FarmPolicy

December 17, 2014

Farm Bill and Policy Issues; Ag Economy; Regulations; and Trade

Farm Bill and Policy Issues

Sen. Richard Lugar (R-Ind.) and Rep. Marlin Stutzman (R-Ind.) penned a column yesterday at The Hill’s Congress Blog (“REFRESH Act: Strengthen rural communities and U.S. energy security”), which stated in part that, “The House and Senate will consider a new Farm Bill at a time when Americans are struggling with climbing energy costs. This nation deserves strategic policies that promote economic growth, enhance our energy security, and work to save Americans’ money. This will require a comprehensive approach that incorporates more domestic oil, biofuels, fuel-saving innovations, and trade with our Canadian partners.

An overlooked source for innovative energy policies is America’s farm program. As Hoosier members of the Senate and House Agriculture Committees, we laid out responsible energy policies when we introduced the REFRESH Act last fall. The REFRESH Act brings real reforms to farm policy and, by simplifying and consolidating the previous Farm Bill’s energy title, encourages diverse fuels, efficiency investments, and new energy opportunities for rural entrepreneurs.”

The lawmakers indicated that, “Specifically, the REFFRESH Act would:

“- Facilitate research, development, and demonstration of next generation biofuels and biochemicals and the biomass crops and residues to produce them. It would leverage private investment and introduce program reforms to encourage cost competitiveness in the biorefineries and BCAP programs.

“- Reauthorize and reform the popular REAP program to demonstrate opportunities for economically viable energy investments and encourage loans rather than grants.

“- Repeal the handouts for sugar-based ethanol.”

Yesterday’s update added that, “The REFRESH Act saves taxpayers $40 billion over the next ten years. Its energy title moves us in the right direction. We emphasized programs that demonstrate the technological and economic opportunity for energy innovation. We move away from an antiquated and costly grant system toward one focused on loan programs. This isn’t big government extending big subsidies. Our bill offers entrepreneurs and farmers a chance to build more robust private sector growth.”

Meanwhile, a news release yesterday from the Senate Agriculture Committee stated that, “U.S. Senator Debbie Stabenow, Chairwoman of the Senate Committee on Agriculture, Nutrition and Forestry, today introduced a new Grow it Here, Make it Here initiative to advance the emerging bio-based manufacturing industry, using agriculture goods to make value-added products and create jobs. Chairwoman Stabenow’s new initiatives would increase access to capital for bio-based manufacturers, improve marketing of bio-based products, spur the commercialization of new agricultural innovations, and strengthen USDA’s Biopreferred Program to create new jobs.

“‘When we grow things and make things here, we create jobs here,’ Chairwoman Stabenow said. ‘In Michigan over 80 years ago, Henry Ford discovered how to use agriculture products in manufacturing his automobiles. Today, innovators are again making things with homegrown products. This initiative will help businesses who want to invest and create new jobs here in America.’”

Recent news items indicate that executive branch policy emphasis has focused on conservation issues and USDA efforts to meet evolving farmer needs.

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Using a hunting display at an outfitters’ store as a backdrop, U.S. Agriculture Secretary Tom Vilsack touted the value the Conservation Reserve Program offers hunters, fishermen and the rural economy as he tried to spur continued enrollment in the program.

“With as many as 6.5 million acres coming out of the Conservation Reserve Program next fall, USDA has made a series of announcements in recent months to boost the incentives for landowners to enroll in CRP. USDA is trying to keep the acreage in the program as close to 30 million acres as possible.

“Vilsack visited a Cabela’s outfitter store near Omaha on Monday after speaking to the National Farmers Union convention and holding a roundtable discussion with farmers and ranchers.”

Mr. Clayton pointed out that, “Last Friday, the White House held a conference touting conservation and the outdoors in which USDA announced plans to establish 1 million acres of continuous CRP that targets particular initiatives. In unveiling that effort, USDA also will offer $50 an acre in higher rental payments as an extra incentive for landowners to consider enrolling land. Vilsack said he didn’t know if the higher payment would do the trick in terms of keeping higher CRP acreage.”

And on Friday, Sec. Vilsack indicated at the USDA Blog (“Secretary’s Column: Opportunity for Farmers and Ranchers”) that, “Two and a half years ago, I announced a new initiative here at USDA called Know Your Farmer, Know Your Food.

It’s the public face of our commitment to help farmers and ranchers of all sizes take advantage of new opportunities, meet the growing demand for local and regional food and succeed in America’s diverse marketplace.”

Sec. Vilsack noted that, “In the past years, more and more farmers and ranchers have looked to sell their products close to home. USDA has supported this trend.

“Farmers across the country have built nearly 4,500 high tunnels – a sort of low-cost greenhouse – to extend their growing seasons with support from USDA. We’ve provided grants to encourage and train a new generation of Americans getting their start in farming.

We’ve also supported the growth of farmers markets. Today there are more than 7,100 around the country where farmers and ranchers are selling locally to improve their incomes – that is a more than 50% increase over the past 3 years.”

Friday’s update stated that, “Today’s ag industry is more diverse and more vibrant than ever, and USDA is working to meet its evolving needs.”

In other policy developments, a news release yesterday from the American Soybean Association highlighted some of the organization’s policy priorities for the coming year.

With respect to the commodity title of the Farm Bill, yesterday’s release stated that, “ASA continues to strongly support programs in the 2012 Farm Bill that provide the greatest possible planting flexibility. Allowing and encouraging producers to respond to market signals rather than government programs has been a cornerstone of the last three farm bills, and enabled U.S. soybean plantings to increase by 15 million acres (nearly 25 percent) between 1995 and 2010.

“ASA recognizes that budget constraints are likely to require restructuring farm programs in the 2012 Farm Bill. Agriculture should accept its fair share of any required spending reductions, provided they are proportionate with other federal programs and they do not require restructuring of the federal crop insurance program, which is the core safety net for producers of soybeans and other commodities.”

The update added that, “ASA developed and supports risk management concepts for the 2012 Farm Bill as a means to partially offset revenue losses that exceed a specified threshold, while complementing crop insurance. Payments under a revenue-based program should be commodity-specific, and based on the difference between historical and current-year revenue at the farm level. While based on current-year production, this approach will have less of an impact on planting decisions and production than a fixed target price program, since any payments would be based on actual revenue losses rather than a decline in prices from fixed support levels. Production agriculture has inherent risks, and properly designed farm policy must not remove all risks.

ASA recognizes that a revenue-based program may not be appropriate for all commodities. ASA is open to supporting an alternative program, provided it does not interfere with the ability of producers to respond to the market or distort planting decisions. Additionally, programs should be in compliance with the United States’ existing World Trade Organization commitments. Existing conservation compliance provisions should continue as a condition of eligibility for receiving farm program payments.”

And, a news release yesterday from Rep. Rick Crawford (R., Ark.) stated that, “[Rep. Crawford] led members of the House Rice Caucus in calling on Iraq to ease import rules for American rice. Crawford co-founded the Rice Caucus in the United States House of Representatives and took the lead on sending a letter to Iraqi Minister of Trade Khair Alla Babaker asking him to ease import rules for American rice.

“‘Arkansas’s First Congressional District in the leading rice producing district in the United States. Our producers supply a quality product that is second to none.’ said Crawford. ‘Agriculture is the number one industry in Arkansas’s First District. As a member of the House Agriculture Committee and co-founder of the Rice Caucus in the House of Representatives, I am working encourage fair trade practices so that our farmers can continue producing the safest, most abundant supply of food in the world.’

In the last year U.S. rice exports to Iraq have fallen some 77 percent.”

 

Agricultural Economy

Reuters writer Charles Abbott reported yesterday that, “U.S. farmers will harvest a record corn crop this year, which will rebuild stockpiles and bring down prices, a University of Missouri think tank projected in a report on Monday that came in 2.5 percent lower than the most recent U.S. government projection.

“The Food and Agricultural Policy Research Center, or FAPRI, projected a corn crop of 13.916 billion bushels, 6 percent larger than the record set in 2009, based on the second-largest plantings since World War Two.

“The U.S. Agriculture Department projected a crop of 14.27 billion bushels on Feb. 24 at its annual outlook conference.”  (The complete FAPRI report is available here).

Mr. Abbott indicated that, “Like USDA, FAPRI estimated a soybean crop of 3.243 billion bushels. The think tank pegged U.S. wheat at 2.239 billion bushels and upland cotton at 18.09 million bales.

“‘The rapid growth in corn ethanol production has slowed,’ said FAPRI in a briefing book. It estimated corn-for-ethanol would grow to 5.07 billion bushels in the marketing year that ends 2013, compared with 4.994 billion bushels this marketing year.”

With respect to production costs, the FAPRI report stated that, “Farm production expenses increased by almost $36 billion (12 percent) in 2011, led by sharp increases in feed, fertilizer and fuel costs; Lower crop prices could reduce feed expenses in 2012 and 2013, but fertilizer and fuel expenses are likely to remain elevated; Total production expenses increase by about 3 percent in 2012 and at a slower rate in subsequent years” (at page 60).

A recent update at the Economic Research Service (ERS- USDA) Charts of Note webpage indicated that, “Total farm production expenses are forecast to rise $12.5 billion (3.9 percent) in 2012. This increase is far less than the $35.7-billion (12.5-percent) growth projected in 2011. The growth in crop-related expenses (seeds, fertilizer, pesticides), livestock-related expenses (feed, livestock/poultry purchases), and fuel and oil expenses are all expected to slow following a decade of very rapid expansion. This chart is found in the Farm Income and Costs briefing room on the ERS website, updated February 13, 2012.”

 

Regulations

Ben Geman reported yesterday at The Hill’s Energy Blog that, “Dozens of House and Senate Democrats are urging federal regulators to implement limits on speculative trading in energy futures markets that the lawmakers call a major factor behind the run-up in gasoline prices.

“A letter Monday to the Commodity Futures Trading Commission (CFTC) from 23 senators and 45 House members underscores how gas prices have soared to the top of the political agenda on Capitol Hill and the campaign trail.”

Yesterday’s update added that, “The March 5 letter to the CFTC bashes the regulators for failure to implement rules finalized last October that establish ‘position limits’ on the amount of futures and swaps contracts for oil and other commodities that traders may hold.

“The limits are required under the sweeping 2010 Wall Street reform law. ‘As the cost for American people to fill their gas tanks continues to skyrocket, the CFTC continues to drag its feet on imposing strict speculation limits to eliminate, prevent or diminish excessive oil speculation as required by the Dodd-Frank Act,’ the letter states.”

Recall that at last week’s CFTC oversight hearing by the House Agriculture Committee, Rep. Jeff Fortenberry (R., Neb.) and Rep. Peter Welch (D.,Vt.) both brought up the issue of gas prices with CFTC Chairman Gary Gensler.

In one exchange, Chairman Gensler explained that, “We are not a price setting agency, its not what Congress asked us to do, we are an agency that oversees the markets to ensure that they are transparent, competitive, and free of fraud and manipulation.  So that’s what we can best do to ensure that these energy markets work and that at whatever price, high or low, in the energy markets, in the agricultural markets, reflect buyers and sellers, both hedgers and speculators, meeting in that market.”

 

Trade

The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Whether Japan becomes the tenth nation to join Trans-Pacific Partnership trade talks is largely up to Japan, according to Assistant U.S. Trade Representative Wendy Cutler.

“In February, the United States and Japan held two rounds of consultations, and now Washington is assessing how Japan would shape its TPP approach to formally bid for entry, Cutler told an American Chamber of Commerce conference in Tokyo last week. She added that TPP member countries are anxiously awaiting Japan’s next move and that the doors to joining the talks are open, though not indefinitely. ‘TPP negotiations are proceeding on one track and our assessment of Japan is proceeding on a second track,’ she said.

“The economies of the nine nations that currently comprise the TPP negotiators represent approximately 28 percent of global gross domestic product. Japan’s entry would be a huge plus for TPP as it would raise that portion to more than a third of total global GDP. However, the prospects for Japan joining the talks will be determined largely by domestic economic and political forces. And, as USTR’s Cutler said, the time available for Japan to make its move is growing increasingly short.”

An update posted yesterday at the U.S. Trade Representative’s Office Blog noted that, “Today, at the 11th round of Trans-Pacific Partnership (TPP) negotiations in Melbourne, Australia, negotiators focused on legal issues, financial services, temporary entry, regulatory cooperation and trade capacity building, rules of origin, and labor issues.  Negotiators also began discussions on sanitary and phytosanitary measures.”

Also yesterday, Bruno Ferrari García de Alba, Mexico’s secretary of economy, penned a column at Politico which stated in part that, “Even more compelling is the fact that, after 18 years of the North American Free Trade Agreement, the economies of the United States and Mexico are closely integrated and grow ever more intertwined. The United States and Mexico now produce goods jointly for global consumption, demonstrated by the 37 percent U.S. value added in Mexico’s global exports. In contrast, U.S. value added in Chinese exports is only 3.7 percent.

“Moreover, for every dollar Mexico gains from exports, 50 cents is spent on U.S. goods and put back in U.S. coffers.

So Mexico’s inclusion in the TPP would be of real value to Washington — not only because it could provide an immediate boost to U.S. exports but also because increased Mexican sales to TPP markets would translate into more U.S. exports, a virtuous cycle. It would result in more jobs on both sides of the border. Our bilateral trade already supports nearly 6 million jobs in the United States, according to a 2010 U.S. Chamber of Commerce study.”

Meanwhile, Vicki Needham and Pete Kasperowicz reported yesterday at The Hill’s On the Money Blog that, “The Senate on Monday afternoon quickly approved legislation that would give the Commerce Department the authority to continue imposing countervailing duties on imports from non-market economies such as China and Vietnam.”

And, Aries Poon and Jenny W. Hsu reported yesterday at The Wall Street Journal Online that, “Taiwan’s cabinet has proposed a series of conditions under which it would allow imports of U.S. beef containing traces of ractopamine, a controversial meat-leaning agent.

“The government said in a statement Monday it may set a ‘safety level’ limiting the amount of ractopamine permissible in U.S. beef imports, and the origin of the imported beef will have to be clearly marked retail packaging.

The government also said that while some imports of beef containing ractopamine would be allowed, all other imported meat, including pork, must be free of the feed additive.”

Keith Good

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