FarmPolicy

October 1, 2014

Farm Bill; Budget; Trade; and, Biofuels

Categories: Budget /Ethanol /Farm Bill /Trade

Farm Bill Issues- Political Notes

Reuters writer Charles Abbott reported yesterday that, “Federally subsidized crop insurance will be a big target for lawmakers looking to cut the budget deficit in the lame-duck session of Congress opening next week, agricultural policy experts agreed the morning after a status-quo general election.

But lawmakers will probably be unable to break their deadlock over enacting a five-year, $500 billion farm bill covering a wide range of agricultural policy from food stamps to crop subsidies and soil conservation.”

However, the article noted that, “The major U.S. farm groups made a strong crop insurance program their top priority for the bill, even if it meant cutting other agricultural supports.

“‘Why start attacking the one tool we’ve been guiding people toward for 25 years?’ asked Dale Moore, a lobbyist for the 6 million-member American Farm Bureau Federation.”

And, Marcia Zarley Taylor reported yesterday at DTN (link requires subscription) that, “In the 1980s, any drought that sent yields in significant parts of the central Corn Belt to 4 to 20 bushels per acre would have triggered another wave of credit delinquencies. But it isn’t just crop farmers who averted what could have been financial cataclysm in 2012. Their creditors got a free pass from revenue-based crop insurance, too.

Farm lenders attending the National Agricultural Bankers conference this week in Milwaukee, Wis., said they can exhale now that an estimated $24 billion in crop insurance claims are in the mail or awaiting audit reviews. Farmers insured more than 80% of the nation’s hard-hit corn crop this season…”

The DTN article pointed out that, “‘Livestock is another story, but I never worried about our crop farmers this year because I knew so many of them had bought insurance,’ said Sam Miller, managing director for BMO Harris Bank’s ag division in Appleton, Wis. BMO Harris finances operations in hard-hit Wisconsin, Indiana, Missouri and Michigan, where some corn clients reported average yields as low as 4 bpa.”

Ms. Zarley Taylor indicated that: “So while crop insurance will likely plug big holes in grain borrowers’ credit lines this season, livestock producers who buy most of their feed will pose more difficult questions.”

Mr. Abbott added in his Reuters article from yesterday that, “With Democrats still in narrow control of the Senate and Republicans keeping their majority in the House, analysts said a short-term extension of the 2008 farm law, probably into spring, was the likely outcome.

“‘Odds are against a five-year farm bill in the lame duck (session) unless it’s part of a budget agreement,’ and a budget deal is also unlikely, said Pat Westhoff of the think tank Food and Agricultural Policy Research, based at the University of Missouri.”

Mary Kay Thatcher, Senior Director of Congressional Relations for the American Farm Bureau Federation, was a guest on yesterday’s AgriTalk radio program with Mike Adams where the conversation focused on the post-election political climate and policy environment.

A portion of yesterday’s AgriTalk discussion can be heard here (MP3- 4:39), unofficial FarmPolicy.com transcript here; in part, Ms. Thatcher stated that, “I think there’s about 16 legislative days that they’re planning to be in session between next week and Christmas. Now, it is certainly possible. There’s plenty of days there. But you have to do the farm bill fairly soon because you’ve got to pass it on the House floor. Then you’ve got to send it back and have it conferenced.

“And even if conference itself doesn’t take very long, think about all the implications of staff having to draft a new bill and having to say, well, we did something here, and so the score of how much this costs changed here, and therefore we have to go back again. It’s a real time consuming thing, so we have to do it very, very quickly.

“And I think it’s just going to be difficult. I think you’re going to have people wanting to look at the whole issue of sequestration and the fiscal cliff, and going to view those as much more important than the farm bill, unfortunately.”

Patton Boggs LLP released its post-election analysis of the 2012 presidential race yesterday.  A detailed analysis of agricultural issues begins on page eight of the report.   A forecast for the 113th Congress begins on page 11.

And DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “House Agriculture Committee Ranking Member Collin Peterson, D-Minn., joined the National Farmers Union and the American Farm Bureau Wednesday in calling for action on a new farm bill in the lame duck session, but House Agriculture Committee Chairman Frank Lucas, R-Okla., declined to comment.

“‘I’m optimistic’ that Congress will finish the farm bill this year, Peterson said in a telephone interview from his district in Minnesota, where he has been deer hunting.”

Mr. Hagstrom added that, “‘[House Speaker John] Boehner always wanted to get it done in the lame duck session,’ Peterson said, adding that House Majority Leader Eric Cantor, R-Va., said this month that the leadership will bring up the bill in the lame duck.

“‘It is time to get this over with,’ Peterson said. ‘I don’t (know) what they are going to fight about anymore — there is no election. I think Boehner wants to get this out of the way before all these other issues come up.’”

The DTN article noted that, “But Peterson also said he believes it should be brought up on the House floor before the Thanksgiving recess — which would mean next week — because a conference with the Senate would take some time.

“‘I still think the commodity title is still going to be somewhat difficult to resolve,’ he added.”

The American Soybean Association and National Corn Growers Association also issued statements yesterday on the election.

An article on Tuesday at National Journal Online reported that, “But the longer Congress goes without passing something—be it some sort of stopgap measure or a new five-year bill—the more problems will arise. Although many commodity groups are covered well into 2013, dairy farmers will see market-assistance measures expire on Dec. 31. Combine that with retroactive disaster aid—to help livestock farmers devastated by the summer’s drought—still waiting to become law, and it seems something will need to happen in the lame-duck session.”

Roll Call yesterday provided a brief overview of the new Members of Congress, and a sketch of House Ag Committee Members after Tuesday’s vote, including the year in which each Member was elected to Congress, has been posted at FarmPolicy.com.

On the issue of the President’s Cabinet, Politico reported yesterday that, “Among the top current officials expected to go:… Lisa Jackson, administrator of the Environmental Protection Agency.”

Al Kamen noted yesterday at The Washington Post Online that, “Agriculture Secretary Tom Vilsack had been on the ‘stay’ list if his wife won her race for an Iowa House seat. But her defeat last night may make his tenure less long-term than thought…Those said to be most likely to leave soon include Energy Secretary Steven Chu and Environmental Protection Agency Administrator Lisa Jackson.”

In other policy developments, Andrew Pollack reported in today’s New York Times that, “Advocates for the labeling of genetically modified food vowed to carry their fight to other states and to the federal government after suffering a defeat in California on Tuesday.

“A ballot measure that would have made California the first state in the nation to require such labeling was defeated, 53.1 percent to 46.9 percent. Support for the initiative, which polls said once was greater than 60 percent, crumbled over the last month under a barrage of negative advertisements paid for by food and biotechnology companies.

“The backers of the measure, known as Proposition 37, said on Wednesday that they were encouraged it had garnered 4.3 million votes, even though they were outspent about five-to-one by opponents. They are now gathering signatures to place a similar measure on the ballot in Washington State next year.”

And Reuters news reported yesterday that, “Voters in two California cities rejected measures that would have imposed the nation’s first penny-per-ounce taxes on businesses that sell sodas and other sugary drinks in an effort to boost municipal revenue and fight obesity.”

 

Budget Issues

Naftali Bendavi, Damian Paletta and David Wessel reported in today’s Wall Street Journal that, “The day after a hard-fought election that left Barack Obama in the White House and control of Congress divided between the two parties, the nation’s political leaders promised to try to avoid year-end spending cuts and tax increases that threaten to push the U.S. back into recession.

“In carefully worded comments Wednesday, major actors in the fiscal drama were both conciliatory to their adversaries and resolute in sticking to their principles. Whether this represents a temporary truce, or a step toward a pact to trim the deficit, won’t be known for weeks.

“But the pressure is on. Deep, automatic federal-spending cuts and tax increases—a combination widely known as the ‘fiscal cliff’—will hit in January unless Mr. Obama and Congress agree to some other way to reduce the budget deficit.”

The Journal article stated that, “To tackle the fiscal cliff, Mr. Obama is expected to initiate a new round of talks with leaders of Congress. The goal would be a ‘grand bargain’ combining higher taxes and money-saving changes to federal benefit programs.

“‘If there’s a mandate in yesterday’s results, it’s a mandate to find a way for us to work together,’ House Speaker John Boehner said Wednesday. ‘My message today is not one of confrontation but of conviction.’”

Russell Berman and Erik Wasson reported yesterday at The Hill Online that, “Many Democrats believe Obama derives a key advantage from the fact that the George W. Bush-era tax rates are going to expire in the absence of any congressional action. The GOP forced Obama to extend the rates for the wealthy in 2010 by tying them to the middle-class rates.

Liberals might feel betrayed by any move by Obama to extend the current rates for the vague promise of new revenue through tax reform in the future.

But that’s exactly what Boehner wants. His remarks on Wednesday amounted to a pitch for a return to the grand bargain that he failed to strike with Obama in 2011.”

Daniel Newhauser and Niels Lesniewski reported today at Roll Call Online that, “While Congressional leaders promised to work with one another to head off tax increases and spending cuts scheduled to begin Jan. 1, prospects for cooperation were dimmed when Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) pointed in different directions.”

The article pointed out that, “Reid, who spoke with Boehner this morning, said neither leader should draw lines in the sand and signaled he thinks Democrats do indeed have a mandate from Tuesday’s election to raise taxes for those with very large incomes.

“‘Look at all the exit polls, look at all the polling, the vast majority of the American people — rich, poor, everybody — agrees that the rich — richest of the rich — have to help a little bit,’ Reid said. ‘People who are making more than a million dollars a year, the vast, vast majority of them are happy to pay that. The only place that people disagree are Republicans in Congress.’”

The Roll Call writers indicated that, “Reid and Boehner were also on different pages today regarding the timing of a possible fiscal deal. While Reid said enough work has been done to allow action during the post-election session that begins next week, Boehner and other Republicans favor a short-term deal laying the groundwork for a broader solution next year.”

Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “Business leaders suggested Wednesday that Congress quickly act to extend all tax cuts for at least a year during the lame-duck session while efforts are made toward completing a grand bargain.”

Meanwhile, the November 5 edition of FBNews, the American Farm Bureau Federation (AFBF) newspaper, stated in an article (“Farmers anxious for action during lame duck on new farm bill, taxes”) that, “Farmers and ranchers are also anxious for Congress to act on estate and capital gains taxes. On Jan. 1, the estate tax exemption is slated to drop from the current $5 million to $1 million per person and the top tax rate will climb from the 35 percent in place now to 55 percent. The spousal transfer for the exemption will also disappear.”

The article noted that, “Until estate taxes are permanently eliminated, farmers want Congress to keep or improve the current exemption, indexed for inflation, maintain spousal transfer and continue the top tax rate.

“‘If Congress doesn’t act on estate taxes, many more surviving farm family members could be faced with making critical decisions to sell land, buildings or equipment to generate enough money to pay the tax,’ said Pat Wolff, AFBF tax specialist.”

 

Trade

Alan Beattie reported yesterday at The Financial Times Online that, “President Barack Obama’s re-election will be met by a resigned shrug rather than either optimism or despair among most observers of international economics or trade. Few were expecting a sharp difference between an Obama and a Romney administration.

“‘On trade issues the two have been broadly similar,’ says Ted Alden, senior fellow at the Council on Foreign Relations think-tank in Washington. ‘There is generally more continuity and less change than it appears on the campaign trail.’”

Mr. Beattie explained that, “Indeed, the fact that the House remained in Republican hands probably makes Mr Obama’s task of negotiating trade deals easier. Democrats in Congress have become steadily more suspicious of bilateral or regional trade deals over the years. Although George W. Bush’s administration negotiated three bilateral deals more than five years ago – with South Korea, Panama and Colombia – Congress did not pass them until Mr Obama had renegotiated provisions to placate US labour unions and the auto industry.”

 

Biofuels

Bloomberg writer Mario Parker reported yesterday that, “U.S. ethanol production is headed for the first decline in 16 years, jeopardizing the nation’s drive to boost alternative fuels, as higher costs and lower demand close plants.”

The article indicated that, “‘A lot of these smaller plants are under the gun,’ Toay said. ‘It’s going to be decision-making time on whether to keep running or close shop. It’s going to be a pretty tough environment.’

The situation is being exacerbated by imports from Brazil, where ethanol is made mostly from sugarcane, said Mike Blackford, a consultant at INTL FCStone Group in Des Moines, Iowa.

Imports in the week ended Nov. 2 averaged 60,000 barrels a day, compared with none a year earlier, government data show.”

And Reuters news reported yesterday that, “International firms are investing in biodiesel production in Brazil, a country on the verge of becoming the world’s top grower of soybeans, the main source of the biofuel.

“They are betting on increasing domestic demand, rather than export potential, in an emerging power that uses more diesel than gasoline. Many also believe Brazil’s government soon will raise the amount of biodiesel required in diesel blends.”

Keith Good

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