January 29, 2020

Policy Issues (Budget); and, the Ag Economy

Farm Bill, Estate Tax, Budget, Immigration and Political Notes

A news release yesterday from the House Agriculture Committee Democrats indicated that, “U.S. House Agriculture Committee Ranking Member Collin C. Peterson, D-Minn., today urged House Republican Leaders to bring the Agriculture Committee’s bipartisan five-year farm bill to the floor for a vote next week.

“‘The election is over so it’s time to get to work. I’m optimistic that, if given the chance, we have the votes to pass a five-year farm bill. There is no good reason not to vote on the bill when we return next week, before Thanksgiving. This will give us the time we need to work out our differences with the Senate and get a new five-year farm bill signed into law by the end of the year.

“‘I remain opposed to an extension of any kind for any time.’”

Meanwhile, Ron Hays reported yesterday at The Oklahoma Farm Report Online that, “[Dale Moore, chief of Staff for the American Farm Bureau] said that he sees plenty of opportunities to get the five-year farm bill passed in the lame duck session.

“‘There is an opportunity and there are a multitude of ways that you can take advantage of those opportunities. But each one has its plusses and minuses. It’s going to depend on the Speaker, and the House Majority Leader and how they want to proceed forward. And it’s also going to depend on all of us, you know, boots on the ground, the farmers and ranchers that we represent, to make sure that when this goes forward we’re ready to make sure that our elected officials let this leadership know ‘we want you to get this farm bill passed.’ Time is a very precious commodity any time in Washington, but particularly during a lame duck.’

“Moore said he’s very optimistic the farm bill can be passed during the lame duck because nothing will materially change in Congress after the first of the year.   He said the potential stumbling block will be in the nutrition title, but if the bill can be brought to the House floor, he believes Ag Committee Chairman Frank Lucas and Ranking Member Collin Peterson can manage to get it passed.”

Yesterday’s update added that, “Tax policies are another situation that Moore hopes will be addressed. He says preventing the increase in the estate tax is very important to farmers and ranchers, but there are other taxes that need to be addressed in the lame duck as well.”

In more detail regarding the estate tax, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “At the end of the campaign, it seemed like the ‘post-election’ lame-duck period would never come, but it has. Now the government must begin to deal seriously with at least some of the issues it has been avoiding. The combination of expiring tax cuts and Budget Control Act spending cuts need to be dealt with in the most expeditious way, and the expired farm programs must be on that list somewhere. These issues and others have obvious major implications for agriculture.

“Two such concerns focus on the estate tax and capital gains taxes. Currently, the estate tax has a $5 million exemption and a 35% rate for estates above that. If Congress takes no action, the tax reverts to a $1 million exemption and 55% top rate.”

Speaking yesterday on the AgriTalk radio program with Mike Adams, American Farm Bureau Federation President Bob Stallman also highlighted the importance of the estate and capital gains tax issues (audio– MP3- 0:24);  and, pointed out that, “Some of the issues in the fiscal cliff, like what happens to the estate tax, capital gains tax, what happens with some of the depreciation deductions, may have more of an economic impact on agriculture in this country than what is in the Farm Bill.”

More broadly on the budget issue, Damian Paletta, Carol E. Lee and Naftali Bendavid reported in today’s Wall Street Journal that, “The White House and Republican lawmakers faced pressure to reach a solution to the looming budget crisis after a nonpartisan agency detailed Thursday how inaction would push the U.S. economy back into recession next year, and skittish investors continued to drive stocks lower.

“Economists from the Congressional Budget Office [CBO] detailed new warnings of an economy speeding toward a so-called fiscal cliff created by a combination of government spending cuts and tax increases set to take effect Jan. 1.” [Note that Senate Finance Committee Chairman Max Baucus (D., Mont.) also issued a news release on the CBO report yesterday].

The Journal writers pointed out that, “White House officials are considering proposals with the twin aims of avoiding the fiscal cliff and sparking negotiations on a broader deficit-reduction deal. Any plan is expected to echo President ‘s campaign call for higher taxes on wealthy Americans, in addition to spending cuts.

“Voters ‘clearly chose the president’s view of making sure the wealthy Americans are asked to do a little bit more in the context of reducing our deficit in a balanced way,’ top White House adviser David Plouffe said Thursday. Mr. Obama planned Friday to give his first post-election statement on the issue.”

Jonathan Weisman reported in today’s New York Times that, “Senior lawmakers said Thursday that they were moving quickly to take advantage of the postelection political atmosphere to try to strike an agreement that would avert a fiscal crisis early next year when trillions of dollars in tax increases and automatic spending cuts begin to go into force.

“Senator Bob Corker, Republican of Tennessee, said he had begun circulating a draft plan to overhaul the tax code and entitlements, had met with 25 senators from both parties and ‘been on the phone nonstop since the election.’”

The article noted that, “Senator Charles E. Schumer of New York, the No. 3 Senate Democrat, extended an olive branch to Republicans, suggesting Thursday that he could accept a tax plan that leaves the top tax rate at 35 percent, provided that loophole closings would hit the rich, not the middle class. He previously had said that he would accept nothing short of a return to the top tax rate of Bill Clinton’s presidency, 39.6 percent.”

Mr. Weisman added that, “Lawmakers also have a wary eye on the electoral landscape. Senator Mitch McConnell of Kentucky, the Republican leader and a crucial player in budget talks, is up for re-election in 2014 and may resist any deal that could foster opposition back home. [However, The Hill reported yesterday that, “Senate Minority Leader Mitch McConnell (R-Ky.) said Wednesday that GOP senators would meet President Obama halfway on economic issues during his second term.”]

“But members of Congress clearly see recent events creating an opening in the postelection session of Congress, when some retiring and defeated lawmakers could have a freer hand on voting for legislation, absent political consequences. Republicans were weakened by losing seats in both the House and the Senate, while Democrats are eager to move to issues like immigration, which animated Latino voters and helped deliver victory on Tuesday. ‘The conditions are there to act,’ Mr. Corker said. ‘I think the environment is different now.’”

And James Politi and Alan Beattie reported yesterday at The Financial Times Online that, “Efforts to avert the fiscal cliff gathered momentum as a senior ally of President Barack Obama called on business leaders to urge Republicans to make concessions to stave off the looming budget crisis threatening the global economy.

Two days after Mr Obama’s re-election, Senator Chuck Schumer of New York, a leading Democratic spokesman on fiscal issues, said he welcomed a signal from John Boehner, the Republican speaker of the House of Representatives, that his party was willing to compromise to avert the fiscal cliff.”

The FT article noted that, “Business groups and many chief executives have been more vocal in clamouring for a deal than they were during the 2011 showdown over the debt ceiling. A bipartisan campaign to ‘fix the debt’ recently raised $30m from as many as 80 corporate leaders who support a grand bargain on deficit reduction that includes a mix of spending cuts and tax hikes.”

Meanwhile, Matt Murphy reported on Wednesday at The Eagle Tribune (North Andover, Mass.) Online that, “Preparing to join a Congress that will be almost as divided by partisanship as it is now, Sen.-elect Elizabeth Warren [D., Mass.] yesterday said she would look first to farm subsidies and defense spending to help reduce the deficit, but said new revenue must be part of the ‘fiscal cliff’ fix.”

Other lawmakers have highlighted the Farm Bill since Tuesday’s election.

The AP reported yesterday that, “[Democrat] Sen.-elect Heidi Heitkamp took a victory lap around North Dakota Thursday and pledged that her ‘job one’ in Washington would be helping to craft farm legislation.

“Heitkamp told reporters after an event in Fargo that she had been offered a spot on the Senate Agriculture Committee, which will be tasked with writing the next farm bill.”

John Ferro reported yesterday at the Poughkeepsie Journal (N.Y.) Online that, “When U.S. Rep. Chris Gibson, R-Kinderhook, heads back to Congress, the first thing on his mind will be the new five-year farm bill.

“Gibson, who defeated Democratic challenger Julian Schreibman Tuesday, said he wants to get the bill passed and presented to President Barack Obama before the end of the year…[Gibson said], ‘We have dairy farmers that are not even able to cover the cost of production right now.’”

“Some analysts have suggested that Congress may delay passage of the bill until after it deals with the ‘fiscal cliff’ of mandatory budget cuts. Gibson hopes there won’t be a delay.”

Brian Amaral reported yesterday at the Watertown Daily Times (N.Y.) Online that, “Fresh off an election victory, Rep. William L. Owens is also in line for a promotion on the Agriculture Committee…With the departure of a few more senior Democrats on the panel, Mr. Owens might become the ranking minority member of an agriculture-related subcommittee come January.”

In other developments, a news release yesterday from the American Sugar Alliance noted that, “U.S. raw sugar prices continued their recent free-fall, dropping another nine percent in October, according to U.S. Department of Agriculture data recently made public.  The October 2012 average price is nearly 40 percent lower than October 2011 prices.

And with sugar surpluses building and sustained low prices on the horizon, industrial sugar users have lost a key talking point in their lobbying campaign to dismantle U.S. sugar production, says the American Sugar Alliance (ASA).”

On a separate issue, Jennifer Steinhauer reported in today’s New York Times that, “Fresh off an election in which Hispanic voters largely sided with Democrats, Speaker John A. Boehner said Thursday that he was ‘confident’ Congress and the White House could come up with a comprehensive immigration solution.

Immigration reform is ‘an important issue that I think ought to be dealt with,’ Mr. Boehner, an Ohio Republican, said in an interview with Diane Sawyer on ‘ABC World News.’”

Also note a related and interesting article from today’s Wall Street Journal: “Heartland Draws Hispanics to Help Revive Small Towns.”


Agricultural Economy

Agweek writer Jonathan Knutson reported yesterday at The Grand Forks Herald (N.D.) Online that, “In what could be a state record for the per-acre value of farmland, an 80-acre parcel in North Dakota’s Walsh County sold for $800,000, or a whopping $10,000 per acre, at public auction Thursday in Grand Forks, N.D.”  (Recall a record sale of farmland in Iowa last month of over $20,000 per acre).

A news item on yesterday’s All Things Considered National Public Radio (NPR) program noted that, “It’s not just the value of Missouri cropland that’s rising. Corn Belt farmland prices from Iowa to Illinois and Nebraska to Kansas have been sky-high lately, boosted by $8-a-bushel corn…[T]he high commodity prices have helped encourage investors like Steve Diggle, who have no connection to farming, to compete for their very own acreage in the Heartland.

“‘We paid about $3.3 million for [about 650 acres] in Southeast Illinois in 2009,’ said Diggle, who is the CEO of Singapore-based Vulpes Investment Management. The company handles $250 million of investor money, about 15 percent of which is in farmland.

“‘This year we sold it at auction and we got $5.1 million,’ he said, referring to the Illinois farmland. ‘That’s 55 percent higher than we paid. Plus we got two yields — one of 3.5 percent and one of 5 percent. So, you know, as an investment, that’s 63 percent over three years. [It] is great and we’re extremely happy with it.’”

The NPR item added that, “But to University of Missouri agriculture economist Ron Plain all of this sounds a bit like the housing bubble burst of 2006. He is concerned a similar bubble could be happening in farmland.

“‘You get several years going up faster than that long-term trend of 6 percent [annual increases] and you’re then in a situation where you’re sort of due for a correction,’ Plain said. ‘And the way you correct is pull those land values down — or ‘pop the bubble’ … and so there’s concern about that and it’s kind of reasonable to worry.’

Plain said that with mortgage rates at their lowest in 60 years, it’s reasonable to expect the cost of borrowing to go up eventually. And if crop prices retreat from record highs, he said, that means ‘less income per acre and therefore less ability to pay for farmland.’”

Bloomberg writer Alan Bjerga reported yesterday that, “U.S. farmers in the Midwest, the center of corn cultivation in North America, have watched helplessly as the worst drought in more than five decades has devastated their crop.

Canadian farmers in the prairie provinces of Manitoba, Saskatchewan and Alberta, long one of the greatest wheat-growing regions on Earth, have started planting corn, Bloomberg Businessweek reports in its Nov. 12 issue…Corn’s new appeal to Canada’s prairie farmers is based on two things: climate change and price. Growing seasons in the prairie provinces — which border Minnesota, North Dakota and Montana — have lengthened about two weeks to as long as 120 days in the past half-century. The mean annual temperature is likely to climb by as much as 3 degrees Celsius (5 degrees Fahrenheit) in the region by 2050, according to Canadian researchers.

A temperate climate and longer growing season are ideal for corn.”

And a news release yesterday from the Food and Agriculture Organization of the United Nations noted that, “The FAO Food Price Index fell one percent in October 2012, and for the first ten months of the year food prices were on average eight percent lower than in the same period in 2011.”

Meanwhile, the AP reported yesterday that, “The worst U.S. drought in decades got worse in parts of the nation’s midsection, further frustrating ranchers and growers of winter wheat in Kansas and Oklahoma, a drought-tracking consortium’s update showed Thursday.

“The U.S. Drought Monitor’s latest map showed that 60 percent of the land in the lower 48 states was experiencing some degree of drought as of Tuesday, down less than a percentage point from the previous week. Nearly one-fifth of the contiguous U.S. remained in extreme or exceptional drought, the two worst classifications.”

And Reuters news reported yesterday that, “Commercial barge traffic on a critical stretch of the Mississippi River south of St. Louis may be severely restricted or halted entirely next month as drought conservation measures stem the inflow of water from the Missouri River, government and industry sources said on Thursday.”

Keith Good

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