April 26, 2018

Farm Bill; Budget; Agricultural Economy; Regulations; and, Political Notes

Farm Bill Issues

DTN Ag Policy Editor Chris Clayton reported yesterday that, “A bipartisan group of 44 senators sent a letter Tuesday to Senate leaders calling on them to bring the farm bill to the floor.

“In a letter to Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., senators stated, ‘With our constant focus on job creation, we write to urge you to schedule floor consideration of the ‘Agriculture Reform, Food and Jobs Act of 2012’ as soon as possible.’”

The DTN article noted that, “An informal view of Senate Agriculture Committee leaders is that they wanted to see floor action on the farm bill before the Senate breaks for Memorial Day. Speaking to reporters on a conference call Tuesday morning, Sen. Charles Grassley, R-Iowa, said there have been no indications from Senate leaders that the farm bill could come up next week.

“‘It might not be a bad deal to bring it up before recess so we actually got the thing done, but I don’t expect it would be,’ Grassley said.”

“Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., and Ranking Member Pat Roberts, R-Kan., did not join others in signing the letter but nonetheless want to see the bill adopted. They will hold a press call on Wednesday to report on progress on the bill,” the article said.

An update yesterday from the American Soybean Association (ASA) indicated that, “‘We are particularly encouraged by the broad and diverse coalition of senators that have lent their support to this letter, and we echo their call to bring the legislation quickly to the floor in the interest of America’s soybean farmers,’ said ASA President Steve Wellman. ‘The nation depends on a vibrant agriculture sector, and agriculture depends on a practical and workable Farm Bill. The ramifications of this legislation are indeed huge, and it remains our goal to see a Farm Bill in 2012.’”

A news release yesterday from the National Milk Producers Federation (NMPF) stated that, “The Senate leadership received a similar letter from farm groups last week, when NMPF joined more than 125 other agricultural organizations in pointing out how important it is to act on the farm bill quickly.”

“NMPF President and CEO Jerry Kozak said that ‘the clock is ticking on our opportunity to get a farm bill done in 2012. We appreciate the display of bipartisan effort by senators from across the country to move this legislation forward.’”

Chris Clayton noted yesterday at the DTN Ag Policy Blog that, “The Hagstrom Report noted there may have been 44 senators on the letter Tuesday wanting action on the farm bill, but there were actually 45 senators asking leaders for quick action. Sen. Dianne Feinstein, D-Calif., had sent her own letter Monday wanting action on the farm bill and also wanting amendments approved for fruits and vegetables.

“A staffer for one of the Senate leaders emailed me [Mr. Clayton] Tuesday that the farm bill will likely receive floor time in June.

“The House Agriculture Committee begins three days of hearings on the farm bill Wednesday with a 10 a.m. EDT hearing on crop insurance and the commodity title.”

A news release yesterday from Rep. John Garamendi (D., Calif.) stated that, “Today, in a letter to the House Committee on Agriculture, [Rep. Garamendi], Congressman Jerry McNerney (D., Calif.), Congresswoman Lois Capps (D., Calif.), and 29 of their colleagues in the California Congressional Delegation detailed their top priorities in the upcoming 2012 Farm Bill, which Congress is expected to consider later this year.  The 2012 Farm Bill, which sets food and farm policy for the nation, provides multi-year funding for a wide range of agriculture programs.

“‘As a rancher and a pear farmer, I know the unique challenges that California’s agriculture community faces,’ said Garamendi. ‘The Farm Bill offers the opportunity for California’s farm businesses to overcome these hurdles through advanced research, pest management, and marketing assistance programs. The bill can also connect disadvantaged families, especially children, with the food they need to lead healthy, productive lives. I join my colleagues in urging the Committee to pass a fiscally responsible Farm Bill that helps America’s families and farmers to Make It In America and grow it in America.’”

Meanwhile, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “U.S. Trade Representative Ron Kirk says he believes that reform of farm subsidies might be possible in today’s economic environment. ‘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 in a very long time,’ he said. ‘I happen to believe if there is a silver lining in this economic instability around the world, it’s forcing a more thoughtful conversation about all subsidies and farm supports, certainly in our Congress, in Europe, in Brazil.’

“Kirk’s evaluation of the situation dovetails with a second set of circumstances that could lead to changes in current farm policy: the booming U.S. farm economy. Sunday’s Washington Post carried an article by one of its columnists –– Robert J. Samuelson –– who argues that changes in the nature of global markets for agricultural products and the significantly different structure of the assets and debt held by U.S. farmers should lead Congress to drop federal agricultural subsidies when it approves the next farm bill.

“That won’t happen, of course. But the themes of tough times for the overall economy coupled with the robust state of the farm economy could prove to be two high hurdles for farm-state legislators to overcome when the farm bill negotiated later this year.”

University of Illinois Agricultural Economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Simple versus Olympic Averages in Prices used in Farm Commodity Programs”) that, “When historical averages are needed, an Olympic average often is used rather than a simple average in calculating benchmarks in Farm Bill commodity programs. For example, the Agricultural Risk Coverage (ARC) program that was passed by the Senate Agriculture Committee uses Olympic averages of prices and yields in calculating benchmark revenue. In this post, Olympic averages are compared to simple averages for corn and soybean prices. Generally, Olympic and simple averages will track one over time. The relationship of Olympic to simple averages depends on the nature of distributions across time.”  Dr. Schnitkey noted that, “For prices, it is difficult to know the relationship between Olympic and simple averages.”

Also yesterday at the farmdoc daily blog, Ohio State University Economist Carl Zulauf penned a brief item titled, “Update on U.S. Senate Ag Committee version of New Farm Bill.”

Patrick Gavin reported yesterday at Politico that, “From the department of clever legislation labeling: Rep. Jared Polis is introducing a piece of legislation that covers pizza, named The SLICE Act…Polis is upset that unhealthy pizza is being routinely served to students and classified as a vegetable by the USDA.”

Yesterday’s Politico update added that, “Corey Henry, the vice president of communications for the American Frozen Food Institute, writes in with a response to Polis.

“‘Congress did not make pizza a vegetable. Pizza is not now considered a vegetable and never will be considered a vegetable, and no one has ever, or will ever, ask that pizza be considered a vegetable. Congress acted to retain the current vegetable crediting for tomato paste as part of USDA’s new school meal nutrition standards in recognition of tomato paste’s significant nutritional value. Tomato paste is an incredibly versatile and nutrient rich food, packed with Vitamins A and C and rich in fiber, potassium and antioxidants. Nearly two whole tomatoes are required to make just one tablespoon of tomato sauce, which is why USDA rightly credits 1/8th of a cup of tomato paste as a full serving of vegetables. Indeed, USDA’s latest Dietary Guidelines for Americans encourage increased consumption of tomato products, such as paste and sauce.’”

In other policy related news, Sarah Muirhead reported yesterday at Feedstuffs Online that, “Denny’s announced today that it will work with its suppliers to eliminate the practice of confining pigs in gestation crates for its bacon, sausage and other pork products.”



Damian Paletta reported yesterday at The Wall Street Journal Online that, “House Speaker John Boehner said Tuesday that any increase in the government’s borrowing limit must be accompanied by spending cuts and other budget savings of greater value, and he rejected tax increases as part of any deal to reduce the federal deficit.

“Those positions signaled to the White House that congressional Republicans are prepared for fiscal brinkmanship at the end of the year, when Bush-era tax cuts are scheduled to expire, large automatic spending cuts are set to begin and the government reaches its $16.394 trillion borrowing limit.”

Jonathan Weisman reported in today’s New York Times that, “Democrats immediately accused Mr. Boehner of once again holding the nation’s full faith and credit hostage to his conservative political agenda, even as Republicans cut corners on the deal struck last summer to end the last debt-ceiling crisis.

“Treasury Secretary Timothy F. Geithner, speaking at the same meeting sponsored by the financier Peter G. Peterson, said the government could bump into its borrowing limit before the end of the year, but, he said, the Treasury has enough ‘tools’ to keep the government afloat into early next year. That should push a debt-ceiling showdown well past the November election.

“Mr. Geithner appealed to lawmakers to raise the debt ceiling ‘this time without the drama and the pain and damage that it caused the country last July.’ And he said an orderly solution could be reached.”

Rosalind S. Helderman reported yesterday at the 2chambers blog (The Washington Post) that, “Senate Minority Leader Mitch McConnell (R-Ky.) said he agreed with Boehner’s framework for requiring cuts equal to any debt ceiling increase.

“‘A request of the president to ask us to raise the debt ceiling ought to generate a significant response to deal with the problem of deficit and debt,’ he said.

“But White House spokesman Jay Carney responded that a ‘charade’ like last summer’s fight over the issue would hurt the economy.”

The New York Times editorial board noted today that, “Mr. Boehner said on Tuesday that his party would again refuse to raise any taxes, relying on spending cuts to offset the debt increase. He also announced that the House would vote before the November election to continue all the Bush tax cuts, set to expire on Jan. 1, depriving the Treasury over a decade of more than $3.5 trillion that could be used for deficit reduction.

“This time, at least, Democrats have more leverage than they did last year. The House cannot prevent those tax cuts from expiring by itself, nor can it stop the big military cuts that also begin on Jan. 1.

“Some members might be willing to reach a deal, but Mr. Boehner’s decision to again threaten a default shows that he is an unreliable budget negotiator. President Obama failed to recognize that last time, and Congressional Democrats gave in too easily. We hope both are hearing the message this time around.”


Agricultural Economy

Ian Berry reported yesterday at The Wall Street Journal Online that, “Farmland values across the U.S. Midwest continued to surge in the first quarter, buoyed by high crop prices and easing drought conditions in some states.”

Mr. Berry pointed out that, “In the heart of the U.S. corn belt, cropland values rose 19% in the first quarter from the year-earlier period, the Federal Reserve Bank of Chicago said in a report Tuesday. While it noted that the year-over-year price increases edged down from the ‘torrid’ pace of 2011, farmland values still increased 5% from the previous quarter.

“A separate report Tuesday from the Federal Reserve Bank of Kansas City showed even greater increases, with values for nonirrigated farmland across the district, which includes much of the central and southern Plains, jumping 25% from a year earlier and 8% from the prior quarter. Cropland values in that district were also fueled by increased energy production in states such as Oklahoma and Kansas, which boosted land-lease revenue from mineral rights.”

Owen Fletcher reported in today’s Wall Street Journal that, “U.S. wheat futures rose 2%, boosted by concerns about dry weather in overseas wheat-producing regions and a less-optimistic government assessment of the U.S. winter-wheat crop.

“Tuesday’s rally came after wheat prices mostly fell over the past two months. Warm weather in the U.S. has sped up development of the winter crop and raised analysts’ expectations for a large, early harvest that will augment already ample global wheat supplies.”

Javier Blas reported yesterday at The Financial Times Online that, “The annual ‘acreage battle’ in the US to decide which crop – corn or soyabean – will receive the biggest increase in farmland area has yet to be settled.

“In the first round of the 2012-13 battle, the US Department of Agriculture declared corn as the big winner as farmers said they intended to sow 95.9m acres of the grain, up 4 per cent from 2011-12 and the highest since 1937. The area devoted to soyabean fell 73.9m acres, down 1 per cent from 2011-12.”

The FT article explained that, “The big increase in corn acreage was the natural response to historically high prices and a favourable ratio of corn-to-soyabean prices in late 2011 and early 2012. But since the USDA published its Prospective Planting report, based on a survey of 84,500 US farmers in early March, the ratio has shifted in favour of the oilseed.

The price ratio for new crop soyabean-to-corn has moved from 2.05 times at the end of last year to 2.51 in late March, rising further to 2.68 times last week. In effect, the market has been trying to ‘buy back’ some acreage for corn to boost soyabean production.”

Meanwhile, an update posted yesterday at the Economic Research Service (USDA- ERS) Charts of Note webpage, stated that, “Fertilizer prices paid by farmers outpaced the increase in crop prices received by farmers from 2004 to 2008, driven largely by high energy prices and input material costs. In response to record fertilizer prices in 2008, farmers reduced fertilizer consumption, which contributed to a large decline in fertilizer prices in 2010. Since then, fertilizer prices have started to climb once again, driven mainly by strong domestic demand for plant nutrients resulting from high crop prices despite a steady decline in nitrogen fertilizer input (natural gas) costs. This chart is based on the data in table 8 of the ERS data product, Fertilizer Use and Price, updated May 4, 2012.”

Joe Leahy reported yesterday at The Financial Times Online that, “Brazil’s cost of sugar production has risen to match that in parts of Europe, illustrating the declining competitiveness of Latin America’s largest economy even in one of its core agricultural industries, according to a key trader of the commodity.

“Once by far the lowest-cost producers, Brazilian sugar companies are suffering from a stronger currency, inefficient infrastructure and rising labour and overheads, leading traders to consider moving production to new markets, such as Africa, said Alberto Weisser, chief executive officer of Bunge, one of the world’s largest commodities traders.”

And Bloomberg writer Whitney McFerron reported yesterday that, “Global poultry prices may ‘remain strong’ in the next two quarters as world meat demand increases and supplies decrease in the U.S. and Brazil, Rabobank International said.

“Beef prices that climbed to a record this year will support poultry, Rabobank analysts including David Nelson said in a report e-mailed today. U.S. wholesale choice beef prices climbed to $1.988 a pound on Feb. 29, the highest since at least January 2004, according to the U.S. Department of Agriculture.”



Bloomberg writer Silla Brush reported yesterday that, “U.S. House lawmakers, acting after JPMorgan Chase & Co. (JPM) announced $2 billion in derivatives trading losses, delayed a committee vote on legislation easing Dodd- Frank Act swaps rules.

“The U.S. House Agriculture Committee postponed a May 17 committee meeting to vote on the measures, which would limit the international reach of the 2010 regulatory-overhaul law’s swaps regulations and allow more derivatives trading to occur in federally insured banks.

“‘As always, Washington has a tendency to overreact. While the news of JPMorgan’s trading loss is unfortunate, the bipartisan legislation the committee was scheduled to consider is unrelated to the cause of the trading loss,’ Representative Frank D. Lucas, an Oklahoma Republican and chairman of the committee, said in a statement.

“‘However, this committee will take the time to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions,’ Lucas said.”

Victoria McGrane and Jessica Holzer reported yesterday at The Wall Street Journal Online that, “On Tuesday, Sen. Mike Johanns of Nebraska, a Republican on the Senate Banking Committee, said he wants the J.P. Morgan Chase & Co. chief executive to expound on the bank’s $2 billion-plus trading loss.”

The article added that, “Rep. Randy Neugebauer (R., Texas), chairman of the House Financial Services Subcommittee on Oversight and Investigations, said lawmakers need a ‘a clear picture of what happened at J.P. Morgan so that we can determine whether the actions that caused this loss pose risks to our financial markets and our economy as a whole.’”


Political Notes

Naftali Bendavid reported in today’s Wall Street Journal that, “A state senator who had been stuck for weeks in third place in polls has won the GOP nomination for a U.S. Senate seat from Nebraska, continuing a pattern of challengers successfully taking on prominent Republicans in party primaries.

“State Sen. Deb Fischer capped a remarkable surge by capturing the Senate nomination on Tuesday. She will face Democrat Bob Kerrey, a former Nebraska senator and governor, in the November election.”

Keith Good

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