May 24, 2018

Farm Bill; Crop Insurance; Ag Economy; RFS; Budget Issues; and, CFTC

Farm Bill Developments

Meredith Shiner reported today at Roll Call Online that, “Facing no clear consensus on a long-term farm bill, or even a one-year extension, House Republicans today pushed a stand-alone drought assistance measure, fearing Members otherwise would leave for August recess without any action to take home to struggling farmers and ranchers.

“Leadership had been scrambling to approve an unpopular one-year reauthorization of farm programs that Senate Democrats already said would be dead on arrival. And with an astounding 80 percent of the contiguous United States currently under drought conditions — according to the National Drought Mitigation Center — top GOP sources expressed serious concern about the optics of doing nothing to aid farmers at the height of summer.

“In a private, closed-door meeting in Speaker John Boehner’s office late this afternoon, leaders decided they could gin up enough votes to proceed with extending emergency benefits to farmers in duress. But they did not rule out having to twist GOP arms or appeal for Democrats’ support.”

Today’s Roll Call article quoted Senate Majority Leader Harry Reid (D., Nev.) as saying, “‘We have a very good farm bill that includes drought relief that is very significant,’ Reid said in his weekly media availability with reporters. ‘I think what the House should do is take these provisions we have in the bill we sent them, and if they want to do something about drought relief, send that to us.’

“‘We’re willing to do anything that’s reasonable, but an extension some of them are talking about is not reasonable,’ Reid added, summarily rejecting the one-year farm bill extension plan the House Rules Committee decided to scrap later in the day.

Leaving the door open to moving the separate disaster piece of the farm bill was a significant move for Reid, especially given that many of his rank-and-file Members believe they should settle for nothing short of the full, five-year extension they passed with 64 votes in June.”

( Note: Yesterday afternoon, Senator Ben Nelson (D., Neb.) addressed Farm Bill related issues on the Senate floor and discussed the importance of passing the five-year legislation, audio (MP3- 5:00)).

Ms. Shiner pointed out that, “As late as this afternoon, Democrats were clearly divided on how to proceed if the House presents a disaster-only bill. Senate Agriculture Chairwoman Debbie Stabenow (Mich.) was set on continuing the push for a full bill and not approving a pared-down measure, according to Senate sources.

“‘We’ve got a five-year farm bill, we ought to have a five-year farm bill,’ Sen. Tom Harkin (D-Iowa) said, insisting he would not support a piecemeal approach.”

The Roll Call article added that, “One key factor working in favor of the disaster-aid-only bill, if the language is acceptable to the Senate, is that Democrats may not lose much leverage in their fight to pass the overall farm bill. The larger package is still a deficit-reducer, and many have speculated that it could be used in a lame-duck session to offset other must-pass measures.

“As word spread that the House would attempt to pass the disaster bill, Senate Republicans also expressed an eagerness to take up the measure and approve it before next week.

“‘It strikes most of us that some kind of drought assistance clearing the Congress and getting to the president this week would be a good idea, given the severity of conditions all across the central part of the country,’ Senate Minority Leader Mitch McConnell (R-Ky.) said.”

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “House Agriculture Committee Chairman Frank Lucas (R-Okla.) urged his colleagues to vote for the limited disaster bill when it comes up for a vote on Thursday.

“‘My priority remains to get a five-year farm bill on the books and put those policies in place, but the most pressing business before us is to provide disaster assistance to those producers impacted by the drought conditions who are currently exposed,’ he said. ‘Beyond that, I will continue to work with my leadership, Ranking Member Peterson and our members to determine the best path forward.’”

The Hill update noted that, “Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) said the upper chamber would even not take up a pared down drought bill this week, in the hope of keeping the pressure on the House to allow a five-year farm bill to go to conference.”

“‘We are going to keep pushing in August,’ Stabenow said. ‘I think in August there a lot of folks who are going to have to answer a lot of questions back home.’”

Mr. Wasson added that, “Stabenow said the one-year extension or stand-alone disaster bill would hurt dairy farmers and other commodity producers.

“‘We are willing to sit down and work out the differences on the commodity title, and I am hopeful we can do that over August and that we will be able to have something that we can present to the House and the Senate in September,’ she said.”

David Rogers reported yesterday at Politico that, “Facing certain defeat, Republicans pulled their one-year farm bill extension from the House docket late Tuesday in favor of a narrower $383 million disaster aid package to address the immediate needs of drought-stricken livestock producers…[T]he action shows how much the GOP leadership — having boxed itself in by refusing to take up a five-year farm bill — is scrambling now to find something the party’s candidates can take home to farm states in August given the severe drought plaguing much of the country.”

Mr. Rogers explained that, “The substitute will restore livestock indemnity and forage programs that have expired in the current farm program, with some assistance also for specialty crops.

“To keep down costs, the aid will apply only to 2012, while offsets will come from imposing caps on two conservation programs much as the House Appropriations Committee has already proposed in its 2013 budget bill. Early estimates indicate the net savings would be about $256 million.”

( Note: On the issue of conservation offsets, an update posted yesterday at the National Sustainable Agriculture Coalition Blog noted that, “We now understand a livestock disaster assistance bill, without a farm bill extension, is being put together for consideration on the House floor under the ‘suspension of the rules’ process for non-controversial bills, a process which requires a two-thirds affirmative vote for a measure to pass.  We are not opposed to that in principle, but would be opposed if it coupled with cuts to farm bill conservation programs.”)

Yesterday’s Politico article indicated that, “Stepping into the debate Tuesday morning, Agriculture Secretary Tom Vilsack dismissed the extension as ‘just an excuse not to put in the work to build a coalition’ needed for a long-term plan for producers but also all of ‘rural America.’

“‘We need a five-year bill,’ Vilsack told POLITICO. ‘If folks care about rural America they will get this done.’

“The ‘rural America’ theme is one that the former Iowa governor has sounded before, emphasizing the economic development, energy and land conservation elements of the farm bills. And with Iowa in play in the presidential campaign—not to mention Vilsack’s wife, Christie, running for Congress back home against Republican Rep. Steve King—the farm bill’s import can no longer be ignored.”

Mr. Rogers added that, “Vilsack upped the ante himself, saying that rural communities can survive the drought but that their economic turnaround could be seriously hurt by the stalemate in Congress.”

The Politico article noted that, “Leaders of the House and Senate Ag Committees had met Tuesday morning to try to find a path forward. But Minnesota Rep. Collin Peterson, the ranking Democrat on the House panel, refused to accept the extension absent a promise from Speaker John Boehner (R-Ohio) to allow House-Senate negotiations in August on the larger five-year farm plans favored by the two committees…[M]ajor commodity groups backed Peterson, and he was helped too by his friendship with Minority Leader Nancy Pelosi (D-Calif.). There had been concern that liberal food stamp advocates would back the extension –since it spared nutrition programs. But Pelosi’s close ally, Rep. Rosa DeLauro (D-Conn.), joined in opposition to the bill Tuesday making it harder to the GOP to get to a majority.”

Also yesterday, a news release from Sen. Kirsten Gillibrand (D., N.Y.) stated that, “With farmland across upstate New York in the grip of a summer drought that is starving production from crops that are still recovering from a late spring freeze and last year’s back-to-back tropical storms, [Sen. Gillibrand] today called on leaders of the Senate and House Agriculture Committees to include New York State in any disaster relief program in the 2012 Farm Bill.”

In other Farm Bill developments, a news release yesterday from Sen. Pat Roberts (R., Kan.) stated that, “To protect taxpayer dollars from waste and abuse, [Sen. Roberts] today called for a full accounting of the U.S. Department of Agriculture’s (USDA) change in definition of an error for the Supplemental Nutrition Assistance Program (SNAP). Roberts is concerned the change in error rates is forgiving errors at taxpayer expense and giving the Congress a false impression of the integrity of the $75 billion a year program.

“‘At a time when our economy is struggling and federal spending is out of control, the federal government needs to account for all spending, just as Americans do when making the family budget,’ Roberts said. ‘These errors, program-wide, could add up to be millions in wasted taxpayer dollars. I want a full accounting from the Department of Agriculture.’”

Meanwhile, an opinion item posted earlier this week at The Hill Online stated that, “Sen. Debbie Stabenow (D-Mich.) has been a driving force on the farm bill, a five-year authorization measure whose fate could be decided this week.

“Stabenow, chairwoman of the Senate Agriculture Committee, defied the odds by passing her farm bill through the upper chamber in June, 64-35… [Sen. Stabenow] has proven to be an adept legislator in her first Congress as head of the Agriculture Committee.”


Crop Insurance

Mark Peters reported in today’s Wall Street Journal that, “A historic drought across the middle of the U.S. is shriveling crops—but not many farmers’ incomes, as widespread use of crop insurance and record corn and soybean prices cushion the blow to growers.

“Farmers already are giving up on crops in parts of the Midwest as hot, dry weather shrinks corn stalks and leaves some cobs without a single kernel. Still, economists don’t expect incomes for commodity-crop farmers to slip drastically, keeping one of the strongest sectors of the U.S. economy humming.

“‘Crop producers will largely weather the losses,’ said Joseph Glauber, chief economist for the U.S. Department of Agriculture.”

Mr. Peters noted that, “At the same time, the drought is having a big impact on chicken farmers and cattle ranchers, who are paying record prices for feed, which is expected to translate into a 3% to 4% rise in food prices. Milk, cheese and other dairy products are also headed upward, and higher commodity prices are expected to squeeze margins for food companies.”

And Bloomberg writer Alan Bjerga reported yesterday that, “This year’s once-in-a-generation U.S. drought may prompt record insurance payouts and still leave some farmers with serious losses as indemnities rival those of a 1988 drought and a 1993 flood, the industry’s top lobbyist said.

“The size of payouts will be known better in the next few weeks, Tom Zacharias, the president of National Crop Insurance Services, said today at a Bloomberg Government breakfast. The ratio of losses to premiums may be similar to those of the late 1980s and the 1990s, when floods and droughts paid out more than $2 for every dollar in premiums, said Zacharias, who declined to make an overall estimate. Premiums this year are close to $11 billion, Zacharias said.

Farmers who have already signed contracts to sell corn, soybeans or wheat may have to repay buyers with their insurance money after their crops fail, he said. Still, many farmers will have financial strains lessened by the program, which has replaced costly federal disaster bailouts, he said.”

The Bloomberg article indicated that, “Keith Collins, a consultant to the crop insurance industry and a former chief economist with the U.S. Department of Agriculture, rejected as ‘fantastical’ the notion that farmers may be better off collecting insurance than raising a crop.

“‘You can find a wide range of income indemnification’ depending on individual farmer situations, Collins said at the breakfast. In cases where farmers have already committed to sell their production and have to buy it back or break a contract, ‘they turn an indemnification check over to their banker,’ yet still need to cover seed and fertilizer expenses for the next crop, he said.”


Agricultural Economy

Jack Farchy and Heba Saleh reported yesterday at The Financial Times Online that, “The increase in grain prices is already being felt around the world. In Indonesia, the tofu industry has threatened to strike over rising soyabean prices; in Mexico, the cost of corn tortillas is on the rise; and Iran last week witnessed a rare protest over the cost of chicken.

“But the economic effects of the sharp rise in agricultural commodities have barely begun. A jump of 30-50 per cent in benchmark corn, wheat and soyabean prices has revived memories of the world’s last food crisis in 2007-08, and large consumers from Egypt and Morocco to South Korea and Taiwan are bracing for a renewed bout of food inflation.

Marc Sadler, head of agriculture risk management at the World Bank, says: ‘For sure there is growing concern across the world from developing countries about what this may mean for them.’”

A tweet yesterday from The Financial Times Commodities, which included a graph, stated that, “‘very poor’ US #corn ratings: 1988 vs 2012. Highest proportion of crop is now very poor since USDA started tracking.”

Meanwhile, the U.S. Department of Agriculture’s National Agricultural Statistics Service released its monthly Agricultural Prices report yesterday, which stated in part that, “The corn price, at $7.36 per bushel, is up 99 cents from last month and is $1.03 above July 2011 [related graph]… The soybean price, at $15.60 per bushel, increased $1.70 from June and is $2.40 above July 2011 [related graph]…and…The July price for all wheat, at $8.31 per bushel, is up $1.61 from June and $1.21 above July 2011 [related graph].”


Renewable Fuel Standard (RFS)

Brad Plumer provided a more in-depth look at recent developments this week regarding the EPA’s Renewable Fuel Standard in today’s Washington Post; reminding readers that, “a coalition of U.S. meat and poultry producers called on the Environmental Protection Agency to relax its corn-ethanol program for one year.”

Moreover, Ken Anderson reported yesterday at Brownfield that, “Some strong criticism today from Iowa Senator Charles Grassley directed towards that coalition of livestock, meat and poultry groups asking for changes to the Renewable Fuels Standard’s ethanol mandate.

“‘I think that what the group is really asking for is to have the grain farmers subsidize their livestock feed at three or four dollars, like they did or have been over a long period of time—until two or three years ago when the price of grain got up,’ Grassley says, ‘and I think they ought to be a little bit embarrassed to think that the grain farmer ought to subsidize the livestock farmer.’

“And, Grassley adds, if not for a vibrant ethanol market for corn, farmers wouldn’t have planted 96 million acres in 2012—the most since 1937.” (related audio also available at the Brownfield link).

And, Reuters reported yesterday that, “The chief executive of global grains trading powerhouse Cargill lent his voice on Tuesday to a growing chorus of corn consumers urging the U.S. government to temporarily curb its ethanol quotas, saying that the expected drop in global corn production was ‘manageable’ with the right response.

“CEO Gregory Page said on CNBC that the U.S. biofuel mandate ‘needs to be addressed’ through existing policy tools, becoming the highest-profile executive to call for some relief from the Renewable Fuels Standard that requires that over a third of the corn crop is made into fuel ethanol.”


Budget Issues

Naftali Bendavid reported in today’s Wall Street Journal that, “Republican and Democratic leaders said Tuesday that they have agreed to extend current government funding levels through the first six months of the fiscal year that begins Oct. 1, avoiding the prospect of a pitched budget battle shortly before the election.

“The deal gives lawmakers the ability to focus on other pressing matters. They must figure out by year’s end how to deal with $1.2 trillion in automatic spending cuts set to begin in January, as well as the expiration of the Bush-era tax cuts next year.”

In related news, Austin Wright reported yesterday at Politico that, “The Obama administration said on Tuesday it’s preparing to work closely with its sprawling bureaucracy on the daunting prospect of automatic spending cuts set to take effect next year.

“For months, the White House Office of Management and Budget has resisted calls from members of Congress and industry executives to explain how it would carry out the cuts, called sequestration, which begin to go into effect on Jan. 2 unless Congress moves to stave them off.

“But in a memo released on Tuesday, acting OMB Director Jeffery Zients announced his agency would soon start working with federal agencies to address ‘issues raised by a sequestration of this magnitude.’”


Commodity Futures Trading Commission (CFTC)

Devlin Barrett and Aaron Lucchetti reported in today’s Wall Street Journal that, “A bankruptcy trustee sifting through the remains of MF Global Holdings Ltd. expressed confidence that the failed securities firm’s U.S. customers will get all their money back.

“In written testimony submitted to the Senate Agriculture Committee for a hearing Wednesday, trustee Louis J. Freeh said farmers, ranchers, traders and other investors still owed an estimated $1.6 billioneventually will be made whole,’ according to a copy of the testimony reviewed by The Wall Street Journal.

“After MF Global collapsed in October under the weight of a customer panic caused by the New York company’s giant bets on European debt, investigators worried they might never recover the missing customer money. The shortfall occurred when MF Global dipped into customer accounts as it scrambled to stay alive.”

Keith Good

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