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Farm Bill; Budget Issues; and, the Ag Economy

Farm Bill

David Rogers reported yesterday at Politico that, “In some of his strongest language to date, Agriculture Secretary Tom Vilsack warned Congress Thursday that it must pick up the pace of farm bill talks and can’t expect a fallback to prevent milk prices from spiking after New Year’s when the current dairy provisions expire.

“Vilsack said it was ‘unlikely’ there could be an extension of the current 2008 farm law, and House and Senate negotiators need to be meeting ‘24/7 until they get a resolution.’”

Mr. Rogers pointed out that, “‘I will do what the law requires me to do,’ Vilsack said at a brief press conference with reporters following a meeting on drought relief. ‘It’s fair to say milk prices will increase, and that’s an unfortunate circumstance … Consumers shouldn’t have to have higher milk costs because Congress can’t get its work done. This can be worked out. There has to be a little give, there has to be a little take … It’s just obviously going at a pace that needs to pick up.’

“Vilsack stopped short of saying he would call the two sides together again as he did on Nov. 29, when he hosted a meeting of the top four members of the House and Senate Agriculture Committees.”

Yesterday’s Politico article added that, “But back in the Capitol Thursday, the sniping continued.

“The Senate Agriculture Committee has been more aggressive, belittling the House’s bargaining position since the Republican leadership never allowed the House farm bill to come to the floor this year. But the end result has only been to harden the lines. And it’s almost as if the farm negotiators want to stage their own milk crisis to rival the ‘fiscal cliff’ talks that have consumed Washington.”

In conclusion, Mr. Rogers stated that, “After members of the Senate panel met Thursday and then spoke to reporters, House Agriculture Committee Chairman Frank Lucas (R-Okla.) and Minnesota Rep. Collin Peterson, the panel’s ranking Democrat, fired back this joint statement:

“‘When the Senate Ag Committee starts to negotiate in good faith with their House counterparts rather than through the press, we stand ready to work with them,’ the lawmakers said. ‘Contrary to what they would have you believe, this is not a rice, peanut and wheat issue. Rather, it’s about making sure policy is defensible to taxpayers and works for all commodities in all regions of the country.

“‘Having made a reasonable offer, we continue to wait for a balanced offer from the Senate so we can sort out the details.’”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “[Democratic Sen. Al Franken of Minnesota] said he agrees with the frustrations expressed by House Ag Committee Ranking Member Collin Peterson, D-Minn., that some of the sticking points should have been negotiated earlier. Still, Franken said he believes differences could be resolved quickly…‘It feels like they are close enough that all of this can be done within a day or so, you know, if push comes to shove,’ Franken told reporters. ‘I really feel we still can do it and it still needs to be part of a end-of-year package.’”

Also yesterday, Nebraska GOP Sen. Mike Johanns held a teleconference with reporters.  During that conference, the following exchange took place: “QUESTION: Senator Johanns, Brent Martin with Nebraska Radio Network.  What do you make of some of rumors that have come out of Washington that people want to tie the farm [bill] to any deal on the fiscal cliff. Is that reasonable? Is that at all possible?

“JOHANNS: It’s possible — it’s possible to tie the farm bill to the agreement on the fiscal cliff. There’s about $20 billion to $35 billion in potential savings, so it’s very tempting to take those savings and, you know, put those toward the fiscal cliff.

But I think that’s a bit of Hail Mary pass; I’m not convinced that’s going to happen. I’d love to see a farm bill done by the end of the year. But again, I think, trying to figure out how to get it done and then capture the savings for the fiscal cliff seems to me to be a very tall order, to be very honest about it.

“But any looking for some savings could go to the farm bill and try to pass it, and they would realize about $20 billion to $35 billion in savings.”

Sen. Johanns added that, “You know, if this were, you know, mid-August, it’d be a very serious proposal. But we’re closing in on mid-December, with a deadline of midnight December 31.  So it’s not that it isn’t serious; it’s just the calendar is now starting to work against these kinds of ideas.”

In yesterday’s DTN update, Mr. Clayton added that, “The Nebraska Radio report [“Efforts to tie farm bill to fiscal cliff intriguing, unlikely”] also quoted outgoing Sen. Ben Nelson, a Democrat, who also said it seems unlikely that agricultural leaders in Congress could reach a conclusion with time slipping away.”

Gary Truitt reported yesterday at Hoosier Ag Today Online that, “[Indiana GOP Senator Richard Lugar] said there is no chance a stand-alone Farm Bill will see action, but one could be included in a larger measure that deals with issues related to the fiscal cliff, ‘I think it is going to be almost a matter of chance. It will depend on if there is a legislative vehicle to which it could be attached.’ He added this vehicle would need to have a ‘must pass’ designation.”

Meanwhile, Agri-Pulse reported yesterday that, “Several senators wrote to leadership today, encouraging the inclusion of the farm bill in any year-end legislation. The group of 33 senators stated ‘with each passing day, the difficulty of enacting a farm bill before the end of this Congress grows.’

“‘Congress must do the responsible thing and pass a full, five year reform farm bill,’ concluded the letter to Majority Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky. ‘Accordingly, we urge you to consider folding in the Senate’s strong bipartisan bill in any end-of-year package.’”

Also yesterday, a news release from the National Farmers Union (NFU) stated that, “[NFU] President Roger Johnson sent a letter to U.S. President Barack Obama today underscoring the importance of including a farm bill in legislation being prepared to avoid the proverbial fiscal cliff.”

A recent report at WNAX Radio 570 (Yankton, S.D.) Online, noted that, “A new Farm Bill must be part of legislation addressing the Fiscal Cliff problem.  That’s according to South Dakota Congresswoman Kristi Noem who says savings contained in the farm bill plan outlined by the House Ag Committee and the Senate could help bring some relief to help avoid going over the fiscal cliff.”

During a news conference yesterday with other Senate Democrats, Majority Whip Richard Durbin (Il.) noted that: “I guess the obvious question the American people are asking and we’re asking is, what is John Boehner waiting for? Why hasn’t he brought up the Farm Bill that passed 175 days ago in the United States Senate, a bipartisan bill? It’s a bill that’s important to Ohio and Illinois and many other states, from farmers who are trying to recover from a pretty tough crop year. And yet, Speaker Boehner won’t call it for a vote.”

And in a very brief exchange on the House floor yesterday (video replay available here) Democratic Whip Steny Hoyer (Md.) asked Majority Leader Eric Cantor (R., Va.) about the status of the Farm Bill.  In response, Rep. Cantor stated: “As the Gentleman knows on the Farm Bill we are committed to trying to address the issue of the Farm Bill prior to leaving for the year.”

In more specific news on the “dairy cliff,” Jerry Zremski reported yesterday at The Buffalo News Online that, “If the ‘fiscal cliff’ alone is not enough to give you indigestion, here’s a new worry: Milk prices may be about to double as a result of a looming ‘dairy cliff.’”

The article added that, “Staffers on the House and Senate agriculture committees have been trying to hammer out details of a new five-year farm bill that could pass by the end of the year. As of Wednesday, they remained hung up on a disagreement about commodity price supports, according to sources close to the talks.”

Joe Olenick reported yesterday at the Niagara Gazette Online that, “In a conference call, [Sen. Charles Schumer (D., N.Y.)] urged the House to pass the bipartisan Senate Farm Bill in order to avoid ‘the dairy cliff,’ which would hurt consumers and farmers alike. The increased cost would rattle the marketplace, creating uncertainty for dairy farmers and hurt product demand, the senator said.”

Brian Nearing reported earlier this week at the Times Union (Albany, N.Y.) Online that, “U.S. Sen. Chuck Schumer [N.Y.] warned Wednesday that a partisan face-off in Washington over a federal farm bill could force a dramatic spike in milk prices starting next year.”

The article added that, “While that might seem like a financial windfall for farmers, a surge in retail prices could cause demand for milk and cheese to collapse, leaving fewer customers outside of the government.”

In other policy related news, a news release yesterday from USDA stated that, “In just four years, America’s top conservationists have enrolled 50 million acres in USDA’s Conservation Stewardship Program (CSP), a program that helps farmers, ranchers and forest landowners take conservation to the next level. CSP is aimed at producers who are already established conservation stewards, helping them to deliver multiple conservation benefits on working lands, including improved water and soil quality and enhanced wildlife habitat.”

And an update yesterday from USDA’s Farm Service Agency noted that, “Agriculture Secretary Tom Vilsack announced today that the U.S. Department of Agriculture’s measures to open conservation land to emergency haying and grazing during the 2012 drought freed up a record 2.8 million acres and provided as much as $200 million in forage for producers facing critical feed shortages.”


Budget Issues

Jonathan Weisman and Jackie Calmes reported in today’s New York Times that, “With time running short to work out a deal to avert a year-end fiscal crisis, President Obama called Speaker John A. Boehner to the White House on Thursday evening to try to move talks forward even as pessimism mounted that a broad deal could be struck that bridges the substantial gap between the parties on taxes and entitlements like Medicare.

“Mr. Obama and Mr. Boehner met for less than an hour, not an encouraging sign, with Treasury Secretary Timothy F. Geithner joining the talks. Afterward, as they did following a Sunday meeting, White House and Congressional aides issued near-identical statements saying only that ‘the lines of communication remain open.’”

The Times article stated that, “The speaker’s tone — and the hostile White House response — raised the level of pessimism that a wide-ranging agreement could be reached quickly to head off hundreds of billions of dollars in automatic tax increases and spending cuts beginning next month. Adding to the sense that the two sides might not come together, rank-and-file Republicans said the leadership had not begun laying the groundwork for a major concession on taxes.”

Lori Montgomery and Paul Kane reported in today’s Washington Post that, “Boehner’s meeting with Obama at the White House capped a week marked by increasingly testy relations between the two men, including a ‘tense’ telephone conversation Tuesday evening. Though the pair met Sunday and appeared to make progress, optimism quickly evaporated as Republicans accused the White House of dropping its demand for new taxes from $1.6 trillion over the next decade to $1.2 trillion — and then jacking it back up to $1.4 trillion.

“Boehner responded by sending the White House a ‘counter-offer’ that changed little from his original offer calling for $800 billion in new taxes over the next decade. By all accounts, the two sides also remained far apart on spending cuts, with Obama offering about $600 billion over 10 years and Boehner demanding about $1.3 trillion.”

Lisa Mascaro and Melanie Mason reported last night at the Los Angeles Times Online that, “Earlier in the day, a top Senate Democrat said increasing the Medicare eligibility age was off the table — an important stance to liberal Democrats.

“Publicly, the two sides appear to be drifting apart as Boehner, in a feisty moment during a morning news conference at the Capitol, insisted that spending cuts deeper than the president has proposed must be part of the deal.

“‘Spending is the problem,’ the Ohio Republican said, raising his voice at times as he pointed to a chart beside him. ‘That’s why we don’t have an agreement.’”

More specifically on the estate tax issue, Hayleigh Colombo reported yesterday at the Journal and Courier (Lafayette, Ind.) Online that, “Set to expire at the end of the year is a 35 percent tax on estates of more than about $5 million. The tax would increase to 55 percent on estates worth $1 million…[C]omplicating matters: Average-quality farmland in the area increased in value this year by nearly 20 percent, according to an annual Purdue University farmland survey, to $7,475 per acre. Top-quality land is $8,949. Poor-quality land is $6,121 per acre…‘The higher value of farmland has basically taken smaller farms that were normally not an issue and made them an issue,’ [Jeff Milligan, owner of Monticello-based CPA firm Baker Milligan] said.”

A news release yesterday from Sen. John Boozman (R., Ark.) noted that, “On the Senate floor [video replay of presentation], Boozman urged action during fiscal cliff discussions to prevent an increase to the death tax….More than 22 percent of Arkansas farm and ranch families could be forced to pay the government a large portion of their inheritance when a family member dies.”

Meanwhile, Mark Peters and Ian Berry reported in yesterday’s Wall Street Journal that, “Sales of land used to grow crops are surging, with owners capitalizing on a sustained rise in real-estate values driven by low interest rates and historically high prices for corn and soybeans. But the last straw for many prospective sellers has been Washington’s continued fiscal confusion and the prospect of higher taxes next year…‘It’s just amazing the amount of farm sales that are going on right now,’ Iowa Gov. Terry Branstad said in an interview.

“Gov. Branstad, like other observers, attributes the recent flurry of transactions to nervousness about the ‘fiscal cliff,’ a combination of spending cuts and increases in federal taxes that could start to take affect Jan. 1. Starting next month, the federal tax rate on capital gains is set to climb to 20% from 15%, while a new 3.8% tax on capital gains that is part of the health-care overhaul law also takes effect. Additionally a key exemption for land passed from one generation to another will drop to $1 million from more than $5 million under current law.”


Agricultural Economy

Matt Kelley reported yesterday at RadioIowa Online that, “Iowa Senator Tom Harkin says this week’s report on rising Iowa farmland values is worrisome. The annual study from Iowa State University found the average selling price for an acre of Iowa farmland was nearly $8,300, an increase of nearly 24-percent from a year ago.

“‘I am concerned about a possible land bubble forming out there on this,’ Harkin says. Authors of the study say record corn and soybean prices are part of the reason for the latest sizeable increase.”

A news release Wednesday from Purdue University stated in part that, “A return to more normal U.S. corn yields in 2013 could send new-crop prices spiraling downward, but persistent drought in some of the nation’s top corn-producing states could have the opposite effect, says Purdue Extension agricultural economist Chris Hurt.

“The U.S. Department of Agriculture predicts the midpoint of U.S. farm prices on 2012 corn will be $7.60 per bushel. If yields are more normal in 2013, Hurt said prices could fall by $2.10 to $5.50 per bushel – the largest ever year-to-year drop.”

However, the release added that, “But normal 2013 U.S. corn production is nowhere near assured, especially if drought centered in the western Corn Belt and Great Plains states persists into the growing season.

Twenty-five percent of Minnesota, 42 percent of Iowa, 63 percent of South Dakota and 96 percent of Nebraska are in extreme to exceptional drought – the two worst categories. All four are among the top six corn-producing states.

“‘U.S. corn yields have been below trend for three years, and more farmers now recognize the possibility of four poor crops in a row,’ Hurt said. ‘This, of course, means that normal crops and sharply lower prices are far from a reality. Prices won’t move sharply lower until crop production becomes more assured as the 2013 season progresses.’”

A recent update of the U.S. Drought Monitor is available here.

Keith Good