FarmPolicy

Farm Bill; Budget; and, the Ag Economy

Farm Bill –Policy Issues

In a column published in yesterday’s Des Moines Register, Secretary of Agriculture Tom Vilsack indicated that, “I was surprised at the Iowa View published Oct. 10 and attributed to Iowa Secretary of Agriculture and Land Stewardship Bill Northey. Unfortunately, his essay makes assertions that are inaccurate, misleading and just plain wrong.

“Here are the facts: President Obama has a strong record of supporting America’s farmers, ranchers and rural America. Today, agriculture is thriving. Record farm income, record agricultural exports and declining rural unemployment all demonstrate the strength of the president’s support of rural America.

“Today, there is a record amount of bio-fuel production. The administration recently announced new renewable fuel standard targets that will increase bio-diesel production, a decision praised by Iowa soybean producers. And he has increased the amount of ethanol that can be blended into gasoline. President Obama remains a consistent supporter of the bio-fuel industry.”

More specifically with respect to the executive branch and agricultural issues, a news release yesterday from the American Soybean Association (ASA) stated that, “With the national spotlight on the race for the White House, the [ASA] reached out to President Barack Obama and former Massachusetts Governor Mitt Romney for each candidate’s points of view on issues critical to soybean farmers. President Obama and Governor Romney offered their positions on the farm bill and crop insurance, estate tax, biodiesel, biotechnology, trade, research, regulations, and transportation and infrastructure.”

Yesterday’s release noted that, “Both candidates expressed a desire to pass a comprehensive farm bill as quickly as possible.”

The full responses from each campaign are available by clicking here.

Meanwhile, the stalled Farm Bill continues to be an issue on the campaign trail.

Adam Chick reported yesterday at WBNG News (Binghamton, N.Y.) that, “Congress has failed to put a Farm Bill in place for the first time in more than 60 years…[D]emocrat candidate for Congress Dan Lamb blames the Republicans for this bill not passing.

“‘This particular program is particularly painful to upstate New York. Dairy farmers, which we know are struggling right now… We’ve lost about a quarter of our dairy farms in the last 10 years in New York. This is the wrong time to be arguing about what has always been a nonpartisan issue,’ said Lamb.

“Lamb says Republicans like Richard Hanna could have done a lot more for America’s farmers to get a bill pushed through.”

Laurie Rich Salerno reported on Saturday at The Record-Journal (Meriden, Conn.) Online that, “With milk prices low and feed costs high, the folks at Greenbacker Dairy Farm in Durham have found themselves receiving some financial assistance over the past several months, along with dairies across the country, in the form of a federal farm subsidy.

“It’s not all that much, ‘but it helps,’ said Joe Greenbacker, who, with his family, runs the expansive farm on Route 68 — and whose ancestors have farmed in the region for centuries.

“Yet the farm is about to receive its last payment, because the program that provides the subsidy expired Oct. 1, along with several other agriculture-related programs under the federal farm law.”

The article added that, “Though it’s already got farmers — particularly dairy producers — concerned, analysts say the absence of a farm bill could quickly affect consumers nationwide. Milk could double or triple in retail price on Jan. 1, 2013, because of another dairy program under the bill that will expire at the end of the year. The program controls how prices of the commodity are formulated. The calculations would revert to those of a 1949 law which would likely cause the price of milk to dramatically increase.”

In other Farm Bill related news, an article Friday at Inside U.S. Trade reported that, “The latest World Trade Organization notification by the United States of its total level of domestic agricultural subsidies shows the U.S. well within the limits to which it agreed in the now-defunct Doha round, but that dynamic could change if either of the pending farm bill proposals is enacted into law.

“In the WTO notification, circulated on Oct. 1, the U.S. reports that it spent only $4.12 billion in trade-distorting, ‘amber box’ payments that the government gives to producers in the 2010 marketing year. That is down slightly from $4.26 billion in 2009 and a significant dip from $6.25 billion in 2008, reflecting an overall downward trend. In 2007, the U.S. spent $6.26 billion, down from $7.74 billion in 2006.

“The 2010 value is also well beneath the cap of $7.6 billion to which the U.S. agreed in the Doha round. But Joseph Glauber, chief economist at the U.S. Department of Agriculture (USDA), said in an interview with Inside U.S. Trade that if either the Senate-passed farm bill or the version approved by the House Agriculture Committee were enacted, that would likely increase the level of U.S. trade-distorting payments.”

The article noted that, “While stressing that his assessment is preliminary in light of the fact that no legislation has been finalized, Glauber said it is fairly apparent that cutting direct payments and replacing them with either a revenue guarantee program or a price-loss program, as the two legislative proposals envision, would lead to an increase in amber box payments.

“In fact, Glauber argued that changing U.S. farm policy along the lines of either of the farm bill proposals could make it more likely that the U.S. exceeds the $7.6 billion cap to which the U.S. informally agreed in the Doha round, especially in those years where commodity prices dip down and subsidy payouts increase.

“But that Doha round cap is not binding on the U.S. because a final deal was never sealed. Instead, the U.S. is only subject to the $19.1 billion limit to which it agreed in the Uruguay Round, and the USDA chief economist said there is little risk that the U.S. will exceed that higher cap no matter which version of a new farm bill Congress approves.”

And an editorial in Friday’s Wall Street Journal reminded readers that, “Brasilia has other trade complaints against the U.S., including the Obama Administration’s ‘Buy America’ program and agricultural subsidies, which distort domestic production and global prices. Brazil challenged America’s egregious cotton subsidies at the WTO and won in 2008. The Obama Administration appealed the ruling, lost in 2009 and still hasn’t changed its policies. Brazil can now retaliate legally under WTO rules.”

In news focusing on crop insurance, DTN writer Marcia Zarley Taylor indicated yesterday at the Minding Ag’s Business Blog that, “Policymakers are closely watching daily futures prices this month. The average of Dec futures for corn will not only determine individual farmer compensation on revenue policies, but will influence just how much this summer’s disaster will cost the federally subsidized crop insurance program.

“Though there are two weeks left to count for the harvest guarantee on corn, Kansas State University economist still thinks the final tab could set a new high water mark for insurance claims.

“As of today, Dec corn futures are averaging $7.51/bu. That’s nearly $2/bu. higher than the $5.68/bu. guaranteed most of the Corn Belt last spring, most operators with Revenue Protection or GRIP policies will receive the higher price on their lost bushels, whatever that price turns out to be.”

In other news, a recent Government Accountability Office (GAO) report (“Modernization and Improved Guidance Could Reduce Employer Application Burden”) noted that, “Over 90 percent of employer applications for H-2A workers were approved in fiscal year (FY) 2011, but some employers experienced processing delays. For example, the Department of Labor (Labor) processed 63 percent of applications in a timely manner in FY 2011, but 37 percent were processed after the deadline, including 7 percent that were approved less than 15 days before workers were needed. This left some employers little time for the second phase of the application process, which is managed by the Department of Homeland Security (DHS), and for workers to obtain visas from the Department of State (State).”

Budget Issues

Damian Paletta reported yesterday at the Washington Wire Blog (Wall Street Journal) that, “The U.S. government appears on pace to hit the $16.394 trillion federal borrowing limit sometime in January, a bit later than the Obama administration had initially projected, according to recent data.”

And Peter Schroeder reported yesterday at The Hill’s On the Money Blog that, “A pair of Senate Republicans is pressing the Treasury Department for details on when the government will reach its $16.4 trillion debt ceiling — and how long it can avoid hitting the limit.

“Sens. Orrin Hatch (Utah) and Jeff Sessions (Ala.) asked Treasury Secretary Timothy Geithner on Monday to lay out a precise timeline for when the government expects to near the debt ceiling and what ‘extraordinary measures’ can be taken to prolong the deadline.

“The request comes while much of Washington is consumed with addressing the glut of Jan. 1 policy changes known as the ‘fiscal cliff,’ and serves as a reminder that the debt ceiling also looms as another high-stakes battle.”

Jackie Calmes reported in today’s New York Times that, “President Obama and Mitt Romney will again debate their visions for the next four years on Tuesday night, and if the campaign so far is any guide, they will not acknowledge that the winner’s agenda could depend on the fiscal showdown between Election Day and Inauguration Day.

“If Mr. Romney wins, Republicans say they would seek to delay the year-end deadline for a bipartisan deal by up to a year to give him time to flesh out his budget plans and get Democrats to agree. But even if Democrats and the financial markets go along with the delay, the months before Mr. Romney’s swearing-in could be as crucial to his presidency as the transition period was for Mr. Obama four years ago, when the economic crisis led him to draft a big stimulus package while President George W. Bush still occupied the White House.”

Today’s article noted that, “Without agreement of some kind, more than $700 billion in automatic tax increases and spending cuts would occur after Dec. 31, scheduled by a mix of coincidence and bipartisan agreement. How the re-elected president navigates this ‘fiscal cliff’ could determine how much political clout and budget resources he will have.

“‘I think it’s the whole ballgame for the second term,’ said John D. Podesta, the former chief of staff to President Bill Clinton, who led Mr. Obama’s postelection transition planning four years ago.

“Politically, Mr. Obama would have to build trust with Republican leaders who had hoped to make him a one-term president, even as he remained in campaign mode, seeking to assert his claim to a mandate to make the necessary trade-offs on spending and taxes.”

The Times article pointed out that, “If Mr. Obama fails to win a broad budget compromise, Mr. Podesta said, his domestic agenda in a second term could be limited to finishing the main achievement of his first four years, his health care law… People in both parties say much would depend on Mr. Obama’s margin of victory and how Republicans would interpret a loss.”

Ben Casselman reported in yesterday’s Wall Street Journal that, “The question is what effect the mere threat of the fiscal cliff will have on consumers. The last time Washington played chicken with the economy, during last year’s debate over raising the debt ceiling, consumer confidence plunged, but rebounded relatively quickly once the threat passed. Actual spending never really suffered at all.

“Don’t count on a similarly mild impact this time around. Last year’s debacle took place over the summer; this one is likely to hit fever pitch smack in the heart of the holiday shopping season. And unlike the relatively esoteric debate over the debt ceiling, this year’s fight will be over something everyone understands: how much they pay in taxes.”

The article noted that, “For now, most Americans are more focused on the election, the job market or perhaps the baseball playoffs than on the intricacies of fiscal policy. But if Washington lets consumers tumble over the fiscal cliff, the economy is in for a hard landing.”

Agricultural Economy

An article at DTN yesterday (link requires subscription) reported that, “Over three-quarters of the U.S. corn crop was harvested by Sunday, Oct. 14, and the soybean harvest wasn’t far behind, according to the latest USDA weekly Crop Progress report… Soybean harvest reached 71% complete, also well ahead of the average of 58%.”

John Vidal reported on Sunday at the Guardian Online that, “World grain reserves are so dangerously low that severe weather in the United States or other food-exporting countries could trigger a major hunger crisis next year, the United Nations has warned.

“Failing harvests in the US, Ukraine and other countries this year have eroded reserves to their lowest level since 1974. The US, which has experienced record heatwaves and droughts in 2012, now holds in reserve a historically low 6.5% of the maize that it expects to consume in the next year, says the UN.

“‘We’ve not been producing as much as we are consuming. That is why stocks are being run down. Supplies are now very tight across the world and reserves are at a very low level, leaving no room for unexpected events next year,’ said Abdolreza Abbassian, a senior economist with the UN Food and Agriculture Organisation (FAO). With food consumption exceeding the amount grown for six of the past 11 years, countries have run down reserves from an average of 107 days of consumption 10 years ago to under 74 days recently.”

A news release yesterday from the Food and Agriculture Organization of the United Nations indicated that, “If countries step up their efforts to reduce hunger, the Millennium Development Goal of halving the proportion of hungry people by 2015 can still be reached, FAO Director-General José Graziano da Silva told the opening session of the Committee on World Food Security (CFS) today.

“Graziano da Silva said that important progress has been made in cutting the number of hungry people by 132 million since 1990. The proportion of the hungry also fell in the developing world from 23.2 percent to 14.9 percent.

“He expressed concern that still around 870 million people are hungry and that hunger has risen in Africa and the Near East. Progress in reducing hunger has stalled since 2007, he said.”

Also, Christopher Doering reported in yesterday’s Des Moines Register that, “Billions of dollars have been invested in a slew of projects to feed a growing global population. While all signs point to progress, uncertainty is growing over how significant the gains have been and whether the different paths being taken are the fastest way to end global hunger.

“As hundreds of people from agribusiness, academia, governments and nonprofits converge on Des Moines for the annual World Food Prize this week, some are concerned that too much focus is being placed on growing food rather than boosting infrastructure such as roads and irrigation and educating small farmers.”

In related news, David Kesmodel reported in yesterday’s Wall Street Journal that, “The agriculture industry is trying to toughen up corn.

“With the Farm Belt recovering from one of the worst summers of drought in decades, the companies that supply corn seeds are rolling out new strains that can survive with less water. It’s a wide-ranging, big-budget battle covering a lot of fronts, from crossbreeding crops to tinkering with the plants’ genes.

“There is no magic bullet, researchers warn. But even incremental gains could have big results, given the size and importance of the corn crop.”

Also in yesterday’s Wall Street Journal, Brad Reagan reported that, “The practice of no-till planting has a firm foothold among American farmers. But many of them aren’t using it full time—and there are big obstacles that may limit how far it spreads.”

Keith Good

Posted by Keith Good • October, 16, 2012 • 4:20 am