FarmPolicy

October 21, 2014

Farm Bill; Budget; RFS; EPA; and, the Ag Economy

Farm Bill Issues

Reuters news reported late last week that, “On the same day a bipartisan bloc of senators called for speedy passage of the long-overdue U.S. farm bill, House and Senate negotiators blamed each other for a stalemate on how to cut crop subsidy spending by one-third.

“Agriculture Secretary Tom Vilsack, meanwhile, warned that there was no alternative to enacting a new five-year law, such as passing a temporary extension.”

The article noted that, “Negotiators are deadlocked on the size of potential cuts in food stamps for the poor, the largest U.S. anti-hunger program and the bulk of USDA’s spending.

“All the same, an agreement on crop subsidies is the linchpin to passing the farm bill.”

The Reuters article explained that, “The House and Senate farm bills would cut crop subsidy spending by one-third, or roughly $20 billion, over 10 years. But they disagree sharply over how far to go in reforming the network of farm supports that date from the Great Depression.”

“In part, the Senate-House deadlock is a dispute over how to revamp U.S. farm supports for an era of volatile market prices and tight supplies. It has elements of a regional dispute between the corn- and soybean-growing Midwest and the South, home to cotton, rice and peanuts.

Southerners say the Senate bill favors the Midwest with its plan to compensate growers when crop revenue is below average, and that insurance-like programs are ill-suited to their crops. Midwestern groups say the House bill allows unduly high supports for Southern crops and would put them at a disadvantage,” the Reuters article said.

In addition, the Reuters article reported that, “Also on Thursday, Mississippi Sen. Thad Cochran indicated he may try to replace Kansas Sen. Pat Roberts as the Republican leader on the Agriculture Committee in 2013.”

DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “The Senate-passed farm bill includes an Agricultural Risk Coverage program that would pay farmers for ‘shallow losses’ that crop insurance would not cover. That program is favored by corn and soybean producers and smaller crops.

“The House Agriculture Committee-passed bill includes a shallow-loss program, but offers farmers a Price Loss Program that would pay farmers if prices fell below certain target levels and raises target prices from current levels. Rice and peanut growers favor the House approach, while wheat growers are split over which approach is best.

“The Senate has made an offer to the House that would allow for a target-price-based program and would raise the baseline spending for rice, peanuts and wheat.”

Meanwhile, an update posted on Friday at the Prairie Farmer Online stated that, “The U.S. House and Senate are still hung up on their differences over the Farm Bill.

“‘I don’t see how this is going to come together before the end of the year,’ said Rep. Collin Peterson (D-Minn.), who spoke via telephone from Washington, D.C., to farmers gathered at the Prairie Grains Conference Thursday in Grand Forks, N.D.

“A Farm Bill could be part of a deal to avert the so-called fiscal cliff — a series of automatic spending cuts and higher taxes scheduled to begin in January unless Congress acts. But if the House and Senate don’t come to an agreement on the Farm Bill, then President Barack Obama (D) and Speaker John Boehner (R-Ohio) could cut their own deal on the Farm Bill as part of their negotiations.”

The update added that, “Peterson said they would likely eliminate direct payments and cut subsidies for crop insurance to come up with the $35-$50 billion in savings in cuts that Republican lawmakers are demanding.

“Peterson worries what a Farm Bill negotiated by the White House and Boehner’s staff might be like because ‘no one the room’ understands agriculture or how their decisions will affect farmers and ranchers.

“‘They will leave us with a mess,’ he said.”

Likewise, the AP reported on Saturday that, “Rural lawmakers worry that $9 billion in annual federal crop insurance subsidies are an easy target for spending cuts in a ‘fiscal cliff’ deal so they’re shopping around for a late compromise on a farm bill to protect them.”

The AP article added that, “The concern about the fate of crop insurance stems from previous efforts by the Obama White House to target the program for cuts. Obama proposed cutting the subsidies by $760 million a year in his budget proposal last February. Conservatives long have eyed the program as a pot of money that could be used for other things.

“Without giving details or numbers, Obama administration officials have made it clear in fiscal cliff negotiations that they see farm programs like crop insurance as a source for savings.”

Saturday’s article noted that, “Agriculture Secretary Tom Vilsack warned the congressional committees this past week that, if they don’t strike a deal soon, the White House and Republicans working to avert the fiscal cliff may cut farm programs that lawmakers want to protect.”

The AP indicated that, “‘Crop insurance proved its value once again this year by helping keep the rural economy on track and helping farmers pick up the pieces after a crippling drought,’ said Tom Zacharias, president of National Crop Insurance Services, an industry trade group. ‘Farmers are telling lawmakers to ‘do no harm’ to crop insurance.’”

On Thursday’s “All Things Considered” radio program (NPR- “Drought Continues: Farmers, Shippers Feel Pressure”) Oklahoma farmer Keith Kissling stated: “Well, we’re going to have to depend on federal crop insurance, it looks like, to get us through this year because it’s – they already know we’re in a disaster for yield in Oklahoma.”

Host Neal Conan asked Mr. Kissling, “How many more years can you stand?

Mr. Kissling replied, “Well, it depends on how many more years we have federal crop insurance. That’s what’s saving us. Our safety net’s saving us right now.”

Also, Sen. Ag Committee Member Amy Klobuchar (D. Minn.) noted on the Senate floor Thursday that: “I think the most common refrain I hear from the business community at home when we discuss what it will take to spur investment and create jobs— what they talk about is certainty. They need certainty. They need certainty if they are a farmer. We need to include the farm bill in this package [a fiscal compromise to avoid the fiscal cliff] so they know what they need to get for their crop insurance. They need certainty if they are a businessperson and deciding whether they should invest in new equipment, and they need to know exactly what the tax consequences and other consequences of that investment will be (Thursday, Congressional Record, at S7996)

Beyond the potential of a broad budget deal as a mechanism to move the Farm Bill, Daniel Looker reported on Friday at Agriculture Online that, “Some members of the U.S. Senate are looking for other ways to speed passage of a farm bill in addition to attempts to attach it to any legislation that might address the fiscal cliff, the year-end expiration of lower tax rates and cuts in federal spending that some economists predict would send the U.S. into another recession.

“In a closed door meeting of the Senate Agriculture Committee Thursday, members briefly discussed trying to attach a completed farm bill to any legislation that might be passed in the lame duck session of Congress to provide assistance to a $60.4 billion disaster aid plan for dealing with damage from Hurricane Sandy.

“‘It was at least brought up as a possibility. It was discussed,’ says a person familiar with the meeting.”

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “Lawmakers representing rural areas are making last-ditch efforts to negotiate a House-Senate farm bill compromise, hoping they can get a five-year farm bill attached to a fiscal cliff deal.

“‘Of course, the next week is pivotal,’ one congressional aide said.”

Yesterday’s update noted that, “House leaders have said they plan to ‘deal’ with the farm bill in the lame-duck session but have not tipped their hand as to how.”

Mr. Wasson explained that, “If the farm bill does not attach to a fiscal cliff deal, supporters are worried that the deal will specify a much larger cut to commodity programs for deficit reduction and then force committees to fight it out next year.

“‘We’d have to start the farm bill over with a huge gash in the middle of it,’ one source said.”

Pete Kasperowicz reported on Friday at the Hill’s Floor action blog that, “Both the House and Senate are back again next week in case they’re needed to pass legislation that helps avoid the fiscal cliff, and may end up staying through the weekend to work on that issue and several others.”

The House floor schedule for this week is available here.

And, the AP reported yesterday that, “[Sen. Charles Schumer (D., N.Y.)] says Sunday that House action on the bill is needed by Jan. 1 to avoid what he calls the ‘dairy cliff.’ He says the farm bill would bring back federal assistance that compensates dairy producers when milk prices fluctuate and feed costs jump.”

Also, a Chicago Tribune editorial noted yesterday that, “Food stamp costs—particularly the abuse of food stamps—need to be curbed. The House and Senate have different numbers in mind —the House is more ambitious. The best way to deal with food stamp policy is to decouple it from farm policy, so these programs can be judged on their own merits. They belong in separate bills, handled by separate committees.

“The White House and congressional leaders are in fiscal cliff negotiations precisely because Washington hasn’t in the past been able to make sound, specific decisions on necessary and unnecessary spending. The farm bill is a good litmus test of whether that will change.”

 

Budget

Lori Montgomery and Paul Kane reported in today’s  Washington Post that, “House Speaker John A. Boehner has offered to push any fight over the federal debt limit off for a year, a concession that would deprive Republicans of leverage in the budget battle but is breathing new life into stalled talks over the year-end ‘fiscal cliff.’

“The offer came Friday, according to people in both parties familiar with the talks, as part of the latest effort by Boehner (R-Ohio) to strike a deal with President Obama to replace more than $500 billion in painful deficit-reduction measures set to take effect in January.”

The Post article noted that, “Boehner’s offer signals that he expects a big deal with sufficient savings to meet his demand that any debt limit increase be paired dollar for dollar with spending cuts. That would permit him to keep a key vow to his party — and head off a potentially nasty debt-limit fight — at least until the end of next year.”

The article added that, “The White House rejected Boehner’s offer, saying it would raise too little cash to significantly dent record budget deficits and do nothing to extend emergency unemployment benefits into the new year, according to a Democrat familiar with the talks. But the offer was viewed as a breakthrough, the Democrat said.

“The offer also includes a proposal to raise tax rates for millionaires, generating as much as $460 billion over the next decade — about half what Obama has demanded from the wealthy, according to official estimates.

“Senior White House officials remained in contact with Boehner’s staff throughout the weekend in a sign that serious negotiations had finally begun after weeks of stalemate and partisan posturing.”

Janet Hook, Carol E. Lee, and Damian Paletta reported in today’s Wall Street Journal that, “Mr. Boehner’s proposal calls for a two-stage process, providing for enactment of a small-scale deficit-reduction plan by year’s end, coupled with a second phase next year, in which lawmakers would embark on a revamp of the tax code and entitlement programs, using a final agreement as a guide.”

The article added that, “In his new offer, Mr. Boehner for the first time formally offered to move off his party’s opposition to rate increases. The Boehner proposal would extend all current tax rates, while raising rates only for income above $1 million, which would rise to 39.6% from 35%. It would achieve nearly $1 trillion in revenue by also closing certain tax loopholes and limiting deductions, GOP officials said. Showing how the two sides are converging, Mr. Obama last week scaled back his initial demand for revenue increases, saying he could accept $1.4 trillion, and signaled a willingness to go lower.

“In return, Mr. Boehner is calling for at least $1 trillion in spending cuts to come in part from entitlement programs such as Medicare. GOP officials said a leading option is a proposal to slow the growth of Social Security benefits by deploying a new formula for cost-of-living increases.

 

Renewable Fuel Standard (RFS)

Zack Colman reported on Saturday at The Hill’s Energy Blog that, “House Republicans plan to put the renewable fuel standard on trial next Congress, a House Energy and Commerce Committee aide told The Hill.

“Committee staff is gearing up for hearings on the subject, citing recent concerns from the AAA motor club, automakers and the oil industry that the rule is pushing a high-ethanol fuel blend onto the market they say will damage cars.”

 

Environmental Protection Agency (EPA- Dust Issue)

John M. Broder reported in Saturday’s New York Times that, “The Environmental Protection Agency announced a new standard for soot pollution on Friday that will force industry, utilities and local governments to find ways to reduce emissions of particles that are linked to thousands of cases of disease and death each year.”

A statement Friday from Sen. Pat Roberts (R., Kan.) indicated that, “[Sen. Roberts], an outspoken critic of the Environmental Protection Agency’s (EPA) attempts to further regulate farm dust, today said the EPA announced that dust standards for farms and rural areas under the Clean Air Act will not be tightened as proposed but will instead remain the same.

“‘I am pleased the EPA made the commonsense decision to leave dust standards unchanged for rural America,’ Roberts said. ‘Whether it is cattle kicking up dust in a feedlot in Larned, Kansas or wheat being harvested on a hot afternoon on the High Plains in June, dust is a naturally-occurring event. It is critical to recognize that no one cares more about maintaining a clean environment than the American farmer and rancher, who know firsthand that clean air and water and healthy soil go hand-in-hand with a healthy economy. Our producers deserve respect and appreciation from the EPA, not costly and redundant regulation.’”

A statement Friday from Sen. Mike Johanns (R., Neb.) noted that, “‘Despite EPA having taken more than a year, I’m glad ag producers finally have it in writing that an absurd agency recommendation to double down on farm dust has been rejected,’ Johanns said.

“In 2011, an EPA report recommended regulating dust twice as stringent as current levels, but later reversed that decision. While today’s announcement is a welcome one, it does not prevent EPA from reviewing and revising dust regulations in the future. Johanns has previously introduced legislation to permanently prevent the agency from regulating farm dust, giving farmers and ranchers long-term, legal certainty.”

 

Agricultural Economy

Reuters writer Sam Nelson reported on Friday that, “Widespread rainfall expected over the weekend in the U.S. Midwest may help stabilize falling water levels on key river shipping routes in the United States, but more rain will be needed to bring water levels back to normal, an agricultural meteorologist said on Friday.

“The moisture also may help slow deterioration of conditions in the U.S. Plains hard red winter wheat region and in portions of the dry Delta/Southeast soft red winter wheat region.”

Stephanie Strom reported in today’s New York Times that, “Chobani, the yogurt company that grew from nothing five years ago to a roughly $1 billion powerhouse today, on Monday will formally open one of the world’s largest yogurt-processing plants in Twin Falls, Idaho.”

The article stated that, “The $450 million, 1 million square-foot plant is the company’s second. It will employ 300 people, and [Hamdi Ulukaya, founder and chief executive of Chobani] said for every 10 jobs it creates directly, it is expected to create roughly 66 additional jobs in ancillary businesses. ‘The state expects the total economic impact of our business there to be $1.3 billion,’ he said.”

The new plant is yet another sign of America’s growing appetite for yogurt and its willingness to embrace new brands over old, as evidenced by Chobani’s explosive growth as well as that of Fage and now, Muller Quaker Dairy, a joint venture between PepsiCo and Unternehmensgruppe Theo Muller, a privately held German dairy company.”

Keith Good

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