FarmPolicy

April 21, 2014

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

Budget Issues

Kevin Robillard reported yesterday at Politico that, “Senate Finance Committee Chair Max Baucus wants to protect an estate tax reduction from any deal averting the fiscal cliff, according to his hometown newspaper.

“Baucus told the Great Falls Tribune in an interview Sunday that he wants to keep the Bush-era rate for estate taxes in order to protect ranchers and farmers who pass their properties on to their children.

“‘…Baucus is working to preserve a reduction in estate taxes that exempts the first $5 million of an estate’s value for individuals and taxes the remainder at 35 percent,’ the paper wrote, but didn’t include direct quotes from Baucus on the topic.”

Yesterday, in his weekly column, Sen. Mike Johanns (R., Neb.) indicated that, “The estate tax currently provides an exemption for all estates valued at $5 million or less.  Anything valued in excess of $5 million is taxed at a rate of 35 percent when it is passed to beneficiaries. If this tax policy is left unaddressed, those rates will significantly change come January.  The exemption will drop to $1 million, with anything above that taxed at a staggering 55 percent.  A $1 million threshold might seem like a lot, but rising farmland prices are pushing the value of ag operations into the stratosphere. The average price for an acre of farmland has ballooned from $1,503 in 2010 to $2,425 today, according to the University of Nebraska Department of Agricultural Economics. Nebraska’s average farm size is 966 acres. Thus, one could estimate the average farm value based on land alone at more than $2.3 million, well above the lowered exemption.

“Farmers and ranchers, many of whom have had land in their families for generations, should not be forced to pay Uncle Sam more than half the value of their estate. And producers should not be forced to sell land to avoid the impacts of the fiscal cliff. Unfortunately, I’ve already heard from Nebraskans who are facing this very dilemma.”

Meanwhile, Sen. Jerry Moran (R., Kan.) was a guest on yesterday’s AgriTalk radio program with Mike Adams where the discussion focused on budget issues.  In particular, Sen. Moran noted that currently there was no evidence to indicate that the potential of increased federal revenue would necessarily be allocated to deficit reduction, as opposed to federal spending.  To listen to a portion of yesterday’s program, just click here (MP3- 2:53).

Likewise, Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “Senate Budget Committee ranking member Jeff Sessions (R-Ala.) said Monday that he and many other Republicans are looking for assurances from Democrats that the additional tax revenue they are proposing in the ‘fiscal cliff’ talks would be used for deficit reduction.

“But Sessions said on Fox News that so far, Democrats have not offered this assurance, which is making it difficult to advance the negotiations.”

Robert Pear reported in today’s New York Times that, “In failed deficit reduction talks last year, Mr. Obama signaled a willingness to consider substantial changes in the social safety net, including a gradual increase in the eligibility age for Medicare and limits in the growth rate of future Social Security benefits. An urgent question hanging over the new round of deficit talks is which of those changes Mr. Obama and Congressional Democrats would accept today…Republicans insist that changes in the major entitlement programs be on the table in exchange for their willingness to accept increases in tax revenue. But Democrats have given no indication that they are willing to consider policy changes or savings of the magnitude demanded by Republicans. The underlying dispute highlights a reason the politics of the deficit are so thorny: even as many voters say they want Washington to reduce the budget deficit, they oppose many of the benefit cuts and tax increases that could help achieve that goal.”

Zachary A. Goldfarb and Lori Montgomery reported in today’s Washington Post that, “[Pres.] Obama telephoned House Speaker John A. Boehner (R-Ohio) and Senate Majority Leader Harry M. Reid (D-Nev.) over the weekend, in a sign that high-level negotiations are advancing with only weeks to go before an automatic series of spending cuts and tax hikes starts to hit nearly every American.

“Boehner, meanwhile, was laying plans Monday for top Republicans to meet with Erskine Bowles, a chief of staff in the Bill Clinton administration who also has close ties to Obama’s White House.”

And Daniel Strauss reported yesterday at The Hill Online that, “House Majority Leader Eric Cantor (R-Va.) on Monday said Republicans were showing openness to new revenues in a deficit-reduction plan because they understood they were elected to ‘fix problems’…Cantor said lawmakers understood the seriousness of the ‘fiscal cliff’ challenge and were ready to take steps to prevent another recession. But he cautioned that Republicans would not back increasing tax rates.”

 

Farm Bill

As budgetary variables continue to garner attention, Sen. Dick Durbin (D., Il.) tweeted yesterday that, “The House returns today&still hasn’t taken up a #FarmBill to help the farmers that produced the food we all enjoyed for Thnksgiving.”

Sen. Durbin also tweeted yesterday that, “During this holiday season, the House should give our nation’s farmers the security they need to expand or grow&pass the #FarmBill.”

Rep. Tom Rooney (R., Fla.), in a column yesterday, noted that, “Like most conservatives, I don’t like subsidies or government intervention in markets. But I do like U.S. sugar policy, which, according to some, runs counter to these core conservative ideals.

“America’s sugar policy has my support and the support of so many other conservatives because it’s the best line of defense we have against an OPEC-like market that threatens our food security and 142,000 U.S. jobs.

“All of the 120 countries that produce sugar have governments that aid their sugar producers and protect their domestic sugar jobs in some way. They have to, because Brazil has used just about every trick in the subsidy handbook to build a market-manipulating empire.”

Rep. Rooney added that, “The policy we have chosen — placing tariffs on imported sugar — guarantees imports into the U.S. market (America is the world’s biggest sugar importer) but keeps subsidized foreign oversupplies from bankrupting U.S. producers. And, it operates without a federal budget outlay, which means it doesn’t cost taxpayers a dime.”

Julie Harker reported yesterday at Brownfield that, “When it comes to crop insurance coverage – the industry and farmers are saying ‘do no harm.’

Tom Zacharias is president of National Crop Insurance Services, a trade association that works for the companies that write the crop insurance business.

“He tells Brownfield that participation in crop insurance is high – 280 million acres covered this year. He credits the hard work of the industry and the USDA’s Risk Management Agency and farmers. ‘We’ve got a lot of acres enrolled, regionally,’ says Zacharias, ‘Coverage levels are up so farmers have adopted crop insurance and it’s the one thing that’s bankable. Bankers understand it. Farmers can use it to help market their grain crop. So, it’s fundamental to their operation.’”

A replay of a Brownfield interview with Dr. Zacharias is available here.

In other policy news, Wayne Pacelle, president and CEO of the Humane Society of the United States, and Gene Gregory, president and CEO of United Egg Producers, penned an opinion item recently at The Coloradoan (Fort Collins, Colo.) Online, noting in part that: “Last year, the United Egg Producers, which represents nearly 90 percent of the U.S. egg industry, and the Humane Society of the United States, the nation’s largest animal welfare group, agreed on a path forward to reform that will result in improved treatment of laying hens and give the industry a greater degree of confidence in the regulatory framework it must abide by. The legislation has also been endorsed by the Colorado Egg Producers Association and the Rocky Mountain Farmers Union.”

The column added that, “The current state laws scheduled to take effect in the near future call for higher standards, and the proposed federal legislation is therefore a form of regulatory relief from this patchwork of conflicting state laws.  An economic study conducted by the independent research group Agralytica indicates that the changes are expected to increase consumer prices by less than 2 cents per dozen, spread out over an 18-year period.”

This is the sort of problem-solving the country needs. Colorado’s members of Congress should enthusiastically support this legislation for the good of farmers, consumers and hundreds of millions of birds,” the authors said.

 

Agricultural Economy

John Schwartz reported in today’s New York Times that, “The drought of 2012 has already caused restrictions on barge traffic up and down the Mississippi River. But things are about to get a lot worse.

“As part of an annual process, the Army Corps of Engineers has begun reducing the amount of water flowing from the upper Missouri River into the Mississippi, all but ensuring that the economically vital river traffic will be squeezed even further. If water levels fall low enough, the transport of $7 billion in agricultural products, chemicals, coal and petroleum products in December and January alone could be stalled altogether.”

Today’s article added that, “‘Without the river, we’re in a world of hurt,’ said Kathy Mathers, a spokeswoman for the Fertilizer Institute. About half of the spring fertilizer that the industry sells to Midwestern farmers travels upriver, she said, and options to get the fertilizer to the fields by other means are few. ‘We know the rail cars aren’t there,’ she said. The corps reduces water flow from the upper Missouri every year as part of its master plan for maintaining irrigation systems and meeting other water needs of the region, which stretches from Montana to St. Louis. This year the process began on Nov. 11, as the corps began reducing water flows from the Gavins Point Dam near Yankton, S.D. The flow has already been reduced from 37,500 cubic feet per second to 26,500, and will reach 12,000 by Dec. 11.

“The plan, approved by Congress, has the power of law. ‘We do not have the legal authority to operate the Missouri River solely for the benefits of the Mississippi River,’ said Monique Farmer, a spokeswoman for the corps.”

An article yesterday at DTN reported (link requires subscription) that, “Winter wheat condition declined again during the week ended Nov. 25, according to USDA’s final weekly Crop Progress report of 2012…Winter wheat condition was reported at 26% poor to very poor, compared to 24% last week.”

The AP reported yesterday that, “Soybeans edged higher on concern that dry weather conditions in Brazil will harm this year’s crop.

“Soybeans for January delivery gained 6 cents, or 0.4 percent, to $14.2475 a bushel on Monday. The futures contract climbed as high as $14.35 during the day. Soybean prices are recovering, after slipping from their highest level in more than a decade in the summer.”

 

Climate Issues

Sarah Murray noted earlier this week at The Financial Times Online that, “The world’s farmers are the canaries in the mine when it comes to climate change. What affects farmers affects the global food supply and causes the price rises that hit middle class wallets and increases the risk of hunger for the world’s poor.

“Climate change is certainly not the only culprit when it comes to food insecurity. A complex cocktail of demographic, economic and policy changes can be blamed for increased pressure on the food supply.”

The FT item stated that, “First, increasingly affluent citizens in countries such as China and India want to consume more better quality food and meat, both of which are highly resource intensive.

“Competition for agricultural land has intensified, with increased biofuel production and expanding urban areas.”

Then, the article indicated that, “If these were the only pressures on the global food supply, feeding the world sustainably could still be achievable, says Jerry Nelson, a senior research fellow at the International Food Policy Research Institute (IFPRI). ‘If you didn’t have climate change, you could tell a story about how it will be challenging and how we need to invest more in productivity, reduce waste and manage international trade,’ he says. ‘But this would be something we could accomplish.

“‘When you throw climate change into the mix, that makes everything a lot more difficult.’”

The FT item pointed out that, “Among the examples of how this affects agriculture are the failure of Russian wheat crops in the wake of an unusually dry and hot summer, the severe drought in the US farming belt, decimating corn and soya crops, and the 2010 Pakistan floods, resulting in $2bn in agriculture-related losses.

Given the interconnected nature of global food markets, these losses do not only affect farmers in the regions concerned. Crop failures in one country lead to price rises in the countries that import those agricultural commodities.”

Ben Geman reported yesterday at The Hill’s Energy Blog that, “A senior State Department official says the U.S. is bringing a strong record on climate change into the latest United Nations negotiations on crafting an elusive global deal to curb greenhouse gas emissions.

“The Associated Press reports from Doha, Qatar — where talks opened Monday – that Deputy Special Climate Envoy Jonathan Pershing suggested that the U.S. deserves more credit.”

The Hill update noted that, “The talks open as President Obama’s second-term climate agenda remains a question mark. Earlier in November, Obama vowed to focus on the issue but didn’t lay out a clear agenda.”

John Broder reported in today’s International Herald Tribune that, “The last three United Nations climate change summit meetings have been disorderly affairs, marked by brinkmanship, breakdowns and a weary sense that there has to be a better way to address the intensifying challenge of a simmering planet.

“The meeting of the United Nations Framework Convention on Climate Change this year, which opened Monday in Doha, Qatar, promises to be a more staid affair than the three previous sessions — in Copenhagen in 2009; Cancún, Mexico, in 2010; and Durban, South Africa, last year. While there is always the potential for a diplomatic disaster at any negotiation involving 194 countries, the agenda for the two-week Doha convention includes an array of highly technical matters but nothing that is likely to bring the process to a screaming halt.”

Lastly today, Reuters news reported yesterday that, “Dairy farmers sprayed thousands of litres of fresh milk at the European Parliament in Brussels on Monday in protest at what they say are excessive milk quotas and prices below the cost of production.

“Hundreds of farmers and tractors from across Europe took up position in a park near the European Commission and a square in front of the parliament in the early afternoon, after blocking traffic along several of Brussels’ busiest streets.”

Keith Good

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