Farm Bill and Policy Issues
Gregory Meyer and Hal Weitzman reported yesterday at The Financial Times Online that, “Brad Lawrence has been farming for 40 years. Following his father and grandfather into the family business, he and his brother grow seed corn, soyabeans and peppermint on 6,000 acres in Knox, north-west Indiana.
“The 57-year-old has seen his share of booms and busts in the agricultural markets, but with commodity prices soaring in recent years and land values at record highs, he says farmers are experiencing an unprecedented windfall. ‘This is the best we’ve ever had it, financially speaking,’ Mr Lawrence says.
“The good times have not escaped notice in Washington, where the federal government is this year expected to write $11bn in cheques to farmers, up 4 per cent from 2011. These kinds of payments might have been justifiable in the 1980s when family farmers were struggling, but with slashing deficits now a priority in Washington, subsidies are under attack.”
The FT article noted that, “But in states where agriculture plays an important role, including the swing states Indiana, Iowa and Wisconsin, cutting payments to farmers could alienate rural voters and tip the balance in November’s elections.”
Meyer and Weitzman explained that, “The small family farm that holds mythic power in the US mind is less and less relevant as a component of the food supply. The majority of US production comes from the 2 per cent of farms with $1m or more in annual sales, USDA says. Medium and large farms reap more than three-quarters of government payments.
“In real terms, farm income in 2012 is projected to decline slightly from record levels but remain the third highest in more than three decades.
“‘You’re talking about people who today, at least on paper, have a lot of wealth and are receiving pretty substantial cheques’ from government, says Neil Conklin, president of Farm Foundation, an education and research group. ‘The public is saying: ‘What am I getting for the money I’m giving these farmers?’”
In more specific policy detail, the FT article pointed out that, “But even as direct payments are targeted, some are less comfortable with touching other programmes. Frank Lucas, the Oklahoma Republican who chairs the House agriculture committee, slammed the president’s plan to cut crop insurance.
“Some farm lobbyists want to boost crop insurance as a trade-off for the loss of direct payments. So-called ‘shallow loss’ coverage would pay for even small dips in income at harvest time, far more than existing crop insurance, which typically covers only 65-70 per cent of shortfalls and along with revenue insurance cost the government a record $7.3bn last year.”
The FT article concluded by stating that, “Tom Sell, a farm industry lobbyist in Washington, says US farmers receive relatively less support than their peers in other countries. He adds that removing financial aid will hurt smaller, family farms and accelerate the move to industrialised, large-scale farming.
“Back in Knox, Mr Lawrence says he is watching the debate in Washington closely. ‘The focus now is on crop and revenue insurance,’ he says. ‘We’re trying to protect those programmes. That’s our line in the sand.’”
An update posted yesterday at Farm Futures Online reported that, “As lawmakers on both the Senate and House Agriculture Committees look for budgetary and policy answers in preparation for the possibility of writing a new farm bill this year there are many unanswered questions. House Agriculture Chairman Frank Lucas, R-Okla., says his first concern is how much money will be available.
“‘Is it a going to be a $23 billion reduction that Senator Stabenow and I agreed to, or the $32 or $33 billion number that the President talked about in his budget proposal, and what will Mr. Ryan of the House Budget Committee throw at us? He had a $40 billion number last time,’ Lucas said. ‘I need a number, I need to know what is available to me, I need leadership to commit to floor time and I think we on the Ag Committee, we’ll try and make something happen.’”
Yesterday’s update added that, “Congressman Lucas says ultimately that if you go away from the old direct payment program and go to crop insurance the question then becomes how much crop insurance do you have?
“‘Do you protect against disasters or do you go so far as to address swings in price,’ Lucas said. ‘And how much money do you have to write those policies with that concept, that’s the real question.’”
In a closer look at crop insurance issues and the Farm Bill, Gene Lucht reported yesterday at Iowa Farmer Today Online that, “Ever so gradually, crop insurance has become the centerpiece of risk management for farmers.
“But, no one knows what is going to happen in regards to crop insurance in the next farm bill.”
The article indicated that, “Crop insurance industry leaders are hopeful, but wary of the upcoming debate.
“‘There are obviously many moving parts in the 2012 farm-bill process, so speculation is premature,’ says Tom Zacharias, president of National Crop Insurance Services.
“‘But, crop insurance is regarded as the fundamental risk-management tool by farm leaders representing every commodity group and the farmers they represent as well as political leaders from both sides of the aisle.’”
(Note, for example, these bi-partisan comments from lawmakers in support of crop insurance that were made at last week’s Senate Agriculture Committee Farm Bill hearing).
Mr. Lucht stated in his article from yesterday that, “Crop insurance industry leaders remind lawmakers they already have seen cuts in the way the government compensates them.
“‘Having already sustained $12 billion in budget cuts for deficit reduction, decreased funding is a major concern to the industry and to the farmers who rely on crop insurance,’ says Zacharias.
“‘We don’t know what will happen,’ says Rep. Leonard Boswell, D-Iowa.
“‘Right now, crop insurance provides a safety net. It has got to be available and affordable.’”
Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) recently addressed the Crop Insurance and Reinsurance Bureau annual meeting. Her remarks, which included comments on farm policy and crop insurance, were made via a video address; a replay of the Chairwoman’s comments has been posted at Agri-Pulse Online.
In more specific developments on U.S. sugar policy, Scott Dailey noted in an Op-Ed column published in today’s Wall Street Journal that, “A team of scientists from the University of California-San Francisco recently published a paper contending that sugar was toxic and addictive, and that it should be regulated like alcohol and tobacco.”
The opinion column proceeded to develop a satirical set of hypothetical scenarios illustrating the potential inane results of implementing such an idea.
Meanwhile, a news release yesterday from the International Dairy Foods Association (IDFA) noted in part that, “Michael Scuse, acting under secretary for Farm and Foreign Agricultural Services for the U.S. Department of Agriculture, kicked off the program [the International Sweetener Colloquium that took place on February 12-15 in Orlando] with a keynote address. He outlined the actions USDA has taken to make up for shortfalls in domestic sugar supplies. He also emphasized the need for continued transparency in the administration of the U.S. sugar program, which falls to USDA under the Farm Bill. Scuse and his department are responsible for implementing provisions of the federal sugar program.
“IDFA and other representatives from sweetener-using industries applauded the under secretary’s remarks. The sugar-using industries, including dairy, widely oppose the current U.S. sugar program because it constricts needed sugar imports, leading to tight supplies in the U.S. domestic sugar market and higher costs for processors and consumers. Consequently, U.S. food manufacturers must rely on USDA to increase sugar imports to provide adequate supplies at reasonable prices.”
On the issue of conservation, a news release yesterday from the Oklahoma Association of Conservation Districts stated in part that, “Recent analysis of nonpoint source pollution reduction numbers from across the nation shows that Oklahoma ranks as the number two state in the nation when it comes to reducing nutrients from our streams and rivers. This is the third year in a row that Oklahoma has ranked in the top ten among states in reducing non-point source pollution from our water, moving from number eight, to number five to now ranking number two. According to Joe Parker, President of the Oklahoma Association of Conservation Districts (OACD), this continued improvement in addressing water quality is a testimony to the success of the dedicated work done by farmers, ranchers and other landowners in partnership with the Oklahoma Conservation Commission, local conservation districts and the USDA Natural Resources Conservation Service (NRCS) to address these issues.”
And in other policy news, the AP reported yesterday that, “Consumers at Connecticut grocery stores would be able to know if genetically engineered foods are in the merchandise mix under a bill state lawmakers are considering to require the labeling of such foods.
“Neither the federal government nor any state currently has a labeling requirement that applies to all genetically modified foods. Connecticut is among nearly 20 states considering a labeling mandate amid health concerns that supporters of the legislation have raised about such foods.
“Connecticut’s legislation would require clear labeling on any food sold in the state that is completely or partially produced with genetic engineering.”
And Bloomberg writer Jack Kaskey reported yesterday that, “Seed companies including Monsanto Co., the world’s largest, will get speedier regulatory reviews of their genetically modified crops under forthcoming rule changes, the U.S. Department of Agriculture said.
“The goal is to cut by half the time needed to approve biotech crops from the current average of three years, Michael Gregoire, a USDA deputy administrator, said today in a telephone interview. The changes will take effect when they’re published in the Federal Register, probably in March, he said.”
Bloomberg Alan Bjerga reported yesterday that, “Low interest rates and surging agricultural income have helped send U.S. farmland prices to a record, a government report showed.
“While ‘a speculative bubble forming in farmland markets cannot be ruled out,’ the gain in value during the past two years has been supported by fundamental growth in farm income, the U.S. Department of Agriculture said today in a report.”
The article added that, “‘Historically-low interest rates are likely a significant contributor to farming’s current ability to support higher land values,’ USDA Economic Research Service analysts including Cynthia Nickerson said in the report. ‘Increases in interest rates would likely put downward pressure on farmland values.’
“Net farm income at record levels has helped agricultural land weather the real-estate crisis that has hammered urban values, the analysts said.”
A news release yesterday from the House Ways and Means Committee stated that, “House Ways and Means Committee Chairman Dave Camp (R-MI) today announced that the Committee on Ways and Means will hold a hearing on President Barack Obama’s trade policy agenda with U.S. Trade Representative Ron Kirk and with a second panel of witnesses on the future of U.S. trade negotiations. The hearing will take place on Wednesday, February 29, 2012, in 1100 Longworth House Office Building, beginning at 10:00 A.M.”
Reuters writer Doug Palmer reported yesterday that, “The United States said on Wednesday it was still considering whether to support Japan’s bid to join talks on a trans-Pacific regional free trade agreement, three months after Tokyo announced interest in the negotiations.
“‘Both governments agreed to continue the consultative process, with additional meetings to be arranged at a later date,’ the office of the U.S. Trade Representative said in a statement after two days of talks with Japanese officials.
“‘The meeting was an opportunity for the United States to continue the assessment of Japan’s readiness’ to make significant market-opening reforms, USTR said.”
The article noted that, “Detroit-based U.S. auto manufacturers have objected to Japan joining the TPP negotiations, saying they do not believe Tokyo is prepared at this time to dismantle ‘non-tariff’ barriers that they blame for low U.S. auto sales in Japan.”
The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Grain farmers in Canada’s main corn- and soybean-producing province of Ontario say they support plans by the federal government to join the ongoing negotiations aimed at bringing about a Trans-Pacific Partnership trade agreement. But they also want to make sure Japan, which is not among the partnership’s current signatories, comes to the table.
“U.S. farmers, too, should be eager for Japan to participate in the talks since one of the main goals of the proposed agreement is to reduce tariffs and thus increase trade.
“The talks currently include nine countries: Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States, with Canada, Japan and Mexico considering whether to join in.”
And in other trade news, the AP reported today that, “The talk of the day among Ray Stoesser and other rice farmers is Iraq’s decision not to buy U.S. rice, a stinging move that adds to a stressful year punctuated by everything from drought to unusual heat.”
The article stated that, “Iraq imports most of its rice, about 1 million metric tons per year, making it a significant player in the global market. In the past decade, about 10 percent to 15 percent of that total came from the United States. But Iraq hasn’t bought any U.S. rice since late 2010.”
“Iraq has been buying instead from Asia and South America, and it recently lowered its quality standards so it would be able to buy rice from India, something that was impossible under the Iraqi Grain Board’s old rules, said Andy Aaronson, chairman of the U.S. Department of Agriculture’s Rice Interagency Commodity Estimate Committee.”
Julie Steinberg, Aaron Lucchetti and Mike Spector reported in today’s Wall Street Journal that, “Investigators probing the collapse of MF Global Holdings Ltd. are scrutinizing two money transfers made during the securities firm’s final days in an effort to uncover what happened to $1.6 billion in missing customer funds.
“Federal regulators at the Commodity Futures Trading Commission and the U.S. bankruptcy trustee for MF Global’s brokerage unit are examining two separate transfers from customer accounts, including a previously undisclosed $165 million transaction, said people familiar with the matter. They said some of the investigators are poring over emails and records related to these and other money transfers.”
The in-depth Journal article also included this graphic illustration highlighting the two transactions at MF Global.
Reuters writer Tom Polansek reported earlier this week that, “With the tax man breathing down his neck, Ohio farmer Tony Rohrs is scrambling to figure out how much money he made last year in an account at MF Global.
“Thousands of former clients of the failed brokerage, including farmers, cattle ranchers and investors, have not yet received tax forms that detail their profits and losses, preventing them from preparing accurate returns for the Internal Revenue Service ahead of a rapidly approaching deadline.”
The article added that, “The collapse of MF Global, which had a large group of agricultural clients, has produced one financial frustration after another for former customers who still have not been fully reimbursed for hundreds of millions of dollars that were frozen in their accounts as a result of the firm’s October 31 bankruptcy.”
And Paul E. Peterson penned a brief update yesterday at the farmdocdaily blog (University of Illinois) regarding issues associated with the MF Global collapse titled, “Should I Sell My MF Global Claim?”