September 23, 2019

Farm Bill Issues, Drought and Food Prices

Farm Bill: Recap of Recent Developments

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “House Speaker John Boehner, R-Ohio, on Tuesday said GOP leaders are working with House Agriculture Committee Chairman Frank Lucas, R, Okla., and other panel members on the ongoing drought disaster gripping the majority of the nation. ‘We understand the emergency that exists in rural America. And we will address it as soon as possible,’ Boehner said.

“Rep. Kevin McCarthy, R-Calif., on Monday suggested drought aid was a possibility. McCarthy, who represents an agriculture-heavy district, said Congress could move legislation to help farmers stricken by the drought. ‘If there’s something because the drought is greater today that we have to take up in the process, we will try to deal with that even by itself,’ McCarthy said.”

The DTN item noted that, “Boehner last week said that crop insurance should be sufficient to cover farmers’ needs this year, but key disaster aid programs for livestock producers have expired. Also, language in USDA’s Fiscal Year 2012 budget bars the agency from providing aid through a program (Section 32) that the department has used in the past to aid livestock operations for weather-related losses.

The pending House and Senate-passed farm bills include livestock disaster aid programs that would be retroactive to this year. Separate bills have been introduced in the Senate and the House regarding those programs, but they also include an extension of the controversial Supplemental Revenue Assistance Payments Program (SURE) that would be another crop disaster aid program for crop producers who already have funding for crop and revenue assurance programs. The SURE program had a separate $100,000 pay cap when it was available. CBO in the past has projected SURE costs at around $1 billion per year. It was not part of the Senate-passed bill, nor the farm bill that passed the House Ag Committee.”

Farm Bill: Extension and Disaster Aid Emerge as Possible Direction Forward

With this background in mind, David Rogers reported yesterday at Politico that, “Boxed into a corner on the farm bill, House Republicans scrambled Wednesday to find a path forward before sending lawmakers home in August to face drought-stricken producers — just months before the November elections.

“House Agriculture Committee staff met with their GOP leadership counterparts Wednesday morning, and there were animated conversations on the House floor later between Chairman Frank Lucas (R-Okla.) and Majority Leader Eric Cantor (R-Va.), who has been a obstacle to farm legislation.

The focus now is on a one-year extension of the current subsidies together with immediate disaster aid for livestock and specialty crop producers impacted by the severe weather. But the cost and practicality of this approach are in serious question, and Lucas can’t count on the support of his ranking Democrat and strong partner on the farm bill, Rep. Collin Peterson of Minnesota.”

Mr. Rogers explained that, “Lucas, who was taking the temperature of his Republican committee members late Wednesday, is more open to an extension and expects to have Peterson’s backing on at least shoring up disaster aid for those producers without crop insurance.

“‘The feeling of leadership is a one year extension provides certainty to folks out on the farms,’ Lucas said. ‘All the pieces are in play. I think this is an acknowledgement of what Mother Nature is doing out in the countryside but the challenge is many fold. I’m very fond of passing farm policy in a bipartisan way, not straight down a party line vote.’

“‘The livestock feed assistance programs are out of money,’ he said. ‘The livestock producers— who now have a shorter supply of feed grain and at a higher price— don’t have any insurance product. They are the ones most exposed.’”

Yesterday’s Politico article pointed out that, “Indeed, party leaders are paying a price now for having dragged their feet for months on the farm bill. At Cantor’s urging, Lucas delayed his markup until after the July Fourth recess, costing precious time. And neither Cantor nor Speaker John Boehner (R-Ohio) provided any help when Lucas and Peterson crafted a major set of food stamp reforms that could have defused the partisan split now over nutrition spending.

“This is the backdrop to Peterson’s negative response to an extension now. As a former Ag chairman who steered the 2008 farm bill through Congress, Peterson said major elements of the farm program will continue until next spring in any case without an extension. And what Republicans are proposing will miss the real problems at hand while delaying promised reforms, such as ending the current system of direct cash payments to producers. ‘This goes against everything that people want,’ Peterson said.

“‘There is no need for an extension,’ Peterson said. ‘The extension doesn’t get at the problem we’ve got … If you add the disaster to it, how do you pay for it?’ Peterson said, pegging the price at about $2.5 billion. ‘There is probably no way to pay for it,’ he added. ‘No one has a real plan at this point.’”

Mr. Rogers added that, “Having passed its bill in the bipartisan leadership of the Senate Agriculture Committee is also cool to the new House approach…[Senate Ag Committee Chairwoman Debbie Stabenow (D., Mich.)] confirmed this in a conference call Wednesday with reporters.

“‘We’re looking for Plan A,’ she said, keeping her focus on a comprehensive five-year bill. ‘We have a looming deadline. We have the drought to deal with. This is a very serious issue.’’

Chairwoman Stabenow also noted in yesterday’s conference call [complete transcript here] that, “Well, first of all, an extension doesn’t have to be in place until the end of September, and that’s the same time frame as the farm bill, so in my judgment, we should move ahead and give farmers and ranchers the certainty that they need by passing the farm bill with disaster assistance as a part of it. We, as I said, have done major disaster assistance for livestock and for fruit growers, and made that retroactive to this year. Certainly support adding additional provisions to that bill. But we don’t do our farmers and ranchers any favors by just doing a short-term, ad hoc disaster assistance program without giving them the economic certainty to be able to plan and make business decisions going into the new year.”

Bloomberg writer James Rowley reported yesterday that, “House Republicans are crafting emergency relief for drought-stricken livestock producers by transferring as much as $300 million from other U.S. farm programs, said Agriculture Committee Chairman Frank Lucas.

“House leaders hope to hold a vote next week on the measure to revive a program that expired Sept. 30, 2011, Lucas said in an interview. It would be extended through Oct. 1, 2013, to help farmers and ranchers hit by the drought in the Midwest and Great Plains, the Oklahoma Republican said.”

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “The head of the conservative Republican Study Committee, Rep. Jim Jordan (R-Ohio) said Wednesday leadership should not bring up the farm bill. ‘I’m against it,’ he told The Hill.

There is talk of a one-year extension or moving a drought relief bill and House Speaker John Boehner (R-Ohio) on Tuesday acknowledged rural areas are facing an ‘emergency’ that needs to be addressed.”

Mr. Wasson noted that, “[Sen. Ag. Comm. ranking member Rep. Pat Roberts (R-Kan.)] on Wednesday signaled some openness, and said that he does not have a final position on a one-year extension yet.

“‘Discussions are continuing,’ he said.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “[Rep. Collin Peterson] said he is opposed to an extension of the farm bill, which House Speaker John Boehner, R-Ohio, is considering. An extension is not necessary for crop insurance or food stamps because they have authority to continue, he said, and an extension of commodity programs is not needed until next June.

“An extension would not extend certain conservation program and fruit and vegetable programs that are expiring because there is no money to pay for them or pay for disaster aid, Peterson said. If there is an attempt to add disaster aid to an extension, lawmakers would probably need to find $2.5 billion to pay for that, he added. Peterson also said he thinks that livestock producers and fruit and vegetable producers need disaster aid the most.

“If an extension is offered, Peterson said, ‘I will oppose it.’ He also said Stabenow and Roberts signaled it would be hard to get an extension through the Senate.”

David Hawkings reported yesterday at that, “[T]he Speaker sounded the political alarm when he signaled he’d put a disaster relief package on the House floor next week, while still being inclined to leave the overall farm bill behind — a decoupling that would make it even more difficult than it already is for him to find a majority later in the year for the bigger crop subsidy and food stamp package.”

Meanwhile, Rep. Steve King (R., Iowa), Sen. Ben Nelson (D., Neb.) and the American Soybean Association yesterday urged House lawmakers to bring the Farm Bill to a floor vote.

Ferd Hoefner, the Policy Director for the National Sustainable Agriculture Coalition, noted yesterday that, “Congress can and should finish its work on a 2012 Farm Bill.  If it does its job, there will be no need for a stand alone disaster bill and no need for anything more than perhaps a very short term extension.  Passing a stand alone disaster bill with an extension is the wrong way to go.”

Rep. Bruce Braley (D., Iowa) noted in a news release yesterday that, “House rules provide that a bill must receive an up or down vote if more than 218 members sign a document known as a ‘discharge petition.’  Braley’s has taken the first steps to initiate the discharge petition process, creating a path forward that would circumvent House leaders’ hold on the Farm Bill.”


2012 Drought and Food Prices

Annie Lowrey and Ron Nixon reported in today’s New York Times that, “Scorching heat and the worst drought in nearly a half-century are threatening to send food prices up, spooking consumers and leading to worries about global food costs.

“On Wednesday, the government said it expected the record-breaking weather to drive up the price for groceries next year, including milk, beef, chicken and pork. The drought is now affecting 88 percent of the corn crop, a staple of processed foods and animal feed as well as the nation’s leading farm export.

“The government’s forecast, based on a consumer price index for food, estimated that prices would rise 4 to 5 percent for beef next year with slightly lower increases for pork, eggs and dairy products.”

The Times article added that, “The impact of the hot and dry weather on the nation’s farmers has put new pressure on Congress to move ahead on a pending five-year farm bill. But House Republican leaders have been reluctant to act because of divisions within the party’s rank-and-file about the cost of the nearly $1 trillion bill.

“The legislation includes several federal agriculture programs that farmers have come to expect, though it does not include any specific drought assistance. Several important disaster relief programs expired at the end of 2011, leaving farmers and ranchers who have lost cattle or grazing land with few options without Congressional action.

“‘I’ve been urging the House of Representatives to get a bill to the floor and get it voted on so they can conference with the Senate and get a farm bill passed,’ said Thomas J. Vilsack, the agriculture secretary.”

Josh Mitchell and Bill Tomson reported yesterday at The Wall Street Journal Online that, “Beef prices are forecast to rise between 3.5% and 4.5% this year, and then by between 4% and 5% in 2013.

“As a result, the department kept its forecast of 2012 food-price inflation at between 2.5% and 3.5%. That is below last year’s 3.7% and near the historical average of just under 3%. Overall, U.S. consumer prices rose 1.7% in June from a year earlier.

“Congress is debating what, if any, relief to provide to farmers. A five-year, $500 billion farm bill that supporters say would bring relief to drought-stricken farmers and ranchers is being held up in the House, as some lawmakers believe the measure doesn’t go far enough in cutting agriculture subsidies and spending on food stamps for the poor.”

The Journal article noted that, “House Speaker John Boehner (R., Ohio) said this week the House would address the emergency conditions from the drought ‘as soon as possible,’ prompting speculation he would support a separate measure targeted at drought relief.”

A news release yesterday from USDA indicated that, “Agriculture Secretary Tom Vilsack today designated 76 additional counties in six states as primary natural disaster areas due to damage and losses caused by drought and excessive heat. During the 2012 crop year, the U.S. Department of Agriculture (USDA) has designated 1,369 counties across 31 states as disaster areas—1,234 due to drought—making all qualified farm operators in the areas eligible for low-interest emergency loans. The additional counties designated today are in the states of Indiana, Illinois, Kansas, Michigan, Nebraska and Wisconsin. The U.S. Drought Monitor currently reports that two-thirds of the continental United States is in a moderate to exceptional drought.”

Bloomberg writer Brian K. Sullivan reported yesterday that, “The Midwest, where record amounts of rain fell in some places yesterday, may remain abnormally dry through the first week of August and the moisture probably won’t be enough to help drought conditions there, forecasters said.”

Moreover, the AP reported yesterday that, “Prices for corn and soybeans are climbing as hopes fade that rain can benefit parched crops across the nation’s heartland.

“Soybeans rose nearly 3 percent Wednesday and corn was up 1 percent. Wheat also finished higher on growing concerns about global supplies.”

And from an international perspective, concerns over paltry monsoon rains in India as well as weather related issues in Russia, continue to cause crop production concerns.

Also yesterday, Reuters writer Ben Berkowitz reported that, “Two of the largest crop insurers in the United States played down concerns over the financial impact of the worst drought in more than 50 years, saying they expected only modest losses even as claims rise to record levels.

Wells Fargo’s RCIS and Ace Ltd’s Rain & Hail and said this week that between careful underwriting and reinsurance, they could handle what many expect to be billions of dollars in total payouts for crop losses this year.”

Meanwhile, University of Illinois Agricultural Economist Scott Irwin indicated yesterday at the farmdoc daily blog (“Update on the Shutdown Price of Corn for Ethanol Plants”) that, “In a recent post (July 13, 2012), we examined the U.S. supply/demand situation for corn in 2012-13 under various yield scenarios. This analysis focused on the demand rationing that would be required as yields declined. If yield turns out to be above 140 we concluded that prices at the time appeared to be sufficient, and perhaps more than sufficient, to ration usage. However, we argued that an average yield of 135 bushels or less would require substantial further rationing, resulting in record high average prices. It is clear that corn yield prospects have continued to decline in the last two weeks as drought conditions this summer have become as bad as 1988 and perhaps worse, potentially only rivaled in the last century by 1936.”

After additional analysis, yesterday’s farmdoc update indicated that, “With expectations continuing to slide for U.S. corn yields this summer, issues related to rationing usage in 2012-13 are taking center stage. How the available supply of corn may be rationed is much more complex than in the past due to the rise of the ethanol industry. As recent observations attest, pricing behavior in the ethanol-gasoline blending market will be very important to determining how any rationing is allocated across the fuel and feed components of the corn balance sheet. What we know at the present time is that, if necessary, ethanol plants can bid the price of corn to record levels.”

In other news, the AP reported yesterday that, “The Agriculture Department says a statement on its website encouraging its employees not to eat meat on Mondays was made without proper clearance.

“The posting earlier this week was part of an internal newsletter that discusses how staff can reduce their environmental impact while dining at the agency’s cafeteria.”

Yesterday’s article added that, “USDA spokeswoman Cortney Rowe says the department does not endorse the ‘Meatless Monday’ initiative, which is part of a global public health campaign.

“The agency removed the posting hours after the National Cattlemen’s Beef Association denounced it in a news release. The USDA often promotes the beef industry by encouraging Americans to eat meat.”

Keith Good

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