FarmPolicy

September 1, 2014

Farm Bill, Budget (Estate Tax), Ag Economy; and, Trade

Farm Bill Issues

David Rogers reported yesterday at Politico that, “House and Senate farm bill leaders are to meet again Wednesday in what’s become a political rollercoaster that risks tossing Congress into a flood of overpriced milk come Jan. 1.

“Just last week, the Agriculture Committees were predicting agreement soon on how to rewrite the commodity title and replace the current system of direct cash payments to producers. But Tuesday’s tone was much more skeptical, and House Ag Chairman Frank Lucas (R-Okla.) warned his party it had to be prepared ‘for how consumers will react at the grocery store when a gallon of milk doubles.’

“‘I was a very hopeful fellow a few days ago. I’m becoming pessimistic,’ Lucas told POLITICO after a meeting of House committee chairs in the Capitol. ‘I’m trying to explain to everybody what the consequences are. I’m going to push to the last moment, but I would acknowledge to you that if we can’t make progress, something has to happen.’”

Mr. Rogers noted that, “Within hours of one another, Lucas and Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) gave speeches Thursday saying a deal was within reach. So it seems too early – just based on Tuesday’s changed mood—to predict total doom.

“But having crunched more numbers in the interim, Stabenow and Lucas each acknowledged the need for more work. And there remains a real regional and philosophical divide over what approach to take.”

More specifically, yesterday’s Politico article pointed out that, “The cost of this proposal – called Agricultural Risk Coverage, or ARC — is almost $29 billion over 10 years. That produces a real net savings when compared with direct payments, but leaves no room for more traditional target price options — or ‘price loss coverage’ as Lucas calls it — favored by Southern wheat, rice and peanut growers.

“‘If not every region can participate in the program — and that requires choice — then you don’t have anything,’ Lucas told POLITICO. ‘If you come back with a proposal that fuzzes around the edges and pretends to be part of a comprehensive plan and it still doesn’t work for everybody, then you haven’t accomplished anything.’”

At the end of the Politico article, Mr. Rogers explained that, “To try to break the ice, a proposal was made in talks last week to effectively split the $29 billion and allow the House and Senate to each write up the program they want with half the money.

“The Lucas camp was described as pleased with the results after getting its score back from the Congressional Budget Office this week. But Stabenow said it became an ‘academic exercise’ since there was no way to preserve the ARC option given the interaction with other forms of crop insurance.

“‘We went to CBO and got numbers as well,’ she told POLITICO. ‘Because of the interaction with crop insurance, I’ve seen nothing where you could have a viable ARC program doing that.’”

Meanwhile, Iowa GOP Senator Charles Grassley was a guest on yesterday’s AgriTalk radio program with Mike Adams where the conversation touched on the fiscal cliff, Farm Bill, crop insurance and the estate tax.  An audio replay of yesterday’s AgriTalk discussion can be heard here (MP3- 12:50), while a FarmPolicy.com transcript of yesterday’s interview is available here.

On the Farm Bill, Sen. Grassley noted that, “We’re closer from the standpoint that there’s talks going on between the House and Senate on some sort of a compromise that you normally have in a conference committee, but it’s informal now because the House hasn’t passed a bill. Since the last time I talked to you, I think I can say it’s a little less likely a bill will come up separately in the House of Representatives.”

And on crop insurance, Sen. Grassley pointed out that, “So anybody that says crop insurance, you’ve got to do more to it, don’t forget $8 billion taken out of crop insurance in the 2008 Farm Bill and $6 billion taken out when they renegotiated these contracts, so crop insurance, based upon pre 2008 levels of expenditure, has already taken a $14 billion hit.”

Note that DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Farmers should expect to see crop-insurance options in 2013 similar to this year, crop-insurance experts told farmers Monday.

“A farm bill completed by the end of the year would likely reduce uncertainty in their favorite risk-management tool as well, but could force producers to make some tough decisions affecting both their commodity programs and insurance options.

“A panel of crop-insurance experts at the DTN/The Progressive Farmer Ag Summit laid out the possible options facing farmers. One of the biggest takeaways from the panel was that neither the House nor Senate versions of the farm bill make cuts to crop insurance. Thus, the best-case scenario for keeping crop-insurance choices for producers is to see a farm bill completed as part of the federal budget talks.”

Also yesterday, Sen. Jeff Sessions (R., Ala.) (video replay of remarks) and Sen. Patrick Leahy (D., Vt.) (video replay of remarks) spoke about Farm Bill issues and the SNAP program (food stamps) on the Senate floor.

Pete Kasperowicz reported yesterday at The Hill’s Floor action blog that, “Sen. Jeff Sessions (R-Ala.) on Tuesday called out U.S. Department of Agriculture (USDA) Secretary Tom Vilsack for avoiding questions on how food stamp funds are being spent, and warned that he would use all his powers in the Senate to force answers from Vilsack if necessary.

“‘The Secretary of Agriculture has a responsibility to answer,’ Sessions said on the Senate floor. ‘I don’t want to get in a fight with him, but if necessary I’ll use what abilities I have in the Senate to insist that we get responses.’

“Sessions, the ranking member of the Budget Committee, has pressed Vilsack for months to answer questions about how USDA is spending money under the Supplemental Nutrition Assistance Program (SNAP), formerly known as the federal food stamp program. Sessions has written Vilsack a few letters asking for explanations about USDA’s attempt to entice Mexican immigrants to sign up for SNAP, and whether USDA is properly enforcing U.S. law that denies people entry into the country if they are likely to become a ‘public charge’ that uses federal programs.”

On the other hand, Sen. Leahy spoke more positively about the SNAP program, and noted in part that, “With so many Americans still struggling to put food on the table, it is not only regrettable, but more than that, it is inexcusable that some House Republicans have turned to slashing central nutrition help for struggling Americans as a means to prevent action on the farm bill.” (Audio clip (MP3- 0:28)).

Complete remarks from Senators Sessions and Leahy yesterday can be read here (from the Congressional Record).

Also on nutrition issues, a news release yesterday from Rep. Adrian Smith (R., Neb.) noted that, “[Rep. Smith] released the following statement on changes to school lunch regulations allowing more meat and grains in meals:

“‘I appreciate the Department of Agriculture’s decision to allow for more grains and meat in school meals.  These changes are a step in the right direction and should be made permanent.  However, parents and local officials will need additional flexibility to implement the school lunch program to effectively meet their budgets and the nutritional requirements of their students.  These decisions are best made at the local level.’”

Rep. Mike Ross (D., Ark.) noted earlier this week that, “The farmers of our state and our nation need our help and Congress must put politics aside and pass a long-term Farm Bill. A new Farm Bill must continue the important safety-net programs our farmers rely on because our farmers deserve assurances from their government that we will stand beside them in times when market and environmental conditions are both favorable and unfavorable.”

And, Joel Senick reported this week at the Worcester Telegram and Gazette (Mass.) Online that, “If a farm bill fails to pass before the 112th Congress adjourns for good at the end of this month, legislators should draft a short-term fix for dairy producers, said U.S. Rep. James P. McGovern, D-Worcester, who sits on the House Agriculture Committee.

“‘We’ve got to figure out a way to make sure our dairy farmers don’t get the short end of the stick,’ Mr. McGovern said.”

The article added that, “If some form of dairy legislation does not pass Congress before the end of the year, the country would revert back to agriculture policy from the 1940s, called parity pricing. This would require the government to purchase milk above market rates, driving up its price, [Alan Everett, chairman of the dairy committee of the Massachusetts Farm Bureau] noted.”

 

Budget Issues (Estate Tax)

Bernie Becker reported yesterday at The Hill’s On the Money Blog that, “A group of wealthy people that includes Warren Buffett, George Soros and former President Jimmy Carter is pressing Congress to roll back estate tax parameters, saying the current set-up leaves ‘too much revenue on the table.’

“The group of roughly three dozen people released a statement on Tuesday calling for both the current estate tax exemption to fall, from roughly $5 million a person to $2 million, and for the rate to rise from a top level of 35 percent to a minimum of 45 percent.”

An update yesterday at the Senate GOP Policy Committee Online indicated that, “If President Obama and Senate Democrats do not act, the federal government will begin taking more than half the value of family farm estates exceeding $1 million beginning next year. This summer, Majority Leader Harry Reid and Senate Democrats passed legislation (S.3412) on a party-line vote that allows Washington to take up to 55 percent, a huge increase over today’s top rate of 35 percent, and drop the tax’s exemption from $5.1 million to $1 million. The lower exemption — combined with soaring farm real estate values — could put more than 420,000 additional farm estates at risk from the death tax.

John H. Cushman Jr. noted yesterday at The New York Times Online that, “Starting on Jan. 1, estates would be allowed to pass on only $1 million free of taxation, and the top effective tax rate on inheritance would rise to as much as 60 percent. This year, in contrast, the exemption from taxation is a bit more than $5 million per decedent and the top rate on taxable estates is just 35 percent…[P]resident Obama has suggested taking the estate tax back to where it was in 2009. That represents a middle ground, exempting inheritances up to $3.5 million ($7 million from a couple) and taxing the remainder at up to 45 percent.”

The Washington Post editorial board noted in part today that, “Long execrated by Republicans as a ‘death tax,’ the posthumous federal levy on accumulated wealth has Democratic detractors as well, especially those who represent significant numbers of rural landowners. Sens. Mary Landrieu (La.) and Mark Pryor (Ark.) want a one-year extension of the current, relatively light estate tax and have written to the Senate leadership promising to round up 60 votes for their position. This is in contrast to Mr. Obama’s proposed increase in the tax. Though not a signatory of their letter, Senate Finance Committee Chairman Max Baucus (Mont.), long a critic of the estate tax, has expressed sympathy for the position of Ms. Landrieu and Mr. Pryor.”

In his discussion on AgriTalk yesterday, Sen. Grassley noted that: “I hope we leave the law right where it is, at a $5 million exemption and a 35% rate. If we do nothing and go over the cliff, you go back to a million dollars at a 55% rate. If that were to happen, I don’t think we’d end up there. I think we’d end up with three and a half million and a 45% tax rate because that’s what is in the President’s mind, or in his budget of last February.

“But I think we’ve got a chance to keep it at $5 million because there’s six or seven Democrat senators, and I believe every Republican senator would be of this point of view, that it ought to be left right where it is, particularly with the big increase in the value of land that’s happened.”

More broadly on current budget issues, Lisa Mascaro and Melanie Mason reported last night at the Los Angeles Times Online that, “Optimism surrounding secretive high-level budget talks faded quickly Tuesday amid a fresh round of partisan finger-pointing, reducing the chances of a resolution to the fiscal standoff by Christmas.

“House Speaker John A. Boehner (R-Ohio) spoke to President Obama by phone late in the evening after presenting a GOP counteroffer.”

Jake Sherman and John Bresnahan reported yesterday at Politico that, “The bellowing on Capitol Hill about which side has offered more ‘specifics’ to resolve the fiscal cliff showdown masks a larger problem for Washington: The two sides are still hundreds of billions of dollars apart on revenue and entitlement cuts.

“Not to mention, Republicans and Democrats are also light-years apart on policy details that back up those budget targets.

“That’s why there’s increasing skepticism in Washington that a deal actually can be reached before Jan. 1, and the country will go over the fiscal cliff.”

 

Agricultural Economy

Dar Danielson reported yesterday at RadioIowa Online that, “The annual survey from Iowa State University shows farmland values increased almost 24-percent over last year to a new record high of an average cost of $8,296 dollars an acre.

“I.S.U. economist, Mike Duffy compiles the numbers for the survey. ‘Basically what we found was higher-quality ground moving at a pretty good level, and lower quality ground not increasing so much,’ Duffy says.”

Jonathan Knutson reported yesterday at the Grand Forks Herald Online that, “Yields and crop prices are the numbers that usually generate the most attention in agriculture, at least among people not directly involved with it. But quietly, behind the scenes, low interest rates are impacting most financial aspects of area agriculture…[F]armers, ag bankers and others say low interest rates are a factor in several important agricultural trends, including: Increasing land values. The return on investments such as certificates of deposit is extremely low, which makes buying farmland more attractive.”

Owen Fletcher and Bill Tomson reported yesterday at The Wall Street Journal Online that, “Wheat futures prices dropped 3.2% to fresh five-month lows after U.S. forecasters projected greater domestic supplies of the grain than analysts had expected.

“The U.S. Department of Agriculture estimated in a monthly crop report that U.S. wheat stockpiles at the end of the crop year next May will be 754 million bushels, well above analysts’ forecasts.”

The Journal writers added that, “The government also projected tighter-than-expected domestic supplies of soybeans, and it left unchanged its projection for U.S. stockpiles of corn next year. But the sharp decline in wheat pulled soybeans and corn lower as well as the day went on.”

Also, the AP reported yesterday that, “Work to explode barge-impeding rock pinnacles in the middle Mississippi River could begin as early as next week, about a month-and-a-half earlier than first projected. But concern remains that without additional water, barge traffic on the drought-riddled river is in jeopardy.”

Sen. Roy Blunt (R., Mo.) tweeted yesterday that, “The Corps is finally heeding my calls to expedite rock removal & help prevent a river crisis. Water releases from the MO River must be next.”

 

Trade

A news release yesterday from Sen. Bob Casey (D., Pa.) noted that, “Today, [Sen. Casey] called for action on Russia’s discriminatory trade practices toward the U.S. dairy industry in a letter to U.S. Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack. Specifically, Casey urged the Administration to push the Russian government to allow U.S. dairy exports.

“‘As the seventh largest exporter of dairy products in the United States, Pennsylvania could benefit from access to Russian markets,’ wrote Senator Casey. ‘If the U.S. made effective use of WTO mechanisms, it could hold Russia to international standards and begin to negotiate a trade position with the country.’”

As a side note, The Hill reported yesterday that, “Sen. Bob Casey (D-Pa.) will stay in the Senate and isn’t considering a 2014 run against Pennsylvania Gov. Tom Corbett (R), he told The Hill on Tuesday.”

Sen. Casey is a member of the Agriculture Committee.

Keith Good

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