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Farm Bill; Prop. 37; Ag Economy; Energy, Budget; and, CFTC

Farm Bill –Policy Issues, Political Notes

Dan Popkey reported on Wednesday evening at the Idaho Statesman Online that, “Majority Leader Eric Cantor, R-Va., said Wednesday in Boise that the House will vote on a stalled Farm Bill during the post-election lame duck session.

“Cantor was in Boise helping 1st District Rep. Raul Labrador, R-Idaho, raise money. Labrador opposes holding votes between the election and the swearing in of a new Congress in January. Labrador also rebuffed the Idaho dairy industry, which urged him to join 2nd District Rep. Mike Simpson, R-Idaho, in pressing Cantor to schedule a vote before the election recess.

The article added that, “Cantor said he delayed action before the recess because ‘we don’t have the votes on the floor.’

“‘I’m committed to bring the issue to the floor and then to see a way forward so we can get the votes to pass (a Farm Bill),’ Cantor said.”

The Statesman item pointed out that, “Cantor also said votes are necessary to stave off defense cuts and tax increases if Congress fails to act swiftly after the election. ‘The chairman of the Joint Chiefs of Staff has told me we’ll have to rethink our ability to be a global power if the sequester cuts go into place at the Pentagon. We don’t want that to happen. We’re going to have to vote on something like that.’”

Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) indicated in a statement yesterday that, “I’m very pleased to hear that Majority Leader Cantor is now committed to bring the Farm Bill to the floor immediately after the election. America’s farmers, ranchers, small businesses and 16 million Americans employed in agriculture desperately need the certainty and disaster relief the Farm Bill provides.

“We passed a bipartisan Farm Bill that reforms farm programs and cuts $23 in spending. I hope our colleagues in the House of Representatives will follow that lead with a bipartisan approach to this legislation. It is critical that we are able to finalize the Farm Bill before the beginning of next year when farm programs begin to expire, which would impact milk and food prices for families.”

Kaitlin Durbin reported yesterday at The Mansfield News Journal (Ohio) Online that, “Incumbent Congressman Bob Gibbs [R., Ohio- Ag. Comm.] stopped in Mansfield on Wednesday to introduce himself and field questions from members of the bi-partisan Mansfield Noon Optimists Club…[A] resident and pork farmer in Holmes County for more than 30 years, Gibbs said a farm bill is an important safety net for American farmers, but he did not condemn the House of Representatives for letting the 2008 farm bill expire on Sept. 30 without a replacement.”

“‘It’s not all that critical to get it in by the Sept. 30 deadline,’ Gibbs said.

“This is not the first time the House has let the bill expire, he said. Gibbs said he was confident the House will pass a farm bill eventually.”

Meanwhile, The Bangor Daily News (Maine) endorsed Rep. Chellie Pingree (D., Maine) for re-election this week.

The Daily News indicated that, “Serving on the House Committee on Agriculture, she’s continued to argue persuasively for the economic value of preserving open spaces and traditional land-based businesses. Her advocacy for small farmers during bipartisan negotiations on a new farm bill appropriately attempts to achieve fairness for Maine farmers and consumers against the interests of powerful agricultural conglomerates.”

With respect to the executive branch, The Des Moines Register pointed out that both GOP Presidential Nominee Mitt Romney and President Barack Obama were in Iowa on Wednesday, both candidates would welcome Iowa’s six electoral votes into their column on election night.

In addition, Secretary of Agriculture Tom Vilsack, the former Governor of the Hawkeye State, and Iowa Secretary of Agriculture Bill Northey, were guests on yesterday’s AgriTalk radio program with Mike Adams.

In turn, Sec. Vilscak and Sec. Northey presented the perspective of the two presidential candidates on a variety of issues that are of concern to rural America and the agricultural sector.

Topics included: trade, issues for beginning farmers and ranchers, estate tax policy, executive branch regulatory activity, energy and the Farm Bill in a time of decreasing budget expenditures.

An audio replay of the discussion with Mike Adams and Sec. Vilsack can be heard here (MP3- 13:13) while an unofficial FarmPolicy.com transcript of their conversation is available here.

Likewise, the audio portion of Sec. Northey’s conversation with Mike Adams can be heard here (MP3- 16:22) and an unofficial FarmPolicy.com transcript of that conversation can be found here.

In other policy related news, Kate Rogers reported yesterday at FoxBusiness Online that, “The Milk Income Loss Contract (MILC) that, among other things, provided farmers with funding monthly as price margins fell on dairy products expired Sept. 30. And Washington insiders say it’s unlikely farmers will see a new bill passed until after the presidential election.”

“Meanwhile, West Coast farmers say the combination of skyrocketing feed prices and no safety net hits them harder than most. Cornell Kasbergen, owner of Rancho Teresita Dairy in Tulare, Calif., estimates 60 bankruptcies of fellow dairy farmers in his area in this quarter alone, and more than 100 producers in the region giving up on the business altogether this year.”

Yesterday’s article added that, “Kasbergen is in support of the National Milk Producers Federation’s push for the Dairy Security Act, which supporters say would aim to help moderate the volatility of milk prices by establishing a voluntary insurance program. Under the legislation, farmers can choose to insure against low margins, which according to the NMPF are defined by the difference between milk prices and feed costs.  When conditions are poor, farmers would get compensated, and also have an option for higher insurance with an out-of-pocket cost attached. In an unpredictable industry, proponents say it would give farmers business-saving leverage to hedge their bets.”

In related news, Gregory Meyer reported yesterday at The Financial Times Online that, “One of the biggest US pork and turkey producers is taking radical action against the effects of soaring feed prices. It is sending animals to slaughter with less meat on their bones, rather than fatten them on the farm.

“‘We lose less money if we sell less pounds,’ says John Prestage, senior vice- president at Prestage Farms. ‘These high feed prices are absolutely killing us.’”

The FT article explained that, “Corn and soyabeans are used in industries from animal feed mills to biofuel refiners. So-called demand rationing, the painful process of livestock culling and plant shutdowns, should keep grain stocks from falling to critically low levels. But the early evidence suggests such rationing has not gone far enough.”

Mr. Meyer noted that, “Barring blockbuster South American crops in the next six months, some argue prices will need to rise again to really deter consumers – and spur serious rationing. ‘You can’t use corn and soyabeans at the rate you used them last year. There is not enough,’ says Chris Hurt, agricultural economist at Purdue University. ‘You’ve got to ration.’”

Owen Fletcher reported yesterday at The Wall Street Journal Online that, “Corn futures fell 1.7% amid renewed concerns about tepid export demand for the U.S. crop…The drop came after the U.S. Department of Agriculture said net export sales for corn for the week through Oct. 18 totaled 142,300 metric tons. That was below analyst estimates that ranged from 150,000 to 375,000 tons.”

The article noted that, “Still, analysts warn that with tight supplies, corn prices need to stay high to keep demand down. Farmers are nearly finished harvesting the U.S. crop, which the USDA projects will be the smallest in six years.”

Christian Wiedenmann reported yesterday at MNI Online that, “Brazil’s WTO Representative Roberto Azevedo Thursday said there are still mechanical difficulties in negotiations to settle the dispute between Brazil and the United States over subsidies to American cotton exporters.

“‘Maybe it was a mistake that we said we don’t want to retaliate,’ Azvedo said in a speech to the Brazil Forum Roundtable.

“Azvedo said he attended a meeting Wednesday at the U.S. Department of Agriculture to discuss the issue, but that while it was a good meeting no concrete progress was made.”

Also yesterday, Kansas State University Agricultural Economist Art Barnaby, Jr. noted (“Pay One Loss in 25 Years and Crop Insurance is Runaway Program?”) that, “This is the largest crop disaster year since 1988, allowing critics to claim that crop insurance is a runaway program, but only because this crop is insured and that was not the case in 1988. Additional political rhetoric now claims the government will pay all of the crop insurance claims. They seem to forget about all the years farmers have paid premiums and in some of those years the government even generated underwriting gains. Standard Reinsurance Agreement (SRA) will determine the share of payments made by companies. One thing is for sure, if this were an ad hoc disaster program the taxpayers would pay all of the loss including administrative costs. We know for a fact that farmers have paid for some of the loss with their past paid premiums!

“The Farm Bill has proposed crop insurance changes and a new farm program to replace Direct Payments. It now appears that it is unlikely this Congress will pass a Farm Bill. That means the next Congress will likely call for Farm Bill cuts and crop insurance will be target because it is now the largest part of the farm safety net.”

Dr. Barnaby added that, “Crop insurance critics now want to eliminate the harvest price or increase the farmer paid premium for the harvest price, claiming the current Revenue Protection contract overpaid farmers. Apparently these critics have never had to pay a forward contract cancelation penalty or replace their on farm feed supply after a crop failure. Without the harvest price many Iowa farmers would not have collected an insurance payment this year. Does any rational person believe there would be no calls for a disaster program in this election year, if large number of Iowa farmers were not being compensated for their losses?


Proposition 37- California Ballot Initiative

Julie Jargon and Ian Berry reported in today’s Wall Street Journal that, “Big U.S. food companies appear to be making headway in their heavily financed push to defeat a ballot measure to make California the first state requiring labels for genetically modified foods.

“Kraft Foods Group Inc., Coca Cola Co., Monsanto Co. and other food and agriculture giants have poured more than $40.9 million into a campaign to persuade California voters to reject Proposition 37 on Nov. 6, according to the California secretary of state.

“Among the opponents’ biggest concerns is that other states might adopt similar rules, which could result in a patchwork of regulations similar to the nutrition-labeling laws for restaurant menus that have frustrated the fast-food industry. Lawmakers in about 20 other states have proposed GMO labeling rules in the past year, though none has become law.”

Marc Lifsher reported in yesterday’s Los Angeles Times that, “Once riding high, Proposition 37, the statewide ballot measure to label genetically engineered foods, has seen its voter support plummet during the last month, and a new poll shows the high-stakes battle now is a dead heat.”

The Los Angeles City Council unanimously passed a resolution supporting Proposition 37 on Wednesday.


Agricultural Economy

Ken Anderson reported yesterday at Brownfield that, “In what may be another new record price for farmland in Iowa, 80.5 acres of ground in northwest Iowa sold at auction Thursday for 21,900 dollars an acre.  The land was purchased by a local farmer.”

The AP reported yesterday that, “The worst U.S. drought in decades showed little sign of easing last week as farmers closed out their corn and soybean harvests and turned their attention to winter wheat, which has been struggling to break through the moisture-starved soil in some states, according to a weekly report.

“The latest U.S. Drought Monitor update Thursday showed that just over 62 percent of the lower 48 states still was in some form of drought as of Tuesday, which was about the same as in the previous seven-day period. Nineteen percent of that land remained in extreme or exceptional drought, the two worst categories.”


Energy Issues

Reuters news reported yesterday that, “BP said Thursday that it had canceled plans to build a plant in Florida to turn tough grasses such as sorghum and cane into cellulosic biofuel, the second big oil company this year to back out of plans to produce ‘next generation’ ethanol from nonfood crops.

“Once seen as a promising alternative to the use of corn and other crops to make fuel, cellulosic biofuel has become a political problem as companies struggle to produce commercial quantities and comply with a government mandate.”

Meanwhile, Dennis T. Avery noted recently at the Center for Global Food Issues Online that, “German media, writing in one of the ‘greenest’ European countries, are now veering away from green energy as fast as lagging public opinion will allow. A few years ago, Germany was ‘fully committed’ to the EU’s goal of ending fossil fuel use. It was building lots of wind turbines, and even some solar farms despite its often-cloudy skies. After the tsunami, Prime Minister Angela Merckel announced Germany would phase out its nuclear plants quickly, implying more power from renewables.

“Now, Germany is burning more coal than ever, and choking on the huge set of green subsidies to which it is already committed.”


Budget Issues

Lori Montgomery reported yesterday at The Washington Post Online that, “The ‘fiscal cliff’ is still two months off, but the scheduled blast of tax hikes and spending cuts is already reverberating through the U.S. economy, hampering growth and, according to a new study, wiping out nearly 1 million jobs this year alone.

“The report, scheduled for release Friday by the National Association of Manufacturers, predicts that the economic damage would deepen considerably if Congress fails to avert the cliff, destroying nearly 6 million jobs through 2014 and sending the unemployment rate soaring to near 12 percent.”

Scott Thurm reported yesterday at The Wall Street Journal Online that, “Here is why dozens of chief executives have inserted themselves into the debate over reducing the federal budget deficit: Some say uncertainty over the looming ‘fiscal cliff’ of tax increases and spending cuts already is hurting their business.”


CFTC (Commodity Futures Trading Commission)

Reuters news reported yesterday that, “CME Group Inc plans next month to begin paying $2 million to former clients of Peregrine Financial Group, the failed futures brokerage looted for years by its now-jailed founder.

“The payments will go to nearly 200 farmers, ranchers and cooperatives who traded on CME’s exchanges, a CME spokeswoman told Reuters on Thursday.”

Scott Patterson reported in today’s Wall Street Journal that, “Swaps trading is one the last bastions of Wall Street where brokers arrange deals over the phone.

“That clubby way of doing business could go the way of the rest of Wall Street, where trading takes place on computers, under a roughly 500-page draft set of rules designed to push the market away from the opaque world of over-the-counter, phone-based trading, into more transparent electronic venues.”

The Journal article noted that, “The thinking: Open markets are safer, cheaper and less prone to manipulation.

“The rules, circulated Thursday at the Commodity Futures Trading Commission, lay out guidelines for so-called swaps execution facilities, or SEFs, the electronic trading venues for swaps mandated by the Dodd-Frank financial overhaul of 2010.”

Keith Good