FarmPolicy

July 23, 2014

Budget and Farm Bill; Biofuels; Ag Economy; Trade; and MF Global

Budget and Farm Bill Issues

Rosalind S. Helderman reported in today’s Washington Post that, “In another test of House Speaker John A. Boehner’s leadership of his restive Republican majority, the House is expected to vote Tuesday on a GOP plan to extend a one-year reduction in the payroll taxes paid by 160 million workers.

“Republicans have been divided over whether to extend the tax cut, as President Obama has urged, or allow the levy to revert to 6.2 percent in January from 4.2 percent.”

The article explained that, “But by linking the tax cut with other Republican priorities — including speeding up construction of the controversial Keystone XL oil sands pipeline — and by paying for the package with other spending cuts, GOP leaders believe they’ve come up with a measure that can draw overwhelming Republican support.

House approval would set up a clash later this week with the Senate, where Democratic leaders have rejected key pieces of the House bill.”

Today’s article indicated that, “A Republican aide said conservative lawmakers have been persuaded to support the bill because of how its costs would be covered. The bill, which would also extend unemployment benefits and avert deep scheduled cuts in Medicare reimbursement rates for doctors for two years, would be paid for through spending cuts.

“Those offsets include eliminating some funding for the federal health-care reform effort, extending a two-year pay freeze for government employees and reducing the federal workforce.”

Jennifer Steinhauer reported in today’s New York Times that, “Under the Republican bill to extend a payroll tax holiday scheduled to be voted on in the House as early as Tuesday, those Americans with gross adjusted income over $1 million would no longer be eligible for food stamps or jobless pay, producing $20 million in savings to help pay for the tax cut for American workers.”

However, the article added that, “[O]f the 53 states and territories, 40 have no asset tests, which means that in some situations it would be possible for someone with, for instance, a large house or a luxury car — or in the case of Michigan, current lottery winnings not yet delivered in full — to receive food stamps.

Department of Agriculture officials dismissed the notion of millionaire food stamp recipients. ‘Federal law is clear,’ said Aaron Lavallee, a spokesman for the department. ‘The program is intended for households with income not exceeding 130 percent of poverty.’”

Meanwhile, Manu Raju and Jake Sherman reported last night at Politico that, “The payroll tax cut is becoming increasingly treacherous for both parties, as House Speaker John Boehner and Senate Majority Leader Harry Reid are stuck in an impasse before Congress tries to adjourn for the year Friday.

“House Republicans are moving forward with a vote on a sweeping package Tuesday, despite a warning from Majority Whip Kevin McCarthy (R-Calif.), who privately told Boehner and GOP leadership Monday that he hadn’t yet secured the votes for the bill.

But increasingly, the fate of the payroll tax cut is tied to a separate bill to keep the government funded into next year.  At the urging of President Barack Obama, Reid privately warned Boehner on Monday that he won’t move on the budget bill unless they have reached some agreement on the payroll measure — fearing the Republicans may pass their bills this week and leave town for the year.”

And on the issue of the larger budget bill to keep the government funded, Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “Congressional negotiators have resolved most of their differences on a $1 trillion omnibus bill but will not release legislative text on Monday as they had hoped.

“Aides differed on the exact reasons for the delay. A GOP aide said the delay is technical in nature and that ‘a bipartisan, bicameral agreement’ is in place on the package. A Democratic aide said that the White House, which has been intimately involved in the omnibus bill behind the scenes, was still reviewing the deal.

“‘There’s still a couple of open items that need to be ironed out. These aren’t deal breakers or game changers but are still important issues that need to be resolved,’ the aide said.”

With respect to Farm Bill issues and the budget, the “Washington Insider” section of DTN reported in part yesterday (link requires subscription) that, “Now, however, press reports indicate that House Agriculture Committee ranking member Collin Peterson, D-Minn., wants Congress to consider adding the farm bill package [the recent super committee Farm Bill draft] (whatever that means, since it appears no one except a couple of the ag leaders has seen the language) to a bill to pay for an extension of payroll tax relief and unemployment insurance, along with benefits for doctors who take Medicare patients.

“Once again, the idea is that the ag leaders would offer to cut their programs by some amount in order to escape future budget scrutiny-in this case, the across-the-board cuts expected to go into effect in 2013 under the law that established the super committee.”

The DTN item added that, “It is not clear how such a deal would work. Would it bind Congress to somehow accept the ag leaders language, or would it just apply to the budget figures? Since the budget would affect mandatory programs, it would seem to require language about their details. In any event, Peterson even observes that he is not enthusiastic about extending the payroll tax reduction and the other provisions in the bill, but that adding the farm bill language would force the 46 members of the House Ag Committee to consider supporting it. You get the idea that there are a few details yet to be worked out.

Peterson admits he has not gone far down that road, and has not talked to many people. Still, House Ag Committee Chair Frank Lucas, R-Okla., told the press he supports ‘ranking member Collin Peterson’s idea’ but note that he took pains to tie the concept to Peterson, a minority member, not to the committee itself.”

In news on the Farm Bill and conservation, Brad Dokken reported on Sunday at The Grand Forks Herald Online (ND) that, “‘There’s a generation of hunters that knows nothing but liberal duck seasons and high bag limits, white-tailed deer behind every bush and remarkably high pheasant populations,’ said John Devney, senior vice president of Delta Waterfowl and an expert on farm bill-related issues.

“Now, those days of abundance appear to be fading into history. After three severe winters that hammered both deer and pheasants, North Dakota is down to about 2.5 million acres of CRP [Conservation Reserve Program], with contracts on another 800,000 acres set to expire next September.

“Throw in high commodity prices, which are encouraging farmers to remove shelterbelts and tile-drain sensitive areas to move water off the landscape faster, and the result is a perfect storm for wildlife and the habitat it needs to survive.”

And, a recent Congressional Research Service Report, “Agricultural Conservation: A Guide to Programs,” by Megan Stubbs, which was released late last month, included a comprehensive overview of conservation programs administered by USDA’s Natural Resources Conservation Service (NRCS) and Farm Service Agency (FSA).

In news regarding nutritional issues, Brian M. Rosenthal reported earlier this week at The Seattle Times Online that, “The Seattle School Board is considering relaxing its ban on unhealthful food in high schools amid complaints from student governments that the policy has cost them hundreds of thousands of dollars in vending-machine profits over the past seven years.

“The policy, approved in 2004 — before any state or federal regulations on school nutrition had been established — put Seattle on the cutting edge of the fight against childhood obesity.

But board members now acknowledge they probably went too far. The restrictions, which are more strict than the now-crafted state and federal nutrition guidelines, allow only products such as milk, natural fruit juice, baked chips and oat-based granola bars.”

The article added that, “Moreover, opponents of the ban on junk food say it’s not even accomplishing its mission of preventing kids from eating unhealthful food.

That’s because students at some open-campus schools have made it a practice to walk to nearby minimarts and gas stations to buy the same products they used to purchase in the vending machines.”

 

Biofuels

Felicia Sonmez reported yesterday at the 2chambers Blog (Washington Post) that, “A bipartisan group of House members is calling for the elimination of ethanol subsidies as a deadline for renewing the tax credit looms at the end of the month.

“In a letter to House Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.) on Friday, 73 House members of both parties urged the leaders to ‘allow ethanol subsidies set to expire to do just that and to resist calls to expand or create new ethanol subsidies in the eleventh hour.’”

Meanwhile, Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “As lawmakers were working to finish a major appropriations bill for fiscal 2012, ethanol opponents were working to include a provision that would block a planned increase in the amount of the biofuel that can be added to gasoline. The cap has long been 10 percent but the Environmental Protection Agency is moving to increase the limit to 15 percent to assure that there is a growing market for ethanol.

“Ethanol industry trade groups and the National Corn Growers Association fired back today with a letter to the House and Senate appropriations committee. The groups said the proposed E15 provision was ‘aimed at derailing and altering the long-standing process by which new fuel blends are brought into the marketplace.’ The EPA did an ‘exhaustive study’ of E15 before deciding that it should be approved, the groups said.”

The editorial board at The Wall Street Journal today provided a lengthy opinion item on biofuels titled, “The Cellulosic Ethanol Debacle.”  The opinion piece concluded by saying, “To recap: Congress subsidized a product that didn’t exist, mandated its purchase though it still didn’t exist, is punishing oil companies for not buying the product that doesn’t exist, and is now doubling down on the subsidies in the hope that someday it might exist. We’d call this the march of folly, but that’s unfair to fools.”

And, a news release yesterday from the Advanced Ethanol Council stated that, “Advanced and cellulosic ethanol producers are urging Congress to extend key tax incentives for cellulosic ethanol beyond their expiration date of Dec. 31, 2012.  In a letter sent today to Congressional leaders, the Advanced Ethanol Council (AEC) pressed for the extension of the Cellulosic Biofuels Producer Tax Credit (PTC) and the Special Depreciation Allowance for Cellulosic Biofuel Plant Property.”

 

Agricultural Economy

Reuters writer P.J. Huffstutter reported yesterday that, “Here in the nation’s heartland, institutional investors, eager speculators and well-heeled farmers have raced in recent years to buy up farmland in order to shelter their wealth from tumultuous Wall Street or expand their profits in the global food chain…[E]ven as grain prices slump to near their lowest in over a year amid prospects for a bumper 2012 crop, the cost of premium U.S. agricultural land zooms higher — as much as 3 percent a month here in the Hawkeye State, a clip that some see as unsustainable.”

The detailed article pointed out that, “That farmers, not pension funds or Wall Street bankers, are driving this bidding war sounds a note of caution, say industry watchers. On the one hand, farmers see such purchases as a long-term play and are not prone to flipping land in the way investors did in the residential real estate boom of the last decade.

“But on the other, the consolidation of the farming industry means that the fall of one operator would likely have far deeper ripple effects in rural America — not only in their immediate communities, but to the bankers, seed suppliers and other sectors that service their needs.”

Julie Harker reported yesterday at Brownfield that, “The U.S. chicken industry is facing challenges that Rabobank says will change the industry permanently. The financial services provider has issued a report saying the key challenges include higher and more volatile feed input costs; the maturing of the U.S. domestic market; rapid globalization of the industry; increasing government regulation; and, excess supply.

“The report – titled, ‘This is Not your Grandfathers’s Chicken Industry,’ says the industry will have to develop new export products for new markets and work to be as efficient as possible with higher production costs. It also says recent court rulings have made it hard for companies to eliminate capacity or even reduce production.”

 

Trade

Alan Beattie reported yesterday at The Financial Times Online that, “A small group of governments including the US and European Union are exploring the possibility of an agreement among themselves on services trade, a sign of rising despair at the stasis in global trade talks.

“The so-called ‘plurilateral’ services agreement would probably include only a handful of governments, all from rich countries.

“The deal, although it could be concluded under the aegis of the World Trade Organisation, would mark a significant retreat from the multilateral principle that WTO member governments offer the same trade benefits to all other members. Though it would be free to any country to join, most developing countries are likely to be too protective of their domestic service industries to open them up to international competition.”

Also yesterday, the U.S. Trade Representative’s Office released a report to Congress regarding China’s WTO Compliance: “The Office of the U.S. Trade Representative presented to Congress today the 2011 annual report on China’s compliance with its World Trade Organization (WTO) accession obligations. The report is statutorily mandated by Congress and highlights the status of China’s ongoing work in areas such as intellectual property rights, industrial policy, agriculture, services and transparency.”

The USTR report can be found here.

 

MF Global

Scott Patterson and Aaron Lucchetti reported in today’s Wall Street Journal that, “A pair of MF Global Holdings Ltd. executives plan to tell a Senate committee Tuesday that they don’t know what became of an estimated $1.2 billion in the failed firm’s customer funds, according to drafts of their statements reviewed by The Wall Street Journal.

“The claims will echo comments made last week by former MF Global Chief Executive Jon S. Corzine, who told a House panel he wasn’t closely involved with decisions regarding customer funds.”

The Journal article noted that, “Mr. Corzine’s former underlings plan to follow a similar script. Bradley Abelow, president and chief operating officer of MF Global, will tell the Senate Agriculture Committee that he doesn’t ‘know the answers’ to questions about the missing customer cash.”

Keith Good

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