB) stated that, “As providers of crop insurance and jobs across rural America, the member companies of the Crop Insurance and Reinsurance Bureau (CIRB) expressed concerns about USDA’s announcement today regarding the implementation of a new rating methodology for setting corn and soybean crop insurance premiums. While CIRB appreciates that the novel methodology proposed in August was not fully adopted, CIRB remains concerned about implementing certain rating adjustments in 2012 – at a time after providers have made business decisions for the upcoming crop year, have already submitted business plans to the Risk Management Agency for approval, and during the period in which providers are in the process of acquiring commercial reinsurance.

“CIRB supports an actuarially sound crop insurance program and urges USDA to consider all consequences – technical, operational, and programmatic – in a transparent manner as it moves forward with any evaluation of additional rating methodology changes.”

Meanwhile, a Radio News Service item from USDA yesterday (“USDA Moving to Lower Corn and Soybean Insurance Premiums” -one minute audio overview) indicated that, “Corn and soybean producers may be pleasantly surprised at what they may be paying to insure next year’s crop.”

An additional USDA audio clip from RMA Administrator Bill Murphy is available here, “Actuality: One Reason Crop Insurance Rates Are Changing.”


Budget and Farm Bill Issues

Manu Raju reported yesterday at Politico that, “Can the Senate’s Gang of Six finally rise to the occasion?

“In the wake of the supercommittee’s pre-Thanksgiving Day failure, the six negotiators plan to meet Monday evening in Senate Majority Whip Dick Durbin’s office to discuss the bipartisan plan they have struggled with since January.

“But don’t expect much from the meeting, aides said, especially because the six senators have routinely held talks for months. Sen. Kent Conrad (D-N.D.) said the meeting was being held because Durbin had promised dinner for the group and that it would be a ‘challenge’ to propose new legislation by year’s end.”

The Politico item added that, “Still, it’s a sign that the group may try to reassert itself into the deficit debate with Republicans and Democrats at loggerheads on tax reforms and entitlement cuts and Congress unable to reverse the mounting $15 trillion debt.

“‘The question is where do we go from here?’ said Sen. Saxby Chambliss (R-Ga.).”

The update noted that, “But the group never publicly unveiled its legislative language — offering only a brief outline of its ambitious proposal — and left many of the details on cuts and tax reforms to the congressional committees of jurisdiction to meet certain goals on budget savings. It’s uncertain how far the plan would go given the general lack of enthusiasm from congressional leaders, especially Republicans uneasy about its $1 trillion goal in new revenues. And if the details of the bill are publicly unveiled, some of that initial support could erode, participants acknowledge.”

Meanwhile, Jonathan Allen reported yesterday at Politico that, “In official Washington-speak, the process is known as sequestration.

“But the mandatory reductions of $1.2 trillion in spending — also known as the trigger — are very real and are on track to slash many government programs.

“By any name, they mean pain, both for the Pentagon and for the weaklings among domestic programs.”

The article stated that, “Unless Congress reverses the trigger before January 2013, the federal government will have to start making plans for these cuts.”

“Because big agricultural subsidies fall on the mandatory side of the spending ledger and most other mandatory spending has been exempted from the cuts, farm-state lawmakers and their constituents are on a course to get hammered by the trigger. That’s why farm-state lawmakers in both chambers and in both parties scrambled to come up with a bipartisan plan for deficit reduction in areas under their jurisdiction. But to no avail. Some argue the sector is doing just fine and can take the cut,” yesterday’s Politico article said.

And Alexander Bolton reported yesterday at The Hill Online that, “Senate Majority Leader Harry Reid (D-Nev.) plans to move a $1 trillion spending bill in December, a strategy that will spark a backlash from Tea Party conservatives.

“If conservatives torpedo the omnibus measure, Reid and other Democratic leaders would likely be forced to accept another long stopgap spending measure or risk a government shutdown when funding runs out at midnight Dec. 17.

“The federal government has been operating on stopgap spending measures since the fall of last year, and many lawmakers are tired of ceding their oversight authority.”

The Hill article explained that, “During a conference call with reporters on Monday, Reid said that appropriators have done too much work to default to another yearlong stopgap. There’s not enough time to pass the spending bills individually or in smaller packages known as minibuses.

“‘We hope to work this process through so we won’t do a CR,’ he said, using an abbreviation for a continuing resolution to fund government. ‘We have already passed a number of appropriations bills. We would put all the others into one package and try to get them done.’”

In more specific news regarding the Farm Bill, in this week’s Agri-Pulse Open Mic program, Agri-Pulse Senior Editor Stewart Doan interviewed Rep. Jack Kingston (R-Ga.).

A summary of the interview stated in part that, “The Chairman of the House Appropriations Agriculture Subcommittee is our guest this week on Open Mic. Georgia Republican Jack Kingston reviews the just-enacted USDA spending bill for fiscal 2012 and explains how the contentious floor debate on the House version of the bill served as a preview of the 2012 Farm Bill debate.”

The entire Open Mic interview is available here, while a short clip from the discussion regarding the appropriations process and the prelude to the Farm Bill debate is available here (MP3- 3:17).

An Inside U.S. Trade article from Friday reported that, “With the failure of the congressional ‘super committee’ to reach a compromise on deficit reduction, the fate of a rushed budget cut proposal affecting U.S. agriculture subsidies is now unclear, with agriculture sources saying it could serve as a template for future farm legislation or simply be scrapped altogether because of its controversial aspects.”

The article added that, “Whatever happens, the failure of the JSC [Joint Select Committee on Deficit Reduction- supercommittee] means that the process of creating the next farm bill will become more complicated than it was with [Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.)] and [House Agriculture Committee Chairman Frank Lucas (R-Oklahoma)] hammering it out behind closed doors, sources said. Lucas has a number of Republican freshman on his committee who identify with the Tea Party and are unfamiliar with agriculture policy, and they may demand cuts or changes that stakeholders would find unpalatable.”

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., says that following the Thanksgiving recess, she plans to continue work on the proposed farm bill that she and House Agriculture Committee Chairman Frank Lucas, R-Okla., drafted for the failed supercommittee.

“Stabenow and Lucas prepared their draft in secret, largely unaided by members of their respective committees. Their hope was to convince the supercommittee to include their farm bill in a deficit reduction proposal that would have been brought to Congress under the condition that no amendments were permitted. Thus, when the supercommittee gave up efforts to draft a deficit reduction proposal, it also short-circuited the unusual farm bill process.

The Stabenow-Lucas draft now will see the light of day, perhaps even receiving a subcommittee or full committee hearing. Once that draft is made public, it should be interesting to see how it changes once all parties — members of Congress, farm groups, consumer groups, environmental groups, anti-hunger groups, agricultural researchers, and others — have an opportunity to register their suggestions.”

And a news release yesterday from Senator Tim Johnson (R-SD) stated that, “[Sen. Johnson] brought together a cross-section of South Dakota’s agricultural leaders for a farm bill listening session to hear their priorities for the rewrite of the legislation. Johnson also highlighted the results of his farm bill surveys, which he sent to South Dakotans across the state over the last year to get their input on the current farm bill and how it can be improved during the reauthorization process.”

“During the listening session, Johnson released the results of his farm bill surveys, which he mailed to South Dakotans across the state and featured on his website to get their feedback in preparation for the reauthorization process. More than 1,000 people shared their input with Johnson, who will be forwarding the results to the Chairman of the Senate Agriculture Committee.”


Agricultural Economy

The AP reported earlier this week that, “The United Nations has completed the first-ever global assessment of the state of the planet’s land resources, finding in a report Monday that a quarter of all land is highly degraded and warning the trend must be reversed if the world’s growing population is to be fed.

“The U.N. Food and Agriculture Organization estimates that farmers will have to produce 70 percent more food by 2050 to meet the needs of the world’s expected 9 billion-strong population. That amounts to 1 billion tons more wheat, rice and other cereals and 200 million more tons of beef and other livestock.”

Meanwhile, with respect to U.S. crop prospects for next year, University of Illinois Agricultural Economist Darrel Good noted yesterday (“Corn and Soybean Demand and Acreage Prospects for 2012”) that, “While the markets will continue to reflect changing demand prospects for the 2011 crop, the potential size of the 2012 U.S. crops will also begin to have more influence as the new calendar year begins.  Prospects for the 2012 crop begin with expectations about planted and harvested acreage for all crops and for individual crops.  Anticipating total planted acreage is made difficult by the fact that planted acreage varies considerably from year to year.  In general, an increase in total acreage is expected next year due to the large area of prevented plantings in 2011.  The USDA’s Farm Service Agency reports 9.6 million acres of prevented plantings in 2011, up from 6.9 million in 2009 and 4.2 million in 2008.  However, the change in prevented plantings is not closely correlated to the change in planted acreage.  The USDA’s National Agricultural Statistics Service estimates that planted acreage of all crops increased by 1.4 million acres in 2011 even though prevented plantings increased by 2.7 million acres.  Harvested acreage of hay declined by 2.26 million, so that total crop acreage declined by only 860,000 acres.

Another reason to expect an increase in crop acreage in 2012 is the net decline of 1.6 million acres enrolled in the Conservation Reserve Program in 2011.  It is not clear how much of that acreage will be planted in the fall of 2011 or spring of 2012, but some of that acreage will likely come back into crop production.

In addition to an increase in planted acreage in 2012, it is generally expected that a larger percentage of the acreage will be harvested in 2012 than in 2011.  While harvested acreage estimates for corn and sorghum silage have not yet been made, it appears that unharvested acreage of all crops in 2011 was nearly 9 million acres larger than in 2010 and 3 million acres larger than in 2009.  Most of the year-over-year increase in abandoned acres was for area planted to wheat and cotton, reflecting the widespread drought conditions in the southwest.”


Trade- EU

Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “The ethanol industry’s main subsidy is set to end soon, but that hasn’t stopped European competitors from trying to get taxes slapped on the U.S.-made biofuel, claiming that subsidies make it unfairly cheap.

“The European Commission has opened an anti-dumping case against U.S. ethanol that could result in duties being imposed on the product at a time when the American industry has been relying on exports as a growing market.”

Also yesterday, Reuters writer Doug Palmer reported that, “The United States and the European Union took a step on Monday toward launching bilateral trade talks to help create jobs on both sides of the Atlantic by capitalizing on already strong economic ties.”


Senate Agriculture Committee Hearing

Bloomberg writer Silla Brush reported yesterday that, “Jon S. Corzine, the former New Jersey governor and U.S. senator who led MF Global Holdings Ltd. before the firm sought bankruptcy protection on Oct. 31, has been called to testify Dec. 13 at a Senate Agriculture Committee hearing on the collapse.

“Corzine, who was chairman and chief executive officer of the New York-based firm, was asked to testify alongside MF Global customers who face as much as $1.2 billion in missing funds, Senator Debbie Stabenow, the Michigan Democrat who leads the panel, said in a statement today.”

A news release yesterday from Sen. Ag. Comm. ranking member Pat Roberts (R-Kansas) indicated that, “[Sen. Roberts] today applauded Chairwoman Debbie Stabenow (D-Mich.) for honoring his repeated requests for a hearing solely examining the MF Global bankruptcy and for also responding to his calls asking for former MF Global CEO Jon Corzine to testify.”

Keith Good