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Budget and Farm Bill; Ag Economy; and Regulations

Budget Issues and the Farm Bill

McClatchy writer Halimah Abdullah reported earlier this week that, “The failure this month of Congress’ so-called supercommittee — the bipartisan panel of lawmakers that was supposed to cut at least $1.2 trillion from looming federal deficits — further complicates the Gang of Six’s efforts to pick up the pieces, [Sen. Saxby Chambliss, R-Ga.] said in an interview Tuesday with McClatchy. The group had hoped to rely on the supercommittee’s framework for cuts, but that committee’s members were unable to agree on the best way to reduce the nation’s debt.

The supercommittee’s failure means $1.2 trillion in automatic spending cuts will kick in January 2013. Half of those cuts will come from defense and the other half from domestic spending.

“‘Now that the debt commission has completely failed we’re in the process of taking our basic proposal… looking at what was done in the spring and during the debt ceiling vote and take out any duplications,’ Chambliss said, adding that he doesn’t have a definitive timeline for filing legislation.”

Jessica Brady reported yesterday at Roll Call Online that, “A bipartisan, bicameral coalition of lawmakers is hoping to resuscitate its quixotic push for a multitrillion-dollar solution to the nation’s deficit and debt problem.

“In the wake of the Joint Committee on Deficit Reduction’s failure last week, members of the ‘go big coalition’ met for more than an hour today in the Capitol to discuss how to move forward in crafting a $4 trillion to $6 trillion deficit reduction package. The group did not have a legislative proposal to discuss but simply weighed whether to work on one that Congress could take up early next year.”

The article quoted Senator Mike Johanns as saying, “‘I guess the encouraging thing for me, not that I can walk out and say, ‘Oh, here are the five things that were agreed upon,’ is that the House and Senate continue to meet, Republicans and Democrats continue to meet,’ the Nebraska Republican said. ‘My hope is that eventually we’ll agree upon a package of proposals that move. But it’s not there yet.’”

Jennifer Epstein reported yesterday at Politico that, “The third-ranking House Democrat, Rep. Jim Clyburn of South Carolina, said Tuesday that he would consider redoing the automatic spending cuts known as the ‘sequester,’ perhaps to reach a deal with Republicans over the payroll tax break.

“But White House press secretary Jay Carney said earlier Wednesday that Obama isn’t open to renegotiating the spending cuts, which are scheduled to take effect in January 2013.”

Meanwhile, on the issue of the pay roll tax break, Becker and Erik Wasson reported yesterday at The Hill Online that, “Senate Republicans have proposed wringing cost savings out of the federal work force and safety net programs to pay for an extension of the current payroll tax cut.

“In a further sign that the debate had shifted to how to, instead of whether, to extend payroll tax relief, Senate Republicans would take a page from President Obama’s own fiscal commission and freeze salaries for federal civilian employees for three years.”

The Hill article added that, “Republicans also incorporated means testing for a host of federal programs in their proposal, including for food stamps, unemployment benefits and Medicare.”

However, Robert Pear and Jennifer Steinhauer reported in today’s New York Times that, “Senate Republican leaders would go after ‘millionaires and billionaires,’ not by raising their taxes but by making them ineligible for unemployment compensation and food stamps and increasing their Medicare premiums. Democrats said that this part of the Republican proposal was not serious, pointing out that high earners were already ineligible to receive food stamps.”

And Meredith Shiner reported today at Roll Call Online that, “However, according to the government’s food stamp information website, households with more than $2,000 in resources are not eligible for food stamps, which casts doubt on the GOP’s case that millionaires are benefiting from that program.”

Also of interest, Politico writers Jake Sherman and Manu Raju reported yesterday that, “House Majority Leader Eric Cantor is quietly working both sides of the Capitol to build support for a plan to scale back automatic spending cuts [sequestration triggers] and combine the proposal with a wide range of critical year-end tax and spending measures.

“What it amounts to is a major year-end pitch: Democrats and President Barack Obama would get their much sought-after payroll tax cut extension and jobless benefits, while Republicans would tweak the Pentagon cuts that defense hawks hate.”

With this budget background in mind, DTN Ag Policy Editor Chris Clayton reported yesterday that, “Lawmakers will need to pick up the pieces of the farm bill process early next year and Senate Agriculture Committee Chairwoman Debbie Stabenow says she will push her committee to mark up a bill in early spring and shoot for passage despite election-year politics.

The DTN article noted that, “Stabenow said the farm-bill process will restart in late January or early February with more hearings, but will begin with a stronger and more fleshed out foundation, Stabenow said.

“‘I’m hopeful we’ll have a markup in early spring,’ Stabenow said. ‘Because, if we’re really going to do something and get it through the House, we have to do that. And I think, frankly, we have to provide economic certainty to farmers.’”

Mr. Clayton indicated that, “The supercommittee process offered an opportunity to expedite a bill that caught most farm-policy experts off-guard. While the overall supercommittee effort failed, Stabenow said, ‘The good news about that is we did some really important work and built some great relationships and now we have a real foundation to go forward.’

“In commodity programs, decisions were based on strong public reaction to direct payments. The principal leaders on the House and Senate Agriculture Committees started with the premise of eliminating that $4.8-billion-a-year expenditure, then examining how to improve risk management. Lawmakers heard from farmers about the value of crop insurance, but that doesn’t work well for all commodities, including rice and peanuts. ‘So that’s what complicates the commodity title,’ Stabenow said. ‘It makes it more difficult as we look at different regions of the country.’”

Yesterday’s article pointed out that; “Some lawmakers and farm groups have expressed concern about the need to cut food-aid programs, which take up more than 70% of the USDA budget. Stabenow noted that food aid is high because of high unemployment and poor economic conditions. Once more people are back on their feet, the costs of food aid will decline naturally.”

With respect to the intersection of Farm Bill proposals and the supercommittee, an editorial by the Lansing State Journal earlier this week stated that, “U.S. Sen. Debbie Stabenow, D-Lansing, who chairs the Senate’s Committee on Agriculture, Nutrition and Forestry, played a leading role in the plan. She and her Republican counterpart in the U.S. House should get credit for completing their assignment. Other House and Senate committees didn’t bother to attempt a bipartisan, bicameral compromise. Stabenow and Rep. Frank Lucas, R-Okla., went out on the limb.

“Now that the supercommittee has failed, they’re being criticized for using the supercommittee process to shield a ‘secret’ bill. Here’s the translation for that: Nobody’s happy when cuts happen, least of all lobbyists who didn’t succeed in protecting their turf.”

And a news release yesterday from the Oklahoma Association of Conservation Districts (OACD) stated that, “Leaders of [OACD] today expressed appreciation to Congressman Frank Lucas, Chairman of the House Agriculture Committee for his continued leadership in attempting to craft a Farm Bill under difficult circumstances. Joe Parker, President of the OACD said that the conservation districts in Oklahoma especially appreciate the nonpartisan, policy driven approach being taken by Mr. Lucas and his Senate counterpart, Senator Debbie Stabenow of Michigan in putting together language to continue the work of Conservation in America.”

In more detail on Title I program ideas, Elton Robinson reported yesterday at the Western Farm Press Online that, “As Congress and commodity organizations discuss moving farm policy from target price/direct payments toward some type of revenue insurance, the devil most certainly will be in the details, says Darren Hudson, agricultural economist at Texas Tech University, speaking at the Ag Market Network’s November conference call.

“Areas of possible conflict or concern include disparities in shallow losses between regions and commodities, financing complications as seen by lenders and creditors and the need for commodity producers to better manage more types of risk.”

Yesterday’s article added that, “Hudson noted that the National Cotton Council’s [NCC] shallow loss proposal (STAX) ‘caught a lot in the industry off guard. People had been discussing these types of revenue products for a while, but the cotton group had always been staunchly in favor of direct payment and counter-cyclical type programs.’

In the STAX proposal, the shallow loss plan can be ‘stacked’ with existing traditional crop insurance. The latter would cover greater losses, Hudson noted. ‘What we don’t want is one of the plans crowding out the existing decisions being made by the producer. The STAX proposal is designed where it’s probably not going to offset a lot of that.’”

(For more background on the NCC’s STAX plan, see this recent Delta Farm Press article, “How does NCC crop revenue insurance proposal stack up?”)

Carl Zulauf, Professor in the Department of Agricultural, Environmental and Development Economics at The Ohio State University, penned an update that was posted yesterday at the FarmDocDaily Blog where he provided a closer look at the ACRE program.

More specifically, the update (“Sustainability of Large Payments by ACRE”) noted that, “Like any risk management program, ACRE can make large payments if a widespread, large systemic risk occurs that affects many farmers at once. However, because ACRE’s revenue benchmark can decline by up to 10% per year, it is unlikely that ACRE will make large payments for extended periods. This article examines the ACRE adjustment process over time.”

In a more detailed look at conservation issues, a recent Congressional Research Report (“Agricultural Conservation and the Next Farm Bill” – Nov. 21, by Megan Stubbs) indicated that, “As Congress debates conservation provisions in the next farm bill the focus continues to be on overall federal spending and agriculture’s share. Conservation funding has grown to represent a sizable portion of the overall farm bill baseline and could see reductions during reauthorization. Many in the conservation community see this as inevitable; however, they do not want to see a reduction in conservation that is disproportionate to other areas of agricultural spending. While most producers are in favor of conservation programs, it is unclear how much of a reduction in other farm program spending they would be willing to support to further conservation efforts. Recent reports and studies have shown that conservation measures are effective in addressing environmental concerns; however, spending reductions, program efficiencies, and federal policies surrounding environmental regulation will likely drive conservation farm bill discussion in the 112th Congress.”

In a closer look at nutritional issues, the editorial board at the Los Angeles Times opined today that, “When it comes to school lunches, federal officials apparently can’t see the pizza for the tomato paste. A congressional vote that slightly affected the nutritional content of federally subsidized lunches has prompted cries of outrage because it blocked two proposals by the Obama administration. The whole brouhaha led to silly accusations that the federal government will now count pizza as a vegetable.

“The U.S. Department of Agriculture, as part of a laudable effort to boost the nutritional quality of school lunches served free or at reduced cost to 31 million children, sought to limit the times children were served potatoes to two per week, and to define a serving of tomato paste as a half-cup. That latter move was seen as key because the pizza children are served at school tends to have 2 tablespoons — an eighth of a cup — per slice. Congress countermanded both of those proposals in November when it passed the agriculture appropriations bill, allowing the smaller amount of tomato paste to continue counting as a vegetable; unlimited servings of potatoes also will be allowed.

“The legislation was obviously prompted by pressure from the food industry, but that doesn’t necessarily make it wrong. Potatoes are nutritious, a good source of calcium, fiber and vitamins C and B6. As for the small amount of tomato paste, it takes a half-cup of tomatoes — enough to count as a vegetable serving — to make 2 tablespoons of paste. Slathering quadruple the paste on a slice of pizza might make it a little healthier, but also unpalatable.”

In crop insurance developments, a news release yesterday from USDA stated that, “The U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) has announced a new pilot program of insurance for camelina beginning with the 2012 crop year. Camelina is an oilseed crop with the potential to create new renewable energy markets in the United States, generate rural jobs here at home, and decrease America’s dependence on foreign oil. The new pilot program will be available in selected counties in Montana and North Dakota for the 2012 crop year, with a sales closing date of February 1, 2012.”


Agricultural Economy

Meghan Grebner reported yesterday at Brownfield that, “A recent land auction near Elkhart, Ind. brought over $11,000 an acre.  According to Schrader Real Estate and Auction Company, a bidder combined two tracts of land to purchase just over 57 acres for $740,000.  R.D. Schrader, president of Schrader’s says over the last year they have seen both farmers and farmland investors recognize the true value of tillable land.”

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions.  Commonly referred to as the “Beige Book,” the report included observations with respect to the U.S. agricultural economy; an overview of this aspect of the Fed report has been posted here at the FarmPolicy.com webpage.

Also yesterday, USDA’s National Agricultural Statistics Service released its monthly Agricultural Prices report, which noted in part that: “The corn price, at $6.00 per bushel, is up 29 cents from last month and $1.45 above November 2010 [related graph]; the soybean price, at $11.50 per bushel, decreased 20 cents from October but is 40 cents above November 2010 [related graph]; and the November price for all wheat, at $7.33 per bushel, is up 4 cents from October and $1.23 above November 2010 [related graph].”

And, USDA released a report yesterday (“Outlook for U.S. Agricultural Trade”) which stated that, “Fiscal 2012 agricultural exports are forecast at $132 billion, down $5 billion from the August forecast and 4 percent ($5.4 billion) below final fiscal 2011 exports.. The forecast for U.S. agricultural product imports in fiscal year 2012 is raised $500 million to $105.5 billion from $105 billion forecast in August… The projected trade surplus for 2012 is $26.5 billion. This compares with the surplus of $42.9 billion in 2011.”



Erica Martinson reported yesterday at Politico that, “The House Energy and Commerce Committee operated on the Clean Air Act on Wednesday, passing legislation that would cut into the Environmental Protection Agency’s ability to regulate particulate matter in numerous situations.

“‘We don’t trust EPA. We know they’ll come back. We know they’ll go after dust. … That’s why we have this bill,’ Rep. John Shimkus (R-Ill.) said.

The committee passed its ‘farm dust’ bill, HR 1633, by a vote of 33-16. Republicans also beat back several amendments by Democrats to limit the bill’s scope.”

Meanwhile, Jia Lynn Yang reported yesterday at The Washington Post Online that, “For months Republican lawmakers have targeted specific regulations they want to repeal or block, all in the name of saving jobs. Next up: remaking the entire process for government rulemaking.

“A handful of bills on Capitol Hill would add new layers of congressional involvement to the rulemaking process, in addition to dozens more criteria for agencies when they analyze a rule’s impact on the economy. The net effect, say consumer groups, is that the already slow process for implementing regulations would get even slower.”

And The New York Times editorial board indicated today that, “The Food and Drug Administration last month denied two longstanding petitions asking it to limit the routine feeding of antibiotics to farm animals, a practice that poses a serious risk to human health. Eighty percent of the antibiotics sold in this country are fed to farm animals. The drugs make the animals grow faster, but their overuse increases the likelihood of antibiotic-resistant pathogens. Some antibiotics are used only in animals, but farmers are also using antibiotics vital in human medicine. This is the class of drugs that the petitions, sponsored by several consumer advocacy groups, had hoped to restrict.

“Rejecting these petitions is a bad decision that runs counter to the F.D.A.’s own research. Its studies — and the work of Margaret Hamburg before she became its commissioner — have shown the danger of feeding antibiotics to animals. In letters explaining its decision, the agency acknowledged that its own draft guidelines, released in June 2010, recommend limiting antibiotics to veterinary use to protect the health of animals on a case-by-case basis. But it says the review process involved in banning broad antibiotic use would take too long and would not be ‘resource-efficient.’”

The Times stated that, “But without government regulation and enforcement, the misuse of antibiotics in the farm industry will not change.”

Keith Good