FarmPolicy

Farm Bill; Ag Economy; Biofuels and, Trade

Farm Bill –Policy Issues

The AP reported yesterday that, “Idaho’s $2 billion milk industry failed to convince Congress this month to pass the new federal farm bill and its provisions to help dairies mitigate rising grain costs and volatile markets that have pushed them to three quarters of losses.

“Though a farm bill cleared the U.S. Senate, it’s languished in the House.”

The article noted that, “Bob Naerebout, director of the Idaho Dairymens Association, said Wednesday his members are disappointed by the delay, as they want the dairy-related provisions enacted quickly to help them re-emerge from nine months of losses. While grain farmers can wait until next planting season, he said dairies need relief now from rising feed prices that have driven dairies’ costs above profitable levels.

“‘We harvest a crop every day, 365 days of the year,’ Naerebout said. ‘It’s critical for us to have stability in the farm bill.’”

Yesterday’s article explained that, “The Idaho Dairymens Association has joined similar groups in other states that are pushing the bill’s provisions that replace dairy subsidies with an insurance program, to pay farmers when the profit margin evaporates on their milk products. Other changes call for production cuts when demand falls short of supply.

“It wasn’t these dairy provisions that stalled a 2012 farm bill vote, however.

“Rather, stumbling blocks have included differences over how the farm bill’s other, higher-profile components should address competing demands: Helping low-income families eat, while still contributing to debt reduction.”

In addition, the AP article pointed out that, “To help make good on losses, Naerebout’s members want the federal government to suspend impending new ethanol requirements for gasoline. Ethanol is made from corn, putting refineries in competition with farmers and boosting prices.”

Meanwhile, David Murray reported yesterday at the Great Falls (Mont.) Tribune Online that, “A group of 25 to 30 protesters gathered outside the Great Falls campaign headquarters of Congressman Denny Rehberg on Wednesday, holding placards deriding Rehberg for the U.S. House of Representatives’ failure to pass a farm bill.”

(Note: Rep. Rehberg, a Republican, is running against Democrat incumbent Sen. John Tester this November for the U.S. Senate.  Yesterday, Larry Sabato’s Crystal Ball (Univ. of Va.) moved the race from “tossup” to “leans GOP,” a rare bright spot for the GOP as U.S. Senate races in North Dakota, Wisconsin and Indiana where all moved from “leans GOP” to “tossup.”  The University of Virginia summary also reclassified the Missouri Senate race to “leans Democrat,” from “tossup.”)

The Tribune article indicated that, “Compromise has been conspicuously lacking when it comes to passage of a new farm bill.”

However, the article pointed out that, “Rehberg’s own voting record is decidedly pro-farm bill. In July, he sent a letter to the House leadership urging action on the legislation. And in August, Rehberg was one of only a handful of Republican representatives to sign a discharge petition in an attempt to force the farm bill to the House floor for a vote.

“According to Ryan McCormick, vice president of the Montana Grain Growers Association, Montana’s entire congressional delegation is uniformly pro-agriculture.

“‘Ag is the one thing that isn’t very controversial in Montana,’ McCormick said. ‘Congressman Rehberg, Senator Baucus and Senator Tester are all strong supporters of Montana agriculture. The biggest single defining interest separating Republicans and Democrats regarding the farm bill is food stamps, not agricultural subsidies.’”

Also this week, House Ag Committee Member Leonard Boswell (D) met with The Des Moines Register editorial board and discussed a wide range of issues regarding his race for Iowa’s new Third Congressional District where he faces Rep. Tom Latham (R).

During Rep. Boswell’s meeting, (summary and audio highlights available here) the Farm Bill came up and he discussed the importance of crop insurance, and biofuels, while expressing his frustration that Speaker Boehner has not let the Farm Bill passed by the Ag Committee come to the floor for debate and a vote.  Food stamp spending also came up in the meeting.

Rep. Boswell was also asked about the idea of putting conservation compliance requirements on producers in order to make them eligible for crop insurance.  He indicated that he thinks that idea should be discussed and noted that there is “not too much land around” that “hasn’t had conservation practices take place.”

Rep. Boswell also noted that Rep. Latham has not been able to persuade the Speaker to get a vote on the Farm Bill.

A summary of Rep. Latham’s meeting with the Register from earlier this week, in which he also discussed Farm Bill issues, can be found here.

An update this week at the Register noted that, “A new poll shows that the two incumbent Iowa congressmen pitted against each other – U.S. Rep. Leonard Boswell and U.S. Rep. Tom Latham – are tied at 45 percent when those who are ‘leaning’ one way or the other are included.”

For more election related information see this FarmPolicy.com post, which was updated yesterday.

In other news, National Crop Insurance Services President Dr. Thomas Zacharias was a guest on yesterday’s AgriTalk radio program with Mike Adams where the discussion focused on crop insurance issues.  An audio replay of this interview from yesterday is available here (MP3- 9:05), while an unofficial FarmPolicy.com transcript of the conversation has been posted here.

Dr. Zacharias noted that, “The dry weather has helped with harvests, so the claims process seems to be moving along reasonably well, and folks appear to be keeping up with the harvest to date. So as in all things, we keep our fingers crossed and hope for the best. Last week at this time we’d paid out, the industry had paid out about $1.6 billion in indemnities, and this week I think we’re up just under 1.8, so we’re moving along the trail… This will probably exceed 2011. And how that will turn out, it’s just too soon to tell.”

Dr. Zacharias reminded listeners that, “This [crop insurance program] is a public-private partnership. Farmers have definite financial skin in the game. Last year farmer-paid premium was about four and a half billion dollars, and I think this year it’s tracking along to be about four billion dollars. So yeah, farmers pay for this coverage, and until there is an indemnifiable loss, there’s no money that changes hands.”

Mike Adams noted yesterday that, “We don’t know what changes may occur in the future, of course, when it comes to crop insurance. There’s been a lot of talk about this farm bill. Of course it expires September 30th. But the crop insurance portion of it does not expire September 30th.”

Dr. Zacharias noted, “That’s true. Crop insurance is governed by its own act, and the program will continue on, so that’s good news for both farmers and taxpayers. Because of the structure of the program, farmers don’t need to worry about payment of claims, that companies are required to carry adequate surplus and reinsurance. Plus, if losses are extremely high, then there’s reinsurance though the reinsurance agreement with USDA, so crop insurance keeps working for all of us regardless of the timing of the farm bill.”

Also yesterday, Ohio State University Agricultural Economist Carl Zulauf penned an update at the farmdoc daily Blog titled, “Interaction between Crop Insurance and Price Support Programs.”

In other policy related news, Marc Lifsher reported in yesterday’s Los Angeles Times that, “By more than a 2-to-1 margin, California voters favor an initiative to require food manufacturers and retailers to label fresh produce and processed foods that contain genetically engineered ingredients.

“With less than six weeks until election day, Proposition 37 is supported by 61% of registered voters and opposed by 25%, according to a new USC Dornsife/Los Angeles Times poll. An additional 14% were undecided or refused to answer.

“The poll showed broad support among voter groups, but the interviews took place before Tuesday’s start of a major television advertising blitz by opponents aimed at changing voters’ minds on the issue.”

The article noted that, “If approved by voters Nov. 6, the labeling initiative would make California the first state in the nation to require labels on genetically engineered crops or processed foods, such as corn, soybeans, sugar beets and Hawaiian papayas. It would require labels on supermarket shelves or on food packages.

“The California ballot issue is being watched closely by experts who say it could set the stage for battles in other states and perhaps thrust the issue of labeling genetically modified organisms to the forefront in Washington.”

Recall that during the Senate Farm Bill debate back in June, Sen. Bernie Sanders (I., Vt.) offered an amendment regarding GMO products and food labels.

A press release at the time stated that, “The Senate today rejected an amendment by [Sen. Sanders] to let states require clear labels on any food or beverage containing genetically engineered ingredients. The vote was 26 to 73.

“‘This is the very first time a bill on labeling genetically engineered food has been brought before the Senate. It was opposed by virtually every major food corporation in the country. While we wish we could have gotten more votes, this is a good step forward and something we are going to continue to work on. The people of Vermont and the people of America have a right to know what’s in the food that they eat.’”

Agricultural Economy

Neil Shah reported yesterday at The Real Times Economics Blog (Wall Street Journal) that, “America’s worst drought in decades was hurting the nation’s economy in the spring — and things could get worse.

“Earlier this month, the Journal reported that despite some soothing rain from the remnants of Hurricane Isaac, some of the drought’s economic damage had already been done. Michael Feroli, an economist at J.P. Morgan Chase & Co., said the nation’s growth in the second half of the year could take a small hit from America’s most widespread drought since 1956.”

Yesterday’s update noted that, “Turns out the U.S.’s GDP is already suffering. The Commerce Department on Thursday said the economy grew at an annualized rate of 1.3% in the second quarter, a steep drop from the first quarter’s 2% and the fourth quarter’s 4.1% — and significantly lower than the government’s earlier estimates of 1.7% and 1.5%. (This is the Bureau of Economic Analysis’s third and final take on second-quarter GDP — the one that usually doesn’t yield big revisions.)

“One factor in the 0.4 percentage point revision: Government statisticians factored in a drop in June in farmers’ inventories, revising these down by some $8 billion. Basically, 2012’s hot, dry weather has decimated corn and soybean crops, along with hay, making feed for cattle, hogs and chickens prohibitively expensive and pushing farmers to take livestock to slaughter early to avoid feed costs — a trend that diminishes their animal inventories and technically detracts from the nation’s GDP growth rate.”

The AP reported yesterday that, “The nation’s worst drought in decades consumed a larger portion of the lower 48 states last week with the Midwest corn harvest in full swing, according to the latest update by a drought-tracking consortium released Thursday.

“The U.S. Drought Monitor’s new map shows 65.5 percent of the contiguous U.S. experiencing some form of drought as of Tuesday, creeping up from 64.8 percent a week earlier. The portion of the U.S. in extreme or exceptional drought — the two worst classifications — rose three-quarters of a percentage point to 21.5 percent.”

From an international perspective, Reuters writers Valerie Parent and Michael Hogan reported yesterday that, “Iran’s state grains agency GTC has discreetly snapped up around 1 million metric tonnes (1.1 tons) of milling wheat in the past 2 weeks mostly from the European Union, traders said on Thursday, showing increased ability to import food despite financial sanctions.

“Iran has in the past exported wheat but Western sanctions aimed at its disputed nuclear program coincided with a bad harvest, forcing the country to quietly enter global markets and make substantial wheat purchases to feed its large population.

“While sanctions don’t target food shipments, they make it difficult for importers to obtain letters of credit or conduct international transfers of funds through banks.”

Biofuels

Bloomberg writer Mario Parker reported yesterday that, “Biofuel supporters, including producers Novozymes A/S and Poet LLC, began a campaign to beat back calls for the elimination of a U.S. requirement for the blending of ethanol with gasoline.

“Fuels America, which will start advertising campaigns to tout the benefits of the renewable fuels standard, including job creation, cleaner energy and reduced dependence on foreign sources of crude oil, the group said today in a statement.

“Lawmakers from both major political parties have called on the U.S. Environmental Protection Agency to suspend the mandate to consume biofuels, citing higher corn prices caused by the worst drought since 1956.”

Zack Colman noted yesterday at The Hill’s Energy Blog that, “Historically a regional issue, fiscally conservative lawmakers have begun to view the fuel standard as an example of needless government intervention in the energy market.

“On top of that, the summer’s devastating drought has both Republicans and Democrats arguing that the biofuels requirements exacerbate food shortages.

“Biofuels backers have responded aggressively, holding a series of meetings with lawmakers this month to try and shore up congressional support for the fuel standard.”

Trade

Stephanie Strom and Elisabeth Malkin reported in today’s New York Times that, “Estimates are that nearly one out of two tomatoes eaten in the United States comes from Mexico — a statistic Florida growers would like to change, even at the risk of a trade war.

“On Thursday, they got a reason to hope.

“The United States Department of Commerce signaled then that it might be willing to end a 16-year-old agreement between the United States and some Mexican growers that has kept the price of Mexican tomatoes relatively low for American consumers. American tomato growers say the price has been so low that they can barely compete.”

The article added that, “Within hours of the American action, Mexico threatened to retaliate, claiming that the Obama administration was trying to placate farmers in an important swing state. The Mexican government has support from seemingly unlikely backers in the United States: the big box stores like Walmart, which fear they will have to raise their prices, and other commodity producers, who worry that their products will be caught in a trade war.

“‘It will be very unfortunate if this devolves into a shooting war because this becomes a tit-for-tat and in the end, nobody wins,’ said John Keeling, chief executive of the National Potato Council.”

Keith Good

Posted by Keith Good • September, 28, 2012 • 3:45 am