Farm Bill Issues
On yesterday’s AgriTalk radio program with Mike Adams, the topic of crop insurance was a featured part of a discussion with David Graves, the Manager and Secretary of the American Association of Crop Insurers.
To listen to a portion of this conversation with Mike Adams and David Graves, just click here (MP3- 7:57).
During yesterday’s discussion, Dr. Graves explained that, “We now have arrived at a point where a lot of people are pleased with the program, but it doesn’t mean that is the end of the road. There are still opportunities to have the program continue to grow and expand.
“We are aware, specialty crops is an example, have a lot of questions about how it can be extended to them in a more effective way. Crops such as peanuts and rice continue to look at it. I think it is one of those situations where at this juncture, we believe the old phrase, ‘Do no harm,’ should be the order of the day.”
Dr. Graves added that, “The job is not finished, we have come a long way; the program has paid out over $10 billion in indemnities this year without Congress having to fight through ad hoc disaster assistance battles. The moneys were made available to farmers in a very, very short period of time- often as little time as two or three weeks.”
AgriTalk host Mike Adams noted that the executive branch budget proposal for the next fiscal year contained reductions to the crop insurance program. Dr. Graves pointed out that, “Everything that is included in this administration’s budget proposal this time around is of great concern. But, as we all know, these proposals are not new; they have been advanced by this administration in previous years, and frankly, Mike, many of these ideas have been advanced by other administrations in years gone by.
“It is almost as if, invoking an old term we used back in my early days of computer programing, as though the administration is stuck in a ‘do loop.’ And for those who tried to write programing they will understand what that means- you get on a path and you just cannot get off. They are stuck with this general idea that there needs to be something done about the federal budget and that agriculture has got to contribute every time around, and they can’t seem to shed themselves of that simplistic idea.”
The AgriTalk conversation also turned to issues regarding crop insurance premiums and participation, (Related audio, (MP3- 3:25)), as well as to a look at changes in the program for this year (Related audio, (MP3- 0:58)).
An article posted yesterday at Agri-Pulse Online reported that, “Three major farm lending associations sent a letter urging the leaders of the Senate Committee on Agriculture to maintain funding for the federal crop insurance program, as well as its private-sector delivery system, as they write the next farm bill.
“The American Bankers Association, the Independent Community Bankers of America and The Farm Credit Council said that without the federal crop insurance system, ‘agricultural lenders would be forced to increase underwriting standards, increase costs to offset risk and likely be forced to reduce credit availability to some producers for their production, equipment and land purchase needs.’
“In their letter to Chairman Debbie Stabenow (D-Mich.) and Ranking Member Pat Roberts (R-Kan.), the associations said federal crop insurance has evolved into a broad-based safety net for producers, which allows lenders to take on the additional risk of financing many young and beginning producers who have less collateral and equity.”
Meanwhile, Bruce Knight, a former NRCS (Natural Resources Conservation Service) Chief and Under Secretary for Marketing and Regulatory Programs at USDA, noted in a recent column at Agri-Pulse that, “What makes 2012 different is that we no longer have a general consensus that programs to support the various commodities should be the same. Perhaps of greater concern is that farm and commodity organizations have proposed several significantly different approaches for managing risk for program crops.
“For example, the Farm Bureau has recommended a ‘deep loss’ program. This strategy would rely on crop insurance to cover the usual ups and downs of weather and market prices, but would provide a backstop deep loss program to stand behind the insurance to cover catastrophic losses.
Mr. Knight continued, “On the other hand, some of the commodity groups are pressing for a ‘shallow loss’ program, which would also work in conjunction with the current crop insurance program. However, it would stand in front of crop insurance and provide assistance to farmers whose income varied as little as five to ten percent from normal levels.
“Other commodity groups favor a traditional system of target prices and countercyclical payments, provided higher target prices are established, lining up more closely with current market prices.”
Mr. Knight pointed out that, “All winter I have been meeting with, speaking to, and most importantly, listening to farmers across the country. Livestock producers, specialty crop farmers, grains and oilseeds producers are unified with a concern about the nation’s deficit. Fortunately, we farmers are now in the midst of better times. If there was ever an opportunity to sever the cycle of dependency on routine government support, this is it. Let’s develop new tools to manage unpredictable problems and use the tools we already have to manage day-to-day concerns.
“Over the past 20 years, crop insurance has evolved into a common tool that most farmers use to manage price volatility and weather variability, whether they produce grains and fiber or specialty crops. It’s in place, it’s getting better, farmers are using it, and it works. In fact, crop insurance has become vital to all our operations, so the first rule for Congress should be ‘Do no harm.’ We need to continue crop insurance as a first line strategy for managing risk. We need to be sure any new policies complement it.
“So, what is needed at this crossroads? I for one would welcome a ‘deep loss’ backstop to handle catastrophic situations that come out of nowhere and cause unimaginable and unpredictable losses. That’s an idea worth exploring as the Senate Agriculture Committee examines risk management in its March 14 hearing.”
Meghan Grebner reported yesterday at Brownfield that, “American Farm Bureau Economist Matt Erickson explains how a deep loss program works. ‘It’s a program that is going to help farmers and ranchers survive large systemic losses and be there at a time when they absolutely need it.’”
Yesterday’s update indicated that, “He [Erickson] says the questions farmers should ask themselves are, ‘Do I want a shallow loss program where the government is going to kick in during a minimal loss?’ or ‘Would I rather have the government only intervene when there is a large systemic loss?’”
And more specifically on the federal budget and agriculture, the Washington Insider section of DTN explained yesterday (link requires subscription) that, “House Budget Chairman Paul Ryan, R-Wis., says he views farm, nutrition and conservation programs under the House Agriculture Committee’s jurisdiction as ripe for major changes. Last year, he proposed 10-year cuts of $30 billion to farm programs, almost $20 billion to conservation programs and $127 billion to the Supplemental Nutrition Assistance Program. He also proposed converting the food aid program into state block grants.
“Also last week, the House Agriculture Committee recommended that it be allowed to determine spending and funding changes as it works to complete a multi-year farm bill to reauthorize programs and set agriculture, nutrition, conservation and rural development policy. In a voice vote, the House panel approved its fiscal 2013 budget estimates and wrote to Ryan to emphasize that the consensus reached on $23 billion in mandatory cuts is reasonable and ‘could be achieved.’”
The DTN item noted that, “While members of the House and Senate Agriculture committees have discussed proposed spending cuts, they have yet to release the document the two committee leaders and their ranking members produced. The House panel’s budget letter suggested that $23 billion net target could be achieved with cuts of $15 billion to commodity programs, $6 billion to conservation programs and $4 billion to nutrition programs. Whether Budget Chairman Ryan will consider those levels sufficient remains to be seen, but they will be the subject of sharp negotiations in the coming days, Washington Insider believes.”
Meanwhile, Jonathan Weisman reported in today’s New York Times that, “The House is bracing for a rancorous showdown over a 2013 budget plan that has already divided Republicans because of a push by conservatives to cut spending below the level both parties agreed to in last year’s deal to raise the federal deficit.
“Trying to demonstrate anew their push to reduce the size of the government, conservative House Republicans want to cap spending on programs under Congress’s discretion well below the $1.047 trillion cap set by the budget deal last summer. But House Appropriations Committee leaders and Republican moderates, facing tough re-election campaigns, want to stick to the agreement struck with President Obama seven months ago.”
Today’s article indicated that, “Last week, House Budget Committee Republicans met privately with Representative Eric Cantor of Virginia, the majority leader, to try to set a spending limit for the 2013 fiscal year that almost certainly would be below the cap set last year. That brought indignant protests from Democrats and predictions of another spending stalemate, this time just before the November election. The Senate will stick with the $1.047 trillion figure, meaning House and Senate spending bills will start out tens of billions of dollars apart.
“Senator Kent Conrad, a North Dakota Democrat and chairman of the Senate Budget Committee, said the budget deal spending levels should be more sacrosanct than a conventional nonbinding budget agreement since the debt limit figure is enshrined in law. Democrats say that if the House and Senate stick to that number, Congress could devote much of its energy to working on a long-term deficit reduction plan that would be ready for a vote shortly after the November election.
“Instead, the Capitol could again be tied in knots over differing levels of spending in a dozen routine spending bills.”
And Jonathan Strong reported today at Roll Call Online that, “House Democrats, led by Budget ranking member Chris Van Hollen (Md.), are planning on releasing an alternative budget resolution to contrast their priorities with the Republicans.”
The Roll Call article pointed out that, “Republicans say the spending ‘caps’ in the BCA [Budget Control Act] are a ceiling and that going below that ceiling is not violating the agreement. But Van Hollen argued that both parties understood the caps to mean spending levels.
Liam Pleven and Matt Moffett reported yesterday at The Wall Street Journal Online that, “Prices for vital crops such as corn and soybeans are climbing again, and could be primed to serve global policy makers, growers and consumers more stomach-churning swings in the months ahead.
“Corn hit a six-month high Monday, climbing 3% amid persistently tight supplies. Soybean prices are up 15% since mid-January as a South American heat wave cuts production there. Even wheat, though relatively abundant, rose 2% Monday.
“The latest moves are pushing some prices back up toward the 2011 highs, when corn jumped to a record and soybeans reached three-year peaks, though they remain well below those levels for now.”
The Journal article added that, “Yet conditions also could be ripe for sharp reversals. U.S. farmers will plant more acres with corn than in any year since World War II, the U.S. Department of Agriculture projects, raising hopes for a plentiful crop after two years of declining yields.”
“‘We are in a volatile state. That’s going to be the case for some time to come,’ said Pat Westhoff, director of the Food and Agricultural Policy Research Institute, a think tank at the University of Missouri-Columbia. The Institute delivered a briefing to Congress last week warning that ‘many of the factors that caused recent price swings remain in flux.’”
Keith B. Richburg reported in yesterday’s Washington Post that, “While the U.S. trade deficit with China continues to soar, a surge in U.S. exports is emerging as a bright spot in the often-troubled trade ties between the world’s largest economy and its largest foreign creditor.
“With a richer China showing a growing appetite for U.S. products, the flow of goods includes an increasing volume of American soybeans, cars, airplanes and medicine — and even garbage that can be mined for copper and aluminum. Overall, U.S. exports to China are up nearly 50 percent in value since 2008.
“The surge is happening without much change in Chinese government policies and without much specific help from the Obama administration, which has a stated goal of doubling all U.S. exports globally by 2014. Instead, experts say, the main reason for the increase has been a booming China, where wealthier tastes include an increased appetite for meat — and hence for soybeans used as livestock feed.”
Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “U.S. Ambassador to Russia Michael McFaul on Monday pushed Congress to quickly approve a new Russia trade bill and defended his frank support for democratic groups in Moscow, something that landed him in hot water with supporters of Russian President-elect Vladimir Putin.
“McFaul said that Congress needs to lift the so-called Jackson-Vanik restrictions on permanent normal trade relations because keeping them in place only hurts U.S. exports and does nothing to help human rights in Russia.”
A news release yesterday from Senate Agriculture Committee Ranking Member Pat Roberts (R., Kans.) indicated that, “[Sen. Roberts] today said a proposal to award huge cash bonuses to MF Global executives to aid in the search for missing client funds following the firm’s bankruptcy is absurd.
“‘This is not your ordinary Chapter 11 bankruptcy,’ Roberts said. ‘The process to return customer funds to their rightful owners will take years. This unprecedented loss of segregated customer funds may well have occurred at the direction of MF Global officials. Any recovered funds should go to customers instead of winding up in the hands of those who mismanaged the funds in the first place.’”
Azam Ahmed and Ben Protess reported in today’s New York Times that, “The thousands of MF Global customers whose lives and businesses were derailed after $1.6 billion vanished in the collapse of the brokerage firm have now received offers to sell their claims and recoup nearly the entire shortfall, people involved in the negotiations said.
“What was once thought to be a lost cause has erupted into a bidding war among Wall Street firms: Barclays, the Royal Bank of Scotland and the Seaport Group, a little-known firm that specializes in distressed assets, are all scrambling to buy MF Global customer claims.
“On Monday, Barclays Capital, the investment banking unit of the London-based bank, agreed to purchase most claims for 90 percent of face value, the people said. R.B.S has said that it will pay 91 percent for the claims of institutions (but not individuals), according to a term sheet.”
And Jacob Bunge and Doug Cameron reported yesterday at The Wall Street Journal Online that, “CME Group Inc.’s Chief Executive Craig Donohue will retire at year’s end, in a surprise change at the world’s largest futures-exchange operator as it wrestles with fallout from the collapse of brokerage MF Global Holdings Ltd.”