September 16, 2019

Budget and Farm Bill; CFTC Issues (MF Global); Ag Economy; Trade; and Political Notes

Budget and Farm Bill Issues

Janet Hook and Laura Meckler reported in today’s Wall Street Journal that, “House Republicans dug in for a year-end standoff Tuesday, scuttling a temporary extension to a payroll-tax break that President Barack Obama called the ‘only viable way’ to prevent a New Year’s tax increase.

The path out of this impasse is uncertain even by the standards of this topsy-turvy year for Congress, in which simple acts of legislating have been clouded by uncertainty. If Congress doesn’t act by Dec. 31, payroll taxes are slated to rise to 6.2% from 4.2%, affecting the paychecks of 160 million workers, and two million unemployed workers would lose federal benefits by mid-February.

“Tuesday, the House rejected by a 229-193 vote a bill passed by the Senate that would have extended the payroll-tax break for two months while Congress tried to fashion a longer-term fix. The GOP-controlled House, upending a deal that appeared set just days earlier, also demanded that Senate leaders return to Washington and negotiate a longer extension of the tax break as well as expiring benefits for the long-term unemployed and Medicare payments to doctors.”

Jennifer Steinhauer reported in today’s New York Times that, “An hour after that vote, [President] Obama swept unannounced  into his press secretary’s daily briefing with White House reporters. He called the Senate measure — which would maintain a two-month extension of a payroll tax holiday for 160 million workers, continue unemployment benefits for millions more and maintain Medicare reimbursement fees for doctors — ‘the only viable way to prevent a tax hike, on Jan. 1. The only one.’”  (Note: a portion of the President’s remarks from yesterday can be heard here, (MP3- 2:19)).

The Times article added that, “Mr. Boehner returned his own televised volley minutes later from the Capitol, where he stood with roughly 150 House Republicans to announce his appointees to a conference committee that is not likely to meet soon. His appointees — many of them vocal opponents of a payroll tax holiday in the past — are now set to pass the next days in Washington, awaiting a blink from the Democrats. (Note: to listen to a portion of Speaker Boehner’s remarks from yesterday, just click here (MP3- 2:05)).

Rosalind S. Helderman reported in today’s Washington Post that, “[Senate Minority Leader Mitch McConnell (R-Ky.)] has not been seen in public since Saturday’s vote, and a growing number of Senate Republicans have urged Boehner to cave, while rank-and-file House Republicans have called their Senate counterparts ‘lazy’ for accepting the deal and demand that the extension be for an entire year.”

Manu Raju and John Bresnahan reported last night at Politico that, “While the two men [Boehner and McConnell] have been remarkably united this year, the year-end package has prompted an unusual amount of confusion, disunity, frustration and increased finger-pointing, both publicly and privately, between House Republicans and Senate Republicans over who is at fault in the political fiasco.

“It’s the kind of situation McConnell and Boehner have long sought to avoid. And now some GOP insiders fear they’ve ceded the upper hand on taxes and the economy to President Barack Obama in the 2012 election year.”

The Wall Street Journal editorial board opined today that, “Republicans have also achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter, although he’s spent most of his Presidency promoting tax increases and he would hit the economy with one of the largest tax increases ever in 2013. This should be impossible.”

Meanwhile, Bloomberg writer Richard Rubin reported yesterday that, “Payroll processors are warning that a two-month payroll tax-cut extension passed by the U.S. Senate would be difficult to implement.”

In other news, Joseph Williams reported last night at Politico that, “Agriculture Secretary Tom Vilsack wants to spread the message to anyone who’ll listen: The U.S. Department of Agriculture isn’t just about farming anymore.

“‘This department is not appreciated,’ the former Iowa governor told POLITICO in a recent interview. ‘We are engaged in virtually every issue and always can provide some support and some meaningful solution to a problem that is vexing folks.’

“To prove the point, he challenges anyone to name an issue that doesn’t touch the department’s portfolio, from bolstering national security by helping wean Afghan farmers from growing opium — a cash crop that funds Islamic insurgents fighting U.S. troops — to providing USDA-backed home loans as a way to repopulate the sparse countryside.”

The lengthy Politico article noted that, “Roger Johnson, president of the National Farmers’ Union, said Vilsack, like Obama, wants to walk a middle path between small farms and Big Ag, but ‘the tension is very real and it’s been there for a long, long time. In some ways, our farm policies have contributed to that growing disconnect between the very large and the smaller operators. To his credit, he has attempted to bridge that. It’s a very difficult bridge.’”

In more specific Farm Bill developments, an American Farm Bureau Federation (AFBF) Newsline update from earlier this week included remarks from AFBF’s Policy Specialist Mary Kay Thatcher, who indicated that, “We have great concerns about the idea that there are really three separate types of programs. There’s a shallow loss program, there’s a higher target price program and then there’s STAX (Stacked Income Protection Plan) for cotton. I just don’t think there’s an economist in the country that is good enough at this that they can make sure that we’re getting equity between three types of programs and if we don’t then we’ll have farmers out there producing for the government again and the signals that the government sends rather than producing for the marketplace.”

Ms. Thatcher also noted in the Newsline update that, “If you set a target price too high then you send a signal to a farmer that the safety net is so great that they ought to rush to producing that commodity instead of stay with what market signals say. And that’s a problem because you really don’t want the government setting those prices. We believe the target prices were set too high. For the most part if they’d been in existence the last 10 years they would’ve triggered six or seven or sometimes nine years out of 10. That’s just way too high to have government interference.”

Julie Harker reported yesterday at Brownfield that, “Far less money would be available if Congress doesn’t write the next farm bill next year. In his weekly conference call with ag reporters, Iowa Senator Chuck Grassley was asked whether he thinks the next Farm Bill will be written in 2012 or 2013.

“‘Considering all the work that’s been done on it in the fall – and I know we didn’t get a final product because the Super Committee disbanded – but, I think there’s a lot of movement that’ll get it done in 2012. And, I think we ought to get it done in 2012,’ says Grassley.

“There’s more incentive to get it done on time next year, Grassley says, because the agriculture baseline will be smaller in 2013, ‘Yeah, unless we change the automatic across-the-board cuts that come as a result of the August 2nd legislation we passed.’”

And a news release yesterday from Sen. Tom Coburn, M.D. (R-OK) stated that, “[Sen. Coburn] today released a new oversight report, ‘Wastebook 2011’ that highlights over $6.5 billion in examples of some of the most egregious ways your taxpayer dollars were wasted. This report details 100 of the countless unnecessary, duplicative and low-priority projects spread throughout the federal government.”

The Senator’s report contained several references to agricultural related spending issues.


CFTC (Commodity Futures Trading Commission) Issues- MF Global

House Agriculture Committee Ranking Member Collin Peterson (D-Minn.) sent a letter yesterday to CFTC Chairman Gensler, urging the CFTC take into account the lessons of MF Global as they proceed with implementing financial reforms.

In part, the letter stated that, “As the Commission continues its investigation of the events surrounding MF Global’s bankruptcy and the Committee continues its own examination, we stand ready to receive the Commission’s report on what lessons have been learned in the wake of MF Global’s bankruptcy and any recommendations the Commission may make that will restore confidence in the safety and security of customer funds held in segregated futures accounts.  We cannot let one company’s actions successfully tar the sterling reputation the futures industry has enjoyed for years.

“To that end, I am writing to express our interest in seeing the Commission take into account the lessons of MF Global as you proceed with respect to future regulatory and administrative matters, particularly with regard to implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Meanwhile, Scott Patterson and Aaron Lucchetti reported in today’s Wall Street Journal that, “Investigators on the hunt for missing customer money from MF Global Holdings Ltd. are scrutinizing about $200 million moved to a company account at J.P. Morgan Chase & Co. three days before the securities firm filed for bankruptcy protection, according to people familiar with the matter.

“The transfer has drawn interest from investigators partly because J.P. Morgan asked MF Global in a letter the following day to attest that the Oct. 28 shift of funds didn’t violate regulations designed to protect customer money.

“The letter suggests that officials at J.P. Morgan, which cleared some trades for MF Global, had become concerned that the securities firm might have gotten the money by dipping into customer funds. Commodity Futures Trading Commission rules prohibit futures brokers from using customer money for their own trading purposes.”

The Journal article noted that, “Last week, CME Executive Chairman Terrence Duffy told the Senate Agriculture Committee that [former MF Global Chief Executive Jon S. Corzine] was aware that MF Global tapped customer accounts, citing a CME auditor who spoke with an MF Global official. According to people familiar with the matter, MF Global finance executive Christine Serwinski told a CME auditor just hours before the Oct. 31 bankruptcy-protection filing that Mr. Corzine knew customer money was moved to the U.K. Ms. Serwinski couldn’t be reached to comment.

“Mr. Corzine has said he doesn’t know where the missing money is, and he told the House subcommittee that back-office personnel in Chicago told him the transfer wasn’t improper.”

A news release earlier this week from the National Pork Producers Council noted that, “Pointing out that pork producers depend on risk-management tools, including futures contracts, to deal with the volatility in feed grain and hog prices, the National Pork Producers Council today urged Congress to bolster confidence in the futures market in the wake of the MF Global bankruptcy.”

And, Jamila Trindle reported in today’s Wall Street Journal that, “The Commodity Futures Trading Commission on Tuesday approved rules requiring trading firms to turn over data about the buying and selling of over-the-counter derivatives products.

“The new rules will for the first time give regulators a window into the market for ‘swaps,’ a previously unregulated corner of the financial markets that played a role in the 2008 financial crisis.”

The Journal article added that, “The CFTC is in the process of finalizing a host of new rules for ‘swaps,’ derivatives that are traded over-the-counter rather than on an exchange. Congress gave the CFTC the bulk of the responsibility for overseeing this market when it passed the Dodd-Frank financial-regulatory overhaul in July 2010.”


Agricultural Economy: International Perspectives

Rajesh Roy reported yesterday at The Wall Street Journal Online that, “India will have to boost its annual food-grain output by 20 million to 25 million metric tons from the current level by 2016-17 to feed its growing population and to meet the requirement of a proposed food security program, Farm Secretary P.K. Basu said Tuesday.

“The nation of 1.2 billion people is the world’s second-largest producer of both wheat and rice, and it posted a record food-grain output of 241.56 million tons in the crop year ended June 30.

“While consumption is rising due to the expanding population, the government will also have to procure more grains because of the food security program. The Cabinet on Sunday cleared the draft law, which seeks to extend the reach of the existing public food distribution system that sells rice, wheat and a few other items to low-income families at below-market prices.”

Bloomberg writer Marina Sysoyeva reported yesterday that, “Russian farmers reaped record crops of oilseeds this year, the Agriculture Ministry said.

“They gathered all-time high harvests of 1.5 million metric tons of soybeans, 1.1 million tons of rapeseeds and 8 million tons of sunflower seeds after drying and cleaning, the ministry said today in a statement on its website, without providing a total for all oilseeds.”

And Bloomberg writer Rudy Ruitenberg reported yesterday that, “European Union farm income per worker rose an estimated 6.7 percent in 2011 after a 13-percent jump last year, helped by rising prices for grains as well as increased productivity, statistics office Eurostat said.

“Income probably climbed in 19 of the EU’s 27 member states, and fell in the other eight, Eurostat said in an online report today.”



The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Deputy U.S. Trade Representative Demetrios Marantis says that the Obama administration shares with House Ways and Means Trade Subcommittee Chairman Kevin Brady, R-Texas, the goal of quickly wrapping up trade talks with Pacific Rim nations. But, Marantis adds, the United States is not going to set ‘artificial’ deadlines for concluding negotiations on a Trans-Pacific Partnership Agreement.

“Brady earlier recommended that the administration wrap up the talks by mid-2012 to enable Congress to vote on the pact before the November elections. Marantis said, ‘I think Chairman Brady and the administration … share the goal of getting this done as quickly as we can. But we’re not going to set an artificial deadline. We’re going to make sure that the substance of the negotiations drive the timing.’”

And Alan Beattie reported earlier this week at The Financial Times Online that, “A federal court has stopped the US administration from imposing emergency anti-subsidy tariffs on imports from China, affecting several current cases and potentially forcing Congress to legislate to permit such actions in future.

“A federal circuit court, the highest level under the Supreme Court, on Monday said the US could not use so-called ‘countervailing duties’ against imports from highly regulated countries such as China which are designated as ‘non-market economies’.

“In a case involving the commerce department’s imposition of countervailing duties on Chinese tyre imports at the behest of US producers, the court ruled that Congress had previously accepted that such tariffs could not apply to non-market economies. ‘Although commerce has wide discretion in administering countervailing duty and anti-dumping law, it cannot exercise this discretion contrary to congressional intent,’ the court ruled. ‘[I]f commerce believes that the law should be changed, the appropriate approach is to seek legislative change.’”


Political Notes

As the Iowa Caucuses quickly approach, and primary voting in other states next month garner an increasing amount of media attention, both Gannett writer Philip Brasher (“Farmers’ agenda: Keep good times rolling”) and Jeremy Bernfeld of Harvest Public Media, (“Republicans on the farm”), recently took a closer look at the Republican presidential candidates and agricultural issues.

Keith Good

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