FarmPolicy

October 1, 2014

Farm Bill; Ag Economy; Budget Issues; Trade; Transportation; and CFTC

Budget Issues (Farm Bill): House Ag Committee Business Meeting on Budget Reconciliation Instructions

Reuters writer Emily Stephenson reported yesterday that, “A U.S. congressional panel approved about $33 billion in cuts over 10 years from food stamp benefits, in a largely symbolic and highly partisan vote opposed by committee Democrats and by anti-poverty groups.

The cuts advanced by the House of Representatives Agriculture Committee on Wednesday would reduce spending on food stamps that help 46 million people buy food by $7.7 billion in the first year, by $19.7 billion in five years, and the balance in the next five years.

The cuts are expected to die in the Democratic-controlled Senate. But the vote by voice underscored Republicans’ preference for domestic spending cuts over defense cuts or tax hikes as they try to avoid automatic cuts that take effect in January.”

At yesterday’s hearing, Committee Chairman Frank Lucas (R., Okla.) explained that, “The recommendations we’re considering today achieve more than $33 billion in savings from the Supplemental Nutrition Assistance Program (SNAP) by making credible reforms that reduce waste and abuse and close program loopholes.

“SNAP—formerly known as food stamps—comprises almost 80 percent of agricultural spending. Over the past ten years, the cost of SNAP has nearly tripled—increasing by 270 percent.

“The cuts we are proposing today cut only four percent over the next ten years.”

Chairman Lucas added that, “I’d like to be clear from the start that none of these recommendations will prevent families that qualify for assistance under SNAP law from receiving their benefits.”

Committee Ranking Member Collin Peterson (D., Minn.) was more direct in his remarks: “In fact, I would contend that this entire process is mostly a waste of time because it doesn’t mean anything.

The Senate has not agreed to any kind of reconciliation, and as you’ve said, Mr. Chairman, the Senate most certainly won’t touch this bill. So this proposal before us is not serious. You can’t have a serious conversation about getting the budget under control when you take large items like defense off the table, which is really why we’re here. Taking a meat ax to nutrition programs that feed millions of working families in this country in an effort to avoid defense cuts is not a serious way to achieve deficit reduction.”

More broadly, Rep. Peterson indicated that, “I’d also like to say that this budget situation, budget process that we have, is completely broken. It has become a partisan deal on both sides, and the press covers this like this is the end of the world or something, and the truth of the matter is the Budget Committee doesn’t have any power to do anything.

“And in the end, we have to make the decisions here in the committee, and so now we’re using reconciliation, because that’s the only way the Budget Committee can actually make anything happen. So somehow or another, we’ve either got to reform this budget process or we’ve got to abolish the Budget Committee completely, which may be the best alternative.”

With respect to the budgetary process that proceeded the Ag Committee’s action yesterday, Rep. David Scott (R. D., Ga.) [corrected] explained at yesterday’s hearing that: “Now, what we did was we passed a law last year called the Budget Control Act of 2011. It established discretionary spending caps and it created what we affectionately refer to as the Super Committee. It was then asked to find an additional $1.2 trillion, $1.5 trillion in savings. And if the Super Committee failed to reach that goal, which they did, then the Budget Control Act contained an automatic spending cut trigger called sequestration.

“These cuts were evenly divided between defense and security spending and domestic discretionary spending. But here is the important rub. Most importantly, they protected vital social security net programs such as Social Security, Medicare, SNAP, which is the food aid for American citizens. Then, all of a sudden, this situation changed. This was the law. This is what we voted upon. This is what we signed.

“And it’s a wonder, as the Ranking Member said, why the American people hold this Congress in such disdain. Now here we are reshuffling the deck as if we never passed this law. And because we had this disagreement between defense and other areas, now we want to shift it and say we want all of these cuts now to fall disproportionately on the poor.”

And, Ms. Stephenson pointed out in her Reuters article from yesterday that, “The committee focused on food stamp cuts even though Representative Paul Ryan’s House-passed budget suggested $30 billion in savings over 10 years could come from rolling back direct payments to farmers and crop insurance.

“Ryan’s budget directed six committees to find $261 billion in 10-year savings, with the biggest share of the cuts in the hands of the agriculture committee.”

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “In a precursor to potential farm bill budget fights, the House Agriculture Committee on Wednesday passed a measure to cut $7.7 billion from the federal government’s main nutrition program as part of the House Budget Committee reconciliation process.”

Mr. Clayton added that, “House Agriculture Committee Chairman Frank Lucas, R-Okla., and the committee’s top Democrat, Rep. Collin Peterson of Minnesota, both downplayed the overall relevance of the cut to the Supplemental Nutrition Assistance Program, commonly called food stamps.

“‘When we engage in the farm-bill process we will look at all spending in all areas,’ Lucas said.”

FarmPolicy.com has provided some extended excerpts from yesterday’s House Ag Committee hearing, remarks from Ranking Member Collin Peterson (D., Minn.), Rep. David Scott (D., Ga.), Rep. Bob Goodlatte (R., Va.), Rep. Jim McGovern (D., Mass.), and Rep. Steve King (R., Iowa) are available here.

A news release yesterday from Feeding America noted that, “Feeding America is outraged by the House Agriculture Committee’s vote today to drastically cut spending on the Supplemental Nutrition Assistance Program (SNAP) by over $33 billion. Cutting SNAP, particularly at a time when millions of Americans are struggling and the need for food assistance has never been greater, is simply wrong.”

In other developments, Iowa GOP Senator Chuck Grassley was a guest on yesterday’s AgriTalk radio program with Mike Adams.  In part, Sen. Grassley discussed the SNAP program and “automatic qualification” provisions that allow citizens to enroll in the program.  Sen. Grassley expressed concern about the ability for SNAP participants to buy “junk food” with program benefits, and also pointed out that the Ryan budget would not become law.  A portion of the conversation with Sen. Grassley and Mike Adams from yesterday is available here (MP3- 4:05).

 

Farm Bill Development

A news release yesterday from the House Ag Committee stated that, “Today, Chairman Frank Lucas announced another series of hearings on the 2012 Farm Bill to begin next week in Washington, D.C. The six Subcommittees will hold the hearings throughout April and May to hear from national agricultural stakeholders advocating for policy priorities. It is the next step in the Farm Bill development.”  Dates for the additional hearings can be found here.

Meanwhile, Daniel Looker reported on Tuesday at Agriculture.com that, “Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) said she hopes to be able to make a draft of her committee’s farm bill public by Friday of this week, with the full committee voting on its provisions starting next Wednesday.

“‘We have a tremendous amount of consensus on the majority of the bill,’ Stabenow said Tuesday at a press conference organized by the North American Agricultural Journalists in Washington, DC.”

And Christopher Doering reported earlier this week at The Des Moines Register Online that, “U.S. lawmakers downplayed Tuesday the possibility of extending the current farm bill after it expires this fall, providing further evidence that House Republicans focused on cutting government spending will play a major role in steering the legislation.”

Mr. Doering pointed out that, “‘I think it’s a very real possibility that the Republicans will not extend the bill unless there are cuts, and that means you’re writing a farm bill,’ Rep. Collin Peterson of Minnesota, the top Democrat on the House Agriculture Committee, told members of the North American Agricultural Journalists in Washington on Tuesday.”

The Register item noted that, “But lawmakers have said the food stamp program won’t be the only area targeted for cuts under the new farm bill. Republican Rep. Frank Lucas, an Oklahoma wheat and cattle farmer, said ‘everything will see reductions’ this time around, especially as the shift is made away from direct payments, the keystone of the last three farm bills, to a support system with a greater dependence on crop insurance.

“‘If you think I’m going to consume a lot of Maalox before this process is over, absolutely,’ he said. ‘I have to work within the environment that I’m given.’”

During his appearance yesterday on AgriTalk with Mike Adams, Sen. Grassley noted that he had expressed concerns on Wednesday about income and payment limitation issues at an informal session of the Senate Agriculture Committee, which he described as an opportunity for Members to talk about the Farm Bill prior to the formal mark-up being released.  A portion of this discussion from yesterday’s AgriTalk show can be heard here (MP3- 3:46).

And, Ron Smith indicated yesterday at the Farm Press Blog that, “Legislators considering significant cuts in farm program benefits, including slashing funding for federal crop insurance, would do well to think about how many farmers would have been ruined by last summer’s historic drought without an adequate crop insurance program.

“As of February, 9, 2012, claims for 2011 crop losses in Texas, New Mexico and Oklahoma totaled $2.9 billion. That figure likely has risen since then.

On one hand, that big expenditure looks like a fat target for the budget axe; on the other, however, that figure represents thousands of farmers in hundreds of rural communities who would be out of business without those funds.”

In other policy news, Alexandra Wexler reported yesterday at The Wall Street Journal Online that, “The U.S. Department of Agriculture will raise the limit for no- or low-tariff raw sugar imports by 420,000 tons Thursday, after the U.S. filled its quota more than five months ahead of schedule.

“Sugar users and processors in the U.S. have been agitating for more import quota, citing tight supply and inflated domestic prices.”

And, the U.S. Department of Agriculture’s Economic Research Service yesterday released its Atlas of Rural and Small-Town America yesterday , which included a statistical focus on people, jobs and agriculture.

 

Agricultural Economy

University of Illinois Agricultural Economists Scott Irwin and Darrel Good noted yesterday at the farmodoc daily Blog (“2012 Corn Crop To Be The Earliest Ever Planted?”) that, “Unusually warm weather in March and early April provided the opportunity to start planting the 2012 corn crop earlier than normal. While there is little doubt that some corn has been planted much earlier than usual, determining whether the crop in total is being planted at a record pace is not as straightforward as it may seem at first glance. The problems include: i) corn planting is generally spread over a relatively long time period, ii) the timing of planting differs substantially by region of the country, and iii) there are several ways to characterize how early or late the crop is planted. One consistent measure is the date at which planting in those states in the heart of the Corn Belt reaches 50 percent completed, as reported in the USDA’s weekly Crop Progress report. We previously examined this measure in the report found here.

Here we review the history of corn planting progress in the states of Illinois, Indiana, and Iowa for the period 1960 through 2011. We calculate the number of days before or after May 1st that planting reached 50 percent complete in each of the three states.”

After additional analysis, yesterday’s farmdoc daily update stated that, “Corn planting in 2012 will reach the 50 percent completion date earlier than any other year since 1960 in Illinois and perhaps in Indiana as well. While Iowa is not likely to set a record early date, it is likely that Iowa will reach 50 percent complete well before its trend date. While some records will be set in 2012 it is important to keep in mind that other years have seen corn planting almost as early. The main market implication is that a smaller than average percentage of the U.S. corn crop is likely to be planted late (after May 20) and incur the yield penalty associated with late planting. As indicated in our post of March 23 a smaller than average portion of the crop planted late supports the expectation for the 2012 corn yield to be about two bushels above trend, if there are no other offsetting factors later in the season.”

Marcia Zarley Taylor reported yesterday at the DTN Minding Ag’s Business Blog that, “Gas guzzlers beware: Higher diesel prices could take some of the fun out of farming in 2012. Assuming an Illinois corn grower averaged $2.83/gallon for diesel in 2011, each $1/gal. increase in 2012 will shave this year’s profit margins as much as 4.5%, according to Sam Bachman, a financial consultant with AgriSolutions, Brighton, Ill.”

 

Budget Issues

Rosalind S. Helderman reported yesterday at the 2Chambers Blog (Washington Post) that, “President Obama has threatened to veto any appropriations bill adopted by Congress that would cap agency spending at lower levels than agreed to in the bipartisan deal to raise the nation’s debt limit last summer.

“The threat raises the possibility of another Congressional clash over spending that could trigger another government shutdown as the fiscal year winds down — this time on the eve of the November election.

The federal budget plan approved by the House earlier this month and authored by Rep. Paul Ryan (R-Wis.) called for setting overall agency spending levels for the 2013 fiscal year at $1.029 trillion, which is $19 billion below the $1.047 trillion cap for the year established under the hard-fought debt deal.”

Erik Wasson reported yesterday at The Hill Online that, “A decision by Senate Budget Committee Chairman Kent Conrad (D-N.D.) to present the recommendations of President Obama’s fiscal commission in committee but not to bring them to a vote shows how far Congress remains from producing a debt ‘grand bargain,’ supporters and critics of the fiscal commission said Wednesday.”

The Hill article added that, “The Senate Budget Committee debated Bowles-Simpson on Wednesday but Conrad declared that no amendments to his proposal will be made and no conclusion to the ‘markup’ would likely occur before the November elections.”

Chairman Conrad also discussed budget issues yesterday on CNBC– video available here.

 

Trade

Yesterday, the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness held a hearing titled, “The Asia Pacific: Trade Opportunities for Agriculture and Food Producers from the Great Plains to the Pacific Northwest.”  where the Committee heard from two panels of witnesses.

A news release yesterday from the American Soybean Association stated that, “Paul Casper, a soybean farmer from Lake Preston, S.D., and president of the South Dakota Soybean Association (SDSA), went before the Senate Finance Committee’s Subcommittee on International Trade, Customs, and Global Competitiveness Wednesday to highlight the importance of a strong and expanding relationship with trading partners in the Asia-Pacific region, and advocate for the aggressive pursuit of market-opening initiatives within the area. Representing SDSA, and the American Soybean Association (ASA), Casper cited the staggering growth and potential of the Asia-Pacific region, which represents close to 60 percent of world GDP, nearly 50 percent of world trade, and is home to more than 2.7 billion people, as a major factor in expanded export opportunities for U.S. soybean producers.”

 

Transportation

Yesterday, the House Committee on Transportation and Infrastructure Subcommittee on Water Resources and Environment held a hearing titled, “How Reliability of the Inland Waterway System Impacts Economic Competitiveness.”

A news release yesterday from the American Soybean Association stated that, “As part of a hearing examining the reliability of America’s aging waterways infrastructure and how it impacts economic competitiveness, Mike Steenhoek, executive director of the Soy Transportation Coalition (STC), testified on Capitol Hill this morning before the House Transportation Subcommittee on Water Resources and the Environment. Representing the STC, which comprises eleven state soybean boards, the American Soybean Association (ASA) and the United Soybean Board (USB), Steenhoek’s testimony focused on the critical need for investment in the nation’s inland waterways system. Steenhoek cited the prominence of soybeans as an export commodity, the erosion of U.S. competitive advantage in transportation, the need to invest in waterways infrastructure, and just as importantly, the need to improve the way we utilize the funding.”

 

Commodity Futures Trading Commission (CFTC)

Bloomberg writer Steven Sloan reported yesterday that, “The U.S. Commodity Futures Trading Commission adopted rules today that will treat commodity options the same as all other swaps.

“In a 5-0 vote, the five-member commission removed regulations that for more than a decade have treated agricultural swaps and commodity options differently than other transactions in the swaps market. Those products will now be subject to the same rules as interest rate, credit and other types of swaps.”

Keith Good

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