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Farm Bill; Budget; Ag Economy; Trade; and Regulations

Farm Bill Issues

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “All crops need a farm program that protects them from multiyear price drops, House Agriculture Committee Chairman Frank Lucas said Tuesday, a position with which House Agriculture ranking member Collin Peterson agrees.

“In a wide-ranging exclusive interview with The Hagstrom Report and DTN, Lucas, R-Okla., praised Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., for her ‘herculean efforts’ to get a bill through committee, and said that he would not underestimate her ability to convince Senate Majority Leader Harry Reid, D-Nev., to provide time on the Senate floor to debate the bill.

“However, Lucas said although the Senate bill’s ‘shallow loss’ revenue program that would cover some losses beyond crop insurance is ‘a great tool’ in good times when prices are high, it would not provide a proper safety net if prices plummet.”

Mr. Hagstrom explained that, “Because payments under the shallow loss program would depend on revenue comparisons that would gradually go down under such circumstances, there would be ‘a free fall to the bottom,’ he said. On the other hand, if target prices were written into the bill, payments would trigger whenever prices reached a certain level.

“‘You write a farm bill for the bad times,’ Lucas said.

“The bill that Stabenow, Lucas, Peterson and Senate Agriculture Committee ranking member Pat Roberts, R-Kan., sent to the supercommittee in charge of deficit reduction in December gave farmers a choice between the shallow loss program and a target price-based program, but Stabenow and Roberts left it out of the Senate package.”

Yesterday’s DTN update noted that, “Peterson, D-Minn., said in a separate interview that he also believes the target prices and counter-cyclical program should be continued.

“‘Crop insurance looks like a really big deal, but if prices go down … you’re going to be insuring yourself for a loss,’ Peterson said. ‘I do not see crop insurance as a safety net.’”

Mr. Hagstrom also pointed out that, “Lucas also said he believes the House version of the bill will cut close to the $33 billion over 10 years that President Barack Obama has proposed. He said he is comfortable with the other titles of the farm bill, but that the House will insist on a bigger cut to food stamps than the Senate bill’s $4 billion.

The House bill may contain a slightly different cotton program from the one in the Senate bill, he said. Lucas declined to provide details of what the House bill might do differently for rice and peanuts, but noted that he wants sorghum treated properly because it is a crop that requires less water than most crops and has a lot of potential.”

Meanwhile, University of Illinois Agricultural Economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“ARC and Multi-Year Price Declines”) that, “The Senate Agriculture Committee recently passed a version of the Farm Bill that now moves for debate in the entire Senate. This Bill replaces direct, counter-cyclical, and SURE payments with Agricultural Risk Coverage (ARC), a revenue-based program that is further described in yesterday’s post by Carl Zulauf (see here). In today’s post, ARC payments are computed for cases in which prices are low for several years. This emphasis is taken as ARC is specifically designed to provide protection in cases of multi-year revenue losses, cases in in which crop insurance often provides limited protection. ARC payments are computed for corn in Champaign County, Illinois, as further described in the next section.”

After a brief but detailed analysis, Dr. Schnitkey noted that, “If prices are persistently low for several years, ARC payments will decline over time as lower prices enter into the calculation of benchmark revenue. Hence, ARC will provide payments in early years of a multi-year price decline, eventually though farmers will need to fully adjust to price declines as ARC payment decline.”

In other developments, a House Agriculture Subcommittee will hold a hearing this morning at 10:00 that will focus on the Farm Bill and credit programs.

Tom Steever reported yesterday at Brownfield that, “The clock is ticking and there is a sense of urgency for action to take place on the farm bill, according to Senator John Thune. Speaking to reporters Wednesday [audio (MP3- 7:21)], the South Dakota GOP lawmaker said it’s up to Senate Democratic leadership to schedule time for the full Senate to consider that chamber’s version of federal farm policy.

“‘It’s really a question of whether or not we’re serious enough about getting the new bill passed so that we don’t end up having to do an extension of the current bill when we hit that September 30 deadline,’ said Thune, in Washington, D.C., ‘and it strikes me, at least, that if we are serious about not having to do an extension and getting a new farm bill put in place, that we’re going to have to move it through the Senate pretty soon.’”

J.T. Rushing reported earlier this week at the Cedar Rapids Gazette (Iowa) that, “The federal farm bill has a long way to go on Capitol Hill, and a short time to get there.”

The article stated that, “Committee Chairwoman Debbie Stabenow, D-Mich., told The Gazette she is optimistic of success, but acknowledges the intense pressures.

“‘The big question is in the House,’ she said. ‘We’re going to send them a really strong, bipartisan bill, and do everything we can to work with them. … The biggest challenge is simply having enough time.’

Senate action on the bill must happen fairly quickly because the House Agriculture Committee hasn’t even begun drafting its bill since members wanted to see the Senate version first.”

On the nutrition issue, The Gazette article added that, “Stark ideological differences between the Democratic-controlled Senate and the Republican-controlled House are all but certain, with Republicans likely to protest any provisions they see as overly generous — some have already begun calling for significant cuts to food stamp programs, for example.”

The article added that, “[Former Ag Committee Chairman Tom Harkin (D., Iowa)] also pledged to fight against any cuts in food stamp programs.”

An update posted earlier this week at FreedomWorks Online (“New Farm Bill Must Harvest Savings and Not Plant New Entitlements”) included a link to a letter from nearly a dozen organizations, which stated in part that, “[W]e believe Congress must not create any new potentially budget-busting entitlement programs that would increase Washington’s role in farm business decisions, such as efforts to put taxpayers on the hook for ‘shallow losses’ in annual farm business revenue… The House of Representatives must lead a full and open legislative debate on Farm Bill reauthorization.”

The editorial board at the Orlando Sentinel opined today that, “All those lawmakers who insist they’re serious about eliminating wasteful federal spending — that includes Florida Sens. Bill Nelson and Marco Rubio — have a chance to prove it by rejecting another five-year renewal of subsidies and demanding an end to the payments. Besides burdening taxpayers and deepening the deficit, they distort the free market and undermine efforts to expand U.S. trade.”

The opinion item added that, “The real winner in Florida would be Big Sugar; the Senate bill would maintain the import limits and sales quotas that prop up the price of U.S.-produced sugar. This government meddling in the free market, unlike subsidies, doesn’t impose a cost on taxpayers directly, but it forces U.S. consumers and food makers to pay much more for sugar. Studies have shown the sugar program is a net negative for the U.S. economy, but the industry has invested heavily in lobbying and political campaigns to hold on to its sweet deal.”

With respect to the executive branch, Reuters writer Carey Gillam reported earlier this week that, “A top USDA official said he is backing the U.S. Senate version of a new Farm Bill and says it deserves rapid passage as a fair program that will benefit U.S. producers.

“A competing plan by the U.S. House of Representatives would make much deeper cuts. Two House hearings were scheduled for this week, but there are growing concerns that wrangling over the Farm Bill could persist past election day, meaning several current programs relied on by producers would expire Sept. 30.

“‘We are encouraging Congress … to have a Farm Bill completed as soon as possible,’ the Agriculture Department’s Under Secretary for Farm and Foreign Agricultural Services Michael Scuse said in an interview with Reuters on Tuesday.”

The Reuters article noted that, “A viable crop insurance program is key, Scuse said, as producers need protection from the devastating impacts of drought, floods, and freezes.

“Last year, the U.S. crop insurance program insured about $110 billion in value for producers. The program paid out about $10 billion in indemnities, he said. The coverage is essential if farmers and their lenders are going to keep food production high, he said.”

The AP reported yesterday that, “The federal government is spending $4 million to help hook up farmers and low-income customers.

“Currently, fewer than a quarter of the nation’s roughly 7,100 farmers markets are set up to use the Electronic Benefit Transfer system, or food stamps. But Kathleen Merrigan, deputy secretary of agriculture, said she hopes these grants will bring another 4,000 of those outlets on line with the Supplemental Nutrition Assistance Program.

“‘SNAP participation at farmers’ markets helps provide fresh fruit and vegetables to families and expands the customer base for local farmers — a win-win for agriculture and local communities,’ she said in a statement.”

The New York Times editorial board noted today that, “The wholesale produce market at Hunts Point in the South Bronx features fruits and vegetables from around the nation and the world. Yet the 105-acre distribution hub provides very little space for smaller, local farmers to sell their produce to schools, restaurants and other retailers. Only about 4 percent of the $2.3 billion in annual sales there comes from food grown in New York State; another 8 percent comes from New Jersey.

A wholesale hub for local farmers could help improve their viability and preserve farmland that is disappearing in New York at a rate of almost 70 acres a day. These farmers tend to manage their land and crops in a more environmentally sound way, and, for consumers, locally grown produce can be fresher than that shipped from afar.”

In other policy news, Chris Clayton reported yesterday at DTN (link requires subscription) that, “Safeway won’t be making quick changes after the nation’s second-largest grocer declared Monday it would move over time to buying its pork from vendors that slaughter hogs not born to sows sequestered in gestation crates.”

The DTN article added that, “Safeway did not offer a date on when the company would move completely away from buying pork from hogs whose sows were kept in individual sow cages. Brian Dowling, Safeway’s vice president of public affairs, said in an interview Tuesday, it would take years to implement and added that time frames range greatly among different companies who have made similar announcements. The plan to move away from gestation crates will involve working with the meatpacking industry. Safeway has no set timeline.”

Mr. Clayton noted that, “The National Pork Producers Council has cited positions taken by the American Veterinary Medical Association and the American Association of Swine Veterinarians, which NPPC states ‘recognize gestation stalls and group housing systems as appropriate for providing for the well-being of sows during pregnancy. In fact, the key factor that most affects animal well-being is husbandry skills — that is, the care given to each animal.’

“Still, there are some large pork industry integrators who have made their own announcements to move away from gestation stalls, notably Smithfield Foods and Cargill Inc.”


Budget Issues

Rosalind S. Helderman reported yesterday at The Washington Post Online that, “The House is expected to vote Thursday on a Republican plan that would spare the Pentagon from the deep across-the-board spending cuts envisioned as part of last summer’s debt-ceiling agreement, reviving what has been an emotional debate in Washington about the best ways to reduce the federal budget deficit.

“With a series of troubling end-of-year deadlines looming, Republicans are proposing to replace the first round of $110 billion in reductions, which are set to take effect in January.”

The Post article stated that, “To forestall the defense hit, the GOP proposal would cut funding for food stamps, eliminate key pieces of the federal health-care law and slash funding designed to help the government better monitor the financial sector.

“The package would cut $36 billion from the food stamp program by reducing benefits to recipients and tightening eligibility.”

The article explained that, “The Democratic-held Senate opposes the Republican proposal and members of both parties have said they think the automatic cuts ultimately could be replaced only as part of a major bipartisan deal that would not be struck until after the November election.”


Agricultural Economy

Owen Fletcher reported in today’s Wall Street Journal that, “Corn prices fell 2.5% as traders sought to curb risk ahead of a U.S. government report Thursday that may point to a big rise in supplies later this year.

“Corn for July delivery, the most actively traded contract, fell 15.75 cents, to $6.0725 a bushel at the Chicago Board of Trade on Wednesday.

“Corn fell along with wheat and soybean futures as traders braced for the U.S. Department of Agriculture on Thursday to issue its latest supply-and-demand tables for major crops. Corn traders worry the USDA could give a high forecast for domestic corn inventories at the end of the crop’s next marketing year, which starts Sept. 1. A forecast above analysts’ expectations, due to a likely large U.S. crop this autumn, could send futures lower.”



Reuters writer Doug Palmer reported earlier this week that, “Pressure around the world to cut government spending and accelerate economic growth has improved the environment for talks about reducing farm subsidies, one of the most sensitive areas of trade, a top U.S. official said on Tuesday.

“‘I do think the overall economic situation in all of our countries puts us in a better position to have a more thoughtful conversation about farming support than we have (had) in a very long time,’ U.S. Trade Representative Ron Kirk said in remarks at the U.S. State Department.

“His comments came as the 10-year-old Doha round of world trade talks to liberalize trade in agriculture, manufactured goods and services remains in a deep coma.”

Mr. Palmer pointed out that, “But farm support programs are on the agenda in the proposed Trans-Pacific Partnership (TPP) agreement covering the United States and eight other countries in the Asia-Pacific.

U.S. dairy and sugar producers, in particular, are concerned their government programs could suffer from a deal in those talks.

“In addition, the United States and the European Union have been mulling a possible free trade agreement, which could require cuts in farm supports.”



A news release yesterday from the American Farm Bureau Federation (AFBF) stated that, “The [AFBF] Tuesday, along with 14 state Farm Bureau organizations and 16 other national and regional agricultural organizations, filed a motion seeking to intervene in Gulf Restoration Network, et al. v. Jackson, et al., a lawsuit seeking to force the Environmental Protection Agency to establish federal numeric nutrient water quality standards for all states in the Mississippi River Basin. The resolution of the lawsuit could be significant for farmers, municipalities and others throughout the 31-state basin because numeric nutrient standards could lead to more costly and stringent limits on nutrient runoff to waters that ultimately contribute to the Mississippi River.

Under the Clean Water Act, states may use either ‘narrative’ or ‘numeric’ standards as a method for determining water quality. Most states in the Mississippi River Basin use narrative standards, such as ‘no nutrients at levels that cause a harmful imbalance of aquatic populations.’ However, if this lawsuit is successful, EPA would be forced to override existing state standards with federal water quality standards and to express those standards as specific numeric limits on nutrients.”

Keith Good