Budget and Farm Bill Issues
Alexander Bolton and Russell Berman reported yesterday at The Hill Online that, “Senate Democrats and House Republicans on Monday inched closer toward a deal that would extend and expand a payroll tax holiday.
“In hopes of luring GOP defectors, Senate Democrats unveiled a new version of their payroll tax legislation that ditches President Obama’s plan to expand the relief to employers. That move cuts the tax break’s cost from $265 billion to $185 billion.”
The article noted that, “Republican leaders immediately pushed back on the proposal and criticized Democrats for pushing tax increases on individuals and small businesses earning more than $1 million annually.
“But GOP sources hinted the bill might form the basis of a later deal if Democrats agree to drop the surtax on millionaires that would be used to offset the cost of the legislation.”
“The House GOP push to draft its own payroll tax proposal has slowed. Republican leaders faced significant resistance from conservatives during a closed-door conference meeting Friday, and their plan was not released on Monday night, pushing a floor vote to Thursday at the earliest,” The Hill update said.
Meredith Shiner and John Stanton reported today at Roll Call Online that, “Senate Democrats unveiled yet another plan Monday to extend a popular payroll tax holiday, but the political theater surrounding their move — including an appearance by President Barack Obama in the White House briefing room— seemed designed to score a public relations win and increase pressure on the GOP.
“In a concession to Republicans, Democrats dropped a proposed payroll tax break for employers but continued to insist on deeper cuts on the amount employees pay. They also amended their proposal on how to pay for the legislation, adding bipartisan spending cuts as well as means-testing of unemployment and food stamps benefits similar to those offered in a Senate Republican payroll tax cut bill last week.”
The Roll Call writers added that, “The exact composition of that package, and how it might be paid for, is still very much in flux. And lawmakers are hoping the looming Christmas holiday will force their opponents’ hands and prevent either side from tacking on sweeteners for their conferences that could jeopardize final passage.”
And Suzy Khimm reported yesterday at The Wonk Blog (Washington Post Online) that, “Democrats opposed the GOP plan to extend the federal pay freeze until 2015 and slash the workforce by 10 percent. But House Republicans also want to reduce benefits for federal workers’ pension plans — a change that Democrats included in one iteration of the supercommittee, along with cuts to agriculture subsidies and other mandatory federal programs outside of health care. Democrats now say they’re willing to put such cuts on the table yet again to pay for the payroll tax break.
“So there’s certainly room for a deal given these two areas of overlap.”
Meanwhile, the “Washington Insider” section of DTN (link requires subscription) reported yesterday that, “The continuing resolution that is keeping the federal government operating during the current fiscal year (FY12) is scheduled to expire at midnight on Dec. 16. Before that happens Congress will need to approve either specific spending measures for the various departments of the government or another continuing resolution that will keep funds flowing at current levels until some yet-to-be-specified date in 2012.
“As Congress considers its spending options, the White House is warning that any legislation that emerges must be in line with the budget deal that was worked out last summer. Specifically, warned White House Communications Director Dan Pfeiffer, Republicans should abandon their efforts to achieve spending levels below those agreed upon in the debt limit law.”
In more specific Farm Bill news, Gannett writer Philip Brasher reported on Sunday that, “Soaring crop prices are coaxing landowners across the Midwest and Great Plains to put Conservation Reserve Program acreage back under the plow, and Congress is considering reducing the program even further.
“A farm bill that leaders of the congressional agriculture committees drafted this fall would cap the $2 billion-a-year Conservation Reserve Program at 25 million acres nationwide, down from the current limit of 32 million acres.
“When the program was created in 1985, the government was allowed to enroll as many as 45 million acres.”
Mr. Brasher explained that, “The program has lost acreage as 10-year contracts have expired and crop prices reached historic highs. About 29.6 million acres are enrolled after landowners pulled 2 million acres out of the program as contracts expired Sept. 30 at the end of the 2011 budget year….Contracts for another 6.5 million acres nationwide expire at the end of fiscal 2012 and an additional 3.3 million acres expire in 2013. Some of that land could be re-enrolled, but landowners are likely to put much of the acreage under cultivation because of the returns they can get from corn, said Chad Hart, an economist at Iowa State University.”
Also yesterday, Gabriel Silverman reported at The Atlantic Online that, “But now, with crop prices at sustained high levels for the past few years and increased scrutiny of the program’s flaws, direct payment subsidies are on their way out with the 2012 farm bill renewal, saving taxpayers more than $4 billion a year.
“Instead of offering up those savings to help chip away at America’s deficit, though, policy makers are using those funds as a justification to expand revenue-guarantee programs and crop insurance — a program that has drawn criticisms and already costs taxpayers billions of dollars a year.”
The article noted that, “Proponents of crop insurance point to the importance of maintaining a robust agriculture system as vital to American independence and security. Agriculture also faces unique challenges like unpredictable weather patterns.
“‘Because we are a nation that hasn’t really experienced food shortages in recent memory, folks forget the role that [farmers] play on a lot of different levels,’ said Mike Torrey, executive vice president of Crop Insurance and Reinsurance Bureau, a lobbying group for the crop insurance industry.”
Yesterday’s update noted that, “‘I think that there is a service benefit to producers through the private sector delivery [of crop insurance],’ said Keith Collins, former chief economist for the U.S. Department of Agriculture. ‘But it does come at a cost. When private companies deliver the product, they have to get paid to deliver the product.’
“While the next farm bill is still in flux, it is generally believed by those involved in negotiations that crop insurance will be expanded. Collins points out that the overall safety net for farmers is diminishing.”
And Dennis McGinn and Ernest Shea, leaders of the 25×25 Alliance, a coalition committed to America securing 25 percent of its energy from renewable sources by the year 2025, penned an opinion item that was posted yesterday at the Baltimore Sun Online; which stated in part that, “In writing the next Farm Bill, Washington needs to exercise fiscal responsibility, especially in these tough economic times. We have a serious budget crisis at hand. But we also have another serious crisis hanging just as ominously over our nation: unresolved energy challenges that directly threaten both our economic security and our national security. This is a problem that farmers in the Chesapeake Bay Watershed can help solve while at the same time addressing another great challenge: cleaning up and restoring the bay.
“Here in the Chesapeake watershed, excess nutrients from animal operations are a significant source of pollution. More than 40 percent of the nitrogen and phosphorus introduced into the bay come from agriculture, and half of these nutrients come from animal manure. The good news is that by deploying new and evolving technologies such as gasification systems and anaerobic digesters, farmers can convert animal manure into much-needed bio-gas and electricity while simultaneously reducing nutrient loads that degrade water quality. And by growing bio-energy crops like perennial grasses and fast-growing trees, which don’t require annual tilling of the soil or the application of fertilizer, farmers can significantly reduce the amount of sediment and nutrients that might otherwise end up in streams, lakes and estuaries that feed into the bay.
“Farm energy programs, such as those authorized in the Energy Title of the Farm Bill, help farmers put these technologies into place and can be a critical tool in turning liabilities into high-value assets. They offset costs to repower biorefineries with biomass feedstocks and low-carbon fuels; construct solar, wind and bio-gas electricity generation systems; and retrofit equipment, barns and other farm infrastructure to improve energy efficiency. Collectively, these projects unlock hundreds of millions of dollars in private investment that in turn diversify our economy, create jobs and generate new streams of revenue. And in an era of fiscal contraction for environmental programs, they can be important new vehicles for improving soil, water and air quality and wildlife habitat.”
Regulations- CFTC Issues
Aaron Lucchetti and Julie Steinberg reported in today’s Wall Street Journal that, “MF Global Holdings Ltd.’s executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss, Jon S. Corzine, people familiar with the matter said.
“The board allowed the company’s exposure to troubled European sovereign debt to swell from about $1.5 billion in late 2010 to $6.3 billion shortly before MF Global tumbled into bankruptcy Oct. 31, these people said. The executive who challenged Mr. Corzine resigned in March.
“The disagreement shows that concerns about the big bet grew inside the company months before the trade rattled regulators, investors and customers. The executive, Michael Roseman, whose title was chief risk officer, also expressed concerns directly to Mr. Corzine in meetings of just the two men and with other people present, people familiar with the situation said.”
The Journal article added that, “Mr. Corzine, who started betting on the bonds shortly after arriving as chief executive in March 2010, responded to Mr. Roseman’s concerns that some of the scenarios were too extreme and likely impossible, people familiar with the matter said. The former New Jersey governor and Goldman Sachs Group Inc. chairman said MF Global’s exposure was limited, adding that the likely profit was worth the risks, these people said.
“The CEO suggested to board members earlier this year that he might leave the company if they didn’t trust his judgment about the bet, according to people familiar with the matter.”
Jacob Bunge and Andrew Ackerman reported today at The Wall Street Journal Online that, “Futures firms would be subject to stiffer oversight under a raft of proposals being explored by federal regulators in the wake of the MF Global Holdings Ltd. collapse.
“Members of the Commodity Futures Trading Commission said Monday that they may push the firms, which process futures trades on customers’ behalf, to report more frequently the amount of customer cash they hold and provide more information about their investment risks.
“The comments came the same day the CFTC voted unanimously to approve a rule tightening restrictions on how futures firms invest customer money.”
And DTN Ag Policy Chris Clayton reported yesterday (link requires subscription) that, “As the House Agriculture Committee prepares to question former MF Global CEO Jon Corzine Thursday, a committee member is preparing additional scrutiny on what happened with the company and customer accounts.
“Besides serving on the agriculture committee, Rep. Randy Neugebauer, R-Texas, also chairs the House Financial Services Subcommittee on Oversight and Investigations. His subcommittee has its own MF Global hearing next week to examine whether current regulations should have stopped the financial collapse that has frozen commodity accounts and angered farmers and other commodity hedgers.
“‘It’s important that we not destroy the credibility of the futures market in this country,’ Neugebauer said in a phone interview Monday. ‘It’s an important tool for our producers all across the country and so the last thing we need is this uncertainty in the marketplace. So that’s the reason this hearing, and getting to the bottom of this, is extremely important.’”
On a separate regulatory issue yesterday, a news release from Rep. Kristi Noem (R-SD) stated that, “According to U.S. House Majority Leader Eric Cantor (R-VA) on Thursday the House will take up a bill sponsored by [Rep. Noem] to prohibit any further regulation of rural dust by the Environmental Protection Agency (EPA). The bipartisan bill, H.R. 1633, was approved by the House Energy & Commerce Committee last week.”
A news release yesterday from the U.S. Trade Representative’s Office stated that, “Please be advised that U.S. and Korean working-level officials are meeting in Washington, DC today and tomorrow to discuss implementation issues regarding the U.S.-Korea Free Trade Agreement. This meeting is part of our ongoing implementation work with Korea that to date has included videoconferences and exchanges of information on laws and regulations. This meeting follows the November 22 approval of the agreement by Korea’s National Assembly and recent Congressional approval in the United States…USTR is working with all three new FTA partner countries toward bringing agreements into force.”
And a news release yesterday from the National Pork Producers Council stated that, “A coalition of food and agricultural organizations today urged the Obama administration to work with Japan to smooth the way for that country’s participation in the Trans-Pacific Partnership (TPP), a multilateral trade agreement.”
A news release yesterday from the Renewable Fuels Association stated that, “Critics of biofuels miss few opportunities to mischaracterize scientific studies and comments in their quest to demonize domestic production of ethanol and other renewable fuels. In a letter to the Senate Environment and Public Works Committee leadership on November 30, a group of usual anti-ethanol suspects grossly misrepresented the finding of two recent papers on American biofuels and American biofuel policy – one from the National Academies of Science (NAS) and one from United Nations Committee on Food Security (CFS). These groups, including corporate livestock, food manufacturing, fossil fuel production, and other industries, are seeking a hearing on domestic biofuels and the Renewable Fuel Standard (RFS).
“Clarifying the record, the Renewable Fuels Association today sent a letter to the same EPW Committee leaders that directly refutes the statements made in the November 30th letter and provides additional research confirming the benefits of domestic biofuel production.”
Meanwhile, Bloomberg writer Andrew Herndon reported yesterday that, “The U.S. Navy will spend $12 million to buy 450,000 gallons of alternative fuel for aircraft, ships and unmanned vehicles, the biggest government purchase of advanced biofuels, Navy Secretary Ray Mabus said.”
U.S. Department of Agriculture Economic Research Service (ERS) Report
On Friday, USDA’s Economic Research Service released a report titled, “The Changing Organization of U.S. Farming.”
An ERS summary of the report noted that, “Innovations in farm organization, business arrangements, and production practices have allowed farmers to produce more with less. Fewer labor hours and less land are used today than 30 years ago, and practices such as the use of genetically engineered seeds and no-till have dampened increases in machinery, fuel, and pesticide use. Likely aided by the increased use of risk management tools such as contracts and crop insurance, U.S. agricultural productivity has increased by nearly 50 percent since 1982. Future innovations will be necessary to maintain, or boost, current productivity gains in order to meet the growing global demands that will be placed upon U.S. agriculture.”