FarmPolicy

April 21, 2014

Farm Bill; Ag Economy; and Trade

Farm Bill and Policy Issues

Jonathan Weisman reported in Saturday’s New York Times that, “House Republicans return from spring recess next week to face the difficult — some say impossible — task of filling the gaping holes in the House-passed budget, including figuring out how to slash income tax rates without costing the government any money and finding nearly $3 trillion in savings from entitlement programs over the next decade.

“The budget, which passed the House last month and has since become a central focus of the presidential campaign, has faced blistering criticism for steep cuts to federal programs, including a blast from President Obama, who called it ‘thinly veiled social Darwinism.’”

Mr. Weisman pointed out that, “A half-dozen committees will begin drafting legislation to meet a budget-mandated $261 billion in savings over the next decade to stave off scheduled across-the-board cuts to the military in January.”

“The Agriculture Committee must slice $33.2 billion from its programs, most likely focusing on nutrition and food stamps,” the article noted.

An update at the House Agriculture Committee webpage indicated that the Committee Members will meet on Wednesday morning “to consider a proposal to satisfy the Committee’s reconciliation instructions required by H. Con. Res. 112.”

Meanwhile, an update posted on Friday at the National Sustainable Agriculture Coalition (NSAC) Blog stated that, “The Senate Agriculture Committee is on track to meet its timeline for marking up a farm bill later this month.  Agriculture staffers in the Senate have been meeting throughout the two-week Congressional Easter recess to discuss issues and proposals.  The Senate Agriculture Committee leadership is writing a draft of the farm bill – known as the Chairwoman’s ‘mark’ – that will serve as the vehicle for Committee members to debate and amend when they meet to ‘mark up’ the bill.  Chairwoman Stabenow (D-MI) has been working closely with Ranking Member Roberts (R-KS) to produce a bipartisan mark.”

The NSAC update added that, “The next two weeks are critical weeks in the multi-step 2012 Farm Bill process.  The Chairwoman plans to release her draft – or mark – potentially as early as the end of next week.  Before she releases her mark, the Senators on the Agriculture Committee members will meet privately to view the draft and voice their priorities and concerns.  Depending on how that meeting goes, and whether there is general buy-in for the contours of the bill, a draft farm bill may be released as early as late next week.” [For more background on this process, see this Brownfield interview with Sen. Mike Johanns (R., Neb.) from late last month].

“Once the draft is released, Agriculture Committee members will meet to mark up and then vote on the bill.  The tentative date for mark up is April 25, but the date can easily change as members read what is in the draft and voice support for or opposition to parts of it.”

With respect to Title I policy ideas that the Senate Ag Committee will consider, Mikkel Pates reported yesterday at The Forum (Fargo, ND) Online that, “Cooperation with Southern Republican senators representing peanut, cotton and rice growers will be a key to whether a Revenue Loss Assistance Program can be passed in the Senate, said officials gathered for a roundtable on the 2012 farm bill.

“Sen. Kent Conrad, D-N.D., hosted a discussion on April 4 with about 50 farm leaders on the farm bill commodity title initiative in Bismarck. He’s pushing it in concert with Sen. John Hoeven, R-N.D., and Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, the other primary sponsor.

“‘Kicking this can down the road would be a huge mistake,’ Conrad told the roundtable participants, of the political urgency. ‘Time is not on our side. From a budget perspective this noose is only going to tighten.’”

Mr. Pates explained that, “Conrad wants the Senate to pass a bill with $23 billion in budget cuts calculated over a 10-year period, which is the same level of cuts as a House/Senate committee level budget proposed last December but not passed into law. If it can be passed in the Senate Agriculture Committee in the next several weeks, that would ‘build momentum’ and perhaps get it accepted in the House, where others have proposed much higher cuts.

Hoeven is perhaps the Republican bipartisan linchpin in the deal.”

On Friday, University of Illinois Agricultural Economist Gary Schnitkey provided a more detailed look at the Revenue Loss Assistance Program in an update posted at the farmdoc daily Blog (“RLAP and Crop Insurance”).

Dr. Schnitkey noted that, “The Revenue Loss Assistance Program (RLAP) is a proposal put forward by Senators Conrad, Baucas, and Hoeven as a 2012 Farm Bill alternative for making counter-cyclical revenue payments. This alternative differs from others in that crop insurance payments are included in its calculation, often leading to reduced RLAP payments when crop insurance payments occur. Inclusion of RLAP will reduce incentives for farmers to buy higher levels of crop insurance. Impacts on crop insurance purchases are examined in this post for corn given prices in 2012. A more typical price scenario also is examined.”

After an analytical look at RLAP, Friday’s farmdoc update indicated that, “RLAP includes net crop insurance payments in its guarantee calculation. This provision likely was included to reduce overlapping payments between RLAP and crop insurance. It also will reduce the costs of the program. However, this provision also reduces incentives for purchasing higher coverage levels of crop insurance.”

Meanwhile, Agriculture Secretary Tom Vilsack stated on Friday at the USDA Blog that, “These are good times for American agriculture. Last year we set new records for farm income and agricultural exports. Farmers and ranchers are carrying less debt, and farm household income is rising.

Even in these good times, our farmers, ranchers and growers need a strong safety net. That begins with a crop insurance program that protects 264 million acres on about 500,000 farms.”

Sec. Vilsack added that, “As members of Congress debate the next Farm, Food and Jobs Bill, a safety net that protects our farmers and ranchers must be a priority. It should reflect the diversity of American agriculture, working for operations of all types and sizes. It should be simple enough to understand. And it must be accountable and justifiable to all Americans – using resources wisely to provide assistance only when it is needed.

“My hope is that Congress acts soon. While crop insurance remains central to the safety net, it is concerning that this year farmers are putting a crop in the ground without USDA’s other disaster assistance programs in place. SURE and the livestock disaster programs, which ended last year, can make a difference for folks struggling to stay on the farm.”

An Inside U.S. Trade article from Friday reported that, “Former Agriculture Secretary Clayton Yeutter last week predicted that the next farm bill will be more trade- distorting than current U.S. farm policy because Congress will likely fund new safety net programs in part by eliminating direct payments, which are considered to be less trade distorting than other subsidies.”

The article pointed out that, “Some commodity groups representing Midwestern crops like corn and soybeans reached a common position on the farm safety net last year, although their views differed sharply with mostly Southern growers of rice and cotton, who wanted to be able to choose separate programs that they claimed would work better for their crops.

“The House and Senate Agriculture committee chairs submitted a joint farm bill proposal to the ‘super committee’ process in November that reflected this range of views, and also included the elimination of direct payments, but it was roundly criticized. Since the failure of the super committee, old divisions between groups have resurfaced and the split along regional lines has remained prominent.”

In other developments, the editorial board at the Chicago Tribune opined over the weekend that, “We’re concerned that when lawmakers take up agriculture legislation this year, they will leave the protectionist sugar racket just the way it is.”

And Eric Brown reported late last week at the Fence Post (Colo.) Online that, “For months, farmers and ranchers have been told they’ll have to wait until 2013 before they get their new farm bill.

Sen. Michael Bennet, D-Colo., encouraged them Wednesday afternoon to believe otherwise.

“During farm bill discussions on the University of Northern Colorado’s campus in Greeley, Bennet said he and fellow Senate Agriculture Committee members are looking to have a bill on the floor as early as this summer and have a new piece of legislation in place by the end of 2012 — not next year, which most experts consider to be a more realistic time frame, given that this is an election year.”

Russ White reported on Saturday at Michigan Live Online that, “Asked about progress on the new Farm Bill, [Senate Ag Committee Chairwoman Debbie Stabenow (D., Mich.)] says she is optimistic that it can be passed this year.”

In other policy news, The New York Times editorial board stated today (“Antibiotics Off the Farm”) that, “Two important events in recent weeks — a regulatory guideline and a federal court decision — have raised hopes that progress can be made in curbing the widespread use of antibiotics to spur growth in cattle, chickens, pigs and other food animals.”

Last Wednesday, the Food and Drug Administration issued new regulatory guidelines, as part of an effort to get drug companies, animal producers and veterinarians to rein in indiscriminate use of antibiotics that are important for treating humans. There is a lot of reining in to do — about 80 percent of all antibiotics sold in the United States are used in animals, the vast majority to promote rapid weight gain, not to treat sick animals.”

The Times added that, “Meanwhile, a Federal District Court judge in New York issued an order last month requiring the F.D.A. to ban low-dose use of penicillin and two forms of tetracycline by animal producers to promote growth unless manufacturers can prove in hearings that such usage is safe for humans and is not promoting drug-resistant microbes.

That is the kind of case-by-case approach the agency was hoping to avoid with its new voluntary guidelines. Even so, it would be useful to proceed down both tracks at once to see which is most effective. Unless producers change their practices, more and more drugs won’t be able to protect humans against resistant germs.”

 

Agricultural Economy

Dan Piller reported late last week at The Des Moines Register Online that, “In Iowa, corn has won the battle for acres. A decade ago, Iowa’s 22 million acres were evenly divided between corn and soybeans. But this year, 14.6 million acres will be planted for corn, while soybean plantings, which were 11 million acres a decade ago, will be just 8.8 million acres this year.

This year’s corn price is uncomfortably close to the $5 per bushel that farmers will spend on fertilizer, diesel fuel and rents to put in a crop this year. The squeeze could threaten the string of record profit years for Iowa farmers and maybe even chill Iowa’s much-ballyhooed farmland boom. Drought in northwest Iowa is creating worries, too.

“‘When cash rents are approaching $500 per acre, you are working on tight margins,’ noted Garrett Toay, Des Moines commodity broker. ‘Corn historically is more profitable than soybeans, so farmers might be reluctant to switch acres.’”

Marshall Eckblad reported in today’s Wall Street Journal that, “Poultry companies that spent decades breeding top-heavy birds to satisfy America’s craving for chicken breasts are hunting for solutions as consumers cluck for more dark meat.

“Demand for legs and thigh cuts is climbing as diners tire of white meat and TV cooking shows tout dark meat’s richer flavor and softer texture. Sales also are benefiting from growing exports to foreign markets that favor chicken on the bone, and from rising immigrant populations in the U.S..

Stronger demand is lifting prices for the formerly cut-rate meats and helping pull the poultry business out of a slump that led to hundreds of millions of dollars in losses and threw some small producers into bankruptcy. Last year, overall chicken prices fell to a two-year low on supply glut. They rebounded to a new high earlier this month.”

And, Biman Mukherji and Rajesh Roy reported in last week’s Wall Street Journal that, “As India prepares to harvest a record grain crop for the second year in a row, fears are rising that its state granaries won’t be able to handle the surplus and food that could feed the nation’s hungry millions will go to waste.

“Two years ago, Parliament erupted in chaos as the opposition slammed the government over the issue of rotting grains due to lack of sufficient storage space, and early indications are that this year may be no different.”

The Journal article added that, “Food ministry officials say the government will add between 3 million tons and 4 million tons of storage capacity by May or June, just ahead of this year’s wheat harvest, and a further 11 million tons by the end of next year.

“But in the past red tape has delayed such plans, leaving food out in the open to rot.

“‘There will be a serious storage problem this year if proper steps are not taken on time,’ Farm Minister Sharad Pawar said in an interview.”

 

Trade

Jeremy Herb reported yesterday at The Hill’s On the Money Blog that, “U.S. Trade Representative Ron Kirk said Sunday that the United States and Colombia will enter into their trade agreement on May 15, an announcement which comes as President Obama concludes his visit to Colombia for the Summit of the Americas.

“The free trade agreement, which had taken several years to complete before Congress passed it last year, is now set to take effect after the Obama administration determined that Colombia had taken sufficient steps to address union worker concerns in a Labor Action Plan.”

House Ways and Means Trade Subcommittee Chairman Kevin Brady (R., Tex.) stated yesterday that, “This announcement is very good news for U.S. workers, farmers, manufacturers, and service exporters.  We can now begin to recapture export market share that we lost in Colombia during the years that the trade agreement was not in force.  Now that we are ‘back on the field’ in Colombia and Korea, I look forward to rapid implementation of the Panama trade agreement, as well.”

Lastly today, The New York Times Business section yesterday included a photo slide show of producers preparing for and planting corn in Illinois, the Times’ photos can be viewed here.

Keith Good

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