FarmPolicy

July 22, 2014

Drought- Farm Bill; Budget; and, Trade

Drought- Farm Bill Issues

Bloomberg writer Brian K. Sullivan reported recently that, “The drought that covers almost 62 percent of the contiguous U.S. states is second in size only to the Dust Bowl of the 1930s and may continue into 2013 in the southern Great Plains, government climatologists said.

“Forecast models suggest an area from parts of western Kansas south into Texas and west to New Mexico will probably see the drought continue until at least March, said David Unger, a meteorologist at the U.S. Climate Prediction Center in College Park, Maryland.”

The Bloomberg article pointed out that, “Drought conditions now cover 61.79 percent of the 48 contiguous U.S. states and 51.7 percent of the entire country, including Puerto Rico, according to the U.S. Drought Monitor in Lincoln, Nebraska.

“There is a chance the Ohio River valley will have above- average levels of rain and snow this winter, alleviating dryness in the soil before spring arrives, Unger said.

“The drought is one of 11 natural disasters that cost more than $1 billion in 2012, said Adam Smith, an applied climatologist at the National Climatic Data Center in Asheville, North Carolina.”

A news release last week from Purdue University indicated that, “One thing is certain for corn farmers in 2013, and that is the importance of risk management amid extreme uncertainty in yields and revenues, Purdue agricultural economist Chris Hurt says.

“Three years of below-normal corn yields and ongoing drought in the western Corn Belt have the potential to drive corn prices to record highs in the coming year, but a return to more normal yields nationwide could send corn prices on their largest-ever year-to-year decline. The wide range of possibilities makes growers vulnerable and emphasizes the need for a variety of risk management tactics.”

The Purdue update added that, “‘The key to risk management is to protect against the potential bad outcomes, but still leave opportunities to capitalize on potential good outcomes,’ Hurt said.

The first way to do that is with crop insurance. Farmers can choose from a variety of coverage types and levels that offer financial protection from low yields and prices. What makes crop insurance so desirable is that it doesn’t limit the revenue a grower can receive if yields or prices are high.

“‘Crop insurance is hugely important,’ Hurt said. ‘Sometimes growers are hesitant to sign up because the premiums have to be paid regardless of whether coverage is used. But I think a lot more people understand the value after the drought this year. If not for crop insurance, it would be depression in many farming communities right now.’”

With this background in mind, Daniel Looker reported last week at Agriculture Online that, “Recently the Environmental Working Group and a coalition of several conservative small-government organizations called for cutting $20 to $30 billion out of federal subsidies for crop insurance. That, along with ending the direct payment program and trimming other commodity programs could save the federal government $100 billion over 10 years, EWG argues.

“Thursday, Senator Tom Harkin (D-IA), a member of the Senate Agriculture Committee, said that he doesn’t believe the Obama Administration will push for crop insurance cuts.”

The article noted:  “‘That’s not something I’ve heard the White House press,’ he [Sen. Harking] told Agriculture.com. ‘I’ve gotten no calls from the Secretary of Agriculture.’

“The Obama Administration has proposed small cuts to crop insurance subsidies in its budget, but Harkin hasn’t heard any recent support for something that neither the Senate nor House agriculture committees included in their own versions of a farm bill.”

Meanwhile, Jerry Lackey reported earlier this week at The San Angelo Standard Times (Tex.) Online that, “The U.S. Senate approved its version of a new farm bill in June. The U.S. House Agriculture Committee passed its version later, but it never reached the floor of the House.

“‘We didn’t take our version of the (farm) bill to the floor because we simply don’t have the votes to get it passed,’ San Angelo’s Rep. Mike Conaway told delegates to the 79th Texas Farm Bureau meeting in Waco earlier this month.”

The article noted that, “Conaway, a Republican from Midland who also represents San Angelo and serves on the House Agriculture Committee, said the stalemate in Washington offers more questions about what happens after Jan. 1 when the current farm bill extension expires.

“‘It’s possible we could see a one-year extension,’ he said. ‘We all would like to see a full, five-year bill in place, but that scenario is not looking realistic at present.’”

An update earlier this week at WNYF- Fox News 28 (Watertown, N.Y.) Online reported that, “North country Congressman Bill Owens [D., N.Y.)] says he’s ‘very disappointed‘ with Speaker of the House John Boehner.

“Owens is frustrated because no farm bill has been brought up for a vote in the Republican-controlled House of Representatives; not the bill that passed the House agriculture committee with support from Democrats (including Owens) and Republicans, and not attempts at producing other versions of a farm bill.”

The update added that, “‘He said he (Boehner) will not, will not, put the farm bill on the floor, and would not even have included it in a fiscal cliff negotiated settlement,’ Owens said.

“‘So clearly, I’m very disappointed in the Speaker; he made representations they would do that, they walked away from those – this is very problematic.’”

Paul Tharp reported recently at The New York Post Online that, “The dairy industry is headed for its own fiscal cliff on Dec. 31. If Congress fails to pass a new farm bill, the government will be forced to buy milk at much higher prices — nearly double the current market rate.

“At the same time, milk consumption has been on the decline in the US. Last year, Americans drank 3.3 percent fewer gallons of milk, in part because of higher prices.”

In other news, Catherine Green reported today at the Los Angeles Times Online that, “In the last year, Prudential Financial Inc. has plowed money into lemons and avocados in Ventura County, almonds and mandarins in the Central Valley and strawberries in Santa Cruz County.

The insurance giant is just one of many players, including highly specialized investors and large pension funds, that have snapped up California farmland recently.

The buying spree has helped push farm and ranch land values to record highs, raising questions about how long the boom might last and what effect it might have on the state’s important agricultural sector.”

The article pointed out that, “The average cost of an acre of farm real estate in California rose to $7,200 this year, roughly $300 above last year’s record [related graph], according to the U.S. Department of Agriculture.

“Some of the highest-priced land is in the almond-growing region of San Joaquin Valley’s Tulare County, where an acre can fetch $15,000 to $19,000. Just two years ago, the price was in the $13,000-to-$16,000 range, according to surveys by the American Society of Farm Managers and Rural Appraisers’ California chapter.”

And, Stephanie Strom reported in today’s New York Times (“In Hopes of Healthier Chickens, Farms Turn to Oregano”) that, “The smell of oregano wafting from Scott Sechler’s office is so strong that anyone visiting Bell & Evans these days could be forgiven for wondering whether Mr. Sechler has forsaken the production of chicken and gone into pizza…Off and on over the last three years or so, his chickens have been eating a specially milled diet laced with oregano oil and a touch of cinnamon. Mr. Sechler swears by the concoction as a way to fight off bacterial diseases that plague meat and poultry producers without resorting to antibiotics, which some experts say can be detrimental to the humans who eat the meat. Products at Bell & Evans, based in this town about 30 miles east of Harrisburg, have long been free of antibiotics, contributing to the company’s financial success as consumers have demanded purer foods.

“But Mr. Sechler said that nothing he had used as a substitute in the past worked as well as oregano oil.”

The Times article stated that, “There is growing concern among health care experts and policy makers about antibiotic resistance and the rise of ‘superbugs,’ bacteria that are impervious to one or more antibiotics. Those bacteria can be passed on to consumers, who eat meat infected with them and then cannot be treated.

“In November, the Centers for Disease Control and Prevention and 25 national health organizations and advocacy groups issued a statement on antibiotics that, among other things, called for ‘limiting the use of medically important human antibiotics in food animals’ and ‘supporting the use of such antibiotics in animals only for those uses that are considered necessary for assuring animal health.’”

 

Budget

Jeremy W. Peters reported in today’s New York Times that, “President Obama is planning to cut his Christmas vacation short and return to Washington to make a last-ditch push for a compromise on a tax and spending dispute that remains stubbornly unresolved.

“The White House said Tuesday that the president would leave Wednesday night. His family, however, will stay behind in Hawaii.

“Meanwhile, both chambers of Congress will come back from their holiday hiatus on Thursday and return to work. While there are growing signs that some members of both parties are prepared to accept a deal that raises taxes on people at the highest income levels, there is considerable distance between Republicans and Democrats and no guarantee that an agreement could pass.”

Michael R. Crittenden reported in today’s Wall Street Journal that, “Congress returns to Washington this week having made little if any progress in addressing the so-called fiscal cliff since lawmakers and President Barack Obama left town Friday for Christmas with deficit-reduction negotiations in tatters. That leaves almost no margin for error to avert the spending cuts and tax increases that are set to take effect in less than a week.

“Aides on both sides say they expect a potential solution to begin taking shape by the end of the week. Right now, however, the parties are engaged in a political staring contest. Both are wary of making the first move.

“Democrats say they need Republican assurances that whatever proposal they come up with will be able to speed through both the House and Senate. Republicans say they are wary of signing off on any proposal prematurely given the range of potential solutions available.”

The Journal article noted that, “In the coming days, lawmakers could pass a measure that extends current tax rates on the first $250,000 of household income, as Democrats have endorsed. This would require little deal-making. But it gives Republicans little to embrace. It also wouldn’t address other issues, including the expiration of unemployment benefits and the imminent expansion to millions of additional taxpayers the alternative minimum tax, or AMT, intended to prevent the very wealthiest from avoiding taxes by accumulating too many deductions and credits. Also unclear: the fate of the spending cuts.

“Democratic aides noted that some Senate Republicans have suggested they could support this approach, which would put immense pressure on House Speaker John Boehner (R., Ohio) to follow suit.”

“Officials also could negotiate a pared-down package that addresses the tax rates and adds other items members of both parties want to tackle. Lawmakers from both sides of the aisle want to pass at least a temporary measure to block a big cut in payments to doctors under Medicare, a fix for the AMT and a provision that would avert an increase in the estate tax,” today’s article said.

Meanwhile, Zachary A. Goldfarb reported in today’s Washington Post that, “Democrats seeking a deal to avert the year-end ‘fiscal cliff’ are trying to etch into stone the signature economic achievement of Republican President George W. Bush by permanently extending tax cuts enacted during his tenure.

“President Obama has put the extension of the tax cuts for most Americans at the top of his domestic agenda, a remarkable turnaround for Democrats, who had staunchly opposed the tax breaks when they were written into law about a decade ago…While it is increasingly unlikely that the two parties will reach an agreement to avoid the fiscal cliff before Jan. 1, it is all but certain that their ultimate deal, whenever it comes, will make permanent the lower rates for most Americans.”

And, Sudep Reddy reported in today’s Wall Street Journal that, “Washington’s budget gridlock is unsettling consumers and businesses, raising the risks that economic growth would be hurt next year no matter what Congress does in the coming days… Aides in both parties say they expect a potential solution to start taking shape by the end of the week. But with so little time, hopes are dimming for anything other than a partial agreement, which would prolong the uncertainty and leave in place some tax or spending measures that act as a serious drag on the weak recovery. This could even trigger another recession, exacerbating the global economic slowdown.”

 

Trade

Matthew Dalton and Stephen Fidler reported in Monday’s Wall Street Journal that, “The U.S. is considering the initiation of talks soon on a trans-Atlantic trade deal aimed at opening Europe’s protected agriculture markets, eliminating tariffs, and cutting regulations that curb trade and cross-border investment.

“An accord between the U.S. and the European Union would be among the most complex and ambitious trade agreements ever attempted, covering an economic relationship that is the world’s largest, valued at around €700 billion ($927 billion) of annual trade in goods and services.”

The Journal writers explained that, “U.S. officials are more open to the idea than they have been in years, even if they remain less enthusiastic than the Europeans. They view a sweeping trade agreement as a way to pry open Europe’s agricultural markets and possibly loosen restrictions on genetically modified crops that the U.S. has long criticized.

“U.S. officials say there has been no political decision yet in Washington to pursue such talks. They say President Barack Obama favors an agreement, but only if it is ‘comprehensive,’ opens European markets to U.S. farm exports, and can be concluded relatively quickly.”

Back on December 17, U.S. Trade Representative Ron Kirk was a guest on the AgriTalk radio program with Mike Adams, where in part, the conversation turned to the issue of a potential U.S.-EU trade agreement.  To listen to this portion of the AgriTalk program on this issue, just click here (MP3- 3:46).

And Elisabeth Malkin reported in yesterday’s New York Times that, “As tomato growers in Florida and some other states fight a 16-year-old agreement that they contend allows farmers in Mexico to export tomatoes at a price below their costs, the Mexican farmers are finding allies in the United States.

“The trade dispute highlights the network of interlocking interests between the countries under the North American Free Trade Agreement. Trade across the Mexican border is now worth more than $1 billion a day.”

Keith Good

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