FarmPolicy

October 23, 2014

Farm Bill; Budget; and, the Ag Economy- Wednesday

Farm Bill Issues

David Rogers reported yesterday at Politico that, “Hopes of salvaging a long-term farm bill in this Congress are fading fast as Speaker John Boehner continues to resist including any such legislation in a year-end budget deal with President Barack Obama.

“Both the White House and Treasury Secretary Timothy Geithner have said savings promised from commodity subsidies could be part of a deficit reduction down payment this year. And as recently as last week, Agriculture Secretary Tom Vilsack urged farm bill negotiators to work ‘24/7’ so they could be the ‘caboose’ on any legislative train leaving before New Year’s.

“But sources familiar with the deficit talks paint a very different picture: of the speaker digging in, saying he can’t include the farm bill in any package for fear of losing more Republican votes.”

Yesterday’s article indicated that, “‘We can’t drop a farm bill in the middle of whatever is negotiated. A 1,000-page bill on top of whatever is negotiated will just make our vote situation harder,’ a Boehner aide told POLITICO. ‘If we can agree on a top-line number, we suspect the committees will have a much easier time getting to a bill next year under regular order.’

“This rankles farm bill supporters, since it was Boehner who blocked the House Agriculture Committee from even bringing its five-year plan – which was 594 pages, not 1,000 — to the House floor before the election. And Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) is still rooting for a ‘Christmas miracle.’”

Mr. Rogers explained that, “Indeed, if a deficit deal is reached with the White House, the best hope for farm bill supporters may be to have the Ag Committees included in an expedited deficit reduction and tax reform package to be completed next summer. This path has not been ruled out by Boehner and would likely set an August deadline for action.

“But beginning in May with winter wheat, farmers will have their own calendar to follow. And another layer of extensions will be needed to bridge this gap as early crops are harvested and new ones planted. If August becomes the new deadline for action, it also raises fresh questions about the fate of direct cash payments to producers due in October.”

In addition, the Politico article noted that, “This raises the question of some interim action. And just as important, will that stopgap include new dairy security provisions, including a controversial milk stabilization program, as part of any such extension?

Boehner has strongly opposed the stabilization language because of his own home state’s dairy interests in Ohio. But in this case, House Ag Chairman Frank Lucas (R-Okla.) has thrown in with Minnesota Rep. Collin Peterson, the committee’s ranking Democrat and the chief architect of the dairy security reforms.

“Peterson has adamantly opposed any extension because he wants to keep the pressure on for a five-year farm bill deal. But he told POLITICO Tuesday that he believes that goal is ‘dead for this session’ and his focus is on getting an extension acceptable to the producers with whom he has been aligned.”

The article continued, stating: “That would have to include his dairy security act with supply management tools to try to stabilize milk prices — a major priority for many producers, including some large dairy co-operatives, but strongly opposed by processors, such as companies like Kraft and Dean Foods.

“‘I’ve come to the conclusion that is it’s dead for this session,’ Peterson said of the five-year farm bill he and Lucas reported from their committee in July. But the Democrat said he also warned the White House that any farm bill extension — without the dairy language — risked a backlash from him and dozens of House lawmakers.

“‘I told the White House that if the dairy bill is not in, I will oppose the debt deal,’ Peterson told POLITICO. ‘I think I have 40 to 50 people who will follow me on that. I basically told the White House that you’d better be careful.’”

Also on the dairy issue, the AP reported yesterday that, “But if no fiscal agreement is reached, and the farm legislation is left adrift, farmers could face the prospect of returning to an antiquated system for pricing milk that would bring big price increases for consumers…[T]he problem is serious enough that industry officials are considering fallback options. The likeliest would have Congress passing an extension of current farm law, which would provide a temporary fix.”

And, Democrat Whip Steny Hoyer (Md.) tweeted yesterday that, “Said to reporters that while we’re focused on #fiscalcliff, there are also other items that need to be acted on: #VAWA, #FarmBill, #Postal”

Senator Al Franken (D., Minn.) was quoted in an article from late last week- where with respect to the Farm Bill- he noted: “Because it saves money in the budget, it really is all the more reason it should be part of any end-of-year package that addresses the ‘fiscal cliff.’”

Meanwhile, Senate Agriculture Committee Ranking Member Pat Roberts (R., Kan.) was a guest on yesterday’s AgriTalk radio program with Mike Adams where the discussion focused on the fiscal cliff and the Farm Bill (audio replay, FarmPolicy.com transcript).

In part, Mr. Adams asked: “Does the farm bill get wrapped in with whatever budget agreement they come up with?”

Sen. Roberts noted that, “That’s a very good question…[S]o if you need an offset to try to stop this sequester that would be so damaging, especially to our national security, here’s $24 billion that you could use, but oh, by the way, just pass the farm bill. And then our farmers, and ranchers, and lenders, and everybody in agriculture could at least have some degree of certainty.”

When discussing some of the issues that have arisen between the Senate and House on the commodity title, as well as regional concerns that have come up on Title I, Sen. Roberts pointed out that, “On price protection, the biggest issue for me, and I think the biggest issue throughout farm country, is not the price protection or what are all the specifics in the farm bill, it’s crop insurance… I don’t know what Mother Nature has in store. I don’t know what we’ve done to her. But she has not been very kind to us, and so we are going to be needing crop insurance for the third year in a row, and that’s the No. 1 issue that I get in farm country, that’s the No. 1 issue I’m trying to protect in the farm bill.”

Sen. Roberts added that: “But an extension gets you a new Congressional Budget Office baseline. That’s the money we have to deal with. And we don’t know what happens to direct payments, we don’t know what happens under an extension. You could be facing a very dire situation of trying to write a commodity program with no money.

“There’s also the danger—and I wanted to underscore this—with the administration sending signals in order to pay for the sequester, they’ll just take money that is going to be targeted to crop insurance and direct payments and just take the money. If they do that, that’s just going to cause a firestorm in farm country, and personally I’m very much opposed to that. I think that would be a very chaotic thing to do.

“So we’ve got pressures really, really forcing us to try to get something done here, both from the standpoint of an extension with no money and also the administration trying to rob the farm stagecoach.”

An update yesterday from the National Crop Insurance Services noted that, “As the claims come in from one of the worst droughts in decades, farmers and ranchers across the country are receiving indemnity payments for the losses they have incurred. As of December 17, more than $8.7 billion has been sent to farmers.”

Ken Anderson reported yesterday at Brownfield that, “Leaders of the Senate and House Ag Committees continue to discuss a farm bill compromise. But regional differences over the commodity title are still a sticking point.

“Iowa Senator Charles Grassley favors the Agricultural Risk Coverage program, which is contained in the Senate version of the farm bill.  He says it is more market-oriented than the Price Loss Coverage program, which is contained in the House Ag Committee’s version and is favored by Southern ag interests.

“‘The fact is the Price Loss Coverage program would take us back three decades in farm policy,’ Grassley says. ‘The program would have farmers farming for the program instead of farming for the market.’”

In separate developments, Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Over in the Senate on Tuesday, Sen. Jeff Merkley, D-Ore., filed an amendment to the Sandy disaster legislation that would extend for one year the livestock disaster assistance, as well as the Noninsured Crop Disaster Assistance Program, known as NAP. That program is typically used for fruit and orchard growers. The disaster programs expired last September, but it has been understood that the programs would be reauthorized in a new farm bill. While Merkley introduced the amendment, it was co-sponsored by fellow Democratic Sens. Max Baucus of Montana, Ron Wyden of Oregon and Claire McCaskill of Missouri, as well as Agriculture Committee Chairwoman Debbie Stabenow of Michigan.

“Stabenow spoke on the floor Tuesday, ‘We are still working very hard to complete a farm bill, to have the House take action, but in the meantime we have disasters that have occurred, and this — these provisions are lifted directly from what we already passed in the farm bill that address what has happened in terms of livestock drought and fires assistance for fruit tree growers, and we will be speaking at a later time about it. But these are essential to be included for thousands and thousands of farmers and ranchers across the country.’”

Mr. Clayton added that, “Yet Merkley’s amendment was then laid aside, which means it’s unlikely to be considered in the final passage of the disaster bill.”

A video replay of Sen. Merkley and Chairwoman Stabenow discussing this issue on the Senate floor yesterday can be seen at FarmPolicy.com Online.

The AP reported earlier this week that, “Several Republicans say they’re sympathetic to Sandy victims, but they favor a smaller aid package for the moment and suggest cutting other federal programs to pay for parts of it.”

Ramsey Cox reported yesterday at The Hill’s Floor Action Blog that, “[Sen. John McCain (R., Ariz.)] proceeded to list several measures he said were either unrelated to Hurricane Sandy recovery or aren’t considered emergencies, including fishery and drought funding that would go to states outside of the northeast.”

In other news, an editorial posted yesterday at the Omaha World-Herald Online stated that, “When Agriculture Secretary Tom Vilsack recently told farm leaders that rural America is becoming less relevant to the nation’s politics and must reverse that trend [related transcript of Sec. Vilsack’s remarks from Dec. 6], he raised some eyebrows. But there are some important facts that can’t be brushed aside in such a discussion.”

After a more detailed discussion, the opinion item concluded by noting that: “It’s not that rural America is irrelevant. It’s that too much of urban America doesn’t understand just how well rural America is working.

“It is Vilsack’s job to make sure that story is heard and understood.”

 

Budget

Paul Kane and Lori Montgomery reported in today’s Washington Post that, “House Speaker John A. Boehner (R-Ohio) veered off the bipartisan course he had been charting toward a broad tax-and-entitlement deal with President Obama and instead Tuesday pushed a GOP package to extend tax cuts for income up to $1 million.

“The move shook the Capitol after several days of significant progress between Obama and Boehner, who had moved closer to a pact raising taxes on the wealthy and curbing government spending, including on Social Security.

Boehner and his aides stressed that he was not giving up on talks with Obama over a broader deal. But the speaker said that the White House had failed to make an acceptable offer and that, as a result, he needed to move ahead with a more limited ‘Plan B.’”

The Post article added that, “At an evening meeting with House Republicans, Boehner made an urgent pitch for his new plan, saying it would lock in tax cuts permanently for more than 99 percent of taxpayers, even if millionaires’ tax rates increased. He said his approach would buy time so he could reach a final deal with Obama early next year to address the remaining portions of the ‘fiscal cliff,’ which includes automatic cuts in government spending and tax hikes.”

“Some Republicans see Plan B — in addition to spurring the White House to give more ground — as a necessary fallback. They doubt the gap between Obama and Boehner can be bridged before the end of the year. If talks were to collapse, the House would have acted to avert the worst effects of the fiscal cliff, putting the responsibility on the Democratic-controlled Senate for whatever happens next,” the Post article said.

Catherine Hollander reported yesterday at National Journal Online that, “‘Clearly the Speaker is frustrated with the lack of responsiveness from the president and the White House staff. He’s trying to come up with a way to make things happen,’ said Rep. Frank Lucas, R-Okla., who chairs the House Agriculture Committee. ‘I respect and understand that. I have been trying to work on a farm bill for a while. I have some of the same frustrations.’”

Jonathan Weisman reported in today’s New York Times that, “Speaker John A. Boehner unveiled what he dubbed ‘Plan B’ less than 24 hours after President Obama offered a more comprehensive deal that would raise tax rates on incomes over $400,000 and, over 10 years, produce $1.2 trillion in tax increases and cut $930 billion in spending….Mr. Boehner pledged to continue negotiating on a broad deficit-reduction deal but called the president’s plan unbalanced and insufficient.”

With respect to the GOP “Plan B” outline, Janet Hook, Carol E. Lee and Corey Boles reported in today’s Wall Street Journal that, “The bill also would block an impending increase in the estate tax and extend the current rate of 35% on estates valued at more than $5.12 million. Without action, the estate tax would jump to 55% on all estates valued at more $1 million on Jan. 1.”

More specifically on the estate tax issue, Marcia Zarley Taylor reported yesterday at the DTN Minding Ag’s Business Blog that, “Farm families feel like they’re playing estate tax roulette as the $5.12 million per person federal estate tax exemption is set to expire Jan. 1–and for good reason. Adding to the anxiety of where Congress will reset estate tax treatment is that superheated land markets have tripled the values of many Midwest farms since 2000–and suddenly trapped many landowners with million-dollar taxes on property they’ve owned for decades and never planned to sell.”

Julie Harker reported yesterday at Brownfield that, “As in other states in the farm belt, farmland prices in Missouri have risen to record high levels. Driven by high commodity prices and low interest rates, Missouri farmland prices mid-year were up 19%, pastureland is 18% higher and non-ag lands are up nearly five-percent compared to July 2011.”

In his interview yesterday on AgriTalk, Sen. Pat Roberts noted on the estate tax issue that, “Seventy percent of rural American farmers and ranchers are going to be hit with this mess if, in fact, the proposal goes back to where it used to be, those taxes go up to 55%, the exemption is down to one million. Look at the land values today in regards to producers across the country. A lot of people are going to be hit with that.  We call it the death tax. Shouldn’t even have that tax. But at the very least we should go back to the compromise reached by Senator John Kyl of Arizona, where you have five million and it stays at 35%.”

 

Agricultural Economy

Bloomberg writer Tim Jones reported yesterday that, “Efforts to clear the drought- depleted Mississippi River will proceed without the aid of explosives as the U.S. Army Corps of Engineers has opted, for the moment, to jackhammer submerged rock obstacles in hopes of opening the waterway for barge traffic.

“While blowing up the so-called pinnacles, submerged formations south of St. Louis that hinder passage in the low- level Mississippi, remains ‘on the table,’ a Corps spokesman said a ‘hydro hammer’ will be used to break up the rocks.”

A report yesterday at RadioIowa Online noted that, “The U.S. Army Corps of Engineers will be increasing Missouri River flows from Gavins Point Dam, near Yankton, South Dakota, instead of cutting back flows as planned.”

The update added that, “Several governors and farm groups had been calling on the Corps to boost Missouri River levels to bring up the Mississippi River’s levels, too, as barge traffic may be impacted. This move today is coincidental.

“[Jody Farhat, chief of the Corps’ Missouri River Basin Water Management Division in Omaha] says the releases into the Missouri won’t have any impact on the near-record low Mississippi River.”

And, Ian Berry reported in today’s Wall Street Journal that, “Soybean futures slid 2% after China cancelled a big order of U.S. supplies, raising questions about the strength of demand for the oilseed.”

The article added that, “The U.S. Department of Agriculture said Tuesday that China, the world’s largest soybean importer, cancelled a previous agreement to buy 300,000 metric tons of U.S. soybeans. A separate cancellation announcement also was presumed to be related to China.

“The cancellations came amid a growing feeling among traders that Brazil and Argentina, the world’s two biggest soybean producers after the U.S., are likely to produce large soybean crops next year that will replenish tight global supplies. China likely determined it could cancel the prior purchases and buy less-costly soybeans as South American supplies enter the pipeline, analysts said.”

Keith Good

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