FarmPolicy

October 31, 2014

Budget; Farm Bill and Policy; Regulations; MF Global; and the Ag Economy

Budget- Payroll Tax- Policy Agenda

Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “The House on Thursday evening approved the first of up to 10 budget reform bills House Republicans hope to consider on the floor in the coming weeks…The bill requires the Congressional Budget Office (CBO) to provide economic analyses of bills with major budgetary impacts — those that have an effect of 0.25 percent of GDP or more, or about $38 billion last year. The analysis would describe the economic impact of the bill, including on GDP, business investment, employment and other economic variables.”

Meanwhile, Bernie Becker reported yesterday at The Hill’s On the Money Blog that, “Democrats and Republicans both said Thursday they want to keep extraneous measures out of a package to extend the payroll tax cut.

“They just don’t agree on what constitutes extraneous.

“At their second meeting in as many days, lawmakers on a House-Senate conference committee sparred over whether to include initiatives on issues ranging from boiler regulations to supplemental welfare programs to recently expired tax provisions.”

The update added that, “With less than four weeks until the payroll tax cut for 160 million Americans expires, Thursday’s meeting continued to feed the perception that negotiators still had major obstacles to overcome.”

As contrasts and political rhetoric between the executive branch and Congress unfold this election year, Senate and House GOP leaders are each working to establish a political strategy and policy agenda that members can coalesce around.

In the Senate, Manu Raju reported yesterday that, “President Barack Obama has made no secret about his plan to run against Republicans in Congress. But Republicans in the Senate are still trying to figure out the best way to run against him.

“With no nominee yet to spell out the party’s agenda, Senate Minority Leader Mitch McConnell (R-Ky.) is locked in a behind-the-scenes debate with other Republicans over their strategy for winning back power.

“The divide within the party is sharp. McConnell and other influential senators believe the party should avoid putting out a detailed platform and focus squarely on Obama’s record, while a range of junior senators — and some veterans like Sen. John McCain — think the conference should lay out a Contract with America-type agenda. Others, such as Sens. Roy Blunt of Missouri and Ron Johnson of Wisconsin, want to more aggressively push House Republican bills in the Senate in order to speak with one voice coming out of Congress.”

And in the House, Jennifer Steinhauer and Jonathan Weisman reported in today’s New York Times that, “Unpopular and divided, the once mighty House Republicans are laboring to repair their image and frame a new agenda.

“Absent for now is a big, contentious docket similar to last year’s, which included the goal of writing new health care legislation to replace the Obama administration’s law. A long-promised overhaul of the tax code seems out of reach. When Representative Eric Cantor, the Virginia Republican and majority leader, issued a memo this week laying out the body’s initial legislative agenda, a centerpiece was a modest tax cut for small businesses.”

The Times article noted that, “Many of the more conservative members, particularly some freshmen, want to continue taking the good fight to Democrats…Others desperately want to find bipartisan compromises that can become law.”

And Billy House reported yesterday at National Journal Online that, “House Speaker John Boehner, R-Ohio, on Thursday sought to downplay talk of testy relations between himself and Majority Leader Eric Cantor, R-Va., but he did say there are ‘rumbles’ between their staffs at times.”

 

Farm Bill and Policy Issues

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Four hearings will be held in February and March in hopes of bringing a farm bill to the Senate floor before the House acts, Senate Agriculture Committee Chairwoman Debbie Stabenow told DTN on Wednesday.

“Stabenow, D-Mich., said she does not know when Senate Majority Leader Harry Reid, D-Nev., would bring a farm bill to the floor, but said that she and Senate Agriculture ranking member Pat Roberts, R-Kans., ‘want to be able to move it as soon as we can so [House Agriculture Committee Chairman Frank Lucas, R-Okla.] has the time he needs in the House.’”

Mr. Hagstrom added that, “Even though the supercommittee on deficit reduction failed to complete its work, Stabenow said the work she and Lucas did preparing the proposal they submitted to it ‘was a very important process for us, very clarifying.’

“‘I really feel like we have developed a lot of good work already,’ she said. ‘We developed relationships that are positive. We know where we still need to work.’

“The commodity title ‘is the area where we have the most work to do,’ Stabenow acknowledged. Noting that commodity groups are meeting this week to discuss their differences and try to reach consensus, she said, ‘I have been urging them to get together.’”

The DTN update stated that, “Reacting to Lucas’s statements that it would be hard to develop a single program that will work for all commodities, Stabenow said she has heard ‘loud and clear,’ including at the farm bill hearing she held in Lansing, Mich., that crop insurance is ‘the No. 1 management tool,’ but crop insurance is not available for all crops.

“‘That is where the challenge comes in,’ she said. ‘I am very confident we can come together on a set of tools.’”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “After a two-day powwow in Washington this week, roughly 40 leaders from 13 farm organizations put out a statement on Thursday that effectively said they met and they like working together.”

The article pointed out that, “Commodity groups have leaned toward the shallow-loss programs that provide a revenue guarantee. The American Farm Bureau has argued such programs offer too much protection on smaller losses and would prefer more focus on catastrophic losses.”

“Everyone expects commodity programs will undergo an overhaul with the likelihood that direct payments are gone and will be replaced with another program. The problem farm groups face is the same one facing lawmakers: They don’t know exactly how much has to be cut from the farm bill. The supercommittee figure was $23 billion over 10 years, but congressional leaders haven’t committed to keeping that dollar figure,” Mr. Clayton said.

The DTN item explained that, “House Agriculture Committee Ranking Member Collin Peterson, D-Minn., said the House Agriculture Committee will follow the lead of the Senate, partially because House members are waiting for direction from Republican leadership. Peterson said House Ag Chairman Frank Lucas, R-Okla., also continues working with House leaders to see when there would be time to move a bill and get floor time.

“‘Always, the idea was that the Senate was going to move first anyway,’ Rep. Peterson said in a phone interview Thursday.”

And on budget related variables, Mr. Clayton indicated that, “Looming out there is the lack of clarity on the mandatory sequestration cuts passed by Congress last August that are expected to take effect Jan. 1. Those cuts were expected to be around $16 billion in agricultural spending; however, specifics are not controlled by Congress, but by the White House Office of Management Budget. The OMB could give instructions to the Congressional Budget Office to build the sequestration cuts into the March baseline, which would effectively lower the money to spend on a farm bill, Rep. Peterson said.

“A more likely scenario is that the House leadership will demand a higher level of budget cuts from the Agriculture Committee, especially after the House Budget Committee wanted $48 billion in cuts from agricultural programs last year. Rep. Peterson said he can work with Lucas, but he worries about the demands the leadership will place on trimming programs.

“‘As long as it’s a reasonable number, I’ll be able to work with them. If they go off the deep end, then I won’t be able to work with them.’”

Gary Truitt reported earlier this week at Hoosier Ag Today (HAT) Online that, “Indiana Congressman  Marlin Stutzman, one of the few working farmers in Congress, told HAT at the Ft. Wayne Farm Show a few weeks ago, that there was a 50/50 chance work would be done on the Farm Bill this year.  This week he told  HAT things in Washington have declined so much that there is little if any chance action will be taken this year.”

Meanwhile, Bloomberg writer Alan Bjerga reported yesterday that, “U.S. food-stamp use in November fell for the second straight month as the unemployment rate declined, the government said.

“About 46.134 million Americans received aid, down 0.2 percent from a revised 46.228 million in October, the U.S. Department of Agriculture said today in an e-mail. Participation was 5.8 percent higher than a year earlier. Monthly spending on the program was $6.22 billion in November, 6.9 percent more than a year earlier.”

Also on nutrition, an Op-Ed published in today’s Los Angeles Times by David R. Just and Brian Wansink stated that, “Last fall, Los Angeles took a hard line on school nutrition. In an attempt to mold better eating habits in kids, the Los Angeles Unified School District eliminated flavored milk, chicken nuggets and other longtime childhood favorites. But instead of making kids healthier, the changes sent students fleeing from school cafeterias. There have been reports of a thriving trade in black-market junk food, of pizzas delivered to side doors and of family-sized bags of chips being brought from home. Garbage cans are filling up with the more nutritious food, even if kids aren’t.

“The lesson? We cannot simply bully kids into eating healthful foods and take their lunch money.”

In policy issues regarding animal agriculture, a news release yesterday from the United Egg Producers noted that, “Congress only has to look at what’s happening in the European egg industry right now to understand the benefits to American farmers, grocers, and consumers of the proposed amendments to the Egg Products Inspection Act (H.R. 3798) introduced last month in Congress.

“Contrary to the proposed legislation in the United States, egg farmers in Europe were given a single deadline (January 1, 2012) with no phase-in period to abandon the use of conventional cage housing for egg-laying hens with no specific alternative housing proposed. The result was a legal morass, confusion and chaos for European farmers, retailers and consumers that contributed to reported egg shortages and higher prices.”

The release added that, “‘Earlier estimates of higher egg prices in the U.S. were based on the fear of a patchwork of state mandates for cage-free production which involves dramatically higher costs. This federal legislation is what is best for consumers, retailers and egg farmers to avoid the catastrophe that is occurring all across Europe right now,’ [Chad Gregory, senior vice president of United Egg Producers] added.”

 

Regulations

Chris Clayton reported yesterday at DTN (link requires subscription) that, “Changes to a child labor rule that give farm kids special permission to work for their families aren’t enough to satisfy members of a House Small Business Subcommittee, who said they want the rule pulled completely.

“In a Subcommittee on Agriculture, Energy and Trade hearing on Capitol Hill Thursday, a Department of Labor official defended the need to update child-labor laws for farms, but highlighted changes made to ensure children can work for family members. Still, lawmakers criticized the proposal with one congressman saying he would block any funding to implement it.”

Sen. Jerry Moran (R., Kans.) was a guest on yesterday’s AgriTalk radio program with Mike Adams where they discussed issues associated with the Dept. of Labor child labor rule, to listen to a this conversation from yesterday’s AgriTalk program, just click here (MP3- 4:00).

And an update yesterday from the House Ag Committee stated that, “This week during The Ag Minute [MP3], guest host Rep. Scott Tipton [R., Colo.] discusses the U.S. Department of Labor’s (DOL) move to reconsider a portion of a proposed labor rule that relates to children working on family farms.  The decision to reconsider the rule is a positive development, but there are still concerns within the agricultural community.  Farming families must be allowed to continue the long tradition of teaching their children the skills required to grow into the next generation of farmers.”

 

MF Global

Scott Patterson reported in today’s Wall Street Journal that, “Even as MF Global Holdings Ltd. was telling investors and a credit-rating firm it was in good shape, the company was girding itself internally with a ‘break the glass’ emergency plan in the weeks before its collapse, according to testimony at a congressional hearing Thursday.

“In the second hearing by a House Financial Services Subcommittee on MF Global’s downfall, lawmakers quizzed two of the firm’s former risk managers about the dangers posed by a massive bet on European debt that eventually led to a series of rating-firm downgrades and a devastating credit crunch that brought down the firm.”

The Journal article noted that, “Lawmakers focused on an internal MF Global document that laid out extreme financial stress scenarios the firm could face in the near future. Those concerns apparently contrast with upbeat comments the same month from former Chief Executive Jon S. Corzine and the firm’s former chief financial officer, Henri J. Steenkamp, lawmakers said.”

In a video update from yesterday, Rep. Randy Neugebauer (R., Tex), the Chairman of the House Financial Services Subcommittee on Oversight and Investigations, provided a summary of some of the key points from yesterday’s hearing.

Jacob Bunge and Dan Strumpf reported in today’s Wall Street Journal that, “CME Group Inc. launched a fresh effort to rebuild market confidence damaged by the collapse of MF Global Holdings Ltd., creating a $100 million insurance fund to protect farmers and ranchers.”

The Journal article added that, “The Family Farmer and Rancher Protection Fund would indemnify individual farmers and ranchers for as much as $25,000 of losses incurred from the collapse of a brokerage used to place trades on the CME. Farmer cooperatives could claim up to $100,000.”

Reuters writer Christopher Doering reported on Wednesday that, “The head of the Commodity Futures Trading Commission has ordered an extensive review of how futures brokerages are regulated, following the collapse of MF Global three months ago, a CFTC official told Reuters on Wednesday.

“CFTC Chairman Gary Gensler ordered the review after questions emerged about whether the CFTC or exchange-operator CME Group, whose self-regulatory arm served as MF Global’s front-line regulator, could have done more to prevent the firm’s collapse and safeguard customer money.”

 

Agricultural Economy

A Voice of America article from this week reported that, “The world will need to double food production within the next three decades in order to feed a rapidly growing and increasingly affluent population.  A United Nations report says reaching that goal will require major increases in intensive, high-efficiency livestock operations for both meat and dairy production.”

With respect to U.S. crop production, University of Illinois Agricultural Economists Scott Irwin and Darrel Good provided a closer look at issues associated with domestic corn production in an update posted yesterday at the farmdocdaily blog (“The Historic Pattern of U.S Corn Yields, Any Implications for 2012?”)

A summary of their analysis stated that, “For any particular year, including 2012, history suggests a 60 percent chance of an average U.S. corn yield above trend and a 40 percent chance of an average yield below trend value. Those arguing that 2012 yields cannot be below trend because both 2010 and 2011 were also below trend ignore the actual pattern of historical corn yields. The odds slightly favor a corn yield above trend in 2012 but there is certainly precedent for another year below trend. More specific expectations about the 2012 average yield will depend on how the planting and growing season unfolds.”

Keith Good

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