FarmPolicy

October 20, 2014

Budget Issues -Senate Farm Bill Hearing; Policy Issues; Ag Economy; and China

Budget issues and Senate Farm Bill Hearing

Naftali Bendavid and Siobhan Hughes reported in today’s Wall Street Journal that, “Congressional negotiators working on a deal to extend jobless benefits and a payroll-tax cut say they have come to a deal, paving the way for a vote before the policies expire at the end of the month.

“‘We have reached an agreement,’ said Rep. Dave Camp (R, Mich.) shortly after midnight. ‘We’re confident that this can be concluded.’

“Sen. Max Baucus (D, Mont.) said, ‘It’s clear that we’ll have a majority of conferees sign the conference report.’”

The Journal article added that, “The costs of the payroll-tax cut would not be offset with spending cuts or revenue increases, in a major concession by Republicans, according to the framework being discussed earlier Wednesday. But the remaining parts of the package were to be funded by auctioning off spectrum, cutting the federal contribution to employee pensions and imposing spending cuts, including to President Obama’s health-care program.”

Meanwhile, Eliza Krigman reported yesterday at Politico that, “There may be little light left at the end of the long regulatory tunnel in Washington for LightSquared and its wireless network of the future.

“The FCC on Tuesday all but closed the door on any hope that the company, backed by billionaire Philip Falcone, will be able to use its wireless technology in airwaves that cause interference with GPS navigation systems.”

American Soybean Association President and Syracuse, Neb.-based soybean farmer Steve Wellman noted yesterday that, “Tuesday’s decision by the FCC is certainly a great relief for more than 600,000 soybean farmers across the country who use GPS technology to precision-apply seed and fertilizer; to test fields for fertility and to monitor yields; to reduce chemical and fuel use; and to map field boundaries, roads, irrigation systems. In short, GPS technology has enabled farmers to produce more food for a growing world population with fewer inputs.”

With respect to the Farm Bill, the “Washington Insider” section of DTN pointed out yesterday (link requires subscription) that, “The proposals [the Obama administration’s fiscal 2013 budget plan] concerning crop insurance also are controversial. These also are expensive and the administration is attempting to make the case once again that some of the subsidies can be cut without hurting the program. The proposal claims more than $7.7 billion savings over the next decade.”

More specifically, the DTN update explained that, “A USDA commissioned study told the agency that it is subsidizing the private companies who sell and service the policies more than necessary, so it proposes cuts to bring their returns in line with industry norms and save about $1.2 billion over 10 years. The department also wants to cap administrative expenses paid to the participating companies to neutralize the effect of the recent spike in commodity prices. The proposal to cap those payments at $0.9 billion is expected to save about $2.9 billion over 10 years, a shift USDA argues can be done without harming the service.

“The proposal also would cut the premium subsidy paid on behalf of producers by 2 percentage points for those policies that currently are subsidized by over 50 percent, and save about $3.3 billion over 10 years. And, it would require USDA to reset premium rates for the catastrophic coverage to more accurately reflect historical performance of that portfolio, for a saving of about $255 million over 10 years.”

Meanwhile, an update posted earlier this week at the National Sustainable Agriculture Coalition Blog stated that, “The President’s request follows the emerging consensus to do away with direct payments but offers no new alternative safety net proposal and instead simply proposes extensions of the ACRE [Average Crop Revenue Election] and SURE [Supplemental Revenue Assistance Payments] programs that most other farm bill actors believe need major reworking.”

With this background in mind, Sarah Gonzalez reported yesterday at Agri-Pulse Online, that at yesterday’s Senate Agriculture Committee hearing, “Senator Mike Johanns (R-Neb.), Secretary of Agriculture under President George W. Bush, asked the current Secretary about the President’s proposal to maintain the Supplemental Revenue Assistance Program (SURE). He said his constituents view crop insurance as their best risk management tool.

“‘I have yet to have a producer tell me he wants me to fight for SURE,’ Johanns said. ‘It just doesn’t work very well.’”

Ms. Gonzalez added that, “Vilsack agreed that SURE, as the program exists now, is not the best risk management program to support crop insurance. However, he added that some type of program is needed to protect farmers against multiple losses.

“‘The problem with SURE is it’s a dollar short and a day late,’ he said. ‘If we continue with it, we clearly have to change the program so it’s relevant today. We see our role as working with you to improve it.’”

The exchange between Sen. Johanns and Sec. Vilsack on this issue can be heard here- FarmPolicy audio (MP3- 5:26).

And Daniel Looker reported yesterday at Agriculture.com that, “When the 2008 Farm Bill was written, a permanent disaster program had strong backing in the northern Great Plains, represented by influential Senate Ag Committee members Max Baucus (D-MT) and Kent Conrad (D-ND).

“Vilsack conceded that the SURE program has been ‘a day late and a dollar short.’  Its payments arrive about a year later than crop insurance. But he said it was needed to help overcome the shortcomings of crop insurance when farmers have multiple years of losses.”

Sen. Baucus spoke more broadly about agricultural funding at a Wednesday Senate Finance Committee hearing on the FY2013 budget proposal- where he noted that: “Deep cuts to agriculture programs will pull the rug out from under our hardworking producers and unjustly target rural states like Montana. Rural development programs provide important economic development, infrastructure and housing resources. Cuts to these programs have a devastating effect on the economies of rural communities and paralyze or ongoing economic recovery. We need to enact deficit reduction in a smart way. I look forward to working with my colleagues and administration to do so.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “The crop insurance industry has friends in the country, and in the U.S. Senate.

“A Senate Agriculture Committee hearing on Wednesday was meant to focus on energy and rural development challenges, but the importance of crop insurance and criticism of President Barack Obama’s proposed cuts to the industry became the themes repeated by senators.

“The bipartisan support for the industry reflected that it is doubtful the farm bill will incorporate the Obama administration’s proposed $7.6 billion in cuts to crop insurers. Congress also is unlikely to turn over elements of crop-insurance services to Farm Service Agency offices.”

Mr. Clayton also noted that, “[Sec.] Vilsack, responding to Sen. John Hoeven, R-N.D., shortly later, said, ‘You’ve heard me talk about crop insurance and our view. We obviously recognize the importance of it, significance of it. I think the question is, you know, how much of a profit margin do you need in order to be sustainable? I think that’s obviously something we can talk about.’”

On a separate issue at yesterdays Senate Agriculture Committee hearing, Sen. John Boozman (R., Ark.) queried Secretary Vilsack about the idea of regional differences in agricultural production that exist in the United States and the corresponding dissimilarities in cost production variables for producers of different crops.  Sen. Boozman addressed potential policy concerns that may need to be considered if federal policy moved away from a “one size fits all” safety net.

To listen to this exchange between Sen. Boozman and Sec. Vilsack, click on this FarmPolicy audio link (MP3- 2:32).

Senator Tom Harkin (D., Iowa) highlighted nutritional issues during a portion of his remarks at yesterday’s hearing.  The former Committee Chairman reiterated that a constituent recently told him that the “Food Stamp President” label that some have attributed to President Obama should be considered a “Badge of Honor.” (FarmPolicy audio here (MP3- 1:21)).

Ken Anderson reported yesterday at Brownfield that, “Construction of a new federal biosecurity lab in Manhattan, Kansas could be in jeopardy.

“The Obama Administration’s new budget contains no additional funding for construction of the new National Bio- and Agro-defense Facility at Kansas State University—and the administration says the U.S. Department of Homeland Security will reassess the viability of the project.”

A news release yesterday from Senate Ag Committee Ranking Member Pat Roberts (R., Kans.) noted that, “[Sen. Roberts] today fought to improve food security in the United States by securing further commitment from U.S. Secretary of Agriculture Tom Vilsack that building a National Bio and Agro-Defense Facility (NBAF) in Manhattan, Kansas, would remain a critical funding priority for the nation.

“At a hearing today of the Senate Agriculture Committee, Roberts used his time to discuss the questionable proposal in the Obama Administration’s 2013 Budget to reassess the construction of an NBAF to replace the aging Plum Island facility.”

A news release yesterday from the Agriculture Energy Coalition (AgEC) stated that, “The [AgEC] commends Sen. Debbie Stabenow (D-MI) and Sen. Pat Roberts (R-KS), Chairman and Ranking Member of the Senate Committee on Agriculture, Nutrition and Forestry, along with other Members for today’s hearing, entitled ‘Energy and Economic Growth for Rural America.’ This hearing was the Committee’s first of the year on the 2012 Farm Bill and demonstrates the important role that Farm Bill energy programs have played in promoting jobs, economic growth, and clean, renewable energy throughout rural America.

“As a called witness, Ag Energy Coalition and NFU member Steve Flick of Show Me Energy made clear that farm-based energy and the programs that support it like BCAP are essential to rural America’s future economic livelihood.”

In other Farm Bill news, an update posted yesterday at Agri-Pulse reported that, “On the eve of the Senate Agriculture Committee launching a series of hearings to evaluate policy options for new multi-year farm legislation, aid and international development groups said they’ll push Congress to at least reauthorize a $60 million program that allows for the purchase of food closer to the areas where it is needed and require U.S. food assistance shipments to be more nutritious.”

“‘Current regulations on the food aid program in the Farm Bill protect special interests at the expense of the hungry, and [that means] that more than a quarter of every dollar the U.S. spends on food aid goes to waste,’ an anti-hunger coalition led by the American Jewish World Service (AJWS), Oxfam America and Bread for the World Institute, said in a statement. ‘With a reformed system that includes cash, vouchers, local procurement of food, and a serious commitment to strengthening local sustainable agriculture, the United States can effectively partner to save more lives and work toward eradicating global hunger.’”

 

Policy Issues

Alessandro Torello reported in today’s Wall Street Journal that, “The European Union and the U.S. agreed Wednesday to mutually recognize their certificates for organic products, in a move that will facilitate transatlantic sales in a market worth roughly $50 billion, the EU’s executive body said.”

A news release yesterday from Rep. John Garamendi (D., Calif.) stated that, “[Congressman Garamendi], a former Insurance Commissioner and a life-long rancher, has introduced the bipartisan Flood Insurance for Farmers Act of 2012, H.R. 4020.

The bill addresses a serious problem for farmers who produce crops and raise livestock in floodplains. As the Federal Emergency Management Agency (FEMA) continues its studies of the levee systems that protect agricultural land, many of the levees have been downgraded. Until the levees are improved, farmers in many places are unable to build new or upgrade existing agricultural structures necessary to conduct or increase production and business. (For more on this problem, read “Remapped flood zones mean new restrictions,” an article in the November 2011 edition of Ag Alert, a weekly newspaper for California agriculture.)”

Dan Strumpf reported in today’s Wall Street Journal that, “Since MF Global Holdings Ltd. filed for bankruptcy protection last year, some customers of its failed brokerage have had little choice but to wait for the full return of their cash.

“That is beginning to change. Lately, investors that gobble up claims in bankruptcy or other distressed situations have begun approaching former MF Global customers with offers to buy their claims for cash, at a discount.”

And a report yesterday at CNBC television (“Egg & Hog Producers At Odds?”) highlighted proposed legislation from the United Egg Producers and the Humane Society of the United States regarding federal egg production standards.

 

Agricultural Economy

Bloomberg writer Alan Bjerga reported yesterday that, “Record cropland values in the U.S. Great Plains are spurring more farmland sales as absentee owners cash in on an agricultural boom, according to the Federal Reserve Bank of Kansas City.

“Lenders in the Federal Reserve region that includes all or parts of seven states in the central U.S. said cropland prices rose 25 percent in 2011 and ranchland increased 14 percent, according to a survey released by the bank today. Farmers remained the main source of purchases, buying 73 percent of farmland sold. Higher values translated into more expensive rents, straining profits for tenant farmers, the Fed said.”

 

China

Kirk Johnson reported in today’s New York Times that, “Twenty-seven years ago, a young man named Xi Jinping, on an agricultural research trip from his home in China, came to rural eastern Iowa and slept in Eleanor and Thomas Dvorchak’s sons’ room. The boys had just gone off to college — their room still stuffed with the things of childhood — and Ms. Dvorchak said she felt bad. She had grown up reading Pearl S. Buck novels about the travails in rural China, and now here was a visitor, perhaps from that same hard place, and they had put him in there with the Star Trek action figures.

“‘He did not complain,’ said Ms. Dvorchak, 72, who is now retired and living in Florida. ‘Everything, no matter what, was very acceptable to him — he was humble.’

On Wednesday, Mr. Xi returned to Muscatine — triumphantly this time, with an entourage and a room of his own — as China’s vice president and heir apparent to the leadership of a rapidly rising world power. Seventeen people he met here in 1985, including the Dvorchaks, were invited to tea.”

The Times article noted that, “Chinese officials have said the trip flowed from Mr. Xi’s desire to relive a pleasant period from his past and to reconnect with Iowa farmers and other residents he came to know a quarter-century ago. It was also clearly a propaganda event at a time of heightened tensions between the United and China over a raft of issues, including differences over how to handle Syria’s violent crackdown of protests and suspicion in Beijing over the reassertion of American power in Asia.

“The tightly choreographed moment was intended to show audiences in the United States and in China the deep connection that the presumed future Chinese president, now 58, feels with the people of the American heartland.

It was also likely meant to highlight China’s growing dependency on food imported from the United States. Iowa, the country’s leading soybean producer, is a big supplier to China. On Wednesday, Chinese trade representatives signed agreements with American grain companies to increase soybean imports.”

Meanwhile, David Leonhardt reported in today’s New York Times that, “With little fanfare, China’s currency has appreciated significantly in the last year and a half, leading many economists to question whether the exchange rate is still the most important economic issue for the United States to press with China’s leaders.

“The rise of the renminbi — up 12 percent since June 2010 on an inflation-adjusted basis and 40 percent since 2005 — has helped American companies by effectively reducing the cost of their products in China. In the last two years, American exports to China have risen sharply.”

Keith Good

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