FarmPolicy

April 17, 2014

Farm Bill- Policy Issues; the Ag Economy; and Regulations (MF Global)

Farm Bill: House Agriculture Committee Field Hearing- Illinois

Producers Seek Certainty- While Advising, “Do No Harm.”

After a mild winter and unseasonably warm spring, in which a few Midwestern producers have already started to plant corn, five members of the House Agriculture Committee (Chairman, Frank Lucas (R., Okla.), Leonard Boswell (D., Iowa), Mike Conaway (R., Tex.), Randy Hultgren (R., Il.) and Bobby Schilling (R., Il.)) came to the 17th Congressional District on Friday to hear farm policy testimony from grain and livestock producers as the 2008 Farm Bill’s expiration draws closer.

Producers sought to assist lawmakers in an effort to bring policy clarity and direction in the midst of an increasingly volatile agricultural environment.  Illinois farmer David Erickson stated that, “I encourage your continued work to complete the farm bill legislation this year and to make it a five-year program that doesn’t rely on temporary extensions,” while Bill Gerard indicated that, “I’d like to see us pass a five year farm bill this year. We farmers are businessmen, and we depend on the stability and certainty of long term farm policy.”  Minnesota farmer John Mages added that, “We need a five year farm bill for the same reason we need long term tax policy. We need to be able to go to the banker and be able to make plans for the future.”

Despite a generally robust farm economy, most producers increasingly must cope with swings in commodity prices that occur at a far greater magnitude and faster velocity than a decade ago.  As gas prices and other input costs tick upward, and federal regulatory uncertainty looms on a variety of fronts, farm policy certainty would be a welcome development for farmers, rural banks, and agribusinesses, which have been a bright spot in an otherwise lackluster American economy.

Certainty remains hazy despite a flurry of Farm Bill hearings stretching back two years under then Chairman Collin Peterson (D., Minn.) and continuing since the mid-term elections as Chairman Lucas conducted 11 audit hearings on every title of the current law.  The Senate Ag Committee, under the leadership of Chairwoman Debbie Stabenow, has been no less proactive in gleaning opinion from producers and stakeholders over the past year as the Michigan Democrat along with Ranking Member Pat Roberts (R., Kans.) have held numerous hearings in Washington, D.C. and in Michigan and Kansas on the 2012 Farm Bill.

And last fall, prior to the collapse of the Super Committee, the Ag Committees provided bi-partisan, bi-cameral leadership in submitting draft recommendations to the deficit reduction panel, the only joint Committee proposal the Super Committee received.

Although an endgame has not been reached, the work by the Ag Committees has drawn out a consensus that crop insurance should be the foundation on which to build future policy, as the stability and predictability of direct payments, a current core component of farm policy, are phased out.

Nonetheless, commodity groups have had difficulty coalescing around a precise policy framework that producers of diverse commodities from across the Plains, Midwest and South can rally around.

The prospects of drafting a Farm Bill became even more difficult last week when House Budget Committee Chairman Paul Ryan (R., Wis.) called on six Committees, including the Ag Committee, to come up with additional savings by the end of April.  With respect to this action, Rep. Peterson indicated that, “I think we were fifty-fifty trying to get a farm bill done this year. I think this lowers the odds significantly. I think this is going to cause a big problem.”

(Note that a more detailed analysis of the Budget Committee process has been posted at the National Sustainable Agriculture Collation Blog.  Also on the budget, The Forum (N.D.) editorial board noted on Thursday that, “For example, [Ryan’s] proposal takes no significant notice of bipartisan farm bill negotiations that call for some $23 billion in cuts in agriculture, conservation and nutrition programs. Ryan would cut $180 billion – a figure that apparently was reached without discussions with ag committee members of either party.”  The House will start debating the budget on Wednesday, and it is expected to pass on Thursday).

At Friday’s hearing, Chairman Lucas explained that, “First and foremost, I want to give producers the tools to help you do what you do best, and that is produce the safest, most abundant, most affordable food supply in the world. And to do this, we must develop a farm bill that works for all regions and all commodities.”

Mr. Lucas added that, “We’ve repeatedly heard that a one-size-fits-all program will not work. I can tell you from experience that what works here in Illinois won’t work as well for my constituents in Oklahoma. So the commodity title must give producers options so that they can choose the program that works best for them.  I’m also committed to providing a strong crop insurance program. The committee has heard loud and clear about the importance of crop insurance, and we believe it is the cornerstone of the safety net.”

Rep. Schilling acknowledged the difficulty ahead in drafting legislation, pointing out that, “Do we have our work cut out for us? Absolutely, but this is a bipartisan committee and we will work together to produce a farm bill that works great for America. We have an economy struggling to regain its footing and a budget crisis to solve. Fortunately, ag has been very, very bright for us.”

Meanwhile, producer Deborah L. Moore explained to the Committee that whatever path the Committee proceeded with, it should be cautious: “In the commodity title we support risk management proposals, and other programs that enable us to better manage risk, maintain planting flexibility, avoid restructuring of existing crop insurance programs, and are compliant with current U.S. WTO commitments.”

John Williams, an Illinois farmer, was more direct, stating that, “I firmly believe the number one goal for the next farm bill should be, ‘Do no harm to federal crop insurance.’”

The issue of conservation compliance and crop insurance also came up at Friday’s hearing in this discussion with Rep. Lucas and Rep. Boswell at the conclusion of panel one.  Nutrition issues were also noted in this interesting part of the hearing- audio (MP3- about five minutes).

Meanwhile, Joanie Stiers reported on Friday at the Daily Review Atlas Online (Monmouth, Il.) that, “‘Everybody in this country has a vested interest in agriculture: We all eat,’ said Congressman Leonard Boswell, an Iowa Democrat and member of the Agriculture Committee. ‘We’re not making more land. We’re making a lot more people.’”

Ms. Stiers added that, “‘From 2010 to 2011, our income increased 50 percent but our expenses increased 58 percent,’ said Deb Moore, a panelist who grows corn and soybeans and raises beef cattle near Roseville. ‘In the fall of 2011, we purchased our seed, fertilizer and crop protectants for the 2012 crop, a full year before that crop will be harvested. We pay for expenses a year ahead to guarantee supply and prices.’”

Daniel Looker reported on Friday at Agriculture.com that, “[Blake] Gerard also said he likes the concept of offering growers of different commodities a choice of the type of safety net program that would be available in the next farm bill such as the one that leaders of the House and Senate Agriculture Committees made for the deficit-cutting ‘super committee’ last fall.

“‘You did a very effective job of putting together a proposal that would work for all producers,’ Gerard said.”

“House Agriculture Committee Chairman Frank Lucas (R-OK), thanked Gerard for saying that, adding, ‘Apparently not everybody in America agrees with that.’”

Mr. Looker added that, “At a press conference after the hearing, the head of the subcommittee that will write the commodity title of the farm bill, Representative K. Michael Conaway (R-TX), said the 46 members face a tough job of selling a farm bill to enough members the House to get the needed 218 votes for passage.

“‘Getting that understanding to our colleagues is easier said than done,’ Conaway said.”

Friday’s article noted that, “The House Agriculture Committee has two more field hearing scheduled through April 20 and after that it will hold about three hearings in Washington, Conaway said.

“‘Then we’re going to kind of wait to see what the Senate does,’ he said. Senate Agriculture Committee Chairwoman Debbie Stabenow has said that her committee will write a farm bill within a few weeks.”

Other coverage of Friday’s House Ag Comm. hearing included:

- “Producers push for five-year bill.”

- “Farmers and Congress Meet To Update Farm Bill.”

- “Farmers offer wish lists for upcoming Farm Bill.”

In other policy news, Gannett writer Maureen Groppe reported on Friday that, “‘Crop insurance really is the main foundation of risk management and we need to strengthen that as we make changes,’ [Chairwoman] Stabenow said [to a group from the Michigan Farm Bureau Friday]. ‘There is not support to continue direct payments so we’ve got to find other options to support farmers.’

“Wayne Wood, president of the Michigan Farm Bureau which brought 120 farmers to Washington for three days of lobbying, said he backs that change.”

The article added that, “Stabenow said she hopes to have a bill completed by her committee and ready for the Senate to take up by early May. House action could be a tougher haul, she said, because there are many new House members who haven’t worked on a farm bill before and don’t know why it’s important.”

Shawn L. Holladay indicated in a column posted on Saturday at the Amarillo Globe-News Online that, “Unfortunately for area farmers, much of the cotton in this part of Texas that was planted never even sprouted, leaving farmers hoping for a miracle but expecting the worst. Luckily, for the vast majority of them, they had purchased a risk-management tool that would serve as a backstop when a disaster like this strikes, ensuring they would survive to farm yet another day. That tool was crop insurance.

“Crop insurance is the risk- management tool preferred by most farmers across the country — about 80 percent of eligible U.S. lands are covered by a policy — because it combines the efficiency of the private sector with the universality of the public sector.”

A news release Friday from the International Dairy Foods Association stated that, “Twenty-five dairy manufacturers – including some of the largest food companies in the United States – sent letters this past week to House and Senate Agriculture Committee members, calling on them to oppose supply management proposals and adopt a compromise producer safety net in the new Farm Bill. Six major Illinois dairy foods companies today became the latest to express their views on dairy policy legislation by submitting letters of record to the Farm Bill field hearing in Galesburg, Ill.”

And in more specific news regarding animal production, Gardiner Harris reported in Saturday’s New York Times that, “The Obama administration must warn drug makers that the government may soon ban agricultural uses of some popular antibiotics that many scientists say encourage the proliferation of dangerous infections and imperil public health, a federal magistrate judge ruled on Thursday.

“The order, issued by Judge Theodore H. Katz of the Southern District of New York, effectively restarts a process that the Food and Drug Administration began 35 years ago, but never completed, intended to prevent penicillin and tetracycline, widely used antibiotics, from losing their effectiveness in humans because of their bulk use in animal feed to promote growth in chickens, pigs and cattle.

“The order comes two months after the Obama administration announced restrictions on agricultural uses of cephalosporins, a critical class of antibiotics that includes drugs like Cefzil and Keflex, which are commonly used to treat pneumonia, strep throat and skin and urinary tract infections.”

The Wall Street Journal also posted a story on this issue on Friday, “FDA Told to Act on Farm Antibiotics.”

Meanwhile, an update posted on Friday at AgriTalk Online stated that, “The U.S. Trade Representative will appeal a World Trade Organization ruling against country of origin labeling on meat.  USTR General Counsel Tim Reif made the announcement on AgriTalk, saying it was part of the ‘commitment to helping ensure that our consumers are provided with accurate and relevant information with respect to the origin of beef and pork products.’  A decision on the appeal is expected in two months.  The complaint against country of origin labeling was filed by Canada and Mexico who claimed that the labeling impaired their market access.”

In news regarding agricultural labor issues, Tom Nassif, the president and CEO of Western Growers, penned an Op-Ed in today’s Wall Street Journal which stated in part that, “Miguel Cabrera, third baseman for the Detroit Tigers, is a six-time All-Star and the reigning American League batting champion. He’s about to play in his 10th season. During the off-season, Cabrera resides with his wife and daughter in Maracay, Venezuela. That makes Mr. Cabrera a guest worker.

“He is one in a huge labor force welcomed into America for seasonal labor. But while baseball players enjoy special treatment, bigger players in the nation’s economy—farm workers—enjoy no such streamlined approach. And yet the farm industry is valued at $60 billion, or 3.5 times the worth of Major League Baseball.”

 

Agricultural Economy

University of Illinois Agricultural Economists Scott Irwin and Darrel Good authored a brief and timely update posted on Friday at the farmdoc daily blog titled, “How Much Impact Will Early U.S. Corn Planting Have on Potential Yield?

Meanwhile, Mark Peters reported on Friday at MarketWatch Online that, “Federal forecasters left the outlook for U.S. food-price inflation unchanged at 2.5% to 3.5% in a monthly update Friday.”

And Jim Carlton reported yesterday at The Wall Street Journal Online that, “Sharp cutbacks in water for farmers threaten to trigger renewed layoffs in a large swath of California, eating into the state’s $40 billion-a-year agriculture industry and damping its nascent economic recovery.

“Amid an unusually dry winter, managers of the federal Central Valley Project, which delivers mountain water for agriculture, late last month announced an initial reduction in farmers’ water allowance for this year to 30% of the allotment in the driest southern reaches of the valley, down from 85% last year. Now farmers and local agriculture officials are taking in the economic impact they face.”

 

Regulations- MF Global

Mike Spector, Julie Steinberg and Aaron Lucchetti reported over the weekend in The Wall Street Journal that, “Jon S. Corzine gave ‘direct instructions’ to move $200 million from an MF Global Holdings Ltd. account containing customer funds three days before the securities firm collapsed, according to an employee email reviewed by congressional investigators.

 

“The Oct. 28 email was disclosed in a five-page memo released Friday afternoon by a House Financial Services subcommittee. The panel is investigating what caused an estimated $1.6 billion shortfall in customer funds at MF Global, which collapsed into bankruptcy Oct. 31.”

Ben Protess and Azam Ahmed reported yesterday at The New York Times Online that, “Jon S. Corzine, the former chief executive of MF Global, was told during the brokerage firm’s final day of business that a crucial transfer of $175 million came from the firm’s own money — not from a customer account, according to an internal e-mail.

“The e-mail, sent by an executive in MF Global’s Chicago office, showed that the company had transferred $175 million to replenish an overdrawn account at JPMorgan Chase in London. The transfer, the e-mail said, was a ‘House Wire,’ meaning that it came from the firm’s own money. The e-mail, sent at 2:20 p.m. on Oct. 28 to Mr. Corzine and two of his assistants in New York, says the transfer came from a ‘nonseg’ account, industry speak for a noncustomer account.

“But the e-mail, a copy of which was reviewed by The New York Times, did not capture the full story behind the wire, which turned out to contain customer money. MF Global employees in Chicago had first transferred $200 million from a customer account to the firm’s house account, people briefed on the matter said. Once it was in the firm’s coffers, the people said, Chicago employees then promptly transferred $175 million of the money to the MF Global account at JPMorgan in London — the account that was overdrawn.”

Keith Good

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