FarmPolicy

April 17, 2014

Farm Bill; Budget Issues; Ag Economy; and, Energy

Farm Bill Considerations

The AP reported yesterday that, “Congress returns Tuesday to a crowded agenda of unfinished business overshadowed by the urgent need for President Barack Obama and lawmakers to avert the economic double hit of tax increases and automatic spending cuts.

“One week after the elections — and seven weeks after they last gathered in Washington, Republicans and Democrats face a daunting task in a lame-duck session that Capitol Hill fears could last until the final hours of Dec. 31. But even before serious budget negotiations can begin, lawmakers will tackle leftover legislation on trade with Russia, military budgets and aiding farmers still reeling from the summer’s drought.

“The first days back will be a mix of old and new — choosing down-ballot leaders in the Senate while the 12 new members, three Republicans, eight Democrats and one independent, are introduced to their colleagues. The House will welcome some 70 new members who will get a crash course on how Congress operates with a class on ethics Wednesday.”

Yesterday’s article noted that, “Crucial in the House this week is passage of legislation that would end Cold War trade restrictions so that U.S. exporters can take advantage of the lowered tariffs and greater market access that accompany Russia’s entry into the World Trade Organization. Russia officially joined the WTO in August and the United States is alone among more than 150 WTO members in not being able to enjoy the more open Russian market.”

With respect to agricultural policy, the AP article explained that, “A five-year farm bill passed by the Senate and by House committee last summer will either have to be extended into next year or passed in the remaining weeks of the session. The 2008 farm bill expired Sept. 30.

The bill’s only real chance for passage is if lawmakers decide to use its savings as part of negotiations on the ‘fiscal cliff.’ The Senate bill would save $23 billion over 10 years and the House Agriculture Committee bill would save $35 billion over 10 years.

Otherwise, the bill will be extended into next year. Some Republicans have suggested a yearlong extension, but farm-state members and farm groups have said they would prefer a shorter extension to keep the pressure on for passage.”

The AP article added that, “Republicans have internally disagreed over cuts to food stamps, which make up about 80 percent of the half-trillion-dollar bill’s cost over five years. The Senate bill would cut about $400 million a year out of the program’s almost $80 billion annual cost while the House bill would cut about $1.6 billion from food stamps annually. Conservatives have said neither version makes deep enough cuts.”

Sean Lengell reported earlier this week at The Washington Times Online that, “Everything from farm subsidies to physicians’ payments, from cybersecurity laws to unemployment insurance benefits, is also on the congressional to-do list. But with about 30 pieces of unfinished business facing Congress, it’s unrealistic to assume lawmakers will address all, meaning some likely will be punted into the new year for the next Congress.”

The article reminded readers that, “House Majority Leader Eric Cantor last month said he was committed to bringing the [Farm Bill] issue to the chamber floor before the end of the year. House Agriculture Committee Chairman Frank D. Lucas, Oklahoma Republican, told the Oklahoma Farm Report last week he is hopeful the Virginia Republican makes good on his promise.

“Sen. Debbie Stabenow, a Michigan Democrat who chairs the Senate agricultural panel, also is pressing for action on a new farm bill this year, saying it should be among the House’s first postelection priorities.”

The Washington Times article added that, “But some dairy farmers say they’re already feeling a pinch, as the Department of Agriculture’s Milk Income Loss Contract Program, which compensates dairy producers when domestic milk prices fall below a specified level, expired after Sept. 30.”

“While the 2012 legislative calendar is winding down, neither chamber will start off the lame-duck session with a bang. On Tuesday, the Senate is slated to take up a Sportsman Act, which would increase access to federal land for hunters and fishers. The House, meanwhile, is scheduled to consider four minor or nonpressing bills, including the Asthma Inhalers Relief Act,” the article said.

Ellyn Ferguson reported yesterday at Roll Call Online that, “The unfinished farm bill is on Speaker John A. Boehner’s legislative to-do list, and by the end of the week, Republican leaders may announce how they will proceed.

“The Ohio Republican and Majority Leader Eric Cantor, R-Va., have said the House will resolve the ‘farm bill issue’ but have provided no details.

“At this point, leaders have three options: Move the House Agriculture Committee bill (HR 6083) to the floor; fold the House bill or the Senate version (S 3240) into a deficit reduction package to take advantage of the bills’ savings; or go with some sort of reauthorization and extension of the 2008 farm law and leave it to the next Congress to produce a five-year measure.”

Yesterday’s Roll Call article noted that, “An extension seems more likely, given the time constraints of the lame-duck session and the need to address the upcoming fiscal cliff of tax and spending issues. An extension could allow programs to continue for a few months, but House Agriculture Chairman Frank D. Lucas, R-Okla., has said a one-year extension of current law (PL 110-246) might be the best option if a new bill cannot be passed…[A]n extension would give lawmakers time to move longer-term legislation through floor votes and to conference committee. It would also mean the baseline or the money allocated for programs for the bills could be reduced when the Congressional Budget Office updates budget estimates early next year.

Ms. Ferguson added that, “But during the recess, Lucas told reporters and farm groups that he would need four days for floor action if House leaders allowed a vote on the bill. To do that, leaders would have to be willing to devote one week out of the four they have scheduled for the post-election session.”

Meanwhile, Christopher Doering reported on the front page of yesterday’s Des Moines Register that, “The marathon race to Election Day ended with Washington looking pretty much the same as it did before voters went to the polls on Tuesday. Now, the status quo could actually be a good thing for farmers uneasy over congressional inaction on a new $500 billion farm bill.”

“Some lawmakers and agricultural policy experts say House Republican leaders were reluctant to bring the farm bill to a floor vote before the election because they hoped to gain a stronger foothold in Congress and take over the White House. They could then pass a short-term extension of the current law before crafting their own five-year law in 2013. Without that conservative shift, the belief is a farm bill has a better chance of passing before the end of the year.”

Mr. Doering indicated that, “But before the election, Majority Leader Eric Cantor, R-Va., said the farm bill would be brought to the House floor before the end of the year. A spokesman for Speaker John Boehner, R-Ohio, said last week lawmakers will discuss the legislation when they return this week.

“‘This election seems to solidify the resistance against those who want big cuts to farm bill programs, especially nutrition and conservation assistance, and oppose needed levels of funds for USDA energy, local foods, or beginning farmer initiatives,’ said Sen. Tom Harkin, D-Ia. ‘Opponents of enacting the farm bill without further delay got no help from voters.’”

The Register article added that, “But the lack of a significant change in Congress and the White House does not mean a smooth road ahead for agriculture. There is no guarantee a farm bill will be passed this year, and the odds are diminished by the heavy workload that awaits Congress when it returns this week.

“[Sec. of Agriculture Tom Vilsack] and others are concerned that instead of acting on the farm bill separately, lawmakers will include it in a broader discussion in Congress and the White House over how to cut spending and deal with the country’s burgeoning $16 trillion debt. The fear is that agriculture could face deeper spending cuts if it is lumped together with other programs.

“Absent action from Congress, automatic spending cuts and higher tax rates begin in January, a combination that has been labeled the ‘fiscal cliff.’ Farmers and ranchers are watching to see if an estate tax cut that expires at the end of the year will be renewed. Unless it is extended, the threshold at which the tax must be paid would drop at the same time the tax rate goes up.”

In more specific news on nutrition issues, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “USDA on Nov. 9 released its most recent data on U.S. participation in the Supplemental Nutrition Assistance Program (SNAP), more commonly referred to as ‘food stamps.’

By the end of August 2012 (the most recent data), there were 47.1 million Americans on food stamps, a new all-time record high.

Another 420,947 Americans were added to the food stamp rolls from the previous month of July, representing the largest monthly increase in a year.”

The DTN item added that, “In 2011 alone, U.S. taxpayers provided $75 billion for SNAP benefits.”

Rosalind Rossi reported earlier this week at the Chicago Sun Times Online that, “Gatorade, vitamin drinks and even whole milk would be barred from sale in Chicago Public Schools during school hours under a new ‘Healthy Snack and Beverage’ policy up for a school board vote this week.

“Selling chocolate bars for school fund-raisers and using candy or fattening cupcakes to reward kids would be ‘minimized’’ but not necessarily outlawed under the proposal. Instead, ‘non-food’ rewards must be promoted.”

The article explained that, “Under the plan, many food and drink items would definitely be off limits from sale to students during school hours. For example, the new policy would…[L]imit milk to 8 ounces of low-fat or skim, or vitamin- and calcium-enriched soy or rice milk that is low-fat. That means no whole milk.”

Also yesterday, a news release from the National Association of Counties stated in part that, “Reauthorization of the farm bill, relief from unfunded mandates, and a renewed focus on rural healthcare and substance abuse are among the National Association of Counties’ (NACo) Rural Action Caucus (RAC) 2013 Legislative Priorities.  These priorities are designed to help improve the lives of Americans living in rural communities.”

 

Budget Issues

Carrie Budoff Brown and Jake Sherman, writing yesterday at Politico, sketched out five different “fiscal cliff” scenarios that could potentially unfold over the coming weeks.

Zachary A. Goldfarb reported in today’s Washington Post that, “With President Obama seeking a deal to avoid the ‘fiscal cliff,’ liberal groups that campaigned aggressively for his reelection are mobilizing to oppose concessions they fear he could make on Medicare and Social Security… [M]uch of the public dispute over the fiscal cliff has centered on the president’s demand that taxes rise for the wealthy. But entitlements are an essential element of the discussion because they are the main drivers of the nation’s borrowing problem over the years to come.”

Jonathan Weisman reported in today’s New York Times that, “With both parties positioning for difficult negotiations to avert a fiscal crisis as Congress returns for its lame-duck session, Democrats are latching on to an idea floated by Mitt Romney to raise taxes on the rich through a hard cap on income tax deductions… But many Democrats now see it as an important element of a potential deficit reduction agreement — and one they can claim to be bipartisan.”

“‘Let’s just say there’s a renewed interest,’ said Senator Kent Conrad, Democrat of North Dakota and chairman of the Senate Budget Committee.”

And, Peter Schroeder reported yesterday at The Hill’s On the Money Blog that, “The recent election has not changed the ‘highly polarized and unpredictable’ political landscape that still presents a threat to the nation’s credit rating, according to Moody’s Investor Services.”

 

Agricultural Economy

University of Illinois Agricultural Economist Darrel Good noted in part yesterday at the farmdoc daily Blog (“Corn and Soybean Prices Following Short-Crop Pattern”) that, “The USDA’s November forecasts of the size of the 2012 U.S. corn and soybean crops were larger than expected, particularly for soybeans. As a result, the general downtrend in soybean prices since mid-September has accelerated, with January futures now at the lowest level since June 29. Corn prices have moved into the lower half of the trading range that has been in place since mid-September and December futures are at the lowest level since September 28. So far, prices seem to be following the classic pattern associated with small crops -peaking early in the marketing year and then declining as the year progresses.”

Andrew Johnson Jr. reported yesterday at The Wall Street Journal Online that, “U.S. soybean futures tumbled 3% to five-month lows as selling continued following a government forecast for a bigger U.S. soy crop.”

And the AP reported yesterday that, “Wheat prices logged their biggest decline in a month Monday, sliding for a second day because of the higher crop estimates released last week by the U.S. government.

“December wheat fell 28.75 cents, or 3.2 percent, to settle at $8.5775 a bushel. That’s the biggest drop since Oct. 12. The grain has gained about 30 percent since the start of the summer because of a jump in corn and soybean prices. Wheat can be used as a substitute for corn for some uses, such as cattle feed.

“The Department of Agriculture predicted in its monthly report Friday that 704 million bushels of wheat will be available in 2013, compared with 654 million bushels in its October estimate.”

Hannah Karp reported in today’s Wall Street Journal that, “Dairy farmers around the country have been pushed to the brink lately by drought and skyrocketing feed costs. But in California they are also battling another force: cheese makers.

“The state’s dairy industry, one of the country’s biggest, has been squeezed for years by soaring feed prices and slowing economic growth. Elsewhere, those conditions have caused milk production to shrink, pushing up prices. But in California, farmers say gains from higher prices have been muted by the state’s formula governing the price that cheese makers pay for their milk—a quirk in state rules that some farmers say has forced them out of business.”

The Journal article pointed out that, “After years of profits, Greg Anema’s dairy farm in Chino, Calif., started to suffer when corn prices spiked in 2006 and increased the cost to feed his 3,400 cows. It got worse after the global economic slowdown hit demand for milk.

Now, Mr. Anema says he is closing his family’s dairy because it has been selling milk to California cheese makers for far less than it would have fetched in other states for the past two years.”

Some 100 California dairy farmers are shutting their doors this year, according to the Milk Producers Council, a group representing dairy farmers. Many of the state’s roughly 1,600 dairy farms are wrestling with financial difficulties. And many farmers point their finger at California’s ‘Class 4b’ milk regulation, which governs the prices cheese makers pay,” the Journal article said.

Meanwhile, the AP reported yesterday that, “Missouri Gov. Jay Nixon and the barge industry are imploring the federal government to take steps to keep enough water flowing on the drought-ridden Missouri and Mississippi rivers to avert a potential ‘economic disaster.’

“Nixon sent a letter Friday to the Army’s assistant secretary urging the Army Corps of Engineers to continue providing sufficient water flow from the Missouri to the Mississippi River. Current corps plans would reduce the amount of water released from the Missouri’s upstream reservoirs starting next week.”

 

Energy

Elisabeth Rosenthal reported in today’s New York Times that, “The United States will overtake Saudi Arabia as the world’s leading oil producer by about 2017 and will become a net oil exporter by 2030, the International Energy Agency said Monday.

“That increased oil production, combined with new American policies to improve energy efficiency, means that the United States will become ‘all but self-sufficient’ in meeting its energy needs in about two decades — a ‘dramatic reversal of the trend’ in most developed countries, a new report released by the agency says.”

The Wall Street Journal editorial board noted in part today that, “This is a real energy revolution, even if it’s far from the renewable energy dreamland of so many government subsidies and mandates. In his 2007 State of the Union, George W. Bush—the Oil Man President of liberal myth—said America was ‘on the verge of technological breakthroughs that will enable us to live our lives less dependent on oil.’

“His main solution: ‘We must continue investing in new methods of producing ethanol—using everything from wood chips to grasses to agricultural wastes.’ The wood-chip revolution remains nowhere in sight, though that didn’t stop President Obama from doubling down on the taxpayer investment in renewables, with similarly failed results.”

Keith Good

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