FarmPolicy

Farm Bill Issues; Agricultural Economy; Trade; and, CFTC Issues

Farm Bill Issues

Peter Schroeder and Erik Wasson reported yesterday at The Hill’s On The Money Blog that, “The House Agriculture Committee will begin a markup Wednesday of a farm bill that exceeds $900 billion in total spending. The panel’s top Democrat, Rep. Collin Peterson (D-Minn.), said he expects a slew of amendments to the bill, including some eliminating controversial cuts to food stamps.

“The House markup of the farm bill could last for days, with wide-ranging debates over everything from sugar quotas to biofuel support to increased funding for fruits and vegetable research. There is no sign yet that the bill is headed for a full House vote, although sources says that the markup means there will be no Agricultural appropriations bills, covering administrative funding for USDA, coming to the floor any time soon.”

Meanwhile, Mary Kay Thatcher, Senior Director of Congressional Relations at the American Farm Bureau Federation, was a guest on yesterday’s AgriTalk radio program with Mike Adams where their discussion focused on the Farm Bill.

With respect to Wednesday’s markup, Ms. Thatcher noted that, “I think that we’ll either start and finish late Wednesday or we’ll finish by Thursday, but I would predict you’re probably going to have a two-day markup. It could take longer. Again, there were rumors of a hundred different amendments, but hardly anyone has seen those amendments, so it’s hard to say exactly how controversial they are and whether people really end up offering them or not.”

Ms. Thatcher also noted yesterday on AgriTalk that, “And you know, there’s still nothing in concrete that we’re going to get this to the House floor. I have yet to see any indication out of Speaker Boehner or Majority Leader Cantor that they want to give this House floor time. We’re down to only 29 legislative working days between now and the election, so very limited amount of time. And this bill’s going to be controversial. So, you know, to put a controversial bill on the floor and to have it under any kind of an open or transparent process would take multiple days, and I’m just not sure that that’s going to happen.

“I do think, Mike, that there is another option that’s been discussed over the past few weeks, and that is get the bill out of committee and then it wouldn’t be an actual conference, because you’d have to pass it through the House to have an actual conference, but you could have some behind the closed doors negotiation, primarily, I would suspect, between the staff of the Senate and the House Ag Committees, majority and minority, over the August recess, and then potentially come back with a bill that could be tied to some kind of piece of legislation that’s moving, be it estate tax reform or extension of the depreciation, or capital gains, or some of those things.”

Also yesterday on AgriTalk, on the issue of nutrition spending, Ms. Thathcer pointed out that, “I think that will continue to be a huge issue, though, because you’re going to have especially Tea Party Republicans who are going to believe we can find far more than $16 billion in waste, fraud and abuse in that program…But on the other hand, you’re going to have Democrats who are going to say, no, we need every dollar we got. So I wouldn’t be surprised if this isn’t by far the most controversial item in the House Ag Committee markup starting Wednesday.”

Brett Neely reported yesterday at Minnesota Public Radio Online that, “[House Ag Committee Ranking Member Collin Peterson (D., Minn.)] said nearly all of the Agriculture Committee’s Democrats have signed off on the cuts to food stamps because that is the only way to convince House Republicans to vote for the bill.

“But Peterson said he and the other Democrats expect the Senate’s food stamp cuts to prevail if both chambers can agree on a bill.”

Yesterday’s update added that, “‘Part of the reason they’re voting for it is that this is not going anyplace in the Senate and everybody knows that,’ he said.

“While Peterson said the more than 500,000 Minnesotans who receive food stamps won’t be affected by the House food stamp proposal, some advocates disagree.”

Dorothy Rosenbaum and Stacy Dean noted on Friday at the Center on Budget and Policy Priorities Online that, “House Agriculture Committee Chairman Frank Lucas (R-OK) and Ranking Member Collin Peterson (D-MN) have released a farm bill proposal that would cut the Supplemental Assistance Nutrition Program (SNAP, formerly known as the Food Stamp Program) by $16.5 billion over the next decade, eliminating food assistance to 2 to 3 million low-income people, mostly low-income working families with children and seniors.

“The Lucas-Peterson proposal would cut total farm bill authorized spending by an estimated $35 billion over ten years; more than 45 percent of the cuts would come from SNAP.  In contrast, the bipartisan Senate-passed farm bill saves a total of $23 billion.  The entire difference between the overall sizes of the two farm bill packages is due to the much larger Lucas-Peterson cuts to SNAP.”

In a related article on the SNAP program, Brad Tuttle noted yesterday at Time Magazine Online that, “The federal government is spending millions to encourage more Americans to apply for food stamps, or rather the Supplemental Nutrition Assistance Program (SNAP), which replaced food stamps. Ads paid for with tax dollars are asking more people to enroll in SNAP even though the program has dramatically expanded in recent years: Roughly 46 million Americans now get SNAP benefits, up from just 17 million in 2000, and the costs associated with the program have risen from $17 billion in 2000, to $30 billion in 2007, way up to $78 billion last year. While those receiving benefits must be happy with the program’s growth, there’s another group that might even be more pleased: corporations that make or sell junk food.

“Sure, poor Americans who get food on the table for dinner, partly with the assistance of SNAP, must appreciate the program. But major corporations and food groups, including Pepsi, Kraft Foods, Kroger, Coca-Cola, and the Corn Refiners of America, also warmly embrace SNAP. All, in fact, have lobbied Congress and/or various states to expand SNAP and make sure that recipients have the most freedom possible in deciding how to use their allowances, including the unlimited purchase of soda and junk food.”

Ron Hays, of the Radio Oklahoma Network spoke yesterday with House Ag Committee Chairman Frank Lucas, a replay and summary of their discussion has been posted at The Oklahoma Farm Report Online.

In part, Mr. Hays indicated that, “Lucas said the Congressional Budget Office has verified the House version of the farm bill will achieve solid savings.

“‘We will achieve approximately $14 billion over on the commodity side of the equation. We’ll achieve about 16 billion on the nutrition side, approximately six billion or so on the conservation side. Now, we’ll plow part of those savings in the commodity title back into the safety net. But the net bottom line is we’ll save more than $35 billion dollars.

“‘That’s substantially more than the Senate’s approximately $23-billion number and greater savings than the President called for in his last two budgets of approximately $33 billion dollars in savings. We’re the frugal bunch when it comes to the taxpayers’ dollars.’”

Yesterday’s Oklahoma Farm Report update noted that, “Lucas said he has a very straightforward game plan for shepherding the Farm Bill through the House when it goes to the floor this week.

“‘The draft that was released a few days ago is the draft that we will work off this coming Wednesday. We will go through the bill title by title: nutrition, conservation, commodities, not necessarily in that particular order, but we’ll go through the titles of the bill. The titles will be opened for amendment by members of both the majority and the minority. We’ll debate and discuss those amendments as they come up and vote on them, accepting or rejecting, and work our way through the process.

“‘I don’t know how many days this will take. We, of course, have to suspend mark-up when we have votes on the floor of the United States House, as is appropriate. But it would be my intention that once we start this process, short of voting on the floor, with the agreement, of course, of my Ranking Member, I’d like to just push this on until we are completed, whenever that may be.’

“Lucas said once a final bill has passed the House, his past experience with Senate Agriculture Committee Chairwoman Debbie Stabenow leads him to believe the conference committee work will proceed smoothly to a fair conclusion.”

A news release yesterday from the House Agriculture Committee stated that, “Chairman Frank Lucas of Oklahoma issued the following statement regarding the release of a new study conducted by the Agricultural and Food Policy Center (AFPC) concerning the economic impacts of the House and Senate Farm Bill proposals on representative U.S. crop farms.

“‘The House farm bill saves taxpayers $35 billion, with more than $14 billion in these savings achieved by reforming U.S. farm policy.  What the AFPC study says is that the House managed to save taxpayers money and reduce the deficit while still providing a safety net that farmers can truly depend on in hard times.  The biggest take-away from the study is the absolute importance of real price protection in a farm bill.  When presented with the various choices, the study reveals that, wherever they farm and whatever they grow, farmers are better off under the risk management option that marries a strong crop insurance policy with a farm bill that focuses on providing real price protection against multiple year price declines.  I hope producers and my colleagues in Congress will give a close look at the study’s findings.’

“Click here to read the full study.”

With respect to dairy, a recent news release from the International Dairy Foods Association (IDFA) included a statement from Jerry Slominski, senior vice president for legislative and economic affairs at the IDFA, who noted in part that, “IDFA is disappointed that the Dairy Market Stabilization Program has been included in the House Agriculture Committee chairman’s mark of the Farm Bill. The stabilization program is designed to limit milk supplies and to periodically raise milk prices. It will reduce dairy farmers’ incomes at the same time that a new subsidized revenue insurance plan enhances their incomes. Taxpayer organizations, consumer groups, dairy food manufacturers and many dairy producers –  including the second largest dairy co-op in the country – have all spoken out against supply management programs like the DMSP.”

And Former Rep. Larry Combest (R-Texas) noted yesterday at The Hill’s Congress Blog that, “Nearly 110,000 sugar jobs were lost from 1994-2008 because of stagnant, low sugar prices, but that trend is being reversed thanks, in part, to the current sugar policy, which operates without taxpayer cost.

“Confectioners, meanwhile, are thriving. Since the 2008 Farm Bill passed, U.S. Census data show that domestic production of candy and chocolate has increased, which means factory expansions and job growth. Wall Street has dubbed the healthy sector as ‘recession proof.’  And the industry’s own trade association has boasted of big profit margins, record-setting sales, and rising revenues.”

Agricultural Economy

Gregory Meyer reported yesterday at The Financial Times Online that, “Soyabean prices have soared to record highs, surpassing levels seen in the 2007-08 food crisis, as drought and heat in the US, the world’s leading producer, threaten the size of its harvest.”

The article noted that, “Late on Monday, the US Department of Agriculture downgraded the quality of the domestic soyabean crop, estimating that 40 per cent was in good to excellent condition from 45 per cent a week earlier.

“The extreme weather has sent grain prices soaring, too, with corn up as much as 5.9 per cent to $7.86¾ a bushel and close to its record.”

The FT article pointed out that, “Analysts say consumers will need to curb demand to prevent stocks from falling further. High prices may force their hand. Soyameal, a key ingredient in chicken and pig feed, hit a fresh record high of $490 per short ton on Monday.

“Since mid-June, shares of meat processors Tyson Foods and Sanderson Farms have declined 8.9 per cent and 16.5 per cent, respectively, while the S&P 500 stock index has risen 0.7 per cent.”

An update posted yesterday at The Financial Times Commodities Twitter page noted that, “Excellent chart comparing this season’s ‪#corn rating vs 1988, the year of the last major drought.”

Purdue University Agricultural Economist Chris Hurt noted yesterday at the farmdoc daily blog (“Pork Industry Faces Financial Disaster?”) that, “Drought and the impact on feed prices may be on the verge of creating a financial disaster for the pork industry and other livestock species. The crop stress which began in Indiana and Illinois is now spreading further to the west. Most of the media attention has been focused on crop producers who face large yield losses; however the animal industries may ultimately fare even worse.”

Andrew Johnson Jr. reported in today’s Wall Street Journal that, “Corn prices soared toward new highs on Monday amid growing fears that the drought scorching the U.S. Midwest will prove to be the harshest in decades…[T]he hot, dry weather could cut the U.S. harvest this autumn by more than 1 billion bushels below the federal government’s forecast of two months ago, leaving domestic supplies relatively tight, analysts say.

“A higher cost of corn likely would drive up the cost of feed for livestock producers, which could lead in turn to higher meat prices, and also spill into the prices consumers pay for cereal, sodas and other packaged foods. Rising corn prices already are squeezing profits for U.S. ethanol companies.”

Zack Colman reported yesterday at The Hill’s Energy Blog that, “National corn stockpiles will hit the largest disparity in production projections and actual supply since 1973 as a result of this summer’s drought, according to a Bloomberg report.

“Global corn demand has never been higher while output has strained under the heat and lack of rain. That means U.S. corn supplies will hit 1.216 billion bushels on Sept. 1, 2013, about 35 percent less than the Agriculture Department’s (USDA) June 12 estimates, the Bloomberg report said.

“USDA could not comment on the report ahead of the figures, including possibly revised predictions, it plans to release Wednesday, a USDA official told The Hill on Monday.”

The update noted that, “It is unclear what kind of effect those stocks would have on biofuel prices such as ethanol.”

From an international perspective, Sudarsan Raghavan reported in today’s Washington Post that, “Niger has the world’s highest rate of child marriage, with roughly one out of two girls marrying before age 15, some as young as 7. As a hunger crisis affects millions here and across the Sahel region of West Africa, aid workers are concerned that struggling parents might marry off their daughters even earlier for the dowries they fetch, including animals and cash, to help the families survive.

“‘The fear is, if the food crisis continues, that more parents will use marriage as a survival strategy and that we’ll see more girls married before the age of 15,’ said Djanabou Mahonde, the head of child protection at UNICEF.”

Trade

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “The Senate Finance Committee is looking to hold a highly anticipated markup of Russia trade and human rights measures next week, sources said Monday.

“The committee will consider legislation extending permanent normal trade relations to Russia and a separate bill aimed at punishing those accused of killing Russian whistleblower Sergei Magnitsky.”

CFTC Issues

Shahien Nasiripour reported yesterday at The Financial Times Online that, “A key vote on Tuesday by the top US derivatives regulator will set in motion more than a dozen new rules governing the $648tn global market.

“The Commodity Futures Trading Commission is due to finalise its definition of what constitutes a swap. The rule, first proposed last year, serves as the linchpin for nearly 20 requirements to overhaul how companies ranging from Goldman Sachs to Royal Dutch Shell hedge risk and speculate on future events by trading in derivatives.”

The FT article noted that, “The CFTC and the Securities and Exchange Commission were mandated by the 2010 Dodd-Frank overhaul of US financial regulations to improve oversight of the opaque over-the-counter derivatives market after swaps dealers, such as AIG, sought taxpayer-funded rescues to avoid failure.

“The definition will start the clock on rules that have yet to be implemented, including the immediate reporting of swaps trades, record-keeping requirements and limits on holdings of certain physical commodity futures and swaps.”

Keith Good

Posted by Keith Good • July, 10, 2012 • 4:25 am