FarmPolicy

Farm Bill; Ag Economy; and, Trade

Farm Bill Issues

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “As much as Sen. Charles Grassley would like a new farm bill, the member of the Senate Agriculture Committee acknowledged Tuesday that it’s far more likely a new bill isn’t forthcoming.

“‘I would imagine at this late stage and with farm legislation sunsetting Sept. 30 that is it most likely we will have a one-year extension of the farm bill,’ Grassley, an Iowa Republican, told reporters in a weekly call.

“Simply put, not much is going to get done in Congress before the election, other than likely extending current policies and delaying final passage of major bills such as the farm bill. Grassley predicted a one-year extension because House members will likely meet only eight days in September while senators are scheduled for 12 days.”

The DTN item noted that, “The problem with an extension is obvious for USDA programs. ‘When we come back next year to negotiate, we are going to be negotiating under more strict budget guidelines and it’s going to make it more difficult for us to pass a farm bill — a good safety net.’”

Mr. Clayton explained that, “In terms of drought protections, Grassley said he thinks any extension would follow the House-passed legislation extending disaster programs that expired last year.

“Farm groups are planning a rally on Sept. 12 at the Capitol to demand a new farm bill be passed. Grassley, however, doesn’t see a huge groundswell of farmers urgently needing a new bill. Grassley said throughout about 20 town-hall meetings in August he did not see any ‘farmer revolt’ over not getting a farm bill completed.”

Matt Kelley reported yesterday at RadioIowa Online that, “Members of Congress will return from their five-week recess next Monday and most political analysts say the American people should expect little-to-nothing to get done in Washington until after the November elections. Iowa Senator Chuck Grassley admits it’s a sad indictment, but it’s also likely true.”

Meanwhile, Mary Kay Thatcher, the Senior Director of Congressional Relations at the American Farm Bureau Federation, was a guest on yesterday’s AgriTalk radio program with Mike Adams where the conversation focused on the Farm Bill.  An audio replay of that discussion is available here (MP3- 12:45).

Ms. Thatcher pointed out that, “And keep in mind, again, you know, we’ve got about 78% of the farm bill that is made up of food stamps.  Well, the food stamp program doesn’t expire September 30th.  They have no reason, in the nutrition community – the WIC program doesn’t expire.  There’s a couple of smaller programs that do.  But in essence, the nutrition community is not near as anxious to have to get this bill done as we are because if an extension simply comes along, well, then they’re not going to have to take either a four or a $16 billion cut.

“The same is true, largely, in the conservation community.  Now, if you have a contract in the CRP now, it would continue to be paid, but no new contracts would be allowed in.  On the other hand, most of the rest of the conservation programs are funded through 2014, so we don’t have the conservation community that’s sweating like we are, either.  We have a very small portion of the people interested in the farm bill who are really concerned about the September 30th deadline, and farmers make up the vast majority of that.”

Elton Robinson reported yesterday at the Delta Farm Press Online that, “Although Brazil is struggling with various concepts of the STAX plan, which could be a key component for cotton in a future farm bill, they are showing a willingness to work with it to resolve subsidy disputes, according to Darci Vetter, USDA deputy undersecretary for Farm and Foreign Agricultural Services.

“Speaking at the National Cotton Council’s mid-year board of directors meeting in Memphis, Vetter said, ‘We in this room would probably agree that U.S. cotton subsidies, particularly as they have not been paying out in past years, are probably not the cause of a lot of the production and pricing problems that are faced by producers around the world.

“‘But that narrative and that belief by some of our trading partners has been difficult to dispel. We continue to try and put a spotlight on the fact that export bans in India, and very flexible tariff policies in China, have a greater impact on global cotton prices and volatility in the market than our U.S. programs do.’”

Mr. Robinson added that, “Vetter said when Brazil ‘first saw the STAX proposal, they listed a number of criticisms they did not like. If you look at their critiques of it over time, you will now see that they are willing to work with it to find a solution. They understand that what is on the table is STAX. They need to work with STAX and find a way forward based on that.’”

In other Farm Bill news, Bloomberg writer Alan Bjerga reported yesterday that, “Food-stamp use reached a record 46.7 million people in June, the government said, as Democrats prepare to nominate President Barack Obama for a second term with the economy as a chief issue in the campaign.

“Participation was up 0.4 percent from May and 3.3 percent higher than a year earlier and has remained greater than 46 million all year as the unemployment rate stayed higher than 8 percent. New jobless numbers will be released Sept. 7.”

Mr. Bjerga pointed out that, “About 47 percent of recipients are children, and 8 percent are elderly, according to the USDA. About half of all new recipients leave the program within 10 months.”

A related news release yesterday from Rep. Tim Huelskamp quoted the Kansas GOP lawmaker as saying: “With imminent expiration of the 2008 Farm Bill, Washington needs to have a grown-up conversation about the unchecked pace of food stamp enrollment. The uptick is due in large part to the failure of the Obama Economy, but also to the ideology that more people dependent on government is better. Congress must put down its foot and stop President Obama from exploiting the Farm Bill for his own political gain.”

The Wall Street Journal editorial board indicated today that, “Liberals argued then and still do that food stamps are one of the most effective ways the government can juice the economy. Really, they claim to believe this. The USDA’s Economic Research Service estimates that food stamps have a ‘multiplier’ of 1.79, meaning that every dollar in transfer payments boosts gross domestic product by $1.79. So why not have the feds put everyone on food stamps for three squares a day and really get the economy cooking?

“The Romney camp won’t say this because they’ll be accused of being cruel, but having one in every seven Americans dependent on food stamps is not a sign of compassion. It is a sign of economic failure. Recall Paul Ryan’s great line from the GOP convention about ‘the best this Administration offers—a dull, adventureless journey from one entitlement to the next, a government-planned life, a country where everything is free but us.’”

In other news regarding nutrition, Michael King reported recently at The Post-Crescent (Appleton, Wis.) Online that, “New government nutrition standards for school lunch and breakfast programs went into effect for this school year, raising the bar for the first time in more than 15 years. Schools must comply to get federal meal reimbursements…Monica Pomasl, food service director for Aramark, which provides meals in Appleton schools, said school lunch menus this year will include more whole grains, increased offerings of fruits and vegetables, and only skim chocolate milk and skim or 1 percent white milk. Fewer desserts will be offered, based on the new standards.”

And, a news release this week from Rep. Mike McIntyre (D., N.C.) stated that, “[Rep. McIntyre] is pushing USDA to help tobacco farmers by urging it to make an adjustment to the tobacco federal crop insurance program so that claim amounts may better reflect market prices.  This is in response to recent requests by tobacco farmers from all across Eastern North Carolina who have contacted the office urging assistance on this issue.”

Note that a Roll Call article yesterday by Emily Ethridge (“Larry Kissell and Mike McIntyre: A Tale of 2 N.C. Democrats at Party’s Convention”) pointed out that, “McIntyre noted that if he is re-elected, he will be in line to be the second-ranking Democrat on the House Agriculture Committee.”

In other news, Carolyn Cui and Michael Rothfeld reported in yesterday’s Wall Street Journal that, “Cotton industry leaders are seeking to toughen measures to ensure that companies can’t flout arbitration decisions stemming from disputes in the $70 billion market.

“The International Cotton Association, a group backed by the world’s largest cotton traders, wants to strengthen what is effectively a blacklist that is supposed to prevent its members from doing business with companies that renege on contracts and then ignore arbitration awards. Currently, such firms are put on what the industry refers to as a ‘default list.’”

The Journal writers explained that, “The effort comes amid what the association says is an unprecedented wave of broken contracts that have upended the cotton marketplace following volatile price swings and have exposed traders to big losses.

“In typical cases, farmers have been accused of breaking contracts to sell cotton when prices rose, while mills that agreed to buy cotton at high prices have been accused of backing out when the market declined.”

Agricultural Economy

The AP reported yesterday that, “The three U.N. food agencies urged governments Tuesday to take quick action to curb rising prices of corn, wheat and soybeans and avoid a repeat of the 2007-2008 food crises.

“The sharp rise in food prices in recent months threatens to make life even more difficult for tens of millions of people, particularly in poor countries, the heads of the U.N. World Food Program, Food and Agriculture Organization and International Fund for Agriculture Development warned.

“A prolonged drought in the U.S. — the No. 1 exporter of corn, wheat and soybeans — has helped drive up commodity prices. The FAO’s next global food price index is due Thursday; its last report found global prices had risen six percent in July after three months of decline, in part because of the U.S. drought and worsened crop prospects for Russia’s wheat harvest because of dry weather.”

The AP article added that, “They also said countries should adjust biofuel production requirements when food supplies become scarce. Livestock farmers in the U.S. have demanded the government relax biofuel production quotas because corn feed is becoming so expensive. Forty percent of the U.S. corn crop goes to ethanol production.”

Vikas Bajaj reported in yesterday’s New York Times that, “Drought has devastated crops around the world this year, including corn and soybeans in the United States, wheat in Russia and Australia and soybeans in Brazil and Argentina. This has contributed to a 6 percent rise in global food prices from June to July, according to United Nations data.

“India is experiencing its fourth drought in a dozen years, raising concerns about the reliability of the country’s primary source of fresh water, the monsoon rains that typically fall from June to October.”

Bloomberg writer Jeff Wilson reported yesterday that, “U.S. farmers were able to accelerate the corn harvest last week ahead of heavy rains from the remnants of Hurricane Isaac, which may have arrived too late to help the drought-damaged crop. Soybean conditions were unchanged.

“About 10 percent of the corn was harvested as of Sept. 2, compared with 6 percent a week earlier, the U.S. Department of Agriculture said today in a report.”

University of Illinois Agricultural Economist Darrel Good noted yesterday at the farmdoc daily blog (“Questions About Corn Acreage”), that, “The pace of consumption of U.S. corn has been slowing, as evidenced by small weekly exports and export sales, smaller weekly estimates of ethanol production, declining cattle feedlot placements, and increased slaughter of dairy cows and the hog breeding herd. The extent of rationing required in the current marketing year that has just begun, however, is still not clear since the size of the 2012 crop is not yet known.”

After analysis on planted and harvested acreage, yesterday’s update pointed out that, “So what about harvested acreage of corn in 2012? We are anticipating that due to the severity of this year’s drought the difference between planted acreage and acreage harvested for grain will be at least as large as in 1980, 1988, and 2002. Differences in those years averaged 10 million acres, in a range of 9.47 to 11.1 million acres. If planted acreage was also slightly less than the NASS June estimate, that experience points to acreage harvested for grain of about 86 million, nearly 1.4 million less than the June NASS estimate.

“Under this acreage scenario, a national average corn yield near the August forecast of 123.4 bushels would result in a crop near 10.6 billion bushels. If the average yield is also four to five bushels lower than the August forecast, as we suspect, the crop may be near 10.2 billion bushels, almost 600 million bushels less than the NASS August forecast. A crop of that size would require a year-over-year decline in consumption of U.S. corn of nearly 1.8 billion bushels, or about 14 percent. Corn prices would likely have to remain high for an extended period in order to motivate such a large decline in consumption. The USDA’s September 12 Crop Production report will provide an important update on the likely magnitude of harvested acreage, yield, and production and bring the rationing question into clearer focus.”

Meanwhile, Emiko Terazono reported yesterday at The Financial Times Online that, “Soyabeans hit a record high after a sharp fall in monthly Brazilian exports raised further fears about falling global supplies [related graph]… CBOT September soyabeans rose as high as $17.94¾ a bushel, beating the previous record reached on August 30, before trading up 1 per cent at $17.81 a bushel.”

Ian Berry reported yesterday at The Wall Street Journal Online that, “Soy futures continue to ride higher on dwindling crop expectations and continued demand from China. As long as China continues to need soybeans, the U.S. will see more export sales, analysts said.”

Jeff Natalie-Lees reported recently at the Aberdeen News (S.D.) Online that, “Cattle producers are being hit hard by a nationwide drought that has caused a shortage of hay and pushed corn prices to record levels.

“Some area cattlemen are reducing their herds rather than take large financial loses.”

Robert Wang reported recently at The Repository (Canton, Ohio) Online that, “Beef and dairy farmers at the Stark County Fair this weekend say that this year’s big drought has damaged their grain crop yields, sent feed prices for cattle soaring and stifled milk production.”

Rick Barrett reported earlier this week at the Milwaukee Journal Sentinel Online that, “Blame it on bottled water or changing tastes, but sales of milk as a beverage have fallen to the lowest level in nearly 30 years – with more than half of U.S. adults no longer consuming the dairy industry’s most iconic product.

“Even the milk-thirsty Great Lakes region, which leads the nation in flavored milk consumption, hasn’t curbed the downward trend that’s gripped the dairy industry for decades.

“In 2011, total U.S. beverage milk sales were 53 billion pounds – about 6 billion gallons – the lowest level since 1984, according to U.S. Department of Agriculture figures released in August.”

The article pointed out that, “Schools are another battleground for the dairy industry because it doesn’t want to lose more market share to other beverages, including soda, bottled water and energy drinks.”

More broadly, Ross Boettcher reported yesterday at the Omaha World-Herald Online that, “The economy of a nine-state Midwest region that includes Nebraska and Iowa has failed to grow in consecutive months for the first time since July 2009, said Creighton University economist Ernie Goss.

“According to Goss’ monthly Business Conditions Index, the region’s economy rose slightly to a score of 49.7 in August from 48.7 in July. The index, based on a survey of supply managers, is scored on a scale of zero to 100. A score of 50 indicates ‘growth neutral,’ with any score below indicating economic decline.”

Bloomberg writer Alan Bjerga reported yesterday that, “U.S. farmers struggling through the worst drought in a half century are less optimistic about their circumstances and more hopeful about the future than they were in March, a survey by DTN/The Progressive Farmer shows.

“Farmers evaluated their present conditions at a score of 120.4, down from 140.2 earlier this year, industry researcher and publisher DTN said today. Expectations for a year from now registered 98.2, up from 87.4. In a separate survey, agribusinesses rated conditions now at 112.2 and in a year at 80.5, both down from February. The benchmark rating of 100 was set in 2010 when the analysis began.”

Also yesterday, a news release from Purdue University stated that, “Indiana’s farmland values and cash rents have continued to soar in 2012, even amid the worst drought in decades, according to a June 2012 Purdue University survey.

“The Purdue Farmland Value Survey showed a statewide increase in farmland value ranging from 14.3 percent to 18.1 percent, depending on land quality, since the 2011 survey. Cash rents increased between 12.8 percent and 15.2 percent.”

Trade

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “The 2012 Democratic party platform released Monday differs from the GOP platform on trade with Russia.

“Congress, as early as next week, could take up a bill to grant permanent normal trade relations (PNTR) to Russia.

“The Democratic platform, like the GOP document, supports PNTR. But, unlike the GOP, Democrats are not demanding that PNTR be linked to a separate human-rights bill.”

Keith Good

Posted by Keith Good • September, 5, 2012 • 3:17 am