FarmPolicy

August 22, 2014

Policy Issues; Ag Economy; and, Immigration

Policy Issues

Julie Buntjer reported earlier this week at the Worthington Daily Globe (Minn.) Online that, “On her second day of a two-day Homegrown Energy Tour of southwest and west central Minnesota, U.S. Sen. Amy Klobuchar on Tuesday was both eager to talk about the failed attempts to pass new federal farm bill legislation and see what Minnesota-grown companies are doing to produce clean energy from wind, sunlight, corn and soybeans.”

The article noted that, “‘If we could somehow get our courage up to get a debt deal done … then I truly believe energy and immigration reform are probably the two issues where we could get some bipartisan consensus.’

“‘We need to push an energy vote for a longer term instead of year to year to year, which is so damaging not just for you guys, but for wind, solar — everyone involved in this,’ Klobuchar added.”

The Globe article quoted the Minnesota Democrat as saying, “‘One of the things I wanted to do was talk to people about what happened at the end of the year — the good and the bad,’ Klobuchar said. ‘The good being we got the biodiesel and the wind and solar tax credits extended; the bad being that the farm bill was simply extended.’”

“Now, Klobuchar is hopeful new farm legislation can be attached to legislation addressing the debt ceiling,” the article said.

“‘The Senate passed a really strong bill and if we could just get that attached, it’s $24 billion in cost savings over the last one and stronger policy,’ she said. ‘We transferred from direct payments to enhanced crop insurance and did some other things to consolidate some programs. While there’s still some difference between the House committee bill and the Senate … we can negotiate.’”

With respect to wind energy, Ryan Tracy reported in yesterday’s Wall Street Journal that, “The U.S. wind industry is planning new wind farms again after Congress renewed subsidies, giving idled factories that make turbines and components the prospect of a fresh set of orders in the second half of 2013.

“But industry officials say this year’s projects are unlikely to match the record number of megawatts installed in 2012, calling into question the long-term viability of a supply chain that ramped up to match last year’s surge in demand.”

The Journal article explained that, “Wind power faces competition from low-priced natural gas and slow growth in U.S. electricity demand. Its largest uncertainty is the fate of the federal tax credit for wind-power production. After some doubt, Congress at the start of the year extended the subsidy of 2.2 cents per kilowatt-hour, but only for projects that start construction by the end of 2013—leaving it unclear if the subsidy will be available in future years. That could curtail the number of installations that developers might otherwise plan.”

The article noted that, “Subsidies have fueled the growth. Between 2009 and 2012, wind-farm developers claimed about $10.8 billion in grants, and the latest extension of its tax credit will cost about $12 billion over 10 years, according to congressional estimates. Wind proponents argue that traditional forms of energy have also received subsidies for decades.”

In other renewable energy news, Bloomberg writer Mario Parker reported yesterday that, “Ethanol production in the U.S. fell 5.1 percent last week to a record low of 784,000 barrels a day, U.S. Energy Information Administration data showed.

“The drop was the largest since the Energy Department’s analytical arm began tracking weekly data in June 2010.”

Meanwhile, Chris Clayton reported yesterday at The DTN Ag Policy Blog that, “As Agriculture Secretary Tom Vilsack talks about the waning political clout of rural America, the battle over the Renewable Fuels Standard is just beginning to test that clout.

“The American Petroleum Institute announced a ‘all hands on deck’ advertising campaign to go after the Renewable Fuels Standard, arguing that scrapping the RFS is the best way to strengthen the country’s domestic refining industry for petroleum, according to articles reporting on a press conference API held on Tuesday.”

Mr. Clayton added that, “API announced last fall the group’s top political priority would be to eliminate the RFS. The lobby group for oil companies is pushing Congress to begin holding hearings on the RFS and EPA decisions such as the approval of E15.

“The American Farm Bureau, in its policy session on Tuesday, inserted a line stating the group supports the Renewable Fuels Standard as it was approved by Congress in 2007.”

In a more detailed look at some of the economic issues associated with biofuels, University of Illinois Agricultural Economists Scott Irwin and Darrel Good noted yesterday at the farmdoc daily blog (“Domestic Biodiesel versus Brazilian Ethanol Revisited”) that, “In a post on January 10, 2013 we examined the relative profitability of meeting the RFS for advanced biofuels with domestically produced biodiesel and imported Brazilian ethanol. We concluded that even with the $1.00 per gallon tax credit for biodiesel, price relationships still favored Brazilian ethanol. We received a number of comments from readers in both the public and private sectors pointing out some omissions in the analysis as well as suggestions for alternative analysis. Here we incorporate those comments into an updated analysis of the relative economics of biodiesel and Brazilian ethanol based on prices as of January 10, 2013.”

In other policy news, Philip Brasher, who writes the CQ- Roll Call “Executive Briefing-Agriculture & Food” report, tweeted yesterday that, “House Ag Chair Lucas says he’ll know in ‘political gut’ when to take up #farmbill. Ranking Dem thinks April.”

The USDA’s Office of the Inspector General (OIG) issued an investigative item yesterday that focused on nutrition programs under the Department’s jurisdiction.  Recall the nutrition programs comprise the largest portion of Farm Bill expenditures.

The two-page OIG report documented more than a half dozen instances of program participant fraud and misconduct uncovered by OIG during 2012.

Also yesterday, a news release from the National Farmers Union (NFU) included a statement from NFU President Roger Johnson, who noted in part that, “It is vitally important that farm policy include programs for farmers and ranchers to manage their risks of bad yields and low incomes, and the current system of crop insurance does a good job of that. However, crop insurance, particularly revenue protections, should not be considered a replacement for fair market prices.”

Mr. Johnson added that, “NFU has supported reasonable limits on the amount of crop insurance premium subsidies that farmers can receive. During the Senate consideration of the 2012 Farm Bill, NFU supported an amendment that would have reduced premium subsidies by 15 percent for farms with adjusted gross incomes greater than $750,000. This would have saved $1.2 billion over 10 years. Furthermore, NFU policy supports a limit of $75,000 worth of crop insurance premium subsidies that one farmer can receive in a year.”

Daniel Looker reported yesterday at Agriculture Online that, “Any doubts that crop insurance tops the list of farm policy goals for farmers were dashed by Farm Bureau delegates at the group’s annual meeting in Nashville Tuesday. The group made it clear they don’t want limits on premium subsidies and spent time debating several other amendments on improving the way insurance works for producers.

“The group passed an amendment to its insurance policy that opposes ‘caps or limits on crop insurance premium assistance to producers’ offered by Texas delegate Rickey Yantis.

“‘As you know in previous discussions of the farm bill, there’s been discussed a $40,000 cap. We feel that would be very detrimental for agriculture,’ Yantis said.”

Mr. Looker pointed out that, “And just to make sure their point is clear, delegates passed another amendment opposing ‘means testing and payment limitations’ for crop insurance.

“Last year the Senate did approve an amendment to its farm bill offered by Senators Tom Coburn (R-OK) and Dick Durbin (D-IL) that lowers premium subsidies to farmers with more than $750,000 in income.  The farm bill approved by the House Agriculture Committee didn’t have that language. And, ultimately, that bill didn’t pass Congress anyway. As Congress gets ready to try again to pass a new farm law, opposition to limits on what is now the most expensive single program for farmers is coming into focus.”

Reuters writer Sarah Mortimer reported yesterday that, “Farmers have spent 20 percent more on agricultural insurance in recent years to protect against crop losses from increasingly frequent bad weather events, according to reinsurer Swiss Re.

“The rise in extreme weather disasters, such as the widespread drought in the United States last year, has reduced food output at a time when the world’s population is expected to grow by a third by 2050, the world’s second biggest reinsurer said in a report on Wednesday.”

In more specific executive branch developments, Coral Davenport reported yesterday at National Journal Online that, “President Obama could look west to fill the job of Interior secretary that will become vacant by the end of March with the departure of Ken Salazar. Washington Gov. Christine Gregoire, who supports the president’s progressive clean-energy and climate-change agenda, is one possible candidate. Gregoire, who has also been mentioned as a potential successor to Lisa Jackson at the Environmental Protection Agency, has pushed policies to move her state away from coal-fired electricity.

“Another candidate for Interior is John Berry, director of the White House Office of Personnel Management.”

And Megan R. Wilson reported yesterday at The Hill’s RegWatch Blog that, “The Obama administration issued $236 billion worth of new regulations last year, according to a report from a conservative think tank.”

 

Agricultural Economy

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions.  Commonly referred to as the “Beige Book,” the report included a number of observations specific to the agricultural economy from several Federal Reserve districts.  A brief overview of the agriculture related portions of the Beige Book summary have been posted here, at FarmPolicy.com Online.

A recent update from the Federal Reserve Bank of Kansas City indicated that, “Despite a severe drought, profits in the U.S. farm sector soared in 2012.  Although total farm incomes remained high, the drought exacerbated a widening gulf in profitability between the crop and livestock sectors.  This issue of the Main Street Economist [“Will Farm Profits Shift in 2013?”] explores the possibility that the pendulum of farm profits may be about to swing.”

Bloomberg writer Jeff Wilson reported yesterday that, “The risk of drought damaging U.S. corn and soybean crops for a second year is increasing as forecasters predict persistently dry weather in the Midwest and Great Plains through April, the start of the planting season.”

Owen Fletcher reported in yesterday’s Wall Street Journal that, “The drought that scorched crops last summer is bearing down now on the roughly $27 billion U.S. wheat market.

“The drought, by some measures the country’s worst since the 1930s, damaged last year’s corn and soybean crops in the Midwest and sent prices on those commodities to records.

Some traders and investors are wagering that the coming wheat harvest in the U.S. will meet a similar fate, forcing wheat prices higher. Almost the entire southern Plains region, including Kansas, the biggest wheat-producing state, remains afflicted by drought conditions. It hasn’t rained enough in recent months to replenish soil moisture, vital to wheat’s development, that was depleted by last summer’s hot and dry weather.”

Meanwhile, a news update yesterday from University of Missouri Extension pointed out that, “Record-high calf prices don’t necessarily mean record-high profits in the beef business.

Scott Brown, University of Missouri livestock economist, said rising feed costs will cut into cattle profits.

“‘Cattle producers should hope for a big corn acreage this spring, with rain in June and July. Also, hope for continued recovery in the general economy,’ Brown told Dallas County cattle producers. ‘As more people get jobs, that creates more demand for beef.’”

Bloomberg writer Brian Wingfield reported this week that, “The drought-depleted Mississippi River is about 6-feet higher at a choke point in southern Illinois than it was two weeks ago, the National Weather Service said, allowing barges to pass safely at least through the end of the month.”

And Miguel Bustillo reported in today’s Wall Street Journal that, “Water wars are heating up in Texas, where officials are suing New Mexico and Oklahoma over river water as the Lone Star State tries to quench the thirst of its booming population.

“The U.S. Supreme Court agreed this month to take up a dispute between Texas’ Tarrant Regional Water District, an agency that supplies water to 1.7 million people in north Texas, and Oklahoma, over water that flows into the Red River. So far, lower courts have ruled for Oklahoma.”

 

Immigration

Kevin Bogardus reported yesterday at The Hill Online that, “Washington’s most powerful business lobby and prominent union leaders are discussing a joint push on immigration reform this year.

“The U.S. Chamber of Commerce is in discussions with the AFL-CIO and the Service Employees International Union (SEIU) about shared principles for reforming the immigration system, officials involved with the talks told The Hill.”

Also yesterday, Tom Quaife reported at Dairy Herd Online that, “In a news conference Wednesday morning, NMPF [National Milk Producers Federation] leaders said there is a real opportunity for a breakthrough on Capitol Hill this year on the immigration issue.

“‘The stars and planets are aligning in the political universe for us to do something on this,’ said Chris Galen, senior vice president of communications at NMPF.

“NMPF has joined with other agricultural organizations to form the Agriculture Workforce Coalition in an effort to reform federal immigration policies.”

Keith Good

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