FarmPolicy

November 21, 2014

Farm Bill; Budget Issues; Ag Economy; and Trade

Farm Bill and Policy Issues

A news release yesterday from the National Corn Growers Association (NCGA) stated that, “As the House Agriculture Committee continues farm bill hearings this week, the [NCGA] and several other agriculture groups today sent a letter to House Ag Chairman Frank Lucas and Ranking Member Collin Peterson on the importance of crop insurance.

“‘Federal crop insurance provides an effective risk management tool to farmers and ranchers when they are facing losses beyond their control,’ the letter stated. ‘It reduces taxpayer risk exposure; it makes hedging possible to help mitigate market volatility; and it provides lenders with greater certainty that loans made to producers will be repaid.’”

The release added that, “NCGA has previously stated that crop insurance remains the number one priority in the new farm bill as well as a market oriented, risk management tool to cover multi-year price declines.”

And, a news release yesterday from National Crop Insurance Services (NCIS) indicated that, “As the House Agriculture Subcommittee on General Farm Commodities and Risk Management prepares to hold a hearing later this week, [NCIS] today released the second in an ongoing series of educational videos on crop insurance.  This video puts a sharp focus on the risk that Texas farmers – who received roughly one-quarter of all indemnities in 2011 – faced in last year’s historic and ongoing drought.

“The video, titled ‘2011 Southwest Case Study,’ contains an overview of the catastrophic drought by NCIS President Tom Zacharias, highlighting the extent of the damage throughout the state and the role crop insurance played in mitigating that damage.  Additionally, two Texans were interviewed to better explain farmers’ ability to survive the drought and bounce back to plant again in 2012.

Rick Boyd, a banker with First United Bank in Lubbock, explains that many banks require farmers to purchase crop insurance to secure their loans.  Boyd noted that if it wasn’t for crop insurance, any Texas farmers might not be back in their fields planting again this year.   ‘2011 was such that, with the insurance, we did not have any farmers that actually went out of business, and over 90 percent of our customers had to draw on their insurance claims,’ he said.  ‘The programs were in place that allowed them, not to make a profit, but to actually get a lot of their expense money back and that was enough to enable them to get financing for the upcoming year,’ he added.”

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Last month, the Senate Agriculture Committee passed by a large margin a bill to replace the 2008 Farm Act, but was opposed by high profile southerners who got most of the headlines. They charged that the bill’s safety net was skewed, with relatively strong provisions for corn and soybeans and wheat, but weak supports for rice, cotton and peanuts.

“In response, Committee Chair Debbie Stabenow, D-Mich., and ranking minority member Pat Roberts, R-Kan., said that the direct payments, which many southerners prefer could no longer be defended and, that there was a limit to what the committee could provide in the way of additional support. The southerners responded that they expected better treatment from budget hawks in the House, and that they might oppose the bill on the floor.”

The DTN item pointed out that, “There are other important points of contention regarding the bill, observers note. For example, the Senate Ag Committee draft bill did not include a number of conservation proposals such as the requirement that producers who receive crop insurance subsidies comply with certain conservation rules. However, such a policy is opposed by rural bankers who told Congress that while conservation compliance is important, it could affect their customers’ ability to get and keep coverage. At this time, there appears to be little interest in the Senate in adding such a provision, and even less in the House.

Yet another concern is the question of whether the Senate insurance program will satisfy Brazil and comply with the demands from their successful trade challenge that is forcing the United States to pay $147 million annually to avoid sanctions allowed by the World Trade Organization.”

Yesterday’s item noted that, “Dan Sumner, a University of California-Davis economist and ex-USDA official who serves as a consultant to Brazilian interests says the proposed cotton program is actually more trade distorting than current policy. Sumner said the STAX insurance program proposed by the National Cotton Council ‘would allow U.S. cotton farmers to ‘lock in’ currently high farm revenues, further insulating them from market forces.’ The program would cover revenue losses of more than 10% and require farmers to pay just 20 percent of the premium. ‘It’s natural that someone looking at it would say that’s a big production subsidy,’ Sumner said.

“Rep. Randy Neugebauer, a Texas Republican, disagrees and asserts that that lawmakers are prepared to face another WTO challenge, if it comes. However, Senate Ag ranking Republican Roberts told the press that he wanted to ‘work around any WTO problems’ with the bill. However, he says he doesn’t expect the bill to be altered.”

The “Washington Insider” item added that, “So, it is clear that a great deal of work remains on highly controversial issues before a farm bill will be ready for floor votes in either chamber. In addition, while many producers believe they will be in a better position now than in the future to fight for programs they want, they are uncertain about how the election will change that view.

“Now, in spite of the political din surrounding the Senate bill, the focus is shifting toward the House committee and its debate which is expected in June. Depending on what happens in the House, the bill that emerges likely will have baseline savings of $23 billion to more than $30 billion –– savings that could lead to its inclusion in some amendment-proof vehicle as a spending offset.”

Late last week, Senate Agriculture Committee Member John Boozman (R., Ark.) discussed the Farm Bill with Mallory Hardin on KARK’s ‘Arkansas Today’ afternoon news, a video replay of this brief interview, in which Sen. Boozman explains some of the concerns he and other Southern Senators have with the current version of the Senate Farm Bill, can be viewed here.

More specifically, a recent analysis from the University of Arkansas (“Arkansas representative farm analysis ARC proposal in Senate markup”), “takes the following specification of the ARC proposal and applies it to a stochastic analysis of Arkansas representative farms. This preliminary analysis is only for the Stuttgart farm (rice‐soybean‐wheat) assuming individual election.”

And a news release late last week from Rep. Bruce Braley quoted the Iowa Democrat as saying: “The Farm Bill is the single most important piece of legislation this year that affects Iowa jobs and the Iowa economy.  From renewable energy to conservation programs, from crop insurance to agricultural research and rural development, the Farm Bill has a huge impact on our state.  It’s my job to listen to Iowans and get their feedback on what needs to be included in this important bill.  I’m working to make the Farm Bill a job creator in Iowa.”

Meanwhile, a news release from USDA yesterday noted that, “[USDA] Farm Service Agency (FSA) Administrator Bruce Nelson today reminded producers that enrollment for the 2012 Direct and Counter-Cyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) ends on June 1, 2012.”

With respect to nutrition issues, Elise Viebeck reported yesterday at The Hill’s Health Watch Blog that, “Rep. Jared Polis (D-Colo.) introduced a bill Monday to stop the amount of tomato paste used on a children’s slice of pizza from counting as a serving of vegetables in school lunches, arguing that the standard effectively qualifies pizza as a vegetable.

“He said he hopes the measure can be included in this year’s farm bill.

“‘Pizza has a place in school meals but equating it with broccoli, carrots and celery seriously undermines this nation’s efforts to support children’s health,’ a fact sheet from Polis’s office stated.”

Yesterday’s article added that, “Legislative language passed last year blocked stricter school nutrition standards proposed by the Department of Agriculture (USDA) and allowed an eighth of a cup of tomato paste — roughly the amount used on a children’s slice of pizza — to count as one serving of vegetables.

“Polis called the decision ‘absurd’ and blamed both Congress and the frozen food lobby.”

On the issue of conservation, some of the Nation’s leading hunting and angling groups sent a letter to House Agriculture Committee Leadership yesterday that encouraged the House to adopt a strong Sodsaver provision in the next Farm Bill, a copy of the letter is available here.

And, an update yesterday at the Wisconsin Ag Connection yesterday stated that, “One of the most outspoken opponents of the Dairy Security Act says the debate over federal dairy policy is ‘far from over.’ The Wisconsin-based Dairy Business Association released a memo on Friday after it was learned that the House version of the Farm Bill would likely include the DSA as its solution to reorganizing the way most dairy producers are paid for their milk.

“The group cited statements from House Speaker John Boehner, who blasted Minnesota Congressman Collin Peterson earlier this year for proposing what he called ‘a convoluted dairy policy.’

“DBA also said a group of dairy producers, farm association representatives and processors met with House Ag Committee member Reid Ribble in Appleton at a roundtable discussion of the Senate farm bill this month, in which the entire group reiterated its support for a free-market system.”

In other policy news, Monica Eng reported yesterday at the Chicago Tribune Online that, “As the battle wages on over the safety of feeding antibiotics to livestock for growth promotion, a new report reveals yet another source of unregulated antibiotics in American animal feed–spent ethanol grain.

“The new report by advocacy group the Institute for Agriculture and Trade Policy suggests that a relatively new source of food for livestock may contain levels of penicillin, erythromycin and other antibiotics. Both of these are medically important drugs whose effectiveness in treating humans can be compromised by overuse in animal feed for non-sick animals.

“When the Food and Drug Administration discovered the antibiotic residues in the grain in 2008, it started requiring ethanol/distiller grain producers to get approval for their presence as a food additive.”

The Tribune article pointed out that, “Last Friday [Representatives] Edward J. Markey (D-Mass) and Louise Slaughter (D-NY) sent a letter to the FDA asking what it would do to better regulate these residues and why it has not released more information about its 2008 findings of antibiotic residue in half of the spent grain tested.

Charles Staff of the Distillers Grain Technical Council took issue with the report, however, saying that it conflated concern over the use of antibiotics added directly to animal feed with the ‘far far lower levels’ in distillers grain.

“‘We are talking about parts per billion that is potentially present,’ Staff said, adding that levels of antibiotics in distillers grain have dropped significantly since the 2008 FDA analysis. ‘We are talking about minuscule levels and you can see that in the later 2010 samples taken by the FDA. [Ethanol producers] have better control and the antibiotic companies have established technical service and people who go out out to the ethanol plants and monitor how they are using it.’”

 

Budget Issues

Lori Montgomery reported in today’s Washington Post that, “Defense contractors have slowed hiring. Tax advisers are warning firms not to count on favorite breaks. And hospitals are scouring their books for ways to cut costs.

“Across the U.S. economy, anxiety is rising about the potential for widespread disruptions after the November election, when a lame-duck Congress will have barely two months to resolve a grinding standoff over taxes and spending.

“The halls of the U.S. Capitol are already teeming with people warning of disaster if lawmakers fail to defuse a New Year’s budget bomb scheduled to raise taxes for every American taxpayer and slash spending at the Pentagon and most other federal agencies.”

The Post article noted that, “In the meantime, political leaders are focused less on finding solutions than on drawing lines in the sand. In a speech Tuesday, House Speaker John A. Boehner (R-Ohio) plans to address the issue of national debt, which will once again be nearing its legal limit in January, just as the tax hikes and spending cuts are due to hit.

“According to advance remarks provided to The Post, Boehner will insist that any increase in the debt limit be accompanied by spending ‘cuts and reforms greater than the debt limit increase’ — the same demand that pushed the Treasury to the brink of default during last summer’s debt-limit standoff.”

Today’s article explained that, “For the moment, most economic forecasters are taking a sanguine view. Mark Zandi of Moody’s Analytics predicts that the lame-duck Congress will make a deal to rescind half the spending cuts and raise taxes for the wealthiest 2 or 3 percent of households — but leave everyone else alone.

“‘There’s a lot of room for compromise,’ Zandi said, noting that Boehner and Obama came close to agreement last summer.

But others are skeptical that lawmakers, fresh from the combat of the campaign trail, will be able to agree on anything. Federal Reserve Chairman Ben S. Bernanke recently warned that the Fed would have ‘absolutely no . . . ability whatsoever’ to cushion the shock to the economy if the nation sails over what he calls the ‘fiscal cliff’ in January. And many analysts worry that the uncertainty will itself begin to dampen economic growth long before New Year’s Day.”

 

Agricultural Economy

Cheri Zagurski and Anthony Greder reported yesterday at DTN (link requires subscription) that, “Crop progress continues to gallop along, well ahead of last year and the five-year average, according to USDA’s weekly report.

Corn is 87% planted and 56% emerged, compared to 56% and 16% last year and 66% and 28% averages, respectively.”

Soybean progress is also moving along at a rapid clip. Forty-six percent of the crop is planted, compared to 17% last year and a 24% average.”

In an analysis yesterday (“Corn Market Direction Unfolding, Magnitude Still Uncertain”) University of Illinois Agricultural Economist Darrel Good indicated that, “Conditions are in place for a very large U.S. corn harvest, a return to a more abundant stocks situation, and a return to lower prices.  The magnitude of these changes is still to be determined and will unfold over an extended period.  Even with higher average yields this year, substantially lower corn prices could have a disproportionately large impact on producer returns as anecdotal evidence suggests that a relatively small portion of the 2012 crop has been forward-priced at higher price levels.”

In other news, Dan McCrum reported yesterday at The Financial Times Online that, “TIAA-CREF, which manages $487bn of assets for university professors and non-profit workers in the US, has raised $2bn from fellow institutional investors to invest in global farmland as it aims to develop a new agricultural asset class.

“The move represents a further step by institutional investors to look for ways to exploit the rapid growth of emerging markets and for long term alternatives to stocks and bonds following the poor performance of the last decade.”

The FT article noted that, “‘We see increased protein consumption in developing economies and alternative energy mandates driving increased demand for food, fibre and fuel from a limited resource – land,’ said Jose Minaya, head of global natural resources and infrastructure investments at TIAA-CREF.

“The group already has around $2.5bn invested in farmland, representing 600,000 acres spread across 400 different properties that are typically then leased to farmers to operate.”

 

Trade

An update yesterday the U.S. Trade Representative’s Office webpage noted that, “Tomorrow, United States Trade Representative Ron Kirk will give remarks at an event celebrating the entry-into-force of the U.S. Colombia trade agreement and World Trade Month. The U.S.-Colombia trade agreement will help to support more jobs here at home by providing additional opportunities for U.S. exporters to sell more goods and services to Colombia, the third-largest Latin American economy.”

Keith Good

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