April 26, 2018

Farm Bill; Ag Economy; MF Global; and Clean Water Act

Farm Bill: Budget Issues

Daniel Newhauser reported today at Roll Call Online that, “The House floor today will become the Baskin-Robbins of budgets: Every political persuasion has its own flavor.

“Members have already said they will double-dip and vote for multiple spending plans, but with seven budgets to consider during floor debate, it is becoming increasingly clear that Budget Chairman Paul Ryan’s blueprint is the only one that can pass the chamber.

“Even if the Wisconsin Republican’s $1.028 trillion plan wins out, however, it would be a symbolic victory at best. Democratic leadership has pointed out that last summer’s Budget Control Act is the law of the land and they and the Senate will stick to its $1.047 trillion level.”

The article added that, “‘Everybody knows that Ryan’s budget is not going to be taken up by the Senate and passed. So it will be deemed here, but effectively as a means of balancing the budget it’s dead,’ said Rep. Mike Simpson (R-Idaho), a member of the Budget Committee who said he will vote for the Ryan’s plan.”

“Reps. Steven LaTourette (R-Ohio) and Jim Cooper (D-Tenn.) are gathering support for a plan modeled on the deficit reduction solutions suggested by a White House-commissioned panel led by former Sen. Alan Simpson (R-Wyo.) and Clinton-era White House Chief of Staff Erskine Bowles.”

Rosalind S. Helderman reported in today’s Washington Post that, “The House could vote for the first time this week on a bipartisan deficit-cutting plan, modeled on the suggestions of a presidential commission chaired by former senator Alan Simpson (R-Wyo.) and former White House official Erskine Bowles, that calls for both spending cuts and new tax revenue.

“The Simpson-Bowles report was widely lauded as the potential key to a breakthrough on shrinking the nation’s debt. But it was never endorsed by a supermajority of the commission’s members, never embraced by President Obama and did not face a vote in either chamber of Congress.

“But now a bipartisan group of House members has submitted a budget plan built on the Simpson-Bowles ideas, a spending plan that would slash $4 trillion from deficits over the next 10 years.”

Damian Paletta reported in today’s Wall Street Journal that, “A vote on the [Simpson-Bowles] measure could come as soon as Wednesday. It is widely expected to fail, but the degree of support for the plan could prove a bellwether of whether Congress decides to pursue a broad bipartisan budget deal this election year.”

The Journal article noted that, “Now lawmakers in both chambers are trying to begin negotiations on a budget deal ahead of the November elections. They warn that a chaotic political environment awaits them before the end of the year, when large tax cuts are set to expire, $1.2 trillion in spending cuts will kick in, and the federal debt level again nears its statutory ceiling.”

Recall that the Simpson-Bowles plan included $10 billion in cuts to agricultural related programs over ten years.  The Ryan budget plan calls for cutting farm programs by $30 billion over ten years, and also includes $134 billion in savings to the SNAP program (food stamps), as well as $16 billion in reductions to conservation programs. The President’s budget included around $32 billion in ag cuts, while the Senate Ag Committee has been looking at a plan that includes $23 billion in farm program reductions.

Also under the Ryan plan, the Ag Committee will need to determine how the cuts are specifically allocated by the end of April.

A recent article posted at the Billings-Gazette Online (Mont.) indicated that, “[Senate Finance Committee Chairman Max Baucus (D., Mont.)] said he is determined to defeat Ryan’s proposal if that’s what the House passes, not only because of the deep cuts to farm programs but also because it calls for deep cuts to the Supplemental Nutrition Assistance Program, or SNAP, a low-income program formally known as food stamps.

“‘These arbitrary cuts don’t stand a chance of passing — I’ll make sure of it. But they do remind us of the fight we are up against to make sure farmers and ranchers aren’t used as a scapegoat for the budget crunch,’ Baucus said. ‘Montana farmers and ranchers are ready and willing to chip in their fair share, but they aren’t willing to shoulder the burden for the rest of the country.’”

Meanwhile, the AP reported yesterday that, “U.S. Sen. Mike Enzi has joined with a bipartisan group of senators who want to cap federal farm payments to large farming operations.

“The proposal would limit annual per farm commodity subsidy payments and marketing loans to $250,000 for married couples. Individual farmers would be capped at $150,000.”

Michelle Monroe reported on Monday at the St. Albans Messenger Online (Vt.) that, “The 2012 re-authorization of the U.S. Farm Bill will likely bring an end to the Milk Income Loss Contract (MILC) program, replacing it with a program aimed at stabilizing the milk supply and a margin support program.

“U.S. Sen. Patrick Leahy, D-Vt, was in St. Albans on Friday to seek input from farmers on the proposed changes. The Senate Agriculture Committee will begin examining the bill and making changes in mid-April, said Leahy. If farmers want to have input on the final bill, they need to make suggestions now.”

And a news release yesterday from the House Ag Committee stated that, “Today, Rep. Glenn ‘GT’ Thompson, Chairman of the House Agriculture Committee’s Subcommittee on Conservation, Energy, and Forestry, held a public hearing to review several aspects affecting forest health, including timber harvests, wildlife management, invasive species, and the U.S. Forest Service’s planning rule.”

In other policy news, Chris Clayton reported yesterday at DTN that, “Leaders in the wheat industry are trying to stave off further cuts in federal research dollars for the crop.

“About 35 wheat growers, researchers, millers and bakers are in Washington this week to lobby Congress about research investments in wheat.

“Lawmakers, USDA officials and farm groups all have said research not only needs to avoid cuts, but needs to be expanded to address the growing number of challenges from diseases, pests and climate change. Still, the overall USDA research budget has had significant cuts in the last few budget cycles. The White House budget proposal for USDA’s Agricultural Research Service would reflect a 12% cut from 2010 levels, or about $148 million less. Further, congressional restrictions on earmarks eliminated $180 million in various USDA research program spending, much of which has not been restored.”

Agricultural Economy

Gregory Meyer reported earlier this week at The Financial Times Online that, “Petrol prices in the US are fast approaching $4 a gallon and wholesalers fear the possible closure of loss-making oil refineries could lead to supply shortages and even higher prices before the summer driving season.”

Erica Martinson reported last night at Politico that, “Once again, it’s the EPA’s turn to sit in the hot seat for rising gasoline prices.

“Republicans leading the House Energy and Commerce Committee are taking up that message this week, charging that the agency does little to determine how its regulatory agenda could affect prices at the pump — in particular, with a much-debated plan to require refiners to reduce the amount of sulfur in gasoline.

“First up to bat: Rep. Ed Whitfield (R-Ky.), with new legislation that would require a presidential commission to investigate the impact of Environmental Protection Agency regulations on consumer gas prices. A discussion draft of the bill would also clamp down on any new regulations until six months after the commission issues a report to Congress.”

Meanwhile, the AP reported yesterday that, “Farmers in the Northeast are checking their orchards and vineyards for damage after a blast of cold air dropped temperatures overnight into the low 20s and even the teens in some places.

“The main concern is tender buds and shoots on plants coming alive weeks early because of the recent record warmth.

“Jim Allen, president of the New York Apple Association, says Tuesday much of the damage won’t be clear until Wednesday, though peaches, apricots, plums and cherries were likely hit hard.”

Reuters writer Carey Gillam reported yesterday that, “Scientists, environmentalists and farm advocates are pressing the question about whether rewards of the trend toward using more and more crop chemicals are worth the risks, as the agricultural industry strives to ramp up production to feed the world’s growing population.”


MF Global

Azam Ahmedand Ben Protess reported in yesterday’s New York Times that, “MF Global’s top lawyer is expected to break her five-month silence on Wednesday to tell Congress that she was unaware of a gaping shortfall in customer money until hours before the brokerage firm filed for bankruptcy on Oct. 31.

Laurie Ferber, MF Global’s general counsel, was expected to tell a House panel that she ‘had no reason to believe’ that the firm had raided customer accounts to meet its own obligations, according to a copy of her prepared testimony. While Ms. Ferber learned of a shortfall in customer money in the afternoon of Oct. 30, she said she believed it to be an accounting error.”

The Times article added that, “The hearing on Wednesday, the fifth Congressional examination of MF Global’s demise, will include testimony from the firm’s North American chief financial officer, Christine Serwinski, and the chief financial officer, Henri Steenkamp.

“In his second appearance before Congress, Mr. Steenkamp is expected to offer little new insight, at least in his prepared testimony.”

David S. Hilzenrath reported in today’s Washington Post that, “Days before the MF Global brokerage firm collapsed, leaving many of its clients without access to their money, a top executive was troubled that the firm appeared to be putting customer funds at risk, the executive says.

“In testimony prepared for a Wednesday hearing, the firm’s former chief financial officer, Christine Serwinski, says she learned that there was ‘a substantial deficit’ in a financial buffer that was supposed to ensure that customer funds were safe.

“When she asked why there was a shortfall, she learned that one part of MF Global had borrowed money from another ‘and had missed the wire deadline to pay it back,’ Serwinski says in the testimony.”

Azam Ahmed and Ben Protess reported in today’s New York Times that, “Some MF Global employees were aware of a shortfall in the firm’s customer accounts days before filing for bankruptcy on Oct. 31, according to people involved in the case, a revelation that raises questions about why the firm failed to safeguard client money and whether it withheld information from authorities.

“One such indication came from an internal document suggesting that the firm was putting customer funds at risk on Oct. 27, an MF Global executive, Christine Serwinski, is expected to tell a Congressional panel on Wednesday. Specifically, the firm had burned through a buffer of its own money and was using the cash of customers who were trading overseas, according to one of the people involved in the case.”

Aaron Lucchetti reported earlier this week at The Wall Street Journal Online that, “A House subcommittee said a top lawyer at J.P. Morgan Chase & Co. will testify at a highly anticipated hearing Wednesday into the collapse of MF Global Holdings Ltd.

Diane Genova, a deputy general counsel at J.P. Morgan, was one of seven witnesses announced by the House Financial Services subcommittee on oversight and investigations.”

The Journal article noted that, “J.P. Morgan was one of the largest lenders to MF Global, cleared trades for the firm and served as a custodial bank for its segregated customer funds, according to a memo released by the subcommittee Friday. An estimated $1.6 billion still is missing from customer accounts at MF Global, which filed for bankruptcy protection Oct. 31.”

And Aaron Lucchetti, Michael Rothfeld and Mike Spector reported in today’s Wall Street Journal that, “The star witness in a congressional hearing about MF Global Holdings Ltd.’s collapse has told Justice Department representatives through her lawyers details about transactions that ended up dipping into customer funds, people familiar with the matter said.

“But Edith O’Brien, the assistant treasurer at MF Global, isn’t expected to reveal those details when she appears at Wednesday’s hearing of the House Financial Services Committee’s oversight and investigations subcommittee. Ms. O’Brien plans to invoke her constitutional right against self-incrimination and to decline to answer questions, people familiar with the matter said.”

Meanwhile, Mike Spector reported yesterday at The Wall Street Journal Online that, “The U.S. Senate late Tuesday passed a resolution urging the trustee overseeing MF Global Holdings Ltd.’s bankruptcy estate to drop a plan to propose bonuses for executives at the securities firm when it collapsed and customer funds went missing.

The resolution, while not carrying any legal force, amounts to a strong rebuke from Capitol Hill to Louis Freeh, the former Federal Bureau of Investigation director now running MF Global’s bankruptcy estate as its trustee. Sen. Debbie Stabenow (D., Mich.), the Senate Agriculture Committee’s chairwoman, and Sen. Pat Roberts (R., Kan.), the committee’s ranking Republican, co-sponsored the resolution. Ms. Stabenow wrote it, a person familiar with the matter said.”


Clean Water Act

Todd Neeley reported yesterday at DTN that, “As agriculture waits for EPA to release the final Clean Water Act guidance document, an official with the American Farm Bureau Federation said he expects Congress to attempt to step in.

“‘EPA clearly likes to be in charge,’ said Don Parrish, senior director of regulatory relations for AFBF. ‘They want to solidify their broad jurisdictional reach. I do think we’ll see legislation introduced in the Senate this week to kill the guidance document.

“‘It has no chance, but we’ve done everything we can do to make this a bipartisan issue.’”

Mr. Neeley explained that, “Parrish was speaking at the National Water Resources Association’s federal water issues conference in Washington, D.C., Tuesday.

Farm groups are worried the new guidance that will be used by EPA and U.S. Army Corps of Engineers field inspectors to make Clean Water Act determinations will include waters that have traditionally not been regulated by the agency — intermittent streams and other waters that have not been part of the act’s definition of navigable waters.”

Keith Good

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