Agricultural Economy: Drought
The Associated Press reported yesterday that, “The nation’s most withering drought in decades only got worse in several key farming states last week, despite cooler temperatures that at least gave those living there a break from this summer’s stifling heat, according to a new drought report released Thursday.
“In its weekly map, The U.S. Drought Monitor showed that as of Tuesday, just over two-thirds of Iowa, the nation’s biggest corn producer, was in extreme or exceptional drought — the worst two classifications. That’s up more than 5 percentage points, to 67.5 percent, from the previous week.
“Nearly all of Nebraska, Kansas, Missouri and Illinois are in extreme or exceptional drought, with Illinois showing the most-dramatic climb in those categories, spiking 17 percentage points in one week, to 96.72 percent, according to the map. In neighboring Indiana, where 5 inches of rain fell in some parts, the area of the state in exceptional or extreme drought fell 9 percentage points, to 37.09 percent.”
The article explained that, “Conditions cooled in the region, but little or no meaningful rain fell, said Mike Brewer, a National Climatic Data Center scientist who put together the latest weekly U.S. Drought Monitor map released by the National Drought Mitigation Center at the University of Nebraska in Lincoln. The lack of rain allowed exceptional and extreme drought conditions to continue to expand in the area from northern Missouri and into Kansas and Nebraska, he said.
“Plains farmers have begun harvesting what corn managed to survive this summer, although in some areas growers cut their fields weeks ago, chalking the year up as a loss. Many ranchers have sold livestock because they had no grass for grazing or money to buy feed, which has soared in cost.”
John Eligon reported in today’s New York Times that, “The wells supplying people’s homes are running dry here [Wildwood, Mo.] at the heart of the nation’s drought, which the government announced on Thursday has spread to 63.2 percent of the country, centered in the parched earth of the southern Midwest.
“For some residents outside municipal water districts, it has become a struggle to wash dishes, or fill a coffee urn, even to flush the toilet. Mike Kraus, a cattle farmer in Garden City, Kan., twisted the tap on the shower the other day after work and heard nothing but hissing.”
Today’s article noted that, “While there are no national statistics on the rate at which residential wells are drying, drilling companies and officials in states across the Midwest have said that hundreds of people who rely on wells have complained of their pipes emitting water that goes from milky to spotty to nothing…[G]ov. Jay Nixon of Missouri has moved aggressively to provide relief to farmers whose wells have run dry, allocating more than $25 million in state aid to either improve the wells or help farmers get water by other means.”
David Zucchino reported in yesterday’s Los Angeles Times that, “Even in the best of times, the Mississippi River is a slow and torpid thoroughfare. But when an extended drought persists and the muddy waters recede, squeezing barges through the narrow channels becomes an expensive, and sometimes impossible, chore.
“The great summer drought of 2012 has closed lower sections of the river, shut down harbors and forced barges to run aground as river levels drop to near-record lows. With no significant rains in sight, authorities responsible for keeping the Mississippi open for commerce say things are likely to get worse before they get better.”
Liam Pleven reported yesterday at The Wall Street Journal Online that, “About the same time next week that the Republican National Convention could get soaked, that Pacific typhoon threatens to hit Liaoning province, a major growing area in northern China. As much as 3% of Chinese corn and soybean production could be at risk, says David Streit of Commodity Weather Group.
“This is a reminder the worst may not be priced in to agricultural commodities such as corn and soybeans, already near record levels [related graph]. That could mean more trouble ahead for the global economy.”
The Journal article added that, “U.S. consumers haven’t seen much impact, yet; it will take a while as higher costs pass down the food chain. The U.S. Department of Agriculture will update its food-inflation forecast Friday. Last month’s report showed no change in the overall 2012 outlook, with pricier poultry and cheaper beef helping offset each other.
“Still, investors shouldn’t be lulled. The USDA already is forecasting above-average food inflation for 2013. And weather remains a risk globally. Dryness could hurt the wheat crop in Australia, a large exporter, highlighting the need for timely rains in September. Later on, Argentina and Brazil need favorable weather to maximize production potential to make up for poor harvests this year of soybeans and other crops.”
Farm Bill Issues
Rep. Tim Griffin (R., Ark.) noted in a press release from earlier this week that, “Visiting these family farms and listening to what the hardworking members of Arkansas’s agricultural community had to say allowed me to see firsthand how deeply this year’s crippling drought is impacting them, their livestock and crops, and our economy. The House passed a drought assistance package weeks ago, and the Senate should vote on it immediately while a responsible long-term farm bill is being finalized so that our farmers, ranchers and dairy producers can get the support they so desperately need.”
A press release this week from Rep. Billy Long (R., Mo.) stated that, “Long understands that farmers and ranchers are small businessmen and supports passage of a long-term farm bill that would provide certainty for the agriculture community. He signed a bipartisan letter urging House leaders to bring the House Agriculture Committee’s farm bill (H.R. 6083) to a vote before the August district work period. Long is frustrated the House has not debated H.R. 6083 and believes a long-term farm bill provides the House with an opportunity to re-work programs so they work better in today’s marketplace and do so in a fiscally accountable manner.”
And Kendall Downing reported yesterday at WPSD-TV (Paducah, Ky.) Online that, “U.S. Senator Dick Durbin [D., Il.] made a stop in the local area [Williamson County, Il.] to show his support for the farm bill. The Senate passed the bill back in June, but it’s still stalled in the House.”
The report added that, “‘Those who’ve been in the business for a while know there are ups and downs. And we’re hoping there will be an up here and coming,’ said Durbin.
“That ‘up’ he’s referring to hinges on Congressional passage of the farm bill.
“But as crops wither away, the House can’t reach an agreement because food stamp funding is included in that bill, and conservative lawmakers want more cuts.”
On the issue of nutrition and the Farm Bill, an editorial this week at Newsday Online indicated that, “If Congress wants to wring maximum suffering from minimal savings, then cutting funding for food stamps in this sluggish economy is just the ticket.
“That’s what Congress is poised to do if farm legislation under consideration that includes funding for the $80-billion-a-year Supplemental Nutrition Assistance Program becomes law. It’s the wrong place for cost cutting.”
Debra Duncan reported yesterday at the Pittsburgh Post-Gazette Online that, “Food banks in Western Pennsylvania are trying to figure out how to absorb cutbacks of 20-25 percent in state funds and cuts of 40-90 percent in a federal emergency food program that have occurred in recent years.”
The article added that, “At the same time, food banks everywhere are seeing an increase in demand for help.
“But the rising cost of food, in part because of this year’s drought, means food banks will be able to purchase less food for those who struggle to feed their families each month.”
Meanwhile, Ovetta Wiggins reported this week at The Washington Post Online that, “Three out of five public school teachers in Maryland say they have students who regularly come to school hungry because they are not getting enough to eat at home, according to a new survey.”
In related news, Dawn Bormann and Laura Bauer reported yesterday at The Kansas City Star Online that, “Fifteen-year-old Alfredo Salazar II steps inside, drops his books at a desk and joins his classmates in the new morning school routine. The sophomore helps himself to breakfast — a whole-grain waffle, apple slices and milk — delivered directly to his classroom and offered for free to the entire student body since school started.”
Yesterday’s article pointed out that, “Alfredo eats quietly with classmates, some of whom finish homework at their desks between bites. Until breakfast was delivered directly to the classroom, Alfredo never bothered to take part in the traditional cafeteria breakfast. Neither did about 90 percent of his classmates. Participation in breakfast was so low that teachers kept granola bars and snacks handy to help hungry students focus on instruction.
“Breakfast in the cafeteria just wasn’t working. Now, though, the Kansas City, Kan., district is putting a grant to work this fall for ‘breakfast in the classroom’ at 13 schools. In the program, Kansas City, Kan., joins about a dozen school districts across the country that have concentrations of students who qualify for federally subsidized lunches. Several other districts have informal programs serving such breakfast without grants.
“The premise is simple: Make breakfast convenient for students by moving it from the cafeteria to the classroom. Location, it turns out, matters. Other districts have seen a drastic increase in students eating breakfast, increased attendance and, at least anecdotally, better focus.”
More specifically on the potential of legislative movement for the Farm Bill, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Press reports indicate that supporters of the 2012 farm bill in the House are working on a long-shot procedural approach — a discharge petition — to force a September vote on the legislation. Typically a tool of the minority party, the possible use of a discharge petition is attracting attention because one of its organizers, Rep. Christopher Gibson, R-N.Y., is in the majority but is openly challenged his leadership’s decision to put the bill on hold.
“House rules require a waiting period of 30 legislative days between the time a bill is reported to a committee — the Rules Committee, in this case — so a petition has not actually been filed. But Rep. Bruce Braley, D-Iowa, the chief organizer of the push for a petition and Gibson are asking colleagues to commit to signing one. If they can collect the required 218 signatures, the bill could bypass the Rules Committee and be placed directly on the House calendar, the House Clerk’s Office reports.
“A spokeswoman for Gibson told the press recently that the congressman believes the cooperation between House Agriculture Committee Chairman Rep. Frank Lucas, R-Okla., and ranking Democrat, Rep. Collin Peterson, D-Minn., can be a model for House consideration in September.”
The DTN item indicated that, “Still, there are many critics of Gibson’s approach. Rep. Steve King, R-Iowa, says he believes the bill would pass and wants the House to consider it, but argues that the discharge petition approach has little support — a comment he made shortly after his Democratic challenger, Christie Vilsack — the wife of Agriculture Secretary Tom Vilsack — said she supports the petition and issued a news release challenging King to sign it.
“Even if the farm bill petition’s organizers can gather 218 signatures, the bill is not guaranteed to reach the floor as passed by the Agriculture Committee. In some cases, the Rules Committee has passed an alternative special rule which allows the leadership to present a modified version of the legislation backed by a petition.”
Also yesterday, University of Illinois Agricultural Economist Nick Paulson penned an interesting analysis at the farmdoc daily blog titled, “The Impact of the 2012 Drought on Corn and Soybean Yield Updates for the PLC Program.”
Energy, Biofuels, RFS
Sara Murray reported yesterday at The Wall Street Journal Online that, “Mitt Romney’s energy plan, which he outlined Thursday at an oil-field supply shop here, would reverse efforts by President Barack Obama’s Interior Department to tighten rules on companies extracting oil and natural gas on federal lands.
“Mr. Romney, the presumptive Republican presidential nominee, laid out the benefits he sees in drilling on federal lands and waters, saying a hands-off regulatory approach would boost output and create jobs.”
Darren Samuelsohn reported yesterday at Politico that, “The Obama campaign slammed Mitt Romney’s promise for energy independence on Thursday, calling it a gift to the Republican’s oil industry donors.”
Reuters news pointed out yesterday that, “Republican presidential candidate Mitt Romney released an energy plan on Thursday that supports Washington’s ethanol quota, a mandate several U.S. governors want to suspend as the worst drought in over 50 years sends corn prices to record levels.”
The Reuters article noted that, “Romney’s energy plan would ‘support increased market penetration and competition among energy sources by maintaining the RFS [Renewable Fuel Standard] and eliminating regulatory barriers’ to diversify the power grid, the fuel system and vehicle fleets. The plan did not detail how Romney, a former Massachusetts governor, would support the ethanol mandate.
“President Barack Obama, a Democrat, has also been a strong supporter of ethanol, which provides jobs in Iowa and other swing states that will be central in the November 6 presidential election.”
On Gov. Romney’s energy plan, The Wall Street Journal editorial board opined today that, “The ‘independence’ trope always polls well, but it is also dangerous because it opens the political field to rent-seeking dreams. Any energy source that can be sold as making the U.S. more ‘independent’ is therefore a candidate for corporate welfare, and Mr. Romney’s blueprint proves the point by endorsing the corn ethanol mandate.
“This is a play to increase energy imports, or at least seven electoral votes, from the sheiks of Cornistan—er, Iowa. The Renewable Fuels Association ethanol lobby promptly put out a press release lauding Mr. Romney’s ‘commitment to domestic renewable fuels.’ This political bow and other false promises are merely setting up his potential Administration for failure.
“Yet given the bipartisan neuralgia of U.S. energy politics, perhaps this was inevitable. George W. Bush was careful to avoid the phrase energy independence amid his green energy folly after 2006, but he nonetheless bequeathed to taxpayers the switchgrass illusion and the loan program that the Obama Administration expanded and used to back Solyndra.”
In more detail on the RFS issue, Zack Colman reported yesterday at The Hill’s Energy Blog that, “A biofuels industry group says lobby pressure has as much to do with the heightened interest from governors to relax the renewable fuel standard (RFS) as does the impact of the drought on their states.”
An editorial yesterday from The Watertown Daily Times (N.Y.) noted that, “Legislation has been introduced that ties the ethanol mandate to the corn supply. The mandate hurts consumers and food producers. Relief from the drought awaits mother nature, but Washington can help alleviate food costs by suspending the mandate.”
However, Bloomberg writer Mario Parker reported yesterday that, “Ethanol, the best-performing energy commodity this year, is cheaper than gasoline, encouraging refiners to use the biofuel even if President Barack Obama’s administration ends a requirement to do so.
“A 48 cent-per-gallon discount to gasoline provides companies including Exxon Mobil Corp. and Valero Energy Corp. (VLO) an opportunity to profit by blending the corn-based additive into fuel, while easing prices at the pump for consumers. Marketers may use ethanol as they look for the cheapest way to boost engine performance and reduce pollution.”
And Mitch Lies reported yesterday at The Capital Press Online that, “In an Aug. 23 phone interview with the Capital Press, U.S. Secretary of Agriculture Tom Vilsack said the federal Renewable Fuel Standard, which has come under scrutiny in recent days, has several up sides…[V]ilsack said the standard creates jobs, lowers gasoline costs and reduces the country’s reliance on foreign oil.
“‘It is important to take a look at all of the equities here,’ Vilsack said when asked if he supports efforts to waive the standard.
“‘The ethanol industry is a job creator throughout the United States,’ he said.”
With respect to requests to the EPA to waive the RFS, yesterday’s article pointed out that, “One factor [Sec. Vilsack] expects to be taken into consideration is corn yields.
“First and foremost, he said, the federal government needs to ‘have a good understanding of precisely what our yields are going to be this year.
“‘We don’t know. We have estimates. And if the estimates are correct, it would be the eighth largest corn crop in the country’s history,’ he said.