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Drought Impacts Persist; Farm Bill; and, Budget Issues

Posted By Keith Good On November 23, 2012 @ 3:11 am In Agricultural Economy,Budget,Farm Bill | Comments Disabled

Annie Gowen reported on the front page of Thursday’s Washington Post that, “Scorching drought and rising demand across the globe have pushed the price of U.S. food exports to record highs this year.

“That is good news for American farmers. But it’s bad news for the hungry, especially on the eve of the holiday season.

The booming market means that the federal government does not need to buy as many excess crops from farmers, resulting in a precipitous drop in government donations to food banks.”

Ms. Gowen noted that, “The effects can be seen even in the Washington area, home to seven of the most affluent counties in the country.

“The Capital Area Food Bank, the central supplier of food for more than 700 pantries and nonprofit groups that help the region’s needy, has seen government food donations plummet 38 percent this year — about 1.5 million pounds of food.”

The Post article explained that, “Bonus commodities were down 27 percent nationally this year until a $170 million purchase of meat this summer to help farmers affected by the drought, according to Feeding America, the consortium of the country’s food banks. That meat will not begin making its way to the hungry until after the holidays.”

“The Agriculture Department typically has money budgeted each year to buy food for its emergency food-assistance program — about $260 million this fiscal year — and the bonus commodities add substantially to that steady donation. Bonus commodities have decreased from nearly 500 million pounds in 2010 to 371 million this fiscal year.

“But with agriculture prices up 6 percent since the recession and expected to remain high through next year, bonus commodities are unlikely to increase, experts say, although market forces are unpredictable.”

Yesterday’s article noted that, “‘Unless we see a sharp drop-off in prices, there will be less pressure for them in the future to make bonus buys than there has been in the past,’ said Patrick Westhoff, who directs the Food and Agricultural Policy Research Institute at the University of Missouri.

“Both versions of the Farm Bill pending in Congress call for expanding the program’s funding while cutting dollars for food stamps, but lawmakers may not act before the end of the year.”

Similarly, Reuters writer Lisa Baertlein reported earlier this week that, “The worst U.S. drought in more than half a century has weakened the safety net for the 50 million Americans who struggle to get enough to eat, and the nation’s food banks are raising the alarm as the holiday season gets into full swing.

“Demand for food assistance – unrelenting as the U.S. economy slowly recovers from the worst recession since the Great Depression – ticks higher during the winter holidays.

“This summer’s crop-damaging weather in the U.S. farm belt has driven up costs for everything from grain to beef. That means higher prices at the grocery store, but it also means the U.S. government has less need to buy key staples like meat, peanut butter, rice and canned fruits and vegetables to support agricultural prices and remove surpluses.”

The article added that, “Government commodity purchases through The Emergency Food Assistance Program (TEFAP) fell by more than half to $352.5 million for the fiscal year ended September 30, from $723.7 million three years earlier, according to the U.S. Department of Agriculture…[C]urrent proposals for the new U.S. farm bill – which sets funding for TEFAP and the food stamp program – include small increases for TEFAP.

“But those increases would be dwarfed by proposals for billion-dollar cuts to the food stamp program.”

Christianna McCausland reported earlier this week at The Christian Science Monitor Online that, “The great drought of 2012 has run its course on America’s farms. Grain producers have harvested shriveled corn and soybean crops. Livestock producers are cutting back herds to avoid higher feed prices.

But the drought’s impact on supermarket store shelves is just about to hit. Consumers can expect to start seeing the effects near the end of the year in the meat case and dairy section, spreading to the rest of the grocery store by mid-2013. The price effects are widespread because the dry spell hit crops fundamental to America’s food supply.”

Bloomberg writer Alan Bjerga reported on Wednesday that, “Americans may want to freeze the leftovers from Thanksgiving dinner, as retail food prices are expected to rise next year, sparked by the country’s worst drought in more than half a century.”

Mr. Bjerga explained that, “Next year, retail poultry prices are projected to increase as much as 4 percent, beef by 5 percent and dairy products by 4.5 percent because of higher feed prices and as herds thinned by the drought tighten supplies, the U.S. Department of Agriculture said. The drought’s effects on food prices may linger as late as 2016, said Christopher Hurt, a livestock economist at Purdue University in West Lafayette, Indiana.

“‘We haven’t seen the full adjustment from the drought yet. That takes time,’ Hurt said.”

Meanwhile, the AP reported yesterday that, “Prolonged drought is prompting some Midwest farmers to sell corn stalks they typically would treat as waste to feed hungry, hay-deprived cattle.

“The Columbia Missourian reports that area corn farmers are collecting stalks that usually are left in fields. The leftover stalks are known as corn stover.

“A market summary compiled by the Missouri Department of Agriculture shows that corn stover is selling in the state for $60 to $100 per ton, or $35 to $45 per large round bale. The state agency didn’t even track corn stover sales prices until this year, and nor does the National Agricultural Statistics Service, whose director says corn stover isn’t typically considered a farm commodity.”

Also, Dan Piller reported in yesterday’s Des Moines Register that, “Iowa farmers have been paid $520.5 million through Nov. 19 for losses on corn and soybean crops mostly damaged by the drought this summer.

“The $445.4 million paid to Iowa farmers for corn loss amounted to 71 percent of total crop insurance premiums of $627.7 million.

“Of those premiums, federal subsidies amounted to $363 million.”

In other drought related developments, The Des Moines Register editorial board pointed out earlier this week that, “In the spring and summer of 2011, Midwest governors accused the U.S. Army Corps of Engineers of negligently causing flooding along the Missouri River by releasing too much water from reservoirs in the Dakotas and Montana. Now the corps is being beseeched to increase flows on the Missouri to aid shipping on the Mississippi River…[A]bout the only thing keeping the lower Mississippi River open to barge traffic is the Missouri River, which is contributing 60 to 80 percent of the water south of the confluence of the two rivers at St. Louis. But the Corps of Engineers is scheduled to begin releasing less water from six dams on the Missouri to increase water stored for irrigation and recreation next spring and summer.

“Midwestern governors and member of Congress, including Iowa’s senators Tom Harkin and Chuck Grassley and four Iowa members of the U.S. House, have called on the Corps of Engineers to maintain the current release rates on the Missouri. That would allow time for river channel improvements to take place on the Mississippi that would permit barge traffic even after the corps resumes scheduled water release rates on Missouri reservoirs. The alternative is to shut down barge traffic until next March on the lower Mississippi.”

The Register argued that: “A temporary delay in reducing Missouri flows seems reasonable, but the corps is required to follow its annual plan for maintaining water levels on reservoirs it manages. That operating plan is approved by Congress. Because it would take too long for Congress to act on a temporary waiver of the Missouri River’s operation plan, the Obama administration should authorize the temporary delay.

“A failure to act could have serious economic consequences. According to the barge industry, 60 percent of the nation’s grain exports move by barge on inland waterways and eventually the Mississippi. Other industries could be affected beyond agriculture. Mississippi barges carry everything from coal and crude oil to raw materials for manufacturing and the finished products.”

Unfortunately, as 2012 draws to a close, drought recovery remains an issue.

The AP reported on Wednesday that, “The worst U.S. drought in decades has deepened again after more than a month of encouraging reports of slowly improving conditions, a drought-tracking consortium said Wednesday, as scientists struggled for an explanation other than a simple lack of rain.

“While more than half of the continental U.S. has been in a drought since summer, rain storms had appeared to be easing the situation week by week since late September. But that promising run ended with Wednesday’s weekly U.S. Drought Monitor report, which showed increases in the portion of the country in drought and the severity of it.”

The AP article noted that, “The report showed that 60.1 percent of the lower 48 states were in some form of drought as of Tuesday, up from 58.8 percent the previous week. The amount of land in extreme or exceptional drought — the two worst classifications — increased from 18.3 percent to 19.04 percent.”

The article added that, “The drought also has been intensifying in Kansas, the top U.S. producer of winter wheat. It also is entirely covered by drought, and the area in the worst stage rose nearly 4 percentage points to 34.5 percent as of Tuesday. Much of that increase was in southern Kansas, where rainfall has been 25 percent of normal over the past half year.

After a summer in which farmers watched helpless as their corn dried up in the heat and their soybeans became stunted, many are now worrying about their winter wheat.”

 

Farm Bill Issues

Tim Horan reported earlier this week at The Abilene Reflector-Chronicle (Kan.) Online that, “[Sen. Jerry Moran (R., Kan.)] said the number one issue facing Kansas farmers is rain, or rather lack of it.”

The article indicated that, “Also the farm bill expired Sept. 30, yet another task for Congress. ‘The Senate has passed one but not the House,’ Moran said. ‘In fact I went over and visited with House colleagues and encouraged them to develop a plan to get a farm bill passed. The House Agriculture Committee has passed its version of the farm bill and it has been announced by the leadership of the House that they will bring the topic of the farm bill to the House floor in this lame duck session.

“‘That’s good news. Assuming something passes the House, we’ll have to work out the differences,’ he added.”

And Tom Lawrence reported on Wednesday at The Daily Republic (Mitchell, S.D.) Online that, “‘I can encourage the House to take up the farm bill as soon as possible,’ [Sen. Tim Johnson (D., S.D.)] said during a meeting in Huron with farmers and others with ties to agriculture. ‘The House should pass something similar to the Senate bill.’

He said a six-month or one-year extension of the bill is an option, but the best solution would be for the House to pass it during this shortened session, and then have the two versions forged into one during a conference committee before President Obama can sign it into law.

“‘I can’t understand why they won’t pass a bill,’ Johnson said of the House.”

Lindsey Boerma reported yesterday at CBS News Online that, “The most realistic avenue to getting members of Congress to act on the urgency of a new farm bill before U.S. shoppers begin to find products like milk on supermarket shelves at ludicrous prices, some experts say, is to bundle it with the one thing on everyone’s mind as the year comes to an end: the so-called ‘fiscal cliff.’”

The update noted that, “A spokesperson for the House Agriculture Committee confirmed to CBSNews.com it’s ‘possible a farm bill could be part of a larger year-end package.’ Ranking members of both congressional chambers’ committees, though, insist they’re resolute to pass not just an extension of a prior farm program, but an entirely new law.”

 

Budget Issues

Jonathan Weisman reported in today’s New York Times that, “Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground.

“One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula. That plan would allow Republicans to say they did not back down in their opposition to raising marginal tax rates and Democrats to say they prevailed by increasing effective tax rates on the rich. At the same time, it would provide an initial effort to reduce the deficit, which the negotiators call a down payment, as Congressional tax-writing committees hash out a broad overhaul of the tax code.

“That idea could be combined with the reinstatement of tax code provisions that once prevented the rich from taking personal exemptions or itemizing deductions. Those rules were eliminated by the tax cut of 2001. Reinstating them would tack an additional one to two percentage points onto the effective tax rates of high-income households without raising the 35 percent rate, but which households would be affected has not been decided. In all, tax experts say, families in the top tax bracket would find their effective tax rate jump to 41 percent, even though the top statutory rate would remain 35 percent.”

Today’s article noted that, “President Obama met a week ago with House Speaker John A. Boehner of Ohio; Representative Nancy Pelosi of California, the House minority leader; Senator Harry Reid of Nevada, the majority leader; and Mitch McConnell of Kentucky, the leader of the Senate Republicans, and both parties emerged confident a deal could be struck.

Since then, progress has slowed considerably. The Congressional leaders had said that aides would provide concrete ideas by Wednesday on deficit reduction targets through revenue increases and changes to social programs, especially Medicare. White House and Congressional staff members did meet early this week, but no such ideas were produced. Democrats want Republicans to first define what they mean by ‘structural changes’ to Medicare and Medicaid. Republicans say Mr. Obama should make the first move, using what they say is the political capital gained by his re-election.

But aides involved in the negotiations said they remained confident, in part because many of the ideas that could break the impasse were fleshed out during successive but fruitless deficit negotiations between the president and Mr. Boehner and between Vice President Joseph R. Biden Jr. and Representative Eric Cantor of Virginia, the House majority leader, and during the deliberations of the Congressional ‘supercommittee’ on deficit reduction formed during the 2011 impasse over raising the nation’s borrowing limit. One Republican aide involved in the current talks said both sides believe a deal can be reached before Christmas.”

Keith Good


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