FarmPolicy

October 25, 2014

Farm Bill; Budget; Ag Economy; Biofuels; and, Trade

Farm Bill, Policy Issues

Rebecca Berg reported yesterday at BuzzFeed Online that, “Add the farm bill to the host of other issues being weighed by lawmakers as part of discussions to avert the fiscal cliff.

“Sen. Debbie Stabenow said Tuesday that the bill, which allocates spending for farm subsidies and food stamps, is ‘very much part of the discussion right nowin fiscal cliff talks.

“‘Well, we’re a way to save money,’ said Stabenow, who heads up the Senate Agriculture Committee.”

The update noted that, “Tying the farm bill to fiscal cliff discussions could help revive debate about the measure and increase the odds of approval before the end of the year, during a particularly busy time for Congress.

“‘I’ve talked to the White House about including it as part of the package, and they are certainly very open to doing that,’ Stabenow said.”

Sam Goldfarb and Ben Weyl reported yesterday at Roll Call Online that, “Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., said she was hoping the Senate-passed farm bill’s $23 billion in mandatory savings could be used to help replace the automatic budget cuts. Stabenow said the White House was ‘very open to doing that.’”

White House Press Secretary Jay Carney, in a press briefing yesterday, mentioned the Farm Bill when asked the following question about the Midwest drought and Mississippi river (related article, “Drought-Parched Mississippi River Is Halting Barges”):  “The governors of Missouri, Illinois, Iowa and 15 senators and 62 members of the House have sent a letter to the administration calling attention to low water levels in the Mississippi River and thus threatening $7 billion worth of commercial traffic. And they’re requesting a presidential declaration of emergency to allow the Army Corps of Engineers to begin work on a project that would immediately help raise the water levels of the Mississippi…What kind of consideration is the White House giving to that request?”

Mr. Carney indicated that, “Well, first of all, I’d tell you that President Obama has been committed to ensuring that his administration takes every step possible to help farmers and ranchers affected by this disaster, the drought that you referred to. And as you know, the administration has taken a variety of actions to that end.

The president has also been clear that Congress must pass a comprehensive multiyear farm bill that no longer — rather, that not only provides much-needed disaster assistance but gets farmers and ranchers the certainty they deserve while enacting critical reforms.

“With regard to the specific request, I would refer you to the Army Corps.”

Also yesterday, DTN Political Correspondent Jerry Hagstrom reported (link requires subscription) that, “House Agriculture Committee Chairman Frank Lucas said Monday that he still favors passing a new farm bill before the end of the year, but is preparing a ‘backup plan’ involving an extension.

“Meanwhile, congressional aides and farm lobbyists said that writing and assembling the votes to extend the 2008 farm bill during the lame duck session may prove at least as difficult as finishing a new farm bill before Congress leaves town in mid-December.”

The DTN article noted that, “‘My goal remains to reauthorize a full five-year farm bill by the end of the calendar year,’ Lucas, a Republican from Oklahoma, told DTN.

“‘But, as chairman, I have to consider the limitations before us and plan accordingly,’ Lucas said.

“‘The responsible thing to do is to have a backup plan, and that backup plan entails an extension. There are still many questions about what an extension would look like and how certain programs without a baseline would be addressed, but what we know for certain is reverting back to an antiquated system that is permanent law is not responsible and not acceptable.’”

Mr. Hagstrom explained that, “But congressional aides and lobbyists in interviews over the past week said that the need to help dairy, livestock and fruit producers who have been hurt by this summer’s weather raises many questions about what kind of extension bill the House and Senate would support [see related DTN update, “Questioning the Logic of a Possible Farm Bill Extension”), how it would be financed and what would happen to the budgetary savings that the agriculture committees had offered as their contribution to reducing the federal deficit.”

Daniel Looker reported yesterday at Agriculture Online that, “On a day when political posturing in Washington sent the stock market plunging, Senator Chuck Grassley (R-IA) told reporters he remains optimistic that Congress will deal with the so-called fiscal cliff before the current lame-duck session ends next month. And he believes that differences between the House and Senate versions of a farm bill could be worked out even if the farm bill is thrown into any tax- and deficit-cutting legislation or agreement.”

Mr. Looker pointed out that, “If there is no vote and the farm bill gets wrapped into a bigger package of legislation, Grassley expected differences between the House and Senate bills to be worked out in a process similar to a year ago, when the leaders of both the House and Senate agriculture committees met behind closed doors to present a farm bill draft to the ‘super committee’ that tried, and failed, to find a way to trim more than $1 trillion from federal spending.

“The process would involve those four people, he said, (the committee chairs and ranking minority leaders). They would reach an agreement ‘and just give it to the legislators putting together the fiscal cliff legislation,’ Grassley said.”

Ferd Hoefner, the Policy Director at the National Sustainable Agriculture Coalition, penned an update yesterday at the AgChallenge 2050 Blog, and noted that, “Disaster, dairy, development, down payment and deficit reduction—those are the five key Ds of a farm bill extension should the effort to pass a new five-year bill yet this year stall out.”

Yesterday’s update fleshed out greater detail on each one of these “D” variables.

The “Washington Insider” section of DTN indicated yesterday (link requires subscription) that, “The situation in the House is especially messy, since leaders must decide if they are to follow regular order and allow floor debate for the committee-approved [Farm] bill or simply shoehorn some key provisions into a fiscal agreement — if there is one. More and more, it seems that the opportunity for regular order with its many, many steps has gone by, especially since Chairman Lucas thinks a full-fledged farm bill debate could chew up one of the remaining weeks in the session even if a modified closed rule were to limit amendments.

“In addition, it is becoming increasingly clear that advocate groups are underestimating the amount of work remaining on this bill. To pass as free-standing legislation, it must reconcile Senate and House positions on the Supplemental Nutrition Assistance Program (food stamps) and the large and serious regional and philosophical differences about the proposed safety net programs — and, their potential cost. Even the most optimistic advocates see a great deal of work remaining with deep differences to be bridged and very little time to do all of that.

“Then, like the fiscal cliff, there is the ‘farm bill cliff’ that will appear if no new bill emerges in the lame duck session — the permanent ‘snap back’ provisions that require re-implementation of commodity price supports dating back to 1949 that risk paralyzing markets and marketing with huge increases in supports. There is broad agreement that ‘something must be done’ to avoid that — perhaps a temporary extension of the 2008 Act. However, deciding how long such an extension should last and what should be included will be very difficult because all such decisions have cost and budget implications that are extremely controversial.”

Meanwhile, Sen. Tom Udall (D., N.M.) tweeted yesterday that, “The House returns today: they need to take up the Senate-passed #FarmBill and help #NM farmers & ranchers get back on track”

While, Rep. Joe Courtney (D., Conn.) tweeted yesterday that, “Heading back to DC today where important issues including passing the Farm Bill and avoiding the Fiscal Cliff are on the to-do list.”

And, a news release yesterday from Rep. John Garamendi (D., Calif.) stated in part that, “Today, [Rep. Garamendi] was recommended to serve as a Member of the House Agriculture Committee. He expects official approval at tomorrow’s Democratic Caucus meeting. Garamendi, a lifelong rancher and farmer, will join in bicameral negotiations on the farm bill, which could be voted on by the House in December.

“‘I didn’t enter Congress to twiddle my thumbs and sit quietly in the background. I must be where the needs of my district are and that’s in the final negotiations for the five-year farm bill. I want to thank Speaker Boehner and Leader Pelosi for giving me this opportunity to serve where I am needed,’ said Congressman Garamendi.”

In other developments, an update yesterday from USDA’s Risk Management Agency (RMA) indicated that, “[RMA] announced today that it will continue to update crop insurance premiums for corn, soybeans, grain sorghum, spring wheat, rice and cotton. Revised rates for corn and soybeans were offered in most counties in 2012. Revised rates for grain sorghum, spring wheat, rice and cotton will be available in 2013.”

And, Corey Boles reported yesterday at The Wall Street Journal Online that, “November’s elections promised to supercharge efforts to revamp the nation’s immigration system. An early test will come this week when the House takes up a bill that would make it easier for more foreign students to remain in the U.S. after graduating with advanced college degrees.

“The legislation pits advocates for a broad immigration overhaul, notably Democrats and the White House, against Republicans who favor a narrower approach for high-tech and engineering firms that are struggling to attract educated workers.”

The Journal article added that, “Also, Tuesday, a pair of retiring Senate Republicans, Jon Kyl of Arizona and Kay Bailey Hutchison of Texas, offered a measure aimed at giving young illegal immigrants a way to avoid deportation, a similar concept to a plan backed by Mr. Obama.”

 

Budget, Senate Rules

David Nakamura and Zachary A. Goldfarb reported in today’s Washington Post that, “The White House signaled Tuesday that it will try to marshal the momentum from President Obama’s reelection triumph into another victory at the negotiating table, launching a full-fledged public relations effort to avoid a ‘fiscal cliff’ that could jolt the nation back toward recession.

“Administration officials said Obama will hit the road this week for a campaign-style series of events with ordinary Americans, including a visit to a toy manufacturer in suburban Philadelphia on Friday. That trip and others will be aimed at increasing pressure on Congress to reach an agreement on heading off a series of automatic spending cuts and tax increases that are scheduled to begin in January.”

Steven T. Dennis reported yesterday at Roll Call Online that, “‘Rather than sitting down with lawmakers of both parties and working out an agreement, he’s [Pres. Obama] back on the campaign trail, presumably with the same old talking points that we’re all quite familiar with,’ [Senate Minority Leader Mitch McConnell], a Kentucky Republican, said on the Senate floor, a day after declaring the fiscal cliff talks at an ‘impasse.’

McConnell said that rather than beating up on the GOP, the president should be lining up Democratic support for changes to entitlements.”

Nancy Cook reported yesterday at National Journal Online that, “Congress returned to Washington this week, confronted with a calendar that leaves roughly one month to strike a deal on a wide range of more than $500 billion in tax and spending issues. For all of the optimism surrounding the initial meetings between leaders, very little progress has been made, according to congressional staffers and lobbyists familiar with the negotiations.”

Also, Seung Min Kim reported yesterday at Politico that, “Senate Majority Leader Harry Reid laid down a firm marker Tuesday: raising the debt ceiling has to be part of a deal on the fiscal cliff.”

And, Alexander Bolton reported yesterday at The Hill’s On the Money Blog that, “Senate Republican Leader Mitch McConnell (Ky.) is warning that Democrats could blow up fiscal-cliff talks by threatening to force a controversial rule change at the start of 2013.

“McConnell suggested Tuesday that Democrats would be wrong to think the threat of the so-called ‘constitutional option,’ also known as the ‘nuclear option,’ does not affect deficit-reduction talks.”

Mr. Bolton explained that, “The constitutional option is a controversial procedure for changing the Senate’s rules through a simple majority vote. It can take various forms, but the expected path in January would be for Reid to ask the Senate to adopt new rules without pausing for unanimous consent. The presiding chair, likely Vice President Biden, would back Reid’s motion and his ruling could then be sustained by a simple majority.”

 

Agricultural Economy

The USDA’s Economic Research Service (ERS) indicated yesterday that, “U.S. net farm income is forecast to decline almost $4 billion from its all-time high in 2011 [related graph].”

ERS noted that, “Median total farm household income increased by 5.3 percent in 2011, to $57,050, and is expected to increase another 1.0 percent in 2012, to $57,645. Most farm households, particularly those operating smaller farms, rely heavily on off-farm income–which is forecast to rise 3.4 percent in 2012. In contrast to the farm households that operate small farms, households associated with commercial farms derive more of their income from farming activities. Their median income from farming increased an estimated 7.9 percent in 2011 to $84,649, and their total household income also increased by 7.9 percent, to $127,009 [related graph].”

Also yesterday, ERS indicated that, “Government payments paid directly to producers are expected to total $10.9 billion in 2012, a 4-percent increase over 2011.  Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.98 billion for 2012.  This 5.7-percent increase in direct payments over 2011 is largely due to the fact that the percentage of base acres on which direct payments are made increased from 83.3 percent for the 2011 crop year to 85.0 percent for the 2012 crop year [related graph].”

Conservation programs include all conservation programs operated by the Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $3.7 billion in 2012 are largely unchanged from 2011,” the ERS report said.

Reuters writer Charles Abbott reported yesterday that, “Feed costs are up 18 percent this year, the USDA said. Feed would account for 40 percent of the overall increase in costs.

“‘Despite gains in almost all sources of farm income, larger increases in farm expenditures, especially for purchased feed, have more than wiped out those price-led gains to farm income,’ [ERS] said.”

The Reuters article added that, “The largest increases in farm income would come from insurance indemnities, the USDA said.

“So far, crop insurers have paid $6.3 billion on losses this year. Some analysts say the drought in the Farm Belt will drive indemnities to $20 billion, nearly double the record set last year.”

ERS also pointed out yesterday that, “The value of farm assets is projected to establish a new all-time high in 2012, at $2.54 trillion…The projected rise in farm sector assets in 2012 is due mainly to a projected 7.6 percent increase in the value of farm real estate. Despite the 2011 and 2012 droughts, farmland values are expected to continue rising, given the strength of commodity prices, accommodating interest rates, and expectations of continued favorable net returns both from the market and from government programs.”

In a statement yesterday on the farm income forecast from ERS, Sec. of Agriculture Tom Vilsack noted in part that, “This year, the farm safety net showed its mettle and merit, helping to deliver peace of mind to thousands of farmers and ranchers dealing with losses caused by natural disasters. It’s a reminder that Congress must do the same, and pass a comprehensive, multi-year Food, Farm and Jobs Bill that provides greater certainty for farmers and ranchers in the season ahead.”

Meanwhile, Owen Fletcher and Sameer Mohindru reported in today’s Wall Street Journal that, “U.S. corn prices soared this summer as drought destroyed crops, sending buyers scurrying for cheaper grains from other countries such as Brazil, Argentina and Ukraine.

“But now, U.S. prices have fallen [related graph] and supplies of corn elsewhere are drying up, prompting some traders to bet U.S. corn will soon be in demand once again.”

The Journal article indicated that, “Commodities traders and investors say they have noticed signs of rising demand for U.S. corn. A government report last week showed exporters had recently booked more orders than traders expected.

“Many buyers who fled U.S. corn turned to Brazil. The increase in demand will help the South American country more than double exports in the year ending June 30 of next year, according to the International Grains Council. But Brazil may be running into problems of its own. Traders say they have heard some producers are running out of corn to sell. Congestion at ports is delaying shipments. And prices of Brazilian corn are rising.”

 

Biofuels

Zack Colman reported yesterday at The Hill’s Energy Blog that, “A top oil-and-gas lobby is changing strategy and will press Congress to repeal a biofuel production mandate instead of pushing for piecemeal changes to the rule.

“The American Petroleum Institute (API) said Tuesday it believes the Renewable Fuel Standard should not be preserved, saying it is too hobbled by nagging problems.”

A news release yesterday from Growth Energy noted that, “Special interests will stop at nothing to discredit the success of renewable fuels created right here at home to ensure their lock on the fuels market goes unchecked.  They continue to protect the status quo, ensuring our addiction to foreign oil and preventing consumers a choice at the pump.”

And today, Rob Green, the executive director of the National Council of Chain Restaurants, penned a column in today’s Wall Street Journal titled, “A Mandate to Raise Food Prices.”  The subtitle of the column stated: “The cause of higher grocery bills isn’t the drought. It’s the failed federal ethanol policy.”

 

Trade

Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “A top Senate Democrat is hopeful that the upper chamber can clear a House-passed trade bill next week that targets human rights violations only in Russia.

“Senate Finance Chairman Max Baucus (D-Mont.) said Tuesday that he prefers legislation providing permanent normal trade relations (PNTR) with Moscow to focus solely on punishing human rights violators in Russia instead of a broader, global bill.”

The update added that, “The House bill, which passed Nov. 16, includes identical trade language to the Senate’s measure repealing the obsolete Jackson-Vanik law, a U.S. law aimed at encouraging the emigration of Russian Jews with the threat of higher tariffs. It specifically calls for denying U.S. visas and freezing the assets of Russian officials involved Magnitsky’s death.

“He [Sen. Baucus] told reporters he hoped the bill could be passed by the Senate next week and sent to President Obama for his signature.”

Keith Good

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