Farm Bill: Budget Issues
Katy O’Donnell reported yesterday at National Journal Online that, “At $1.2 trillion, the federal deficit will be $93 billion larger than previously expected in fiscal year 2012, due almost entirely to the cost of a payroll tax cut, the Congressional Budget Office projected Tuesday in its March baseline update.
“The 10-year deficit accumulated by 2022 will fall by $186 billion, according to the CBO.
“The deeper fiscal hole could hurt the GOP’s ability to brag about slashing deficits during election season. But Democrats are unlikely to gain advantage either because they fought against Republican efforts to identify new spending cuts that would offset the cost of the payroll tax cut.”
An update yesterday at this CBO webpage explained that, “In conjunction with its analysis of the President’s budget, which will be issued in a few days, CBO has updated the baseline budget projections that it released in January. CBO has not revised its assessment of the economic outlook since January; however, the new baseline projections incorporate the budgetary effects of recently enacted legislation and updated technical assumptions based on new information (such as data about spending and revenues so far this year and program details released in conjunction with the President’s budget).”
Meanwhile, Erik Wasson reported yesterday at the Hill’s On the Money Blog that, “House Republicans appear to be on the verge of moving forward with a 2013 budget plan despite an intra-party squabble over spending cuts.
“Rep. Paul Ryan (R-Wis.), the chairman of the House Budget Committee, is apparently on track to produce a budget plan despite tensions in the GOP conference over the spending cap it contains.
“The American Enterprise Institute (AEI) on Tuesday announced Ryan will deliver a speech on March 20 at the think tank to unveil ‘A Blueprint for American Renewal.’”
Also on the budget, Karl Puckett reported earlier this week at the Great Falls Tribune Online (Mont.) that, “Budget cuts to farm programs are coming, said Montana native Bruce Nelson, administrator of the USDA Farm Service Agency.
“Continuing to provide a safety net for agricultural producers — in light of the funding reductions — will be the challenge for FSA, he said Monday in Great Falls.
“‘We believe the emphasis should be on safety nets that relate to lower prices, lower revenue and lower production,’ Nelson said.”
The article stated that, “‘Everybody is anticipating that the programs will be reduced,’ Nelson said. ‘The challenge for the administration, and Congress, is to stay within targets and still provide safety nets for ag producers.’
“The administration proposed eliminating the direct payment subsidy program, Nelson said. That program makes payments to ag producers regardless of markets or crop conditions, Nelson said.
“Instead, the administration strongly supports crop insurance as the principal safety net, along with the reauthorization, until 2017, of five disaster programs that expired last September.”
Recall however, that the administration’s latest budget proposal for agriculture called for $32 billion in cuts in mandatory spending from farm bill programs, including more than $7.6 billion in reductions over the next 10 years from crop insurance.
Farm Bill: Lawmaker Perspectives
On yesterday’s AgriTalk radio program, Mike Adams conducted an interview with Rep. Tom Latham (R., Iowa) who serves on the House Appropriations Agriculture Subcommittee.
In part, Rep. Latham stated that, “The agreement between the House and the Senate last year, when you looked at the super committee, which failed, obviously, but they had a very, very strong proposal that was bipartisan, bicameral, that would have saved about $23 billion over the next ten years. Agriculture is willing to contribute to deficit reduction. We just have to do it in a smart way. Certainly direct payments are on the table, and most people believe that they will not continue. What we need to do is have a very robust risk management tool, both for crop and for revenue. And that’s really where we need to focus on to make sure that we do have at least that safety net out there.”
Later in the AgriTalk interview, Rep. Latham stated that, “If we take some of the resources from the direct payments, put it into a very robust crop insurance plan that would actually work and function is the way to go. And that’s what farmers are telling me here in Iowa also. But there are people who want to take a lot more money out of risk management. There’s actually some discussion at USDA, and has been ongoing, about USDA taking over the whole crop insurance industry, so there’s a lot of challenges out there.
“I think that would be ill advised that we… There was a reason that it was put into the private sector, because the USDA couldn’t function, couldn’t handle the program before, way back in history. That is a priority, as far as I’m concerned, is to make sure that we have the funding, have policies in place as far as risk management that actually work for farmers.”
Rep. Latham also commented on the prospects of getting a Farm Bill passed: “Well…and again, there was an agreement between the House and the Senate on a bipartisan basis last fall. There’s some folks that don’t like some of the provisions in dairy and some of those areas, but that is probably the best hope. I think you could get a bill like that on the floor and pass it that would save, again, about $23 billion. The president’s budget this year says that they’ll save $32 billion over the next ten years, not stating any policy changes, but just saying that that’s what they expect to have as savings.
“We could do it in the House. The Senate I’m not sure is capable today, the way it’s operated, to get anything done over there. We’ve got 30 some bills that would create jobs sitting on Harry Reid’s desk right now, and they’re dying over in the Senate. I’m just afraid that the same thing might happen with the new farm bill.”
Sandra Hansen reported yesterday at the Star-Herald Online (Scottsbluff, Neb.) that, “There will be a Farm Bill this year, according to Rep. Adrian Smith (R-NE). During a public meeting at the Farm And Ranch Museum Monday morning, Smith told about 40 constituents that he expects a Farm Bill will be passed in 2012, though likely during the lame duck session.
“‘If it passes the Senate, a bill will take place,’ Smith said, adding that he believes there is enough support in the House to get the job done.”
The article added that, “‘The debate is going to be on food stamps,’ Smith predicted. ‘That’s where the money is.’”
Farm Bill: Broader Overview
Reuters writer Charles Abbott reported yesterday that, “U.S. lawmakers are short on time and money to make the biggest cuts in agriculture in a generation and failure risks unintentionally driving up food prices and adding to an already onerous deficit.
“Just as Congress took the country to the brink of an unprecedented debt default by haggling over whether to raise the debt ceiling, fractious Republicans and Democrats may wait this year until the last minute to agree to significant cuts to farm supports amid historically high crop prices.”
Mr. Abbott noted that, “The Senate is expected to move first on the new farm law. Agriculture Committee chairwoman Debbie Stabenow, a Michigan Democrat, plans a final information-gathering hearing, on crop subsidies, on Wednesday before bill-drafting begins. She has vowed a bill in the spring.” (NOTE that today’s hearing has been rescheduled for Thursday).
The Reuters article stated that, “Two changes are all but certain in the new farm bill — an end to the $5 billion a year ‘direct payment’ subsidy that is paid regardless of need and the return of millions of acres of idle farmland to crop production…[O]dds are long that the bill can get done because of the legislative gridlock expected by mid-year due to election-year politics and budget pressures. Congress usually needs a year or more to enact a farm law.”
“Farm policy experts and half a dozen major U.S. farm groups are calling for a new insurance system that would protect revenue against disastrous drop in incomes while allowing the government to save money on a five-year farm law,” the Reuters article said.
“A sizable number of growers, however, particularly rice and peanut farmers, are skeptical revenue protection will be a good deal for them. They prefer the decades-old system, with a dose of higher support prices. There is strong sentiment in farm country a strong crop insurance program should be top priority, even if other farm supports wither.
“As a result, Congress is on track for a farm law that lets farmers choose the approach they want, rather than the usual single system for all. Stabenow and [House Ag. Comm. Chairman Frank Lucas (R., Okla.)] say a ‘one-size fits all’ plan may be impossible this time.”
Mr. Abbott also noted that, “Kansas Senator Pat Roberts, the Republican leader on the Senate Agriculture Committee, said one option to pass the farm bill was to attach it to another piece of legislation.
“‘That idea is out there,’ he told soybean growers on Tuesday, later telling reporters, ‘We don’t want an extension.’”
Bloomberg writer Alan Bjerga reported yesterday that, “Growers of corn, cotton and other major crops are going to have to learn to live without special subsidies under a new farm bill, said Robert Stallman, the head of the largest U.S. farmer group.
“With Congress in a budget-cutting mood and farm profits near records highs, producers will have to make the most of general programs meant to serve all commodities, such as crop insurance, rather than look for extra incentives, Stallman, the president of the American Farm Bureau Federation, told reporters today in a briefing at the organization’s Washington headquarters.
“‘Individual commodity organizations don’t understand that they aren’t going to get their wishes fulfilled,’ Stallman said. ‘We think we need to have an overarching program that covers all commodities,’ said Stallman, who added that the elections in November will make passage of a farm bill this year difficult.”
Farm Bill: Closer Look at Dairy; and Crop Insurance- Conservation Compliance
In more specific Farm Bill developments, a news release this week from the International Dairy Foods Association stated that, “The House Agriculture Committee did not ask any dairy manufacturers to testify at the field hearing held last Friday in upstate New York on the Farm Bill. The dairy panel included three New York dairy producers who spoke in support of legislation that manufacturers oppose because it will stifle New York’s rapidly growing dairy food industry and unnecessarily burden the free market with export-killing regulations.
“Dairy manufacturers would be directly regulated by the Dairy Security Act, H.R. 3062, as proposed by the National Milk Producers Federation, the trade association representing the dairy coops, and introduced by Rep. Collin Peterson (D-MN).
“H.P. Hood LLC, which operates five dairy plants in the state of New York, and Great Lakes Cheese Co. Inc., which owns two processing facilities in New York, submitted letters to Representatives Christopher Gibson (R-NY) and Bill Owens (D-NY) for the hearing record, voicing their opposition to the Dairy Market Stabilization Program (DMSP) and support for changes to the Federal Milk Marketing Orders.”
A news release yesterday from the National Milk Producers Federation (NMPF) stated that, “The [NMPF] Board of Directors supported a resolution today urging Congress to pass a Farm Bill in 2012, one that contains an improved safety net for farmers in the form of the Dairy Security Act.”
On the issue of crop insurance and conservation compliance, an update posted yesterday at the Economic Research Service Online (USDA) explained that, “Environmental compliance requires farm program participants to conserve soil on highly erodible cropland and refrain from draining wetlands or risk losing all or part of most farm program payments. Since 2008, ‘direct payments’ have accounted for a large share of payments subject to withholding. Federally subsidized crop insurance is not currently subject to environmental compliance but has been in the past. If direct payments are reduced or eliminated in future farm legislation but crop insurance is again subject to withholding, environmental compliance incentives would change. In many areas where crop production is risky, such as the Northern Plains, crop insurance could provide a conservation incentive that is equal to or even larger than direct payments. In other areas, such as the Mississippi Delta, compliance incentives could decline. This map appears in the March 2012 issue of Amber Waves magazine.”
In other policy developments, Josiah Ryan and Ben Geman reported yesterday at The Hill’s Floor Action Blog that, “The Senate on Tuesday rejected plans to extend a host of lapsed or soon-to-expire tax breaks for renewable fuels and power sources.
“Lawmakers voted 49-49 for Sen. Debbie Stabenow’s (D-Mich.) amendment to transportation legislation, but 60 votes were needed for approval.”
The update explained that, “Stabenow’s plan would have also extended various incentives for energy efficient homes and appliances, plug-in vehicles, production of certain biofuels and a program that provides grants in lieu of tax credits for renewable power, among others.”
In his interview yesterday on AgriTalk, Iowa GOP Rep. Tom Latham also discussed his recently “introduced bipartisan legislation to address the Department of Labor’s proposed regulations for youth working on farms,” known as the “Preserving America’s Family Farms Act.”
(Note, additional background on the issue of children and farm safety can be found in this update that was posted earlier this week at National Public Radio’s Food Blog.)
Rep. Latham noted that, “Well, what this is, Mike, is a bipartisan – [Democrat Rep.] Dan Boren and I from Oklahoma have introduced a bill to prohibit the Department of Labor from enacting regulations that would prohibit our youth in agriculture on the farm from working on the farm. You know, this just goes to any kind of common sense that is void in Washington these days. The Department of Labor thinks that they have jurisdiction.”
The full AgriTalk discussion on this issue can be read here.
Dow Jones news reported yesterday that, “Growth in U.S. corn yields is likely to be sluggish for the next few years, as farmers’ expansion into the U.S. Plains and their abandonment of typical crop rotations limits average output, Rabobank said in a report released Tuesday.”
Mark Landler reported in today’s New York Times that, “If there was ever any doubt about the political salience of China in an election year, it was erased Tuesday, when President Obama stepped before cameras in the White House Rose Garden to announce a procedural move in a long-running trade dispute with China over rare earth metals.
“Mr. Obama said that the United States was lodging a formal ‘request for consultations’ with China at the World Trade Organization, the first step toward filing a legal case against the Chinese government over its ostensible hoarding of metals that are used to manufacture a range of sophisticated technology products.”
Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) indicated in a news release yesterday that, “[Sen. Stabenow] today applauded U.S. Trade Representative Ron Kirk for taking action to address China’s illegal restrictions on the export of rare earth minerals. Today, the Trade Representative announced he was filing a case with the World Trade Organization challenging China’s anti-competitive practices. Senator Stabenow was among the first to urge the Administration to address this problem. These rare earth materials are important components in many U.S. made-products, including hybrid car batteries, wind turbines, energy efficient lighting, and automobiles.”
Iowa GOP Senator Charles Grassley noted yesterday that, “The President is right to bring cases against U.S. trading partners that violate their obligations. Every member of the World Trade Organization has to follow the same rules. But this case [against China] and last week’s case against India on poultry products undermine the need for the President’s planned Interagency Trade Enforcement Center. The cases show the United States is already capable of bringing enforcement actions without a new layer of government. It’s not clear whether a new office would lead to more cases or just create redundancy.”
Meanwhile, Owen Fletcher reported in today’s Wall Street Journal that, “The U.S. corn market got the sale it was looking for Tuesday.
“The U.S. Department of Agriculture reported private exporters sold 240,000 metric tons of U.S. corn for delivery to unknown destinations. Commodity traders widely believed the buyer was China. If so, it would be the nation’s largest corn purchase this year amid surging demand and rising domestic prices.
“Some Chinese feed companies have signed contracts to import U.S. corn and many more are considering doing so, signaling a likely rise in 2012 corn imports if domestic prices remain elevated, analysts and traders said. Many private Chinese feed mills are inquiring about prices and some of them have signed deals to buy, though the size of the deals is small, said an analyst with commodity consultant Shanghai JC Intelligence Co., without elaborating.”