December 12, 2019

Budget; Farm Bill; CFTC (MF Global); Climate; and the Ag Economy

Budget Issues, Payroll Tax

Felicia Sonmez reported yesterday at the 2chambers Blog (Washington Post) that, “The Senate on Thursday voted against proceeding on a symbolic resolution that would have disapproved of President Obama’s request earlier this month to raise the federal borrowing limit, clearing the way for the $1.2 trillion increase to proceed as expected.”

The update noted that, “Last week, the House approved the disapproval resolution on a largely party-line vote, with most Republicans voting ‘yes’ and most Democrats voting ‘no.’

“Even if the resolution had passed, Obama most likely would have vetoed it, and lawmakers would have faced the hurdle of a two-thirds supermajority in both chambers to override the White House’s decision.”

Meanwhile, Elisabeth Bumiller and Thom Shanker reported in today’s New York Times that, “The Pentagon took the first major step toward shrinking its budget after a decade of war as it announced Thursday that it wanted to limit pay raises for troops, increase health insurance fees for military retirees and close bases in the United States.”

The Times article explained that, “Next year’s Pentagon budget is to be $525 billion, down from $531 billion this fiscal year. Even though the Defense Department has been called on to find $259 billion in cuts in the next five years — and $487 billion over the decade — its base budget (not counting the costs of Afghanistan or other wars) will rise to $567 billion by 2017. But when adjusted for inflation, the increases are small enough that they will amount to a slight cut of 1.6 percent of the Pentagon’s base budget over the next five years.”

With respect to the payroll tax issue, Mike Lillis reported yesterday at The Hill Online that, “A senior Democrat on the payroll tax conference panel had some strong words Thursday for Republicans hoping to attach Keystone pipeline language to the package.

“‘That is so stupid, already, for them to be pushing the Keystone pipeline issue in this bill, in this conference,’ Rep. Henry Waxman told reporters gathered near the Chesapeake Bay for the Democrats’ annual caucus retreat. ‘The pipeline issue is one that the Republicans are obsessing over.’”

More specifically on USDA budget issues, concern from a variety of quarters has been expressed regarding the Department’s recent “Blueprint for Stronger Service” announcement, which included the prospect of closing “259 domestic offices, facilities and labs across the country, as well as seven foreign offices.”

Lawmakers such as Sen. Kirsten Gillibrand (D., N.Y.), Sen. Mark Pryor (D., Ark.), Rep. Rick Crawford (R., Ark.), and Sen. Sherrod Brown (D., Ohio) have highlighted the office closure issue, as have USDA Farm Service Agency employees and producers.

In a tele-conference with reporters earlier this week, Sec. of Agriculture Tom Vilsack spoke about the “Blueprint” in more detail- related audio of this portion of his press conference can be heard here (MP3- 3:18).


Farm Bill Issues

Reuters writer Charles Abbott reported on Wednesday that, “The next U.S. farm law could move away from a traditional uniform plan and offer different subsidy schemes to grain, soybean and cotton farmers as a way of accommodating a demand for deep cuts in spending, according to an influential farm state lawmaker.

Frank Lucas, the Agriculture Committee chairman in the U.S. House, said that the next law, due this year, will likely end the $5 billion a year direct-payment subsidy, which is a target because it is paid regardless of need.

“‘I don’t know that you can craft a ‘one size fits all’ program,’ said Lucas, an Oklahoma Republican, in discussing regional infighting over the farm bill. In the end, lawmakers could leave the choice to growers on what works best, he said.”

Mr. Abbott explained that, “Corn and soybean groups want a farm safety net built on insurance-like tools that protect growers against catastrophic loss of revenue. Farmers in the U.S. South and Plains say fickle weather makes insurance less attractive.

There is growing doubt, however, that U.S. lawmakers will be able to craft a farm bill in this election year that covers some $480 billion in funding. The bill has a big impact on the country’s booming agri-business. Analysts put the odds of success at 50/50.”

The Reuters article stated that, “Farm groups, representing some of the biggest farming operations, back a welter of conflicting proposals. Some would replace traditional subsidies with insurance-like programs to assure farmer revenue. Others want higher support prices. Cotton growers want a hybrid of loan rates and insurance.”

Don Walton reported yesterday at the Lincoln Journal Star Online (Neb.) that, “Sen. Mike Johanns said Thursday he is beginning to view crop insurance as ‘the new safety net’ for farmers and likely to be ‘a mainstay of our agriculture policy’ as Congress begins to consider a new farm bill.

“In the approaching new world of farm policy, he said, ‘you don’t get a payment just because you farm.’

“Under the crop insurance program, he said, ‘payment is tied to a loss.’”

The article noted that, “Johanns addressed farm policy during his weekly telephone conference call from Washington.”

During that conference Sen. Johanns stated that, “It’s become very, very clear to me that crop insurance really is the new safety net. And it’s a system that is working.

“Farmers pay premiums. They have an annual premium that they pay to participate in the Crop Insurance Program. So they have skin in the game. The federal government provides support. So, there’s a piece of this that is provided through federal support. And probably most importantly, crop insurance is actually tied to a loss. You don’t get a payment just because you farm. It’s a system that has wide support across Nebraska. We have a very high participation rate and I see it as a mainstay of our Ag policy going forward.”

Sen. Johanns added that, “Well, one of the things about crop insurance is that it has — it has gone through a process whereby it was cut back pretty dramatically. Part of that did go to dealing with the national deficit. So, about $6 billion was involved in that…[I] think in — in crop insurance, if I might use an old cliche, we’ve given at — at the office on that one. And I really would push back against somebody who says, look we can — we can continue to take more and more out of this program.”

Amy Bickel reported earlier this week at The Hutchinson News Online (Kans.) that, “Experiencing one of the worst droughts since the 1930s, Kansas farmers have claimed nearly $1 billion in crop insurance indemnities to offset the loss of their withered wheat and fall crops.

“That surpasses a record set during the 2002 drought as claims continue to stream in to the U.S. Department of Agriculture’s Risk Management Agency Topeka office, said Director Rebecca Davis.”

And Joseph Morton reported yesterday at the Omaha World-Herald Online that, “Sen. Mike Johanns, R-Neb., said Thursday that some of his old proposals from his days as U.S. secretary of agriculture could be dusted off and used in putting together the next farm bill.

Specifically, he cited efforts to consolidate many of the complex and overlapping conservation programs covered by the farm bill.

“‘We’d sit down at the USDA and start talking about conservation programs, and it didn’t take long and we were confused,’ Johanns said during his weekly conference call with reporters. ‘There’s just a whole host of them. So doing some things to try to deal with that would be very helpful.’”

An update posted this weekat KATC TV Online (Lafayette, La.) reported that, “Congressman Jeff Landry [R., La.] attended the Louisiana Rice Council and Louisiana Rice Growers Association Annual meeting today to hear concerns from farmers and discuss legislative efforts.”

The update indicated that, “Landry went on to discuss that since only 61 members of Congress represent rural districts, it is up to the farmers to fight for their protection. ‘If we get into a farmer verses farmer fight, we’re only going to lose access to a responsible, long-term Farm Bill that ensures our farmers can keep feeding and clothing our nation.’”

Peter Harriman reported this week at the Argus Leader Online (S.D.) that, “The realities of election year politics suggest Congress won’t tackle an ambitious agenda this year, Sen. Tim Johnson says. That was reflected in President Obama’s state of the union address Tuesday.”

The article stated that, “Johnson doubted Congress will find the will to write a new farm bill this year. Since the existing one that expires in September has found wide favor in the agriculture world, Johnson said it probably will be extended. ‘For how long, I don’t know,’ he said.”

With respect to nutrition issues, Bloomberg writer Stephanie Armour reported earlier this week that, “An Obama administration effort to add more fruits, vegetables and whole grains to U.S. school meals may limit educators’ ability to deliver a balanced diet to 32 million children, meat- and potato-industry groups said.

“The first major overhaul of the school meal standards in 15 years, unveiled yesterday, came at the expense of some agriculture interests, by limiting potatoes at breakfast and dropping a requirement that meat be served at the morning meal.”

The Environmental Working Group also included an update on the new school meal standards at the organization’s webpage yesterday, “Putting Real Food in School Lunches.”

In other policy developments, a news release Wednesday from the American Farm Bureau (AFBF) stated that, “The [AFBF] is urging congressional members to oppose legislation that would restrict the use of antibiotics in livestock and poultry. In letters to Senate and House members, AFBF said the legislation would handicap veterinarians and farmers in their efforts to maintain animal health and protect the nation’s food supply.”

Also on the issue of animal agriculture, yesterday’s All Things Considered program from National Public Radio (NPR) contained a more in depth look at the recent bill introduced in Congress that would improve housing for egg-laying hens; the foundation for that legislation stems from an agreement reached this summer between the United Egg Producers and The Humane Society of the United States.

An audio replay of the NPR program with transcript and related links has been posted at NPR’s Food Blog and is available here.


CFTC (MF Global)

Ben Protess and Azam Ahmed reported in yesterday’s New York Times that, “Earlier this month, in a ninth-floor conference room of the Northern Trust bank in Chicago, an unlikely assembly of futures industry executives, regulators and customers discussed the fallout from MF Global’s collapse.

The closed-door meeting illustrated a fundamental shift under way in the futures industry: financial firms, ordinarily loath to accept regulation, are now spearheading efforts for new oversight as they try to heal the black eye left by MF Global and the disappearance of $1.2 billion in its customers’ money.”

The Times article added that, “Concerns about a lack of controls and regulation are underpinning the movement for change after MF Global’s downfall.

“‘To a certain extent, I think the industry was hoping there was some smoking gun, so it could be seen as unique or as an aberration,’ said Gary DeWaal, the global general counsel of the futures firm NewEdge. ‘But the longer this goes on, the more you wonder whether there was something in the system that went wrong.’”

The article noted that, “The Senate Agriculture Committee has sent letters to big industry players, seeking their input on a crackdown. ‘As we move forward, the committee will further examine customer protections in the commodities markets to see where reforms are needed so participants are assured their money is safe,’ said Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the committee.”

Yesterday, an update titled, “Customer Accounts and the MF Global Bankruptcy, ” by Paul E. Peterson was posted at the FarmDocDaily Blog (University of Illinois), this update also contained additional information on the MF Global issue.


Climate Change

Pilita Clark reported yesterday at The Financial Times Online that, “It is not often that reports on climate change highlight the benefits of global warming, as well as the risks.

“Yet that is what the 464-page Climate Change Risk Assessment published on Thursday by the Department for Environment, Food and Rural Affairs seeks to do.”

The FT article noted that, “The agriculture section cites many climate risks, such as increases in drought, pests and disease. But it also discusses possible benefits from higher yields for crops, such as wheat and sugar beet.”


Agricultural Economy (Biofuels)

Bloomberg writers Laura Price and Lucia Kassai reported yesterday that, “Corn farmers in Argentina, the world’s second-biggest exporter of the grain, will face a renewed heat wave next week after two months of dry weather harmed South American crops.”

Meanwhile, Gregory Meyer reported yesterday at The Financial Times Online that, “From the state of Kansas, where he grows 2,000 acres of wheat, Jerry McReynolds watched with disappointment last year as the price of the grain kept falling. ‘It has dropped like a rock, unfortunately,’ says the American farmer.

“The cause had little to do with the drought that has wiped out much of the 2011 winter wheat harvest in Kansas, Oklahoma and Texas. Instead, Mr McReynolds’ bottom line was hit by a force thousands of miles to the east, where Russian wheat exports have poured through the Bosporus strait, depressing global prices.

“The world’s wheat supply has gone from grave to plentiful, illustrating how quickly agricultural markets can turn with the seasons. Stocks are forecast to top 200m tonnes by mid-2012, the highest in more than a decade.”

The FT article noted that, “The US agricultural attaché in Moscow last week forecast a ‘dramatic slowdown in exports’ during the rest of the Russian marketing year, noting that exports from the three major southern growing regions ‘has largely finished’.

More pressure on wheat prices could be on the way. In the southern hemisphere, Australia and Argentina both had good crops. Global wheat supplies are anticipated to reach a record 690m tonnes this year.

“In the US, the largest exporter, farmers added 3 per cent to land they planted with winter wheat, a crop to be harvested at midyear. In a strange twist, the drought in plains states such as Kansas may well lead to more winter wheat, after farmers ploughed under stunted corn fields and replaced them with wheat.”

An editorial this week at The Financial Time Online stated that, “The good news is that the world’s farmers are set for bumper crops this year. Global wheat stocks are at their highest in 12 years and the United Nations Food and Agriculture Organisation index shows commodity prices are 11 per cent lower than the peak last February.

“The bad news is that, despite the cornucopia of good harvests, the world is a long way from resolving the urgent question of food security. Roughly one in six people suffers from chronic hunger. The number of hungry risks rising dramatically as the world’s population heads towards 9bn by 2050. No one wants a repeat of the food shortages and soaring prices that set off riots in 30 countries in 2007-08, bringing down governments.

The first step to address the problem is to revive investment in agricultural productivity, which has been falling for 20 years or more.”

Reuters writer Hugh Bronstein reported yesterday that, “The United States is headed for a corn output boom over the years ahead that will increase supplies available for ethanol production, the head of an industry chamber said on Thursday… He [National Corn Growers Association Chief Executive Rick Tolman] expects U.S. corn yields to climb to an average 300 bushels per acre by 2030, almost double current yields. ‘That’s going to allow us significantly more opportunity to grow,’ Tolman said.

Thomas Dorr, head of the U.S. Grains Council, said the ethanol boom is not cutting into the amount of corn available for food.”

And a news release yesterday from USDA stated that, “Agriculture Secretary Tom Vilsack today announced that USDA has approved a conditional commitment in the amount of $232.5 million to ZeaChem Boardman Biorefinery, LLC (ZBB) through the Biorefinery Assistance Program. ZBB will operate a 25 million gallon per year biorefinery, which will be constructed on an industrial site in Boardman, Oregon, along the Columbia River… [L]ocated in the northeast part of the state, the biorefinery will use high-yield cellulosic fermentation technology to produce advanced biofuels (cellulosic ethanol and other biofuels).”

Keith Good

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