Budget and Farm Bill Issues
Pete Kasperowicz reported on Friday at The Hill’s Floor Action Blog that, “Next week starts a hectic two-week period in which Republicans and Democrats hope to reach several agreements on issues like 2012 spending, a payroll tax cut extension, and some form of unemployment benefit extension.”
The Hill update explained that, “The 2 percent payroll tax cut that expires this year will also be front and center. Senate Democrats this week tried to push through an extension of that cut that also expanded it to a 3.1 percent cut, and spent the week daring Republicans to oppose it.
“But Republicans said that while they want the cut, they don’t want the Democrats’ pay for, which was a tax on income above $1 million. Senate Majority Leader Harry Reid (D-Nev.) has hinted that he might revisit the payroll bill, and Republicans on Friday presented several ideas for paying for the extension, like a freeze in federal pay and workforce reductions.”
Beyond the payroll tax extension, the AP reported on Saturday that, “[Lawmakers are] ready to commit up to $50 billion more to continue unemployment benefits to people out of work for more than half a year…And doctors have no reason to doubt they won’t be rescued, again, from steep cuts in their Medicare payments. Combine that with the tax cuts and jobless benefits, and Congress could add almost $200 billion to the federal ledger this month.”
Janet Hook and Naftali Bendavid reported in Saturday’s Wall Street Journal that, “On the tax question, both [House Speaker John Boehner (R-Ohio)] and Senate Minority Leader Mitch McConnell (R., Ky.) have said the break should be extended, but that its cost should be offset with spending cuts…To reinforce his party’s commitment to reducing the deficit, Mr. Boehner proposed offsetting the roughly $200 billion cost of the bill with a menu of spending cuts, including a hiring freeze on federal workers.”
As the budget debate on payroll taxes, unemployment benefits, the Medicare “doc fix” and other issues proceed to resolution, some observers have warned that federal farm programs could be a potential source for offsetting the costs of some of these measures.
Friday’s Agriculture Today radio program (Red River Farm Network (RRFN) – with Randy Koenen) included a report highlighting recent remarks on the budget process and the Farm Bill from House Agriculture Committee Ranking Member Collin Peterson (D-Minn.). Rep. Peterson spoke late last week by a video link from Washington, D.C. to an American Crystal Sugar Company meeting; a replay of his remarks is available at this RRFN link. (MP3- 10:35).
In part, Friday’s Agriculture Today program stated that, “[Rep. Peterson] said budget offsets are needed and that could impact the Farm Bill.”
Rep. Peterson stated that, “‘There’s a slim chance that the work that we did and the $23 billion reduction may be called upon in that process to help them come up with the money to pay for these other ideas,’ said Peterson, ‘I talked to the chairman and we’re in a waiting mode now to see how that process plays out; if that doesn’t happen, then we will have to go back to regular order and the idea, I think, is to start in early February in the House, probably have a couple hearings and then get into marking up the bill.’”
To listen to a clip from Friday’s Agriculture Today program, which includes a brief replay of a portion of the remarks from Ranking Member Peterson, just click here (MP3- 2:13).
And yesterday, The Washington Post editorial board pointed out that, “Lawmakers probably will turn to a mix of previously identified savings, such as auctioning spectrum or cutting agriculture subsidies [as a way to pay for the payroll tax cut].”
Meanwhile, Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “Senate Majority Leader Harry Reid (D-Nev.) will unveil a compromise proposal on Monday to resolve the simmering congressional dispute over whether and how to extend a payroll tax holiday.
“Sen. Kent Conrad (D-N.D.), speaking on Fox News Sunday, said that Reid informed him over the weekend that the compromise proposal was coming Monday.” (To listen to Senator Conrad’s remarks on this issue from yesterday, just click here (MP3- 0:51).
Paul Kane reported in today’s Washington Post that, “On Sunday, Democrats said Reid would make a new offer, perhaps Monday, to provide offsetting savings from a tax benefit that some economists say adds an extra 1 percent to economic output. House Speaker John A. Boehner (R-Ohio) is likely to offer his own proposal this week, setting up potentially dueling votes over the proposals by week’s end.
“Reid and Boehner are probably headed for a final negotiation on the payroll tax that will initiate a two-track process for the legislation, which the leaders say must pass before Christmas. Along with the tax holiday, leaders are considering attaching an extension of unemployment insurance benefits and a measure to adjust Medicare payments to doctors — all of which, according to Boehner, will need accompanying spending cuts to make the package deficit-neutral.
“In addition, Congress has until Dec. 16 to iron out the final pieces of a spending blueprint for roughly two-thirds of the federal government, a huge package that sets federal agency budgets at $1.043 trillion for 2012.”
As stakeholders keep an eye on budget developments, Tom Lutey reported yesterday at The Billings Gazette Online (Mont.) that, “Outside the House and Senate Agriculture committees that craft the farm spending bill, calls for deep cuts are coming from Republicans and Democrats alike. The Tea Party-backed group FreedomWorks, lead by former U.S. House Republican Majority Leader Dick Armey, is calling for the end of all farm subsidies and has support in the U.S. Senate. House Budget Committee Chairman Rep. Paul Ryan, R-Wis., proposed a $30 billion cut to farm subsidies over the next decade. Democratic President Barack Obama’s deficit plan, released earlier this year, included a $33 billion farm subsidy cut over 10 years.”
Burt Rutherford reported last week at Beef Magazine Online that, “On the legislative front, [Neb. GOP Sen. Mike Johanns] says he’s disappointed that the Joint Committee on Deficit Reduction wasn’t able to reach any agreement on federal spending cuts. But, in the case of the farm bill, that may not be all bad.
“The farm bill proposal that was submitted to the joint committee was developed behind closed doors. ‘I have to tell you, I fundamentally believe government works best when there’s lots of sunshine. I’ve always been a fan of transparency and public discussion. The idea of developing a five-year farm policy plan without an open process concerned me a great deal.’”
The “Washington Insider” section of DTN reported on Friday (link requires subscription) that, “Already, critics are suggesting that the sunshine of next year’s [Agriculture] committee hearings on the details of the leaders’ proposals may make them a hard sell to representatives of other segments across the economy where asset prices are not booming nor incomes bouncing at or near record levels.”
But with respect to higher farm income levels being reported during the Farm Bill debate, Bloomberg writer Alan Bjerga noted last week (On the Economy radio program) that producers will recall a similar situation when the 1996 Farm Bill was developed -only to see commodity prices fall substantially after the Bill was implemented- related audio here (MP3-0:22).
On the issue of commodity prices, Gregory Meyer reported on Friday at The Financial Times Online that, “Rabobank, a top lender to agribusiness, forecast grain prices weakening from the historic highs of 2011, potentially levelling off food inflation in the year ahead…‘We anticipate an increased supply of many agri commodities to result in lower prices in 2012, but we do not expect a price collapse due to supportive demand and only a modest build-up of inventories,’ said the bank.”
Meanwhile, The Kiplinger Agriculture Letter indicated on Friday that, “Politics may delay a new farm bill until ’13. Some GOP senators see political advantage in stalling until after next year’s elections in the hopes of getting a bigger say if the GOP wins control of the Senate and the White House and keeps it in the House.”
The Louisville Courier-Journal reported on Saturday that, “Family farms — and the rest of the U.S. economy — are threatened by regulation from the Obama administration, Senate Minority Leader Mitch McConnell told the Kentucky Farm Bureau Federation’s annual meeting on Saturday…[H]e said the Obama administration consists of academics and former elected officials, and doesn’t understand agriculture.
“‘This administration is the most hostile to rural America as any I’ve ever seen, because apparently none of them have had any experience with it,’ McConnell said.”
Ana Campoy reported in today’s Wall Street Journal that, “Some farmers are opposing new rules proposed by the federal government that would restrict the chores children can be hired to perform in the nation’s fields, including driving tractors and rounding up cattle in corrals on horseback.
“The U.S. Department of Labor says its proposal aims to look after children’s safety in a dangerous industry. The rules would bar most farm hands younger than 16 years old from jobs such as operating power equipment, branding and breeding farm animals, and working atop ladders at heights over six feet.
“Farmers say the planned regulations are overreaching.”
Agriculture Committee’s Oversight- CFTC Issues
David Rogers reported on Friday at Politico that, “Tired of waiting, the House Agriculture Committee moved Friday to subpoena former New Jersey Democratic Sen. Jon Corzine to testify regarding the collapse of MF Global and the loss of customer funds belonging to farmers who relied on the futures broker.” (See related article, “Shock waves from MF Global collapse felt on farms”).
“The bipartisan action reflected the growing impact of the scandal and appeared to break the ice in Congress as hours later, Sen. Debbie Stabenow (D-Mich.) who chairs the Senate Agriculture Committee, announced she would also seek a vote in her panel next week to compel her former colleague to appear.”
Reuters writers Alexandra Alper and Charles Abbott reported on Friday that, “Investigators are searching for as much as $1.2 billion in missing customer money, which regulators said the firm may have diverted for its own needs – a major violation of industry rules. Regulators are probing MF Global’s business practices, including its accounting and disclosures. The FBI also has shown an interest in the missing funds. Neither MF Global nor its executives has been charged with wrongdoing.”
Reuters writer Christopher Doering reported on Saturday that, “MF Global took futures segregated money and put it into the account for customer securities, essentially mixing futures and securities that were both owned by customers, said an official familiar with the matter.
“Until now, it was believed that only customer futures accounts were affected.
“The source also told Reuters that MF Global had been using customer funds for ‘several days if not weeks’ rather than just a few days before the firm collapsed.”
Meanwhile, Katy Burne and Jamila Trindle reported in Saturday’s Wall Street Journal that, “Critics of last year’s Dodd-Frank financial-overhaul law are taking their fight to the courts, after first lobbying lawmakers and then regulators to push back a rule aimed at curtailing bets in commodities markets.
“Two Wall Street trade groups—the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association—on Friday filed joint lawsuits against the Commodity Futures Trading Commission. The groups are seeking to throw out the rules creating new limits on traders’ speculative positions or for regulators to be forced to justify the necessity of the rules before they go into effect.”
Liam Pleven and Tom McGinty reported in today’s Wall Street Journal that, “Government reports about the U.S. corn crop have become increasingly unreliable of late, contributing to wild swings in corn prices, a Wall Street Journal analysis shows.
“Over the past two years, the Department of Agriculture’s monthly forecasts of how much farmers will harvest have been off the mark to a greater degree than any other two consecutive years in the last 15, according to a Journal analysis of government data. This year’s early-season forecasts also appear to have been way off. The next monthly report is due on Friday.
“At the same time, periodic stockpile reports—government estimates of how much corn is stored in farm silos and other storage facilities—have generated big surprises. The average monthly swings in stockpile estimates between May and October, the heart of the growing season, have been greater this year than in any year since 1996, according to the Journal analysis.”
The Journal article added that, “USDA officials blame unpredictable weather for recent errant production forecasts. They say the figures are snapshots that change based on fresh information, such as damage caused by heat waves or changes in consumption patterns.
“‘If somebody’s going to be in these commodity markets, they better understand these things are subject to change,’ says Gerald Bange, chairman of the USDA’s World Agricultural Outlook Board, which is involved in producing the data.”
Today’s article indicated that, “Darrel Good, a professor at the University of Illinois who has written extensively about USDA data, says that a number of recent quarterly stockpile reports have been simply incorrect—the numbers have been higher or lower than the actual amounts in storage. ‘Things went haywire in June and September,’ he says. ‘The cumulative numbers just don’t make sense.’
“A USDA spokesman says the agency stands by the numbers.
“The USDA data drive all sorts of decisions in the agricultural economy and beyond. Farmers use the information to help decide how much their corn is worth and when they should try to sell it. Ranchers, ethanol producers and food companies all pay attention when making their own corn purchases.”
The Journal writers noted that, “For all their shortcomings, USDA production figures are considered the best domestic agricultural estimates available.
“Corn buyers and sellers say the department’s task has gotten harder in recent years. With global demand for corn on the rise and prices soaring, U.S. farmers have been planting more. Production has grown by 30% over the past decade. The growth of the ethanol fuel industry, which has become a massive consumer of corn, has further complicated matters.”