December 6, 2019

Farm Bill; Ag Economy (Biofuels); Budget; and, CFTC

Farm Bill Issues

An update posted on Saturday at WDAY (ABC-TV, Fargo, N.D.) reported that, “An outgoing U.S. Senator [Budget Committee Chairman Kent Conrad (D., N.D.)] is voicing his concern over the farm bill not getting through Congress.”

The update pointed out that, “Conrad says there was bipartisan progress on a farm bill, but says those on the far right will have more leverage in this lame duck session.

“Conrad says, ‘I’m very worried that they will come back to us and say, ‘we want more. We want even more cuts, more savings.’ And that would put things like crop insurance, that are so important to North Dakota, at jeopardy.’”

Tom Lutey reported late last week at The Billings Gazette (Mont.) Online that, “U.S. Sen. Max Baucus, D-Mont., told sugar producers he’s still determined to pass a farm bill by year’s end and affirmed support for a key industry program.

“Baucus, visiting the Western Sugar Cooperative refinery for a ‘work day’ helping process the 2012 sugar beet crop, said that after the election he will push hard for a new farm bill. The Senate passed a farm bill last June, but House Republican leaders, sensing wide divisions over farm bill spending, kept their version from reaching the floor before leaving town in late September to campaign.

“‘We’re going to make a real effort to get it passed,’ Baucus said.”

The article noted that, “Ervin Schlemmer, who farms near Fromberg, said uncertainty over the farm bill’s status weighs on key financial decisions the longer producers wait for a result. The agriculture programs in the farm bill are crucial to securing operating loans at local banks, particularly for less-established young farmers.

“The main sticking point between the House and Senate farm bills are cuts to federal nutrition programs like food stamps.”

Mr. Lutey added that, “In Congress, few are on the fence when it comes to sugar politics, about which major political players don’t mince words. Sen. John McCain, R-Ariz., in Billings campaigning for Rep. Denny Rehberg on Wednesday and Thursday, called the sugar program ‘a masterful scam’ as Senate Republicans tried to strip it from the farm bill in June. Wednesday, on his way to Billings, McCain posted on his Twitter account that ‘Farm Bill sugar subsidies force consumers to pay more for treats — $3.5 billion a year.’ The tweet was quickly reposted by 57 followers of McCain, including lobbyists and House lawmakers, who have yet to vote on a farm bill this year. The 2008 Republican presidential nominee was on his way to North Dakota, the mecca of sugar beet production, for more campaigning Wednesday afternoon.”

An update Friday at Inside U.S. Trade pointed out that, “[Sen.] Charles Grassley (R-IA), a senior member on the Senate Agriculture Committee, this week said he believes an extension [of the Farm Bill] is more likely if President Obama is re-elected because that will put the fiscal cliff issue on Congress’ front burner. By contrast, if Republican nominee Mitt Romney is elected, Congress will likely hold off in order to give the new administration time to weigh in on fiscal policy — making space for the farm bill.

“‘If Obama is re-elected and we have to deal with taxes and the fiscal cliff in November and December, I think it’s going to be pretty difficult to get more than a five-month extension of the farm bill,’ Grassley said in a weekly phone call with reporters on Oct. 30. ‘If Romney would be elected and we put taxes and the fiscal cliff six months into next year, then there will be more time– and there might be time for a five-year farm bill.’

But one industry source said he saw it the other way around. If Romney is elected, he said, there is a better chance that Republicans will seek to delay on the farm bill, in hopes that they can have more influence on the process once a Romney administration assumes control and has a chance to weigh in on farm policy.”

Also, Pat Westhoff, the director of the Food and Agricultural Policy Research Institute at the University of Missouri, indicated on Saturday at The Columbia Daily Tribune (Mo.) Online that, “Many observers believe, for example, that a farm bill is only likely to get done during the lame duck session if there is also a broader agreement on tax and spending issues.

If the election significantly changes the political balance of power, the party that gains strength might want to delay big decisions until the newly elected take power in January.

As a result, major long-term agreements in the lame duck session appear more likely if the election confirms the current balance of power than if there are significant shifts.”

Meanwhile, Dan Piller reported on Saturday at The Des Moines Register Online that, “Farmers who chose to pay more to insure their crops at harvest prices will receive $7.50 per bushel for corn and $15.39 per bushel for soybeans, the U.S. Department of Agriculture said this week.

“Those who elected to be covered by the less expensive non-harvest price coverage will receive the $5.68 per bushel for corn and $12.55 per bushel for soybeans set in March at the time of insurance sign-up.

“Farmers customarily buy coverage for about 75 percent of their crops. Crop insurance will cushion much of the loss in yields caused by this year’s drought. Estimates put the losses at 15 percent or more.”

Mr. Piller added that, “Nationally, crop-loss insurance payments through Oct. 29 totaled $3.5 billion. That total included $1.63 billion for corn and $247.6 million for soybeans, according to USDA figures.

“Federal subsidies for U.S. crop insurance premiums this year total $6.9 billion, 62 percent of the $11.03 billion in premiums paid to insure all 2012 crops.”

Robert Pore reported yesterday at The Grand Island Independent (Neb.) Online that, “This week, Sen. Mike Johanns, R-Neb., and Rep. Adrian Smith, R-Neb., praised the U.S.-Panama Trade Promotion Agreement going into effect. But the Nebraska Corn Board said future trade agreements are in doubt without a Farm Bill.”

Mr. Pore pointed out that, “Because the farm bill did not pass in the House, as it already has in the Senate, FMD [the U.S. Department of Agriculture’s Foreign Market program Development] funding ended Oct. 1 and Market Access Program (MAP) funding, another foreign market development tool, will end Dec. 31.”

In news regarding nutrition issues, Pete Kasperowicz reported on Friday at The Hill’s Floor Action Blog that, “Sen. Jeff Sessions (R-Ala.), the ranking member of the Senate Budget Committee, said that as of the Friday jobs report, the number of people added to food stamp rolls after four years under President Obama’s administration is 75 times higher than the net number of new jobs created.

“‘Simply put, the President’s policies have not produced jobs,’ Sessions said. ‘During his time in office, 14.7 million people were added to the food stamp rolls. Over that same time, only 194,000 jobs were created — thus 75 people went on food stamps for every one that found a job.’”

As the presidential election comes to a close, many political observers point to the importance of Ohio in the final Electoral College tally.  A recent Boston Globe article explored some of the political dynamics taking place in Rural portions of The Buckeye State.

And, John Eligon reported in today’s New York Times that, “Mr. Obama won this battleground state four years ago [Iowa] in part by making mammoth gains among voters in the rural, agriculture-centric regions in the west. In Adams County, for instance, he flipped a 15-point Democratic loss in 2004 into a three-point victory in 2008.

“But that was against Senator John McCain, a Republican, who provoked the agricultural community in Iowa with a hostile stance toward ethanol and the farm bill, which provided a federal safety net for farmers but expired on Sept. 30 this year. Mr. Romney has adopted a friendlier tack with farmers, as both sides scrape for the support of rural voters — a group that makes up about a third of the state’s electorate and could sway the tight race for Iowa’s six electoral votes.

“‘The rural vote’s going to be very important,’ said Gov. Terry E. Branstad, a Republican who supports Mr. Romney. ‘That’s kind of been the backbone of the Republican strength in Iowa.’”

In other developments relating to tomorrow’s vote, Marc Lifsher reported on Friday at the Los Angeles Times Online that, “Supporters of Proposition 37, the genetically engineered food labeling initiative, are saying that the FBI is investigating the No campaign for allegedly fraudulently using the seal of the U.S. Food and Drug Administration in a campaign mailer.”

The LA Times article indicated that, “The Yes campaign’s assertions immediately were knocked down by the U.S. Attorney’s office for the Eastern District of California in Sacramento.”

Yesterday, the Los Angeles Times editorial board reiterated its opposition to Prop. 37:  “Proposition 37. No. This measure would require labeling on food products that contain genetically modified ingredients. The appropriate question is less whether consumers have a ‘right to know’ if products for sale contain such ingredients, but rather which sellers should bear the burden of labeling, and whether the regulator should be the marketplace or government. Currently, producers of products without genetically modified organisms can, and many do, inform and appeal to customers with labeling. If the time comes when the weight of scientific consensus is that such ingredients are a health hazard, then it may be time for government to step in and require labeling on products with GMOs. But consensus currently leans the other way.”

Norimitsu Onishi reported in today’s New York Times that, “If voters here approve a proposal on Tuesday’s ballot, Richmond [Calif.] will become the first city in the United States to add a tax on businesses that sell soda and other sweetened drinks, although many states already collect taxes on such drinks directly as part of anti-obesity efforts…Fierce campaigning has brought in the kind of money rarely seen in a community of 104,000 people. Soda companies have funneled $2.5 million into efforts to defeat the tax, or Measure N, while supporters have raised only $69,000.”


Agricultural Economy (Biofuels)

University of Illinois Agricultural Economists Darrel Good and Scott Irwin indicated on Friday at the farmdoc daily Blog (“The Biofuels Era – A Changing of the Guard?”) that, “The increase in corn used for ethanol has been a major driver of crop prices in the New Era that began in the Fall of 2006. In the face of one of the worst droughts of the last century this summer, there have been numerous calls to limit the policy incentives to use corn for ethanol production in the upcoming year. The U.S. Environmental Protection Agency (EPA) is currently considering formal requests for this potential relief. While ethanol has garnered nearly all of the headlines in recent years, its role as the leading driver of crop prices may be nearing an end.”

After a cogent and detailed analysis, the authors noted that, “The biofuels era that began in 2006 helped propel corn and other crop prices to a new higher level that has been sustained for nearly six years. One might be tempted to conclude that this new era is coming to an end as corn consumption for ethanol levels out and corn production begins to catch up. Instead, it actually appears that the new era of higher crop prices could be extended well into the future as a result of the RFS for advanced biofuels that in all likelihood can only be met with a rapid expansion in biodiesel production. To gain some perspective on the potential size of this expansion, consider our projection of 3.113 billion gallons of biodiesel production in 2015. This would require about 23.5 billion pounds of feedstock when total consumption of fats and oils in the U.S. currently totals about 28 billion pounds annually. Consumption of tallow and grease, another biodiesel feedstock, is thought to be near 10 billion pounds per year. At the projected level for 2015, biodiesel would account for over 60 percent of fats and oils consumption from all sources. This compares to about 20 percent in in 2012. The new price era, then, would not be extended by rising corn demand, but by rising vegetable oil demand. Whether this scenario actually is realized depends crucially on the evolution of biofuels policy here in the U.S. and energy policies in Brazil. We will be monitoring these issues closely in the future.”

Meanwhile, Reuters writer Carey Gillam reported on Friday that, “Drought-struck areas of the U.S. Plains winter wheat belt need a deluge of rain and snow this winter to fully recharge parched farmland, an unlikely scenario that means wheat, corn and soybean crops could face a rough new season.”

And, Pat Curtis reported on Friday at RadioIowa Online that, “A survey of business leaders and supply managers in nine Midwest states, including Iowa, shows an economic slump over the region. Creighton University economist Ernie Goss compiles the Mid-America Business Conditions Index – which dropped to 46.5 last month, down from 50.4 in September.”


Budget Issues

Erik Wasson reported on Friday at The Hill’s On the Money Blog that, “The White House could use its authority to temporarily delay the spending portion of the fiscal cliff early next year, according to a new report…OMB Watch, a non-governmental agency, in a new report argues that should Congress be unable to avoid this sequestration in the lame-duck session, the White House could use its powers to buy a few weeks or a month of extra time in January.”

Similarly, Zachary A. Goldfarb reported in Saturday’s Washington Post that, “The Obama administration could blunt the economic harm caused by the ‘fiscal cliff’ at the end of the year by using its unilateral powers over spending and taxes, for instance, by freezing how much in taxes is taken out of payroll checks, according to former senior officials and other tax and budget experts.

“Beyond postponing tax increases, administration officials might also soften the blow from dramatic federal spending cuts by shifting available money toward paying immediate costs — such as government employee salaries — rather than saving for construction projects later in the year…[I]f the administration were to take such emergency actions this time around, it could buy the White House and Congress more time to reach a deal, easing some of the urgency to preempt the fiscal cliff. Economists have warned that the combined effect of increased taxes and slashed spending could plunge the nation into recession.”

Lori Montgomery reported in today’s Washington Post that, “The best hope for a deal to avoid the ‘fiscal cliff’ may lie with the alternative minimum tax, an obscure provision of the tax code that is about to become alarmingly relevant to millions of middle-class taxpayers.

“Unless Congress acts by the end of the year, more than 26 million households will for the first time face the AMT, which threatens to tack $3,700, on average, onto taxpayers’ bills for the current tax year. Because those people have never paid the AMT, they have no idea they are in its crosshairs — put there by a broader stalemate over tax policy that has kept Congress from limiting the AMT’s reach.”

Today’s article explained that, “Unlike most tax increases in the fiscal cliff, including the expiration of the George W. Bush-era income tax cuts, the AMT bill would come due almost immediately. And tax experts say it would be extremely disruptive to try to fix the AMT after the 2012 tax year closes Dec. 31.”

From a broader perspective, on Saturday, Erik Wasson reported at The Hill Online that, “Treasury Undersecretary Lael Brainard will try this weekend to soothe the fears of the world’s major economic powers about the ‘fiscal cliff’ facing the United States.”

Meanwhile, Manu Raju reported yesterday at Politico that, “An emboldened President Barack Obama would quickly unveil a sweeping proposal aimed at preventing the country from falling off the fiscal cliff if he wins reelection Tuesday. At least, that’s what one top Senate Democrat expects him to do.

“Senate Finance Chairman Max Baucus (D-Mont.), a central player in the fiscal talks, said in a weekend interview here [Butte, Mont.] that he expects a victorious Obama to lay out a ‘balanced’ plan that will drive the lame-duck talks over taxes and spending looming over Washington once Election Day passes.”

And, an update posted yesterday at The Hill noted that, “The chances of the lame-duck Congress dealing with a fight over added spending for Hurricane Sandy appears to be increasing.”


CFTC (Commodity Futures Trading Commission)

Reuters writer Tom Polansek reported on Thursday that, “Commodity Futures Trading Commissioner Mark Wetjen said on Thursday an insurance fund for futures traders is ‘worth exploring,’ raising the profile of a customer-protection concept that gained new life after MF Global failed one year ago.

“The futures industry has debated the merits of a government-sponsored insurance fund for futures traders, modeled after the Securities Investors Protection Corporation (SIPC), and an industry-sponsored bailout fund since MF Global’s collapse revealed more than $1 billion missing from customer accounts.”

Also late last week, Iowa GOP Senator Charles Grassley issued a comment on the aftermath of MF Global’s collapse.

Keith Good

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