FarmPolicy

October 30, 2014

Farm Bill- Policy Issues; Biofuels; Ag Economy; Trade; and MF Global

Farm Bill- Policy Issues

Reuters writer Tom Polansek reported yesterday that, “North Dakota farmer Justin Zahradka will plant wheat this spring on 40 acres that has been off-limits for two decades, protected by a government conservation program that is shrinking as high crop prices make farmland more valuable.

“The 18-year-old high school senior leased the land a year ago from a neighbor who opted not to re-enroll it in the federal Conservation Reserve Program, a scheme that pays farmers and landowners nearly $2 billion annually to leave land idle in order to protect wildlife and the environment.

“After loosening up the soil with vegetables last year, he has high hopes for a good harvest. His acres are part of a total 1.7 percent rise in the number of acres of U.S. field crops that farmers are projected to plant this spring, according to Friday’s annual U.S. Agriculture Department plantings survey.”

The article noted that, “U.S. farmers tapping conservation land could lift crop acres in the world’s top grains producer to a record next year. The trend could ease food supply fears across the globe at the risk of disrupting wildlife including bald eagles that migrate across North Dakota.”

Mr. Polansek explained that, “This year, contracts covering more than 6.5 million acres worth of CRP land will expire, the second-largest turnover in its 26-year history, according to USDA data.

“In total, the amount of land in the CRP has fallen to the lowest since 1988, down 20 percent from a peak of 36.7 million acres in 2007, according to USDA data as of end-February.

“While not all that land will be suitable for crops, economists say as much as half may be put back into farming for the first time in decades.”

Also with respect to conservation, an update posted yesterday at the National Sustainable Agriculture Coalition Blog stated that, “On Wednesday, March 28, 30 national conservation organizations delivered a letter to the House and Senate Agriculture Appropriations Subcommittees, urging members to ‘oppose cuts to mandatory agricultural conservation programs in the fiscal year 2013 agriculture appropriations legislation.’

“The letter notes that since 2002, ‘the Conservation Title has been uniquely and disproportionately targeted for appropriations cuts’ and calls on the Appropriations Committees ‘to recognize the importance of agricultural conservation programs by rejecting cuts to mandatory Farm Bill conservation programs’ in the fiscal year (FY) 2013 appropriations bill.”

Meanwhile, Alexandra Wexler reported in yesterday’s Wall Street Journal Online that, “U.S. sugar users are pressing for more low-tariff imports of the sweetener as an annual window opens for the federal government to relax trade restrictions.

“The U.S. imports about a quarter of the 11 million tons of sugar it consumes each year, but the government limits how much of that can be brought in duty-free or at low tariffs. The quota is designed to protect domestic producers but can also inflate prices for sugar users.

“With U.S. supplies down 2.8% from the previous season, the pressure is on the government to allow more duty-free or low-tariff sugar in.”

The Journal article stated that, “But increasing the flow of sugar to the U.S. could add to volatility in the futures market. Raw-sugar futures have swung between 23.26 cents and 26.78 cents in little more than a month as concerns over the size of top grower Brazil’s crop and a delay to the harvest there have been countered by expectations for exports from No. 2 producer India and Thailand.”

In other policy developments, a news release yesterday from the Specialty Crop Farm Bill Alliance (SCFBA) stated that, “[SCFBA] today applauded a letter signed by 32 senators calling for a 2012 Farm Bill that will build on previous specialty crop investments. In the letter to Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) and Ranking Member Pat Roberts (R-Kan.), the senators said the specialty crop programs established in the 2008 Farm Bill generated significant benefits for consumers, producers and farm communities.

“The letter notes that investments in the 2008 Farm Bill included ‘research, invasive pest and disease mitigation, foreign market development, nutrition and targeted state-level funding for local initiatives. This translated into job creation, trade expansion, infrastructure investment for capacity building, targeted research for new innovations and technology, and increased access for fruits and vegetables in federal nutrition programs.’

Specialty crops are a critical component of the agriculture economy and represent nearly half of all farmgate crop value in America.”

And the AP reported yesterday that, “Minneapolis Mayor R.T. Rybak is expected to sign an amendment that will make it easier to grow and sell fresh food in the city.

“Minneapolis already allows community gardens in most areas, so this latest change to the city’s zoning code takes urban farming to a new level.”

In budget related news, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Agriculture Secretary Tom Vilsack last week told a Senate panel that budget constraints are among the largest drivers of the administration’s plans to close nearly 260 USDA offices, facilities and labs across the country.

“Testifying before the Senate Agriculture Appropriations Subcommittee as the panel held its first hearing on USDA’s proposed budget for fiscal 2013, Vilsack said the department had cut its overall staff level by nearly 7,800 positions over the last 15 months. ‘We have less money and less people. This is not an easy process. We have tried desperately to avoid furloughs and layoffs,’ Vilsack said.

“Some committee members were harshly critical of the plan, with the degree of outrage generally rising as did the number of USDA facilities targeted for closing in their state. For decades, presidents and agriculture secretaries from both political parties have tried to cut the number of USDA offices, with scant success. This time, the effort stands a greater chance of working, if only because the dollars won’t be available to continue the status quo.”

A news release Friday from House Agriculture Committee Member Leonard Boswell (D., Iowa) stated that, “[Rep. Boswell], along with U.S. Rep. Rick Crawford (R-AR-01), today introduced legislation that would prevent the Department of Agriculture from closing any Farm Service Agency offices until the completion of proper county workload assessments.

“The bill, called the ‘Farm Service Accountability Act,’ would prohibit the closure or relocation of offices with a high workload volume. In January, the USDA announced – as part of a consolidation plan – it would be closing 131 FSA offices throughout the country. In addition to evaluating county workloads, the FSA Act would require the two employee provision to apply when the 2008 Farm Bill was originally enacted in May 2008 to reflect normal levels of employment, not post retirements and workforce caps.”

In other policy related news, Rod Smith reported yesterday at Feedstuffs Online that, “A recent survey of Ohio voters found ‘overwhelming support’ for proposed federal legislation that would implement the agreement between The Humane Society of the United States (HSUS) and the United Egg Producers (UEP) that transitions U.S. egg production from conventional cage housing to enriched colony cages, according to HSUS, which released the results of the poll.

The survey found that 71% of voters favor H.R. 3798, which would establish ‘national standards’ for egg production, i.e., mandate producers to transition to colonies by the end of 2029, HSUS said. Only 22% oppose the legislation, and 7% are undecided, HSUS said.

“The legislation would take the form of an amendment to the Egg Products Inspection Act and was introduced in Congress in January.  HSUS and UEP announced the agreement last year.”

Yesterday, Al Kamen reported at The Washington Post In the Loop Blog that, “We wrote a happy item last week about nearly four score Obama nominees confirmed after the Senate and White House struck a deal to confirm the nominees in exchange for a pledge there would be no White House recess appointees over spring break.

“But there was sad news for a handful of nominees left on the platform when the train chugged away, awaiting an uncertain future as summer approaches.”

The update pointed out that, “Michael Scuse, who was nominated in September to be undersecretary of agriculture for farm and foreign agricultural services,” is among those waiting for Senate action.

Also yesterday, Katie Micik reported at DTN that, “The U.S. agriculture industry needs to shift its focus from biofuels and domestic demand to expanding export markets, said Bunge North America CEO Soren Schroder at the National Grain and Feed Association annual convention last week.

“By 2020, 500 million metric tons of corn, soybeans, wheat, canola and palm oil will trade hands each year across the globe, about 100 mmt more than what was traded last year. The U.S. share of that trade is projected to decline to 34%, a drop from the 41% share of the global market the states held in 2000.

“‘Total exports are still growing so we haven’t felt it as much, but in terms of total share, we haven’t kept up,’ Schroder told the audience of elevator managers, feed millers and food processors. ‘It’s been Argentina. It’s been Brazil. It’s been the Black Sea and Canada. And that’s probably how it should be; we can’t feed the world alone. But how much of this should we be happy with? I would say the challenge is make sure we keep what we’ve got.’”

 

Biofuels

On the issue of biofuels, DTN writer Todd Neeley reported yesterday (link requires subscription) that, “The EPA took an important step Monday in moving E15 to market, as the agency announced approval of the first applications for registration of ethanol for use in producing the 15% blend of the gasoline, according to a news release from EPA.

“For more than 30 years, federal law limited ethanol blends of 10% in gasoline. The E15 registration allows for the fuel’s production, sale and use in model year 2001 and newer gasoline-fueled cars and light trucks.”

 

Agricultural Economy

John Perkins reported yesterday at Brownfield that, “USDA’s first national crop progress report of 2012 shows a slightly faster than a year ago corn planting pace.

“As of Sunday, April 2, 3% of the U.S. corn crop is planted, compared to 2% both a year ago and for the five year average. Texas is at 45% planted followed by Tennessee at 15% and North Carolina at 10%. Missouri is at 7%, Illinois is at 5%, and Indiana, Nebraska, and Ohio are all at 1%.”

Andrew Johnson Jr. reported in today’s Wall Street Journal that, “Dry weather in parts of the U.S. corn belt and surging soybean prices could undercut government projections for a record-beating corn crop this year.

“The U.S. Department of Agriculture projected Friday that farmers will plant more acres with corn this spring than in any year since 1937. But traders are betting that the planting won’t necessarily translate into a historically large harvest.

“The growing season is off to a rough start in some parts of the corn belt, where the warm, dry winter has left soil low on moisture. That means more rainfall will be needed to ensure adequate yields. Also, a rally in soybean prices could lead some farmers to change their plans for plantings at the last minute, switching land to soybeans from corn.”

The Journal article noted that, “‘It doesn’t matter how much you plant, it’s what you grow, and that alone will force traders to price in fears of weather threats,’ said Tim Hannagan, a trader at a brokerage firm PFG Best in Chicago.”

For more on this issue, see “Winter Precipitation and Corn Yield,” by University of Illinois Agricultural Economists Scott Irwin and Darrel Good that was posted yesterday at the farmdoc daily blog (University of Illinois).

 

Trade

Alistair MacDonald reported yesterday at The Wall Street Journal Online that, “President Barack Obama and Canadian Prime Minister Stephen Harper talked common cause on the Americas on Monday, but their two nations’ historic trade relationship is being tested anew by tensions over membership in a trans-Pacific trade group.

“Mr. Obama, after hosting a one-day summit with Mr. Harper and Mexican President Felipe Calderón, said all three nations will take new steps to ease regulations with the aim of increasing trade among them and creating more jobs. The three also discussed immigration policies and the war on drugs. Mr. Obama said the U.S. would welcome both countries’ entry into the Trans-Pacific Partnership, a free-trade zone spanning the Pacific Ocean. And Mr. Harper reiterated his country’s eagerness to join the TPP, saying it was part of Canada’s ‘ambitious trade agenda.’”

Meanwhile, a news update yesterday from the U.S. Trade Representative’s Office stated that, “United States Trade Representative Ron Kirk today sent to Congress and to President Obama three reports detailing significant achievements by the Obama Administration in reducing or removing key foreign government barriers to American exports. The reports describe how the Administration has fought for American jobs over the last year by working to reduce or eliminate unwarranted sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) as well as other significant barriers to American exports.”

 

MF Global

Azam Ahmed and Ben Protess reported in yesterday’s New York Times that, “MF Global customers who closed their accounts in the brokerage firm’s final days have been fuming for months about how the firm mailed checks to them, instead of promptly transferring the money electronically as usual. Many of those checks arrived after the bankruptcy filing, and subsequently bounced.

“Now customers are taking action, trying to show that MF Global delayed the return of their money to cover the firm’s own bills and stay afloat. They are amassing client documents and submitting them to federal investigators in hopes of building a criminal case against MF Global executives.”

The Times article added that, “It is unclear whether investigators are already aware of the checks, or if they will find the information useful.

“But customers, who have been waiting months for their money, are growing increasingly frustrated. Although the authorities have found that MF Global transferred roughly $1 billion of client funds to banks and other financial firms, they cannot easily recoup that money.”

Keith Good

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