FarmPolicy

August 27, 2014

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

Farm Bill- Policy Issues

Yesterday afternoon on National Public Radio’s “Talk of the Nation” program (“The Consequences Of A Short-Term Farm Bill Fix”), Secretary of Agriculture Tom Vilsack and Iowa GOP Senator Chuck Grassley discussed Farm Bill issues.  A summary of the NPR program indicated that: “Lawmakers in Washington extended some provisions of the farm bill that expired in October. Subsidies for grain cotton and soybeans will be renewed, and budgets for some organic and environment initiatives will be cut. Since the extension only lasts nine months, many farmers are left with uncertainty.”

In particular, Sec. Vilsack explained that, “I think farmers are expressing some frustration about the fact that they were close to getting a five-year program that would have been comprehensive, that would have had a series of reforms, that would have assisted in dealing with the fiscal challenges the country is faced with.

“They’re now faced with uncertainty in terms of what the policies are going to be, and they’re faced with uncertainty in terms of how much support there will actually be once a five-year bill is ultimately passed by Congress. A new Congress, a different fiscal challenge because of the sequester discussion, so it’s the uncertainty of it all and the frustration.”

After a brief explanation and some of the general parameters of the Farm Bill, and why it is an important piece of legislation, Sec. Vilsack noted that, “Well, I would say producers in the Southern crops, rice and cotton, certainly benefit in terms of the continuation of a support system which they like. Obviously those who are in the organic and specialty crop areas, fruits and vegetables, may not be as well-supported by this extension as they would have been under the new proposal.

“The grain, corn, soybeans are pretty much – it’s sort of a break-even proposition. Dairy producers I think are very much frustrated by all of this because in place was a new system to provide support for dairy farmers when they had difficulty, when they were in financial trouble. They lost that opportunity, and now they have to work their way back to a different system.”

Meanwhile, Sen. Grassley pointed out that, “The one-year extension is obviously better than nothing. With prices the way they are now, the safety net that’s there for farmers isn’t as much of a concern whether or not you have a farm bill…”

Later in yesterday’s NPR program, Sec. Vilsack noted that, “Well, one of the reasons that the new bill was so important is because it moved away from the direct payment system which a lot of people had concerns about, including the president, including myself, and put more focus on a crop insurance effort. Basically, producers would purchase insurance coverage. And if for reasons of drought or some other natural disaster they weren’t able to produce what they would normally produce, they were able to buy protection, buy coverage.

“We would see in the long term that as a critical component to any kind of new farm legislation that we have, a functioning crop insurance system in which people can essentially partner with the government and reduce their risk. It seems to me that’s a logical way to approach it.”

Also this week, Ken Anderson noted at Brownfield that, “Is the fact that Congress failed to pass a new five-year farm bill in 2012 a sign of the agriculture sector’s declining influence on Capitol Hill—and with the public in general?

“That question is being discussed in the ag community, especially after what some are labeling ‘the fiasco’ surrounding last week’s extension of the 2008 farm bill as part of the fiscal cliff package passed by Congress.

“U.S. Agriculture Secretary Tom Vilsack first broached that subject in December —and in a recent interview with Brownfield, he reiterated his concern that rural America is becoming less and less relevant to the politics of this country.”

The Brownfield update indicated that, “‘I think we need a broader message here—and I think 2012 was a wake-up call for all of us about the need for a more proactive message,’ Vilsack says. ‘A need to reach out and develop new and stronger alliances—and to be getting the agricultural message not just in agricultural publications and in agricultural meetings and discussions, but in discussions throughout the economy and throughout the government.’

“Vilsack says rural America needs to be more willing to embrace new ideas and opportunities—to adopt a new attitude—to, in his words, ‘to replace that preservation mindset with a growth mindset.’”

To listen to the full Brownfield discussion with Sec. Vilsack, just click here.

In other news, information released earlier this month by the U.S. Department of Agriculture provided a detailed look at SNAP program participation (food stamps).  The data showed that approximately 47.5 million individuals are currently receiving SNAP benefits.

And with respect to news coverage of legislative developments, Washington Post ombudsman, Patrick Pexton, noted in a column in Sunday’s paper (“The Post needs less on politics, more on government”) that, “…[b]ut these less visible Cabinet departments are barely covered. Most of them have not even one full-time reporter assigned to them.”

Mr. Pexton stated that, “Think about just one of those departments. The Agriculture Department helps shape both which crops will be grown by some 2 million farmers in this country and the prices they will bring, at home and abroad. U.S. farmers exported approximately $136 billion in food in 2011 — a record — with large increases in wheat, corn, beef and veal. How is that affecting life down on the farm?

“The food-stamp program, now called the Supplemental Nutrition Assistance Program, is also under the USDA. It serves 47 million Americans, a record. Is it working, is it effective, is it serving the needs of families and of farmers? Readers might like to know.

“I advocate increased coverage of the Cabinet departments not only because it is good public-service journalism but also because I think it is good strategy in the long term. It could increase Post readership locally in print by federal workers and nationally on the Web by people affected by government policies — farmers, for instance, whose local and regional papers don’t cover this sector as well as they used to, either.”

The Post item added that, “One of the problems of American journalism broadly is that stories about government have retreated while stories on politics and personality have skyrocketed. Washington coverage increasingly means just the White House, Congress and all politics all the time: the polls, the gaffes, who’s up, who’s down, who’s raising the most money. This coverage increases the banality of U.S. politics, where issues are never discussed beyond sound bites.”

In other news, Ben Geman reported yesterday at The Hill’s Energy Blog that, “Now that President Obama has proposed new national security Cabinet members, the White House may be able to move to the Energy Department and Environmental Protection Agency.

“Obama’s energy team is going to be remade just like his national security and foreign policy team, and many observers expect Energy Secretary Steven Chu to announce his resignation as soon as this week.”

Yesterday’s update added that, “At the DOE, possible Chu successors include former Colorado Gov. Bill Ritter (D); former Sen. Byron Dorgan (D-N.D.); Center for American Progress founder John Podesta, who was President Clinton’s chief of staff; and Deputy Secretary of Defense Ashton CarterThe White House has not offered a timeline for naming a nominee to replace Jackson, a decision that could yield a tough confirmation fight to lead an agency that Republicans routinely criticize.

“Deputy Administrator Bob Perciasepe will replace Jackson on an acting basis and could also get the formal nomination.”

 

Budget

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “The United States could face a debt-ceiling crisis as early as mid-February, according to an expert report out Monday.

“The Bipartisan Policy Center (BPC) estimates that the nation will begin defaulting on its payment obligations between Feb. 15 and March 1, unless Congress raises the $16.4 billion debt ceiling.”

And Steven T. Dennis and Meredith Shiner reported yesterday at Roll Call Online that, “In the coming debt-ceiling debate, President Barack Obama and Speaker John A. Boehner will face another test of wills over fiscal policy — and the ‘Boehner rule’ could be a linchpin that will either set the tone for the remainder of Obama’s term, if Boehner has his way, or be a thing of the past, as the president hopes.

“The weakened speaker — who survived an aborted coup attempt by insurgent Republicans last week — is clinging to the rule he coined in 2011 that every dollar in debt ceiling increase be matched by a dollar of ‘spending cuts and reforms.’”

The article added that, “But Obama vows he will no longer negotiate for the debt ceiling ‘hostage’ — even as he makes a demand of his own. He wants any new spending cuts to be accompanied by even more tax revenue than the $620 billion he secured during the fiscal cliff negotiations.

“To the extent that there is wiggle room, Boehner hasn’t put a time limit on when spending cuts must take place, and most of the entitlement changes he is seeking — such as increasing the Medicare eligibility age — would have much bigger effects in future decades.

“Plus, the president continues to say he wants a longer-term debt and deficit deal that would include new spending cuts, but so far he hasn’t proposed enough to comply with the spirit of the Boehner rule. But two years of on-again, off-again grand bargain talks haven’t yielded a breakthrough, and there’s no indication yet that they will finally be able to consummate such a deal anytime soon.”

 

Agricultural Economy

Andrew Johnson Jr. reported yesterday at The Wall Street Journal Online that, “U.S. soybean futures rose, boosted by technical buying and concerns that recent price declines were overdone.

“Chicago Board of Trade March soybean futures settled up 21 1/4 cents, or 1.6%, at $13.88 1/2 a bushel.”

The Journal article noted that, “Soybeans also benefited from strong recent demand for exports of soybean meal, although exports of soybeans themselves have been subject to order cancellations from China.

Soybean supplies remain tight overall, also underpinning prices.”

The article pointed out that, “Corn futures rose on hopes that recent steep price declines would spark an uptick in export demand. Those hopes were fueled by an export sale announced by the government….[E]xport demand for U.S. corn has been weak for months as foreign buyers were turning to cheaper supplies from other large exporters, like Brazil. But U.S. prices have become more competitive as they have fallen in the last month.

“March corn futures rose 5 1/4 cents, or 0.8%, to $6.85 1/2 a bushel.”

And, Bloomberg writer Tony C. Dreibus reported yesterday that, “Wheat futures rose on speculation that farmers will abandon more of their winter crop than usual amid lingering drought in the U.S., the world’s top exporter.

“As much as 25 percent of hard red winter wheat may not be harvested after the most-severe drought since the 1930s killed plants, Mark Hodges, the executive director of Plains Grains Inc. in Stillwater, Oklahoma, said last week. The Department of Agriculture will announce planting estimates on Jan. 11.”

Meanwhile, Purdue University Agricultural Economist Chris Hurt noted yesterday at the farmdoc daily Blog (“Pork Profits on the Horizon”) that, “Pork producers have begun the chant ‘four more months’ as they can now see the light of profits as they are set to emerge from a tunnel of losses. That tunnel of darkness stretched from the spring of 2012 through the winter of 2013, with average estimated losses of $18 per head, primarily due to high feed prices.

Feed prices reached a summit in the third quarter of 2012 with the peak of the drought. Estimated total hog production costs shot up $10 per live hundredweight, reaching an estimated $72. Costs last fall and this winter dropped about $4 per hundredweight and are expected to moderate an additional $8 with normal 2013 crop production. By fall that could put estimated costs of production around $60 per hundredweight.”

After additional analysis, Dr. Hurt stated that, “The U.S. pork industry has suffered with high feed prices partially driven by three consecutive years of poor U.S. corn crops. Eventually, better yields will likely result in lower and less volatile feed prices. Almost everyone in the animal production industries, including pork producers, hope 2013 is the year that scenario begins.”

Katie Micik reported yesterday at DTN that, “Farmers and ranchers feel better about the 2012 season at year’s end than they did before planting, yet uncertainties from the ongoing drought blur their picture of the upcoming year, according to results of the latest DTN/The Progressive Farmer Agriculture Confidence Index.

“The overall confidence index for crop and livestock producers is a positive 109.1, compared to 107.9 in August and 108.5 before planting the 2012 crop.

“Each year, DTN surveys 500 farmers and ranchers and 100 agribusinesses before planting, before harvest and late in the year to take the pulse of the agriculture economy. A value of 100 is considered neutral, while a higher value is optimistic and a value under 100 is pessimistic. The survey asks individuals to rate their feelings about the present and expectations for the future. Those two ratings are averaged together for the overall confidence index.”

And, Bloomberg writer Brian Wingfield reported yesterday that, “The Mississippi River will be deep enough through January to support commercial barge traffic, Major General John Peabody of the U.S. Army Corps of Engineers said, citing dredging and favorable weather forecasts.

“Peabody said today that dredging should maintain a 10-foot channel through the end of the month, which is deep enough for commercial vessels on the river south of St. Louis.”

Also yesterday, AP writer Candice Choi reported that, “First there were McNuggets. Then there were Chicken McBites. Now McDonald’s could be adding ‘Mighty Wings’ to its chicken menu.

The world’s biggest hamburger chain is set to expand its test of chicken wings to Chicago this week, after a successful run in Atlanta last year. The wings are being sold in servings of three, five or 10 pieces with prices starting at $3, according to Lynne Collier, an analyst with Sterne Agee.”

The AP article added that, “Prices for chicken wings have been climbing over the past year, reflecting an increase in the number of restaurants serving them, said David Harvey, an agriculture economist who specializes in poultry and eggs at the U.S. Department of Agriculture.”

Keith Good

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