FarmPolicy

April 23, 2014

Farm Bill; and the Ag Economy

Farm Bill and Policy Issues

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Senate staffers have been meeting to hammer out details of a bill that members can begin to discuss this week. Lawmakers’ main challenge is expected to be to cut overall farm spending, and the Senate committee has talked of cuts of about $23 billion over 10 years, the figure both committees submitted to the super committee last year. However, the Republican-led House is working with two deeper-cuts: a budget reconciliation bill that trims farm bill spending by $33 billion over 11 years, and the annual budget resolution that cuts agriculture by $180 billion over a decade.

“Nevertheless, observers still say they expect Senate Ag Committee Chairwoman Debbie Stabenow, D-Mich., to propose legislation similar to that drafted last fall. This is thought likely to include a proposal to end direct payment programs, boost crop insurance, and attempt to rewrite dairy policy to protect farmers’ operating margins.”

The DTN item stated that, “However, participants in the discussions are telling the press that the elements of the commodity title are a long way from complete. Potential sticking points include a ‘shallow loss’ program that compensates farmers for even relatively small crop losses, in some cases protecting up to 90 percent of historical average revenue; sharp boosts in price supports for some commodities; revisions to the cotton program that may not resolve a World Trade Organization dispute between Brazil and the United States; a supply management system for milk; and continuation of very expensive subsidies for crop insurance.

“According to observers, the basic outline in the Senate draft reflects mainly farm group wishes, and is raising concerns from environmental groups and others who support less generous farmer protections and greater emphasis on conservation, especially since the farm economy is enjoying relative prosperity.”

Yesterday’s analysis added that, “The committee’s cotton provisions are under particular scrutiny because they reflect a proposal from the National Cotton Council that would replace marketing loan payments and a target price-based countercyclical payment program with a complex insurance program that avoids producer payment limits. The council says its proposal would comply with the WTO finding that the earlier program hurt Brazil’s cotton industry. Brazil disagrees, however, on the grounds that that the new proposal also would distort trade by its subsidies and producer revenue protections — a charge the NCC has disputed.” [Note: For additional background on the NCC policy idea, see this FarmPolicy update from September.]

In additional reporting on this issue, Alex Daniels wrote yesterday in the Arkansas Democrat-Gazette (“World will be watching as U.S. tackles farm subsidies”) that, “As Congress prepares to craft a new farm bill in the coming weeks, Arkansas cotton growers are bracing for tens of billions of dollars in cuts in the cash payments and taxpayer backed loans that they have received for years.”

“The cuts are drawing protests from cotton farmers in Arkansas, but overseas cotton growers say the cuts are long overdue,” the article said.

Mr. Daniels explained that, “After eight years of challenges and appeals at the World Trade Organization, the Brazilians got the United States to pay $147.3 million in damages when the international organization found that three types of farm support distorted the international price for cotton.

“The offending U.S. programs are countercyclical payments made to farmers when the price of cotton drops below a pre-established mark, marketing loan payments that provide farmers cash and a minimum price on crops they have offered as collateral, and loan guarantees to foreign cotton buyers.”

Yesterday’s Democrat-Gazette article also pointed out that, “As the House and Senate agriculture committees start working on a new bill, they will use as their starting point the deliberations last fall by a budget-cutting Joint Select Committee on Deficit Reduction, the supercommittee, which failed to agree on a broad plan to reduce federal deficits.

“The House and Senate agriculture committees produced a plan for the supercommittee that would have cut $23 billion from the Department of Agriculture budget over 10 years.

The plan shifted from direct payments and the federal programs that were targeted in the Brazil case toward an insurance-based roster of federal programs.”

Also yesterday, Hembree Brandon reported at the Delta Farm Press Online that, “But, [Abbott Myers, chairman of the board of Mississippi Land Bank] says, the growing federal deficit, the likelihood that Congress will eliminate direct payments and other farm program funding, the potential for interest rates and inflation to increase, and continuing higher costs for farm inputs pose challenges to farmers.

“‘There is a lot of uncertainty. It’s hard to tell what’s going on in Washington with regard to the new farm bill. It looks like it’s meeting a slow death by a thousand cuts, and the farm bill we know today won’t be there in the future. It looks like all direct payments will be gone, and the farm bill will be basically an insurance program.’”

In other news developments focusing on Title I of the Farm Bill, an update last week from Kansas State University Agricultural Economist G. A. (Art) Barnaby, Jr. (“Revenue Loss Assistance Program vs. Crop Insurance”) stated in part that, “Revenue risk has only two variables, price and yield. Puts cover price risk and insurance covers yield risk. Combining puts and insurance in to a revenue derivative is a more efficient method for insuring revenue than independently insuring price and yield risk. SURE and its proposed replacement, Senate Bill S. 2261; Revenue Loss Assistance and Crop Insurance Enhancement Act of 2012 (RLAP) is a derivative of puts and insurance with USDA paying 100% of the premium costs.”

The update contained a detailed “side by side comparison of RLAP and 85% Revenue Protection (RP).”

Meanwhile, David Rogers reported yesterday at Politico (“Republicans to slash food stamps”) that, “From food stamps to child tax credits and Social Service block grants, House Republicans began rolling out a new wave of domestic budget cuts Monday but less for debt reduction — and more to sustain future Pentagon spending without relying on new taxes.”

Mr. Rogers pointed out that, “But what’s also driving the latest cuts is a newer narrative, voiced by House Budget Committee Chairman Paul Ryan (R-Wis.), that the social safety net is at risk of becoming a ‘hammock.’ And even as the unemployment rate has begun to fall, conservatives are alarmed that the level of income-related government benefits continues to rise.

“Nothing better illustrates this perhaps than the renewed focus on food stamps — now titled SNAP (Supplemental Nutrition Assistance Program). And the estimated $33.2 billion in 10-year savings there could have an immediate impact on the farm bill debate and come November, the 2012 elections.

An average family of four would face an 11 percent cut in monthly benefits after Sept. 1 and, even more important, tighter enforcement of rules would require that households exhaust most of their liquid assets before qualifying for help. This hits hardest among the long-term unemployed, who would be forced off the rolls until they have spent down their savings to less than $2,000 in many cases.”

After a closer look at some SNAP details, the Politico article indicated that, “Caught most in the middle is Agriculture Chairman Frank Lucas, who will take up the cuts Wednesday.

The Oklahoma Republican has shown a genuine commitment to reforming the current farm program and last fall drafted a bipartisan bill that ended direct payments and demanded fewer cuts from nutrition programs. In interviews with farm state radio stations — as well as POLITICO — Lucas has never hidden his skepticism about the budget task at hand. And Lucas appears to have made a calculated decision to go hard right, assuming that the budget process will be a partisan exercise in any case.

The affable Oklahoman is clearly gambling that he can move back to the center later this spring and summer when he wants to work with Democrats on farm legislation. ‘We have a process in place to move forward with a bipartisan farm and we will do so accordingly,’ said Tamara Hinton, Luca’s press secretary on the committee. ‘We expect to announce the next set of farm bill hearings this week.’”

Mr. Rogers noted that, “Inside his committee, he has kept up good ties with Minnesota Rep. Collin Peterson, the ranking Democrat and former chairman. And Lucas knows that SNAP cuts of this scale have been rejected before not just by Democrats but also by a surprisingly diverse set of Republicans in the Senate.

“No less than Sen. Marco Rubio (R-Fla.), a hero of the tea party movement mentioned as a potential vice presidential nominee, opposed some of the same cuts on a 58-41 Senate vote last October. And with 29 electoral votes in November, Florida’s experience with food stamps is telling.”

A news release Friday from Rep. Earl Blumenauer (D., Ore.) stated that, “Representatives Earl Blumenauer and Suzanne Bonamici [D., Ore] hosted a day-long series of events to highlight Oregon’s agricultural community and its impact on health and the economy. Events included a tour and roundtable with local farmers, an overview of Farm-to-School food programs in the Beaverton School District, and a forum featuring local stakeholders from farms, food production and processing, food service, and hunger-related organizations. The discussion focused on food and agricultural policies under debate for the next Farm Bill.

“The Farm Bill may be one of the most important pieces of legislation many have never heard of,” said Blumenauer. “It affects more than just farmers and ranchers, having a profound impact on what we eat and how that food is produced. This summit provides an ideal platform to discuss reform ideas and help craft national agricultural policies that are better for farmers, for consumers, and taxpayers.”

And the Environmental Working Group yesterday released a Farm Bill platform that can be found here.

With respect to the executive branch, DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “[Agriculture Secretary Tom Vilsack] spoke Monday to members of the North American Agricultural Journalists meeting in Washington, D.C. He stressed that the farm bill legislation is not simply the farm bill, but the ‘food, farm and jobs bill.’

“‘The key is flexibility and I think you are going to see that,’ Vilsack said. ‘If there is less money, then don’t give as many programs, simplify them, and give us flexibility. Allow us to be creative.’”

The DTN item added that, “The Senate Agriculture Committee could begin voting on language for a farm bill as early as next week. Senators are working under the premise USDA would face $23 billion in program cuts over 10 years, though House GOP leaders are wanting broader overall federal cuts, including more from USDA’s programs for farmers and food-aid recipients.

In the past, when USDA officials made decisions to close offices, a phone call from a senator would more often than not keep an office open. ‘Those days are over. That’s not available. We’re beginning to ratchet down on everything we are doing,’ Vilsack said.”

Mr. Clayton stated that, “Noting the budget plan offered by House Budget Chairman Paul Ryan, R-Wis., Vilsack said the cuts to programs and offices could become broader. Vilsack said the Ryan plan calls for $29 billion in cuts to commodity programs over 10 years, as well as $16 billion in unspecified cuts and more than $120 billion in cuts to food-aid programs over 10 years.

With food-aid sales adding roughly 16% to net farm income, that equates to roughly $20 billion in lost net income to farmers over 10 years, Vilsack said.

“‘There are consequences to these decisions,’ Vilsack said. ‘People need to understand that, and we need to work with that.’”

Daniel Looker reported yesterday at Agriculture.com that, “Vilsack praised the work of Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and ranking member, Senator Pat Roberts (R-KS).

“‘It’s clear the Senate Agriculture Committee is serious its work and will begin this month’ to mark up its version of legislation that authorizes USDA programs for the next five years.”

Mr. Looker added that, “Vilsack expects the full Senate to vote on the bill in late spring or early summer. And it’s possible to have legislation approved by Congress before the current law expires in September, he said.

“Vilsack said that would be preferable to extending the current law because some programs have already expired or will run out this year.”

In other policy related news, Michael Gulledge reported yesterday at The Springfield News-Leader (Mo.) Online that, “Ozarks farmers could soon see restrictions when purchasing feed for their livestock.

Some farmers worry that feed producers will self-impose restrictions based on guidelines released Wednesday by the Food and Drug Administration to help stop the creation and spread of antibiotic-resistant bacteria.”

The article stated that, “American Farm Bureau Director of Congressional Relations Kelli Ludlum said while it is still looking into the guidelines, it has concerns about making feed with antibiotics harder to get.

“‘We have some concerns making these important animal health tools harder to access,’ Ludlum said. She added that the bureau wants to study the impact of antibiotics in animal feed and their impact on human health, but does not want restrictions without scientific proof.

Finding veterinarians to write prescriptions could also be an issue, said Eldon Cole, regional livestock specialist at the University of Missouri Extension.

“‘It will create a greater burden on veterinarians, and some areas don’t have enough veterinarians available,’ he said.”

Mr. Gulledge added in yesterday’s article that, “[Jeff Windett of the Missouri Cattlemens Association] also said that for the Missouri beef industry, antibiotics are expensive. He said the price alone keeps them from being overused.”

 

Agricultural Economy

Kevin Pieper reported yesterday at USA Today Online that, “A much-used herbicide, which for years has helped farmers throughout the United States increase profits, is losing its effectiveness and forcing producers to spend more and use more chemicals to control the weeds that threaten yields.

“‘I’ve gone from budgeting $45 an acre just two years ago to spending more than $100 an acre now to control weeds,’ said Mississippi farmer John McKee, who grows corn, cotton and soybeans on his 3,300-acre farm in the Delta.

“The problem is Roundup, a herbicide introduced in the 1970s, and its partner, Roundup Ready crop seeds, genetically modified to withstand Roundup’s active ingredient, glyphosate. In 1996, Monsanto introduced Roundup Ready soybean, soon touted as a game changer.”

The article noted that, “The problem now is the weeds that Roundup once controlled are becoming resistant to glyphosate, [Bob Scott, extension weed scientist with the University of Arkansas] said.”

And Liam Pleven reported yesterday at the MarketBeat Blog (Wall Street Journal) that, “A blaze is slowing down the U.S. Department of Agriculture today, and weekend rains are cooling down the agriculture markets.

Our colleagues over at Dow Jones Newswires are reporting that the USDA will delay issuing its regular crop progress report due to a small electrical fire that caused a server outage. Instead of updating the world at 4 p.m. today on how planting is going for corn and other important crops, the USDA will likely issue the report on Tuesday, if the servers are back up.

Corn prices, meanwhile, are falling after the Midwest got doused this weekend, easing concerns that there won’t be enough moisture in the ground in some places. Given that the USDA has said farmers plan to plant more acres with corn than in any year since 1937, good growing conditions could yield a huge crop.”

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Lastly today, The National Agricultural Law Center recently announced a webinar (“Legal Issues in Animal Agriculture: Regulating Living Space”) that will be held on Thursday, May 10, 2012.

According to the Center’s webpage, “This presentation, part of a series of webinars on current legal issues in animal agriculture, will focus on the emerging legal and policy issues dealing with farm animal confinement. This presentation focuses on the laws and regulations of farm animal confinement in the United States, with a special emphasis on the statutory evolution behind them.

“In the last ten years, several states have adopted statutes that regulate the amount of living space required to raise certain kinds of farm animals. Controversial ballot initiatives like California’s Proposition 2 have led to higher-profile compromises like last summer’s HSUS/UEP agreement, among other significant developments that have significant impacts on the animal agriculture industry.

“The presentation is designed to be useful to anyone — attorneys, lobbyists, federal and state policymakers, extension personnel, producers, and others — with an interest in a definitive understanding of food animal confinement laws in the United States.”

Keith Good

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