FarmPolicy

July 24, 2014

Budget and Policy Issues (Farm Bill); the Ag Economy (ERS Updates); and China

Budget: Agriculture, CFTC, EPA, Trade, and Energy; and Pay Roll Tax Issue

Budget Issues: Agriculture- Farm Bill

Lori Montgomery reported in today’s Washington Post that, “President Obama rolled out an election-year budget on Monday that would delay action to reduce the national debt in favor of fresh spending on Democratic priorities aimed at rebuilding the American middle class.

“In his final budget request before facing voters in November, Obama called for $350 billion in new stimulus to maintain lower payroll taxes, bolster domestic manufacturing, lure jobs back from overseas, hire teachers, retrain workers and fix the nation’s crumbling infrastructure. There would be only modest trims to federal health-care programs and no changes to Social Security, the biggest drivers of future borrowing, despite last year’s raucous political debate over the federal debt.”

Peter Schroeder reported yesterday at The Hill’s On the Money Blog that, “Jeffrey Zients, acting director of the Office of Management and Budget, will serve as the president’s point man this week. He will appear before the Senate Budget Committee on Tuesday and the House Budget Committee on Wednesday.

“Joining him as a frequent presence before Congress will be Treasury Secretary Timothy Geithner, who is scheduled to testify at no less than four hearings this week.”

Mr. Schroeder added that, “Agriculture Secretary Tom Vilsack will round out the budget chat before appropriators Friday.”

Ed O’Keefe noted in today’s Washington Post that, “The proposed budget for fiscal 2013 would reduce spending at the U.S. Department of Agriculture by about $700 million, or 3 percent compared with this year’s spending levels, by cutting farm subsidies and closing hundreds of tiny regional offices.”

“‘For the past decade, the agricultural sector has been extremely strong,’ Obama’s budget proposal said, noting that overall farm incomes were projected to grow $21.8 billion in 2011, the second-highest inflation-adjusted value for farm income in 35 years.

“Obama’s previous proposals to cut farm subsidies have met fierce opposition from farm-state lawmakers.”

Reuters news reported yesterday that, “President Barack Obama proposed slashing subsidies to the booming agriculture sector by $32 billion over the next decade, just as Congress begins the lengthy process of overhauling the expiring U.S. farm law.

“For the third year running, Obama proposed sweeping cuts to the U.S. Department of Agriculture in his annual budget. Congress, however, has yet to come to an agreement on how to reform the massive subsidies to the sector.

Obama’s plan includes eliminating the $5 billion a year in direct payment to farmers that is disbursed regardless of need, an idea that has some support among U.S. lawmakers.”

The article pointed out that, “The plan to cut some $32 billion over 10 years for farm support is far larger than the $23 billion agreed by Agriculture Committee leaders in Congress last fall during deficit-reduction talks.”

Yesterday’s Reuters article added that, “Obama said USDA should cut some 2 million acres (800,000 hectares) from the long-term Conservation Reserve, which holds farmland out of production. Crop insurance subsidies would be cut by $7.6 billion through 2022.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “The proposal only made minor tweaks to recommendations in USDA programs pitched by the administration last year. The dollar figure for USDA budget cuts has ranged from $15 billion to $48 billion over 10 years, depending on the proposal. Lawmakers on Capitol Hill have been trying to lock in a $23 billion figure in the farm-bill discussions, which is $9 billion lower than the administration proposed on Monday.

“Noting the range of figures being used for budget cuts, Agriculture Secretary Tom Vilsack said some consensus is needed on the dollar figure for USDA budget cuts. ‘I think it’s incumbent on folks to put ideas on the table that, at the end of the day, provide sufficient time at USDA to manage change and allow us to maintain a strong, viable and economically feasible safety net for producers,’ he said.”  (Note: A related audio clip from Sec. Vilsack yesterday on this issue can be heard here, (MP3- 1:30), while an overall statement on the budget proposal from Sec. Vilsack can be found here).

Mr. Clayton explained that, “Senate Agriculture Committee Ranking Member Pat Roberts, R-Kan., said the administration ignored feedback from producers who said that crop insurance is the most effective safety net. ‘Farmers and ranchers are ready to do their part to rein in federal spending. In negotiations last fall, we identified $23 billion in savings from U.S. Department of Agriculture programs,’ Roberts said.  ‘Our work to listen to farmers and ranchers continues this week as we hold more hearings on tough issues facing farm country and how they impact producers, consumers and the taxpayers.’

Tom Zacharias, president of the National Crop Insurance Services, stated that the industry has already contributed more than $12 billion in spending reductions since 2008.”

Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) indicated yesterday that, “I am encouraged the President agrees that direct payments are an indefensible program of the past, but do not agree with further cuts to crop insurance, which is a critical risk management tool. I have heard loud and clear that strong, effective risk management is the number one priority of farmers and producers across the country. Farming is a high risk business and we don’t want farmers and other small businesses going under because a few days of bad weather – it jeopardizes the economy and the safety of our national food supply.”

And House Ag Committee Chairman Frank Lucas (R., Okla.) noted that, “The agriculture community remains committed to doing its part in deficit reduction.  However, this proposal shows a lack of perspective and understanding in how agriculture can realistically contribute…For example, President Obama’s proposal to cut crop insurance threatens the integrity of the program itself.  And, he ignores other areas for savings such as streamlining or eliminating duplicative programs in conservation, or closing loopholes in nutrition spending.”

Bloomberg writer Alan Bjerga reported yesterday that, “Spending on food-stamp benefits would fall 0.6 percent to $69.9 billion in the year starting 2013 as employment improves, according to projections contained in the budget President Barack Obama submitted to Congress.

“Spending for the food-stamp component of the Supplemental Nutrition Assistance Program, or SNAP, still would be the second-highest on record and 17 percent above 2011, the government said in its proposal today for U.S. Department of Agriculture spending. Overall budget authority for all related initiatives would fall 0.9 percent to $87.4 billion.”

Additional reaction to the President’s budget proposal was also posted on the web by the National Sustainable Agriculture Coalition and the National Farmers Union.

In other Farm Bill developments, a news release yesterday from the National Cotton Council indicated that, “Addressing the joint meeting of the National Crop Insurance Services and American Association of Crop Insurers, National Cotton Council President/CEO Mark Lange laid out the circumstances that brought the U.S. cotton industry to endorse a sweeping change in cotton policy.

“Speaking to their convention in Scottsdale, AZ, today, Lange said the Stacked Income Protection Plan, or STAX, allowed U.S. cotton to meet budget constraints, provide meaningful risk management and address the commodity’s unique policy challenge — the World Trade Organization (WTO) Brazil case.”

 

Budget Issues: Commodity Futures Trading Commission (CFTC)

Reuters writers Christopher Doering and Sarah N. Lynch reported yesterday that, “The White House on Monday proposed big budget boosts for U.S. financial market regulators, which are months behind in finalizing Dodd-Frank reforms and are under pressure to more vigorously police markets in the wake of the 2007-2009 financial crisis….The Securities and Exchange Commission would get an 18.5 percent funding increase, while the Commodity Futures Trading Commission would receive a 50 percent rise in spending under the Obama administration’s fiscal 2013 budget.”

 

Budget Issues: Environmental Protection Agency (EPA)

Amy Harder reported yesterday at National Journal Online that, “President Obama’s environmental agenda, under political attack and on the back burner in a sluggish economy, will face budget cuts for the third straight year…The proposed Environmental Protection Agency budget for fiscal year 2013 is $8.3 billion, down from $9 billion last year. This year’s request represents a 1.2 percent decrease, or $105 million, from the 2012 enacted level.”

 

Budget Issues: Trade

Kelsey Snell reported yesterday at National Journal Online that, “Obama’s budget proposal would expand the International Trade Administration and the Office of the U.S. Trade Representative while also upping funds to ensure fair trade practices at the border. The budget includes $517 million to promote exports and enforce international export laws and $13 million for enhanced customs and border enforcement to tackle the sale of pirated goods…The budget also includes a small bump in funding for the office of U.S. Trade Representative of $3 million.”

 

Budget Issues: Energy

Reuters writer Timothy Gardner reported yesterday that, “The White House proposed more funds for renewable energy and pipeline safety in the 2013 budget while renewing the call to end subsidies for the oil and gas sector…The budget for fiscal year 2013 proposes $27.2 billion for the Department of Energy, a 3.2 percent increase of what Congress enacted last year, and includes $2.3 billion for research and development for energy efficiency, advanced vehicles and biofuels.”

 

Payroll Tax- Farm Bill

An update posted yesterday at the Red River Farm Network stated that, “House Agriculture Committee Ranking Member Collin Peterson [D., Minn.] is having a difficult time seeing how the next farm bill can come together. One possibility is that it could be tied to the payroll tax cut bill. ‘They still don’t have this payroll tax thing worked out and one thing they’re fighting over is how to pay for it, so, if they get down to the end and they’re missing $25 billion, there’s a small possibility that they might decide to put the farm bill in there because it would actually pick up some votes.’”

A similar report regarding this idea was posted last week at AgWeb Online.

However, Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “House Republicans on Monday afternoon introduced a bill that could be passed this week to extend the payroll tax holiday for the rest of this year without paying for it…The Temporary Payroll Tax Cut Continuation Act, H.R. 4013, would simply amend current law to extend the two-percentage-point cut in the payroll tax through the end of 2012.”

 

Other Policy Issues: Animal Agriculture

Bill Tomson and Julie Jargon reported in today’s Wall Street Journal that, “McDonald’s Corp. is pushing its pork suppliers to stop confining sows in small pens known as gestation stalls, moving to address concerns raised by animal-welfare advocates—and catch up with some competitors.

“The burger giant on Monday said the pens are ‘not a sustainable production system’ and there are alternatives that ‘are better for the welfare of sows.’ The move was announced in conjunction with the Humane Society of the U.S., which praised the decision.”

The Journal article added that, “The National Pork Producers Council, a farmers trade group, said it continues to support the use of gestation stalls, but was also willing to assist in the transition for McDonald’s suppliers.”  (Related NPPC news release here; also, Sec. Vilsack was asked about this issue in a news briefing yesterday, to listen to a portion of his remarks, just click here (MP3- 3:00)).

 

Agricultural Economy (Economic Research Service Reports)

Bloomberg writer Alan Bjerga reported yesterday that, “U.S. farm net income probably will fall 6.5 percent in 2012 from last year’s record as the biggest crop acreage in a generation and rising costs trim profits, the Department of Agriculture said.

“Income will total $91.7 billion, down from a revised $98.1 billion in 2011 and the second-highest ever, the USDA said today in a report. The value of crops will rise 3.1 percent to $204.9 billion, while revenue from livestock sales will increase 0.6 percent to $165.7 billion, the USDA said. Expenses [related graph] such as diesel fuel and animal feed will increase 3.7 percent to $235.1 billion, eroding profits.”

The article added that, “U.S. government subsidies may rise to $11 billion this calendar year, up 4 percent from 2011, according to today’s report” [related graph].

A separate Economic Research Service update from yesterday stated that, “In 2010, median total farm household income was $54,162, up 3.7 percent from 2009 and 0.8 percent above the 5-year average for 2006-10. Median farm and off-farm incomes were $-2,020 and $49,490, respectively, both higher than in 2009. Median total farm household income is expected to increase by 1.8 percent in 2011, to $55,131, and to further increase in 2012 to $55,805. Most farm households earn the majority of their income from off-farm sources and off-farm income is expected to increase by 3.2 percent in 2011, to $51,069, and an additional 3.9 percent in 2012, to $53,037.”

Katie Micik reported yesterday at DTN (link requires subscription) that, “Farmers are expected to plant 94 million acres of corn this coming crop year, according to USDA’s baseline estimates released Monday morning. That’s near the low end; some private estimates put corn acreage as high as 96 million acres. USDA also maintained that corn would follow trendline yields and hit 164 bushels per acre in 2012.”

 

China

The Washington Post featured an article today containing background on Chinese Vice President Xi Jinping, while Bloomberg news reported yesterday that, “Xi, set to arrive late today in the U.S., will travel to Iowa and Los Angeles after meeting President Barack Obama at the White House.”

The Bloomberg article added that, “Iowa is the biggest corn-producing state and people there say Xi will get a warm reception that contrasts with the tone in Washington and on the campaign.”

Reuters writer Carey Gillam reported earlier this week that, “China is half a world away from the 2,300-acre family farm in east-central Iowa where John Weber and his son plant corn and soybeans.

“But 62-year-old Weber is among a number of Iowa farmers who are benefiting as rising incomes in China lead to demand for billions of dollars of American farm goods.”

The Reuters article noted that, “This week, a visit by Chinese Vice President Xi Jinping to the farm state will underscore the possibilities of the deepening agricultural trade relationship between China and the United States.”

An update today at the China Real Time Blog (Wall Street Journal) stated that, “Agricultural policy has lately proved a tough row to hoe for the U.S. and China — the world’s largest agriculture exporter and the world’s largest producer, respectively. There was an unexpected spat over animal feed last June, and lately top Chinese officials have been downplaying the country’s need for U.S. corn.

But at least for Vice President Xi Jinping’s visit to the U.S. this week, China is pursuing a detente in the farm fight.

“China is keen to cooperate with the U.S. in food security, sustainable agriculture, agricultural trade, and agricultural science and technology, China’s agriculture minister Han Changfu said in an extensive interview with the official Xinhua news agency published on his ministry’s website Monday, the same day Mr. Xi flew to Washington for the start of his five-day trip.”

Keith Good

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