FarmPolicy

August 17, 2019

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.”

Naftali Bendavid reported in today’s Wall Street Journal that, “Republican leaders said Tuesday they would join Democrats in supporting an extension of the 2011 payroll-tax cut despite some reluctance within the GOP, virtually assuring that American wage-earners will continue to receive the benefit next year.

“Republicans still oppose Democrats’ plan to pay for the tax break with a tax on people earning more than $1 million a year. GOP leaders said they would find another way to pay for the tax break and predicted it would pass.”

Although the Journal article did not specifically mention agricultural offsets, today’s article noted that, “GOP leaders haven’t yet said how they want to offset the extension. Privately, lawmakers are discussing some ideas explored by Congress’s deficit supercommittee, such as selling broadcast spectrum and increasing airport fees.”

And Jennifer Steinhauer reported in today’s New York Times that, “Indeed in the Senate, where the fight over the payroll tax break began this week, Republican support for the extension is growing, as long as it is paid for in a way that passes muster with the party.”

More broadly on the budget issue, Scott Wong reported yesterday at Politico that, “The supercommittee’s collapse may have breathed new life into other congressional deficit-cutting efforts, but Senate Majority Leader Harry Reid on Tuesday dismissed a plan by the bipartisan Gang of Six senators as nothing more than ‘happy talk.’

“‘If someone has a proposal about reducing the deficit, the debt, here is my suggestion: Put it in bill form, in writing – not all these happy statements on what people think can be done,’ Reid told reporters after his weekly caucus meeting.”

Yesterday’s article added that, “Earlier this year, the gang unveiled a proposal that would cut roughly $4 trillion from the deficit over the next decade through a combination of spending cuts, revenue increases and entitlement and tax reforms – a plan that’s received backing from about 40 senators from both parties.

“But the group failed to write the proposal into legislation, and punted many of the decisions of how it would be implemented to Senate committees.”

Nonetheless, Meredith Shiner reported today at Roll Call Online that, “With the super committee’s failure last week, industrious lawmakers are grasping yet again at the opportunity to reach a sweeping deficit reduction deal — but they face the same obstacles that have crushed every group that’s tried.

“Still seeing an opportunity in the bleakest of legislative outlooks, the bipartisan ‘gang of six’ met for dinner Monday night in the Capitol office suite of Senate Majority Whip Dick Durbin (D-Ill.) to discuss a post-super-committee Congress. The group has grown to eight — and its members also tout the support of dozens more who attended informal information sessions throughout the summer — but the size of their challenge has not been reduced.”

Ms. Shiner pointed out that, “Lawmakers at the dinner suggested that they talked about talking, but they did not decide whether they would try to fill the void left by the failed Joint Committee on Deficit Reduction. And even if the group wanted to rescue the country from ballooning deficits, it never produced legislative language to back its big goal of reaching nearly $4 trillion in deficit reduction by tackling entitlements and tax reform.

If the gang of six wants to be serious, sources suggest, it will need to come up with a real product sometime in the beginning of 2012. So close to the failure of the super committee, however, that seems like a hefty goal.”

The Roll Call article noted that, “The biggest incentive for the gang and others in Congress to devise a deficit reduction deal is the $1.2 trillion in automatic cuts that were triggered by the super committee’s demise. Those cuts include nearly $500 billion in across-the-board spending cuts to the Department of Defense — cutbacks Defense Secretary Leon Panetta and some Congressional Republicans have deemed catastrophic.”

In more specific news regarding the Farm Bill, Senate Agriculture Committee ranking member Pat Roberts (R-Kansas) was a guest on yesterday’s AgriTalk radio program with Mike Adams.

An audio replay of their discussion from yesterday is available here, while an unofficial FarmPolicy.com transcript of the conversation between Mike Adams and Sen. Roberts can be found here.

Noting the unprecedented procedural developments surrounding the establishment of the supercommittee, Sen. Roberts indicated that, “This was the most odd and unique farm bill process I’ve ever seen, and I’ve seen quite a few. We still don’t have the final language of what was put together. But on at least what we understand, I was pleased with some things and others gave me great concern.

“And so on crop insurance and conservation, we’ve made some progress. On the commodity title we still don’t know, but I just fear the commodity title would take us back to 1985 instead of looking ahead to 2020. I don’t see a situation where it would be in the best interest of American agriculture and our farmers and ranchers to be farming for the program once again, as opposed to the market, or in a situation where we would be inviting a WTO challenge.

So we’re going to have to start from square one. We’re going to have to go back to regular order, which we should do, and we ought to have open and transparent hearings, and all members of the committee should be involved, and I think that that’s what we should be doing and I think we will do that.”

The former House Agriculture Committee Chairman also noted yesterday on AgriTalk that, “First we’ve abrogated our responsibility to a committee that was doomed to failure, apparently, and now we’re going in through a sequester process, which would be very difficult, and then you have a threatened veto by the president. So we’ve got to go through all those sequences of what, and what happens to agriculture during that time I don’t know.

“We’ll be fighting hard to protect agriculture, but also fighting hard to maintain what farmers and ranchers know have to happen in regards to our good faith efforts to contribute to deficit reduction. So what number is out there down the road, I just can’t tell you, facing a sequester or what happens in the future. But one thing I will say, that we ought to let policy drive the number, and not the number drive the policy. And I think we got ahead of ourselves in these negotiations that were given to the committee.”

Meanwhile, a news release earlier this week from Rep. Jim Langevin (D-RI) stated that, “With Congress beginning consideration of the 2012 Farm Bill, which sets national farm and food policy every five years, [Congressman Langevin] organized a public forum today at the Warwick Public Library, where he outlined initiatives he has supported to strengthen Rhode Island’s interests and took input from the state’s farming community about additional ways to benefit the food industry locally.”

The release added that, “In fighting for the Ocean State’s priorities, Langevin has emphasized that unlike other farming regions in the country that focus primarily on commodities like cotton, corn and wheat, Rhode Island produces more specialty crops, including fruits and vegetables, and the state’s farms are predominantly smaller, family owned enterprises that serve New Englanders as opposed to a national consumer base.”

On the issue of nutrition programs, the largest category of Farm Bill spending, Sam Dillon reported in today’s New York Times that, “Millions of American schoolchildren are receiving free or low-cost meals for the first time as their parents, many once solidly middle class, have lost jobs or homes during the economic crisis, qualifying their families for the decades-old safety-net program.

The number of students receiving subsidized lunches rose to 21 million last school year from 18 million in 2006-7, a 17 percent increase, according to an analysis by The New York Times of data from the Department of Agriculture, which administers the meals program. Eleven states, including Florida, Nevada, New Jersey and Tennessee, had four-year increases of 25 percent or more, huge shifts in a vast program long characterized by incremental growth.”

The Times article explained that, “Students in families with incomes up to 130 percent of the poverty level — or $29,055 for a family of four — are eligible for free school meals. Children in a four-member household with income up to $41,348 qualify for a subsidized lunch priced at 40 cents.

Among the first to call attention to the increases were Department of Education officials who use subsidized lunch rates as a poverty indicator in federal testing. This month, in releasing results of the National Assessment of Educational Progress, they noted that the proportion of the nation’s fourth graders enrolled in the lunch program had climbed to 52 percent from 49 percent in 2009, crossing a symbolic watershed.”

 

Crop Insurance

The Administrator of USDA’s Risk Management Agency (RMA), Bill Murphy, was also a guest on yesterday’s AgriTalk radio program.  Mike Adams and Admin. Murphy fleshed out more details of RMA’s recent announcement regarding lower insurance premiums for many corn and soybean famers in 2012.

An audio replay of yesterday’s discussion on crop insurance with Mike Adams and Bill Murphy is available here.

 

Agricultural Economy

The U.S. Department of Agriculture’s Economic Research Service (ERS) provided an updated look at farm income and other economic related data yesterday.

The detailed analysis, “Farm Income and Costs: 2011 Farm Sector Income Forecast,” stated in part that, “Net farm income is forecast at $100.9 billion for 2011, up $21.8 billion (28 percent) from 2010 [related graph].”

The ERS update noted that, “Crop receipts are expected to rise over 16 percent in 2011, reflecting large anticipated increases in prices, especially for hay, corn, wheat, and cotton. Livestock receipts are expected to rise nearly 17 percent, led by strong prices for dairy and red meats. The 2011 forecasts, if realized, will mean record or near-record sales and price levels for many crop and livestock categories and represent substantial increases over last year.”

On the cost side of the ledger, ERS pointed out that, “After falling $12.0 billion (4.1 percent) in 2009 and rebounding a relatively modest $4.5 billion (1.6 percent) in 2010, total production expenses are set to rise $34.4 billion (12.0 percent) in 2011 to a nominal record $320.0 billion. The 2011 jump resembles the large increases in production expenses in 2007 and 2008. This is the first time that expenses will have exceeded $300 billion. When adjusted for inflation, 2011 expenses also set a record, surpassing the previous peak reached in 1979 [related graph].”

On the subject of government payments to farmers, yesterday’s update stated that, “Government payments paid directly to producers are expected to total $10.6 billion in 2011, a 14.4-percent decrease from the estimate of $12.4 billion paid out in 2010. Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.71 billion for 2011. Direct payment rates are fixed in legislation and are not affected by the level of program crop prices. However, the 4.9-percent decline in direct payments forecast in 2011 relative to the 2006-10 average is due to producers having enrolled in the ACRE program. Authorized under the Food, Conservation, and Energy Act of 2008, ACRE provides revenue insurance to producers in exchange for a 20-percent reduction in their annual direct payment allotments beginning with the 2009 crop year.

With respect to program payments based on price levels, strong crop prices are expected to persist through 2011, reducing all expected program payments based on price to $45 million (a decline of 92 percent from 2010 levels). ACRE revenue insurance payments are expected to drop from $422 million in 2010 to $20 million in 2011. Countercyclical payments are forecast to be $17 million made to peanut farmers. Producers of program commodities are expected to receive $8.3 million in marketing loan benefits (MLBs)—including loan deficiency payments, marketing loan gains, and certificate exchange gains [related graph].”

Additional ERS economic data was also updated at this webpage yesterday, “Farm Income and Costs: Assets, Debt, and Wealth.”

Secretary of Agriculture Tom Vilsack issued a statement yesterday regarding the updated income forecast and Reuters writer Charles Abbott reported yesterday that, “While farmers are also seeing soaring land values, the rising fortunes could make the sector a bigger target in Congress where some lawmakers have been calling for a sharp cutback in farm subsidies.”

 

Trade

David Shepardson reported last week at The Detroit News Online that, “The International Brotherhood of Teamsters, Public Citizen and the Sierra Club filed suit Wednesday to block Mexican trucks from operating in the United States.

“Late last month, the first Mexican trucks began entering the United States under a long-delayed pilot program. The issue has been a major point of contention between U.S. labor unions and the Mexican government.”

The article noted that, “In July, U.S. Transportation Secretary Ray LaHood gave the go-ahead for an 18-month pilot program allowing Mexican trucks to enter the U.S. from approved companies.

“Mexican trucking companies have battled to enter the United States for 17 years since they were authorized to enter the U.S. under the North American Free Trade Agreement. They were initially supposed to have full access to U.S. roads by 2000 under the 1994 agreement.”

Mr. Shepardson added that, “Mexican trucks were to begin operating under the pilot program in 2009 before President Barack Obama’s administration halted it. Mexico slapped tariffs of up to 25 percent on about 100 U.S. agricultural exports worth $2.4 billion a year.

Mexico cut the tariffs in half earlier this year after the Obama administration approved a monitoring program for Mexican trucking companies that had been approved earlier. Mexico dropped the rest of the tariffs last month.”

And Alan Beattie reported earlier this week at The Financial Times Online that, “Renewed global economic weakness is threatening a fresh wave of protectionism, compounding government restraints on international commerce introduced earlier in the worldwide financial crisis, according to the EU’s top trade official.

Karel De Gucht, the EU trade commissioner, also sounded a downbeat note about the forthcoming meeting of ministers from the World Trade Organisation’s member countries, saying they had no real plan to strengthen the WTO given the stasis in the so-called ‘Doha round’ of trade talks.”

The article noted that, “Mr De Gucht, in an interview with the FT on Monday, said only 17 per cent of the worldwide total of supposedly short-term protectionist measures put in place in the first phase of the global financial crisis had been reversed. ‘It is true that in the 2008-2009 crisis there was not a significant rise in protectionism,’ he said in an interview. ‘But … the protectionist measures taken during that time and were supposed to disappear – most of them are still in force … Now you see a second wave of protectionism that is more structural.’”

Keith Good

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