May 22, 2018

Farm Bill; Budget; Ag Economy; and Trade

Farm Bill Issues

DTN Markets Editor Katie Micik reported yesterday that, “The commodity title remains the most contentious piece of the farm bill and is making it difficult for the Senate Agriculture Committee to reach an agreement by Memorial Day, Chairwoman Debbie Stabenow said Monday.

“Stabenow, a Michigan Democrat, gave the keynote address Monday at the National Grain and Feed Association annual conference.

“‘I think the biggest challenge is getting the commodity title right because we have so many different regions and so many different commodities that when we move from direct payments to a risk-based model not every commodity has the same access to crop insurance, the same coverage in crop insurance. So we really have to work that through,’ Stabenow told DTN on the sidelines of the meeting.”

The DTN article explained that, “Stabenow acknowledged that passing a farm bill out of her committee by Memorial Day is an ambitious timetable. Right now, she’s meeting with members of the committee and industry groups and starting to draft the bill’s language.”

“On commodity-program difficulties, southern crop farmers tend to prefer a program that would manage their price risk, such as raising target prices for their cotton and rice. That program is criticized by some as price distortion that could sway planting decisions.”

Ms. Micik pointed out that, “Midwest growers tend to prefer revenue risk protection that balances yield and price risk over a widespread or regional level, but some argue that unfairly favors farmers who live in areas with fairly consistent weather and production histories.

Those geographical constrictions are making it difficult for farmers in the Northern Plains and western states to get on board with a revenue program because the crop districts and counties are much larger and more variable than in other parts of the country. Stabenow offered an example: the average county in Michigan, her home state, is about 800 square mile while an average Montana county is about 2,500 square miles.

“‘We have to make sure this policy works for everyone, and that is our challenge because if at the same time we want it to work for different geographical areas, we want it to be simple. And the more you look at how to make it work for different areas, the more complicated it gets,’ she said. ‘What we need to do is make sure that this program works for all of our diverse crops and regions while at the same time staying cost effective.’”

Logan Hawkes reported earlier this week in an article posted at the Southwest Farm Press Online that, “Saying work on a new farm bill is poised to take a backseat in the legislative process, Texas Congressman Henry Cuellar, D-Texas, a member of the House Agriculture Committee, is speaking out in support of bipartisan cooperation to address the needs of agriculture and warns failure to take up long-term ag reform this year needs to move from the backseat to the front burner.

“In a statement released this week, Cuellar says America’s Founding Fathers were farmers who understood the value of producing goods at home rather than relying on imports to sustain the nation and warned failure to move forward with a new farm bill ‘will leave the engine of the world’s most efficient agriculture industry wavering in the uncertainty of what the future holds.’

“‘The remainder of the 112th Congress is likely to be consumed by the debate of a variety of long-term pieces of legislation, including corporate tax reform, surface transportation funding and debt reduction provisions. Unfortunately, the likelihood of Congress taking up long-term agricultural reform legislation…is less promising,’ says Cuellar.”

The update noted that, “Cuellar says he is uncertain why farm legislation should take a backseat to other major issues this year when bipartisan support for farm legislation four years ago passed with over 300 lawmakers in favor of it. He says U.S. agriculture has shown positive growth during the economic downturn of recent years and believes positive reform now could pave the way for continued growth.”

Meanwhile, on yesterday’s AgriTalk radio program, which was broadcast from Washington, D.C., host Mike Adams interviewed Mary Kay Thatcher of the American Farm Bureau Federation, Jon Doggett from the National Corn Growers Association, and Tom Hance, who was representing the American Soybean Association, to solicit their perspectives on farm policy issues.

An audio replay of a portion of yesterday’s AgriTalk program with these guests can be heard here (MP3- 10:15), while an unofficial transcript of this part of yesterday’s AgriTalk program is available here.

Mr. Adams queried the panel on the Farm Bill and asked May Kay Thatcher about the prospects of getting a bill passed this year; she responded by saying that, “I don’t think we’ll get it done. I think there’s about a 15% chance that we actually get a farm bill done. But I do think we’re going to have some progress pretty soon. I suspect when they come back from their two-week break the first part of April that you’ll see the Senate Ag Committee move on a markup fairly quickly.”

Ms. Thatcher added that, “Well, then, sometime around the first of October, when this one expires, we’ll have to have an extension of some sort, and that’s not good news, because we know there will be some cost to that extension. Now, whether it’s we’ll take a billion dollars of the direct payments as the price, or three billion, or five billion or whatever it is, we don’t know, but there is no good reason to not do it this year. I just think that when you’re really handicapping it, thinking about getting Senate and House floor time, we’re down to about 55 legislative days left in the calendar year, probably not going to happen.”

On the issue of crop insurance funding, Ms. Thatcher noted that, “Crop insurance, I think, will come off either unscathed or maybe even get a little bit more money, some slight fixes in the program. Pretty much everyone agrees that if direct payments are going away, this is the most important safety net we’re going to have. Not all commodities, especially when you think about rice and peanuts, think it’s as great of a program as corn and soybeans and wheat do. But I think that crop insurance is going to probably be slightly improved in this bill.”

When asked about the biggest potential difference in a Senate and House passed Farm Bill, Ms. Thatcher stated that, “The nutrition title is mostly likely. You look at [Democrat Senate Ag Committee Chairwoman] Debbie Stabenow, she’s from Michigan. A fairly high unemployment rate there, lots of use of the food stamp program. She really doesn’t want to take any cuts in the nutrition budget at all.

“And you go over to the House side and have [House Ag Committee Chairman] Frank Lucas [R., Okla.], who I think easily can find 20 or 30 billion in what he would say is fraud, waste and abuse and administrative savings. I have to believe that Frank Lucas is probably a little closer to being right. When you’re looking at a program that’s going to cost $750 billion over the next ten years, even a 1% fraud, waste and abuse rate, it seems like you could find that fairly easily.”

Jon Doggett pointed out on yesterday’s AgriTalk program that, “We will have to defend every single dime in every single program in the farm bill, including crop insurance,” while Tom Hance added that, “Well, I certainly echo the sentiments of my colleagues that crop insurance, that that not be compromised is first and foremost. And then beyond that, when you get into what policies are going to be put in place to replace current programs, you don’t want to distort planting decisions. You want folks to be farming for markets, not for programs, and you want it to overall be defensible.”

Also on yesterday’s AgriTalk program was this interesting exchange on the political climate in Congress: Mike Adams– Is there a concern that agriculture is more vulnerable now to cuts because of higher commodity prices and the feeling by some, especially around here, that, hey, why do you need programs when you’ve got high prices?

Jon Doggett: “Mike, I think there’s two things about that. One is you have folks that have voted for farm bills in the past who now say, you know, you’re doing really well, why do we need to do this one more time? But the freshman class that was elected in the House of Representatives last year, I hear over and over again these are folks that are saying there is no reason for the federal government to be involved in agriculture in any way, shape or form. I’ve never heard it in my 25-year career here in Washington, D.C. the way I’ve heard it in the last six, eight, ten months.”

More specifically on nutrition issues and the Farm Bill, the USDA’s Economic Research Service (ERS) yesterday released a brief report that examined trends in USDA’s food and nutrition assistance programs through fiscal 2011.  The report, “The Food Assistance Landscape: FY 2011 Annual Report,” stated that, “About 1 in every 4 Americans participates in at least 1 of the 15 domestic food and nutrition assistance programs of the U.S. Department of Agriculture (USDA) that provide a nutritional safety net for millions of children and low-income adults.”

The ERS update, which is filled with helpful graphics, added that, “Federal expenditures for USDA’s domestic food and nutrition assistance programs totaled $103.3 billion in fiscal 2011, or 8 percent more than in the previous fiscal year. This marked the 11th consecutive year in which food and nutrition assistance expenditures exceeded the previous record.”

And an interactive update posted yesterday at the Center for American Progress Online noted that, “A new report from the Center for American Progress looks at the economic consequences of cutting the Supplemental Nutrition Assistance Program as the House leadership budget proposal for fiscal year 2013 will likely propose. The map below looks at the state-by-state impact of a potental 10 percent reduction in spending for the Supplemental Nutrition Assistance Program through harsh measures to reduce eligibility. We estimate that these measures would result in 96,000 jobs lost, take millions of meals off the table, and undermine the stability of tens of thousands of American families.”

And the Chicago Sun-Times published a column yesterday by an individual currently participating in the USDA food stamp program titled, “I’m on food stamps. Don’t hate me for it.”

In other Farm Bill developments, an update posted yesterday at the National Sustainable Agricultural Coalition (NSAC) Blog stated that, “Today, [NSAC] released its 2012 Farm Bill policy platform, Farming for the Future: A Sustainable Agriculture Agenda for the 2012 Food & Farm Bill.  The platform is the culmination of two years of policy work with a broad, diverse coalition of over 90 grassroots organizations from across the country.  It reflects the real, urgent needs of farmers, ranchers, and food entrepreneurs.”

Yesterday’s blog update contained a brief overview of the platform, while the full platform can be found here.


Budget Issues

House Budget Committee Chairman Paul Ryan (R., Wis.) penned a column in today’s Wall Street Journal where he stated that, “Less than a year ago, the House of Representatives passed a budget that took on our generation’s greatest domestic challenge: reforming and modernizing government to prevent an explosion of debt from crippling our nation and robbing our children of their future.”

Rep. Ryan added that, “And so Tuesday, House Republicans are introducing a new Path to Prosperity budget that builds on what we’ve achieved.

“Like last year, our budget delivers real spending discipline. It does this not through indiscriminate cuts that endanger our military, but by ending the epidemic of crony politics and government overreach that has weakened confidence in the nation’s institutions and its economy. And it strengthens the safety net by returning power to the states, which are in the best position to tailor assistance to their specific populations.”

The update noted that, “Our budget also spurs economic growth with bold tax reform—eliminating complexity for individuals and families and boosting competitiveness for American job creators. Led by House Ways and Means Committee Chairman Dave Camp, our budget consolidates the current six individual income tax brackets into just two brackets of 10% and 25%.”

Naftali Bendavid reported in today’s Wall Street Journal that, “The battle over 2013 spending levels has been similarly fierce. Under last year’s Budget Control Act, reached last August, the two parties agreed on a level of $1.047 trillion for discretionary spending.

Some conservative Republicans say that number is too high and are pushing for a lower figure. The GOP budget is likely to settle on a figure of $1.028 trillion, aimed at appeasing the party’s conservative faction, who wanted a lower amount, without unduly alienating Republicans who wanted to stick with the $1.047 trillion figure.”

The Journal article added that, “Senate Democrats warned Monday that dropping that figure could risk another government shutdown.

“‘We believe that ignoring the BCA represents a breach of faith that will make it more difficult to negotiate future agreements,’ wrote Sens. Kent Conrad of North Dakota and Daniel Inouye of Hawaii, in a letter to House leaders. ‘Rather than trying to tear down the BCA, we should be holding it up as an example of what can be accomplished if we are willing to set aside our differences and work hard to find bipartisan solutions to our nation’s challenges.’”


Agricultural Economy

An update posted yesterday at the farmdocdaily blog (“Corn Yield Prospects”) by University of Illinois Agricultural Economist Darrel Good, stated in part that, “With 2011-12 marketing year-ending stocks of U.S. corn expected to be near pipeline levels, the size of the 2012 crop has substantial price implications. Acreage intentions will be revealed in the USDA’s March 30 Prospective Plantings report, but much of the current discussion centers on prospects for the U.S. average corn yield.

“Widely differing views of yield prospects for 2012 have emerged. A number of factors may contribute to the diverse views, but four have received a lot of attention. These include (1) the timing of planting, (2) the magnitude and potential change in the trend yield, (3) expected summer weather conditions, and (4) the location and magnitude of acreage changes. A brief discussion of these factors follows, with more detailed analysis to be provided in upcoming posts at farmdocdaily.”

After a concise but detailed discussion, yesterday’s update added that, “It is generally expected that U.S. corn plantings will increase by 2 to 3 million acres in 2012. It has been argued that the increase will occur in lower yielding areas and therefore prove to be a drag on the U.S. average yield. However, the yield implication of increased acreage is likely to be extremely small. First, some of the increase in corn acreage may occur in the higher yielding areas of the eastern Corn Belt since acreage there in 2011 was below the recent peak of 2007. Second, a 2 to 3 percent increase in acreage has the potential to only marginally impact the U.S. average yield even if all the increase was in low yielding areas.

While the 2012 yield debate will continue well into the growing season, the most logical expectation is for an average yield near the long term trend. The trend yield for 2012 is just under 160 bushels per acre. The USDA’s early forecast for 2012 is for a yield of 164 bushels. With harvested acreage projected at 87 million acres, a 4 to 5 bushel difference in the U.S. average corn yield represents a difference of 350 to 435 million bushels in crop size. Prospects of an average yield near 160 bushels would suggest that new crop corn prices are probably low enough, while prospects for a yield of 164 bushels or higher would likely push prices marginally lower.”

In other news, Michael Haddon reported yesterday at The Wall Street Journal Online that, “Temperatures will average higher than normal across all of Europe until June, with the exception of the U.K., Iberia and southern parts of the continent in April, Weather Services International said Monday, just as the region’s wheat crops are already suffering from prolonged dry conditions.”



A news release Friday from the American Farm Bureau Federation stated that, “Permanent Normal Trade Relations with Russia is the American Farm Bureau Federation’s top trade priority this year, said the organization in a statement sent today to Congress. AFBF submitted testimony to the Senate Finance Committee for its hearing looking at extending PNTR for Russia.”

In a related item, the Wall Street Journal editorial board indicated yesterday that, “Days after Vladimir Putin won another manipulated election, President Obama responded by calling for the Senate to repeal the 1974 Jackson-Vanik amendment, which links trade access to Moscow’s treatment of its citizens. The dispute in Washington isn’t whether Jackson-Vanik should stay in place, but what should follow.

“With Russia set to join the World Trade Organization this summer, American companies would be hurt by Jackson-Vanik, which blocks the U.S. from granting normal trading status. Under WTO rules, Russia could adopt retaliatory tariffs. Even Russian opposition leaders consider Jackson-Vanik a ‘relic,’ as Garry Kasparov and Boris Nemtsov wrote in these pages Thursday. They support its repeal. As do we.

“The problem is that the White House doesn’t want anything else put in its place to hold the Kremlin to account for human-rights abuses. Some senior Senators disagree, and they support a worthy successor to Jackson-Vanik.”

The Journal item noted that, “Maryland Democrat Ben Cardin has championed a bill named after Sergei Magnitsky, a corruption whistle-blower who died in Russian police custody in 2009. The legislation freezes the assets of Russian officials implicated in human-rights abuses and bans them from the U.S.”

Keith Good

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