FarmPolicy

November 1, 2014

Farm Bill; Budget; Biofuels; Immigration; and, Ag Economy

Farm Bill

Brian Beary reported on Friday at Europolitics Online that, “Farm subsidies may be less divisive an issue today for EU-US relations than they were in the past, but they still feature on the radar. While from the 1990s, the EU and US converged somewhat in how they chose to subsidise their farmers, the latest US Farm Bill proposal, which will set farm supports for 2013-2017, reverses that trend. Some EU officials are watching with concern as the US prepares to abandon the so-called ‘direct payment’ model of subsidy that the US itself pioneered in the 1990s and which today is a key part of the EU’s Common Agricultural Policy (CAP). Direct payments have gained a bad reputation in the US, seen by some as giving public money to farmers for doing nothing, so Congress is set to jettison them, replacing them with more crop insurance subsidies. This could eventually set the EU and US on a collision course at the World Trade Organisation (WTO), which sets ceilings on subsidies that it deems to be trade-distorting. The crop insurance subsidies that Congress looks set to embrace would be classified as trade-distorting under WTO rules. So, if the US increases their use, it could be at risk of overshooting its subsidy ceiling should food prices rise.”

The article added that, “The current WTO ceiling on ‘amber box’ trade-distorting subsidies for the US is $19 billion. Analysts anticipate that crop insurance payments under the Farm Bill as it is currently drafted would amount to at least US$9 billion a year. Back in 1990, crop insurance subsidies in the US were just US$0.4 billion. By comparison, under the European Commission’s proposals for farm spending for 2014-2010, direct payments – which are classified as non-trade distorting by the WTO and thus there is no ceiling on them – should amount to around €40 billion a year. This model is likely to be retained by the EU, albeit tweaked slightly to promote more environmentally-friendly farming practices. The EU has its own crop insurance programme. This is considered by the WTO as ‘green box’ or non-trade distorting because farmers’ revenue losses must exceed 30% for them to be eligible to receive payments.”

Nonetheless, the article added that, “Some in the EU, however, view the rise of crop insurance subsidies in the US as a positive development. For example, in the European Parliament, which is now co-legislator on all aspects of farm policy, the Chair of the Committee on Agriculture (AGRI), Paolo De Castro (S&D, Portugal), recently told Europolitics that he viewed the US crop insurance model as something that the EU should consider emulating.”

Joey Bunch reported on Saturday at the Denver Post Online that, “Brent Boydston, vice president of public policy for the Colorado Farm Bureau, said his members are most concerned about crop insurance to safeguard against weather, pests and price collapses.

“‘Crop insurance is the only risk management a farmer has. He can’t really go out to the private market and buy it on his own,’ Boydston said. ‘We have to make sure that safety net remains in place.’”

Meanwhile, The Washington Post editorial board opined on Sunday that, “The drought that struck the United States in 2012 affected about 80 percent of agricultural land, making it the most extensive such weather event since the 1950s, according to the Agriculture Department (USDA). Consumers will feel the impact of last year’s smaller harvests in the form of higher grocery prices this year. Yet the increases will be relatively modest — a half-percentage-point increase in food price inflation, according to USDA economic projections.

“This is a tribute to the American farm sector’s productivity. As such, it is also a reminder of how far-fetched the rationale for federal agricultural subsidies — the threat of food shortages — really is. The most recent invocation of this phantom came amid the drought, when congressional boosters of the subsidy-marbled 2012 farm bill tried, without success, to exploit the dry spell.”

With this assumption regarding stable, worry-free food production in mind, which appears to implicitly dismiss any serious threats from climate change, despite an editorial in today’s Washington Post schizophrenically urging President Obama to “give this challenge [climate change] the priority it deserves,” Sunday’s opinion item went on to state that, “In short, federally backed crop insurance has long since evolved into yet another form of corporate welfare, whose direct costs and perverse unintended consequences outweigh its purported public benefits.”

Meanwhile an update posted on Friday at the Southwest Farm Press Online (video included) indicated, “Texas A&M’s Joe Outlaw says the signs may not be good for the Stacked Income Protection Plan or STAX [background here, and here] offered by the National Cotton Council. He spoke at the Beltwide Cotton Conferences in San Antonio.”

 

Budget Issues

An update last week at The Bottom Line Blog (The Committee For a Responsible Federal Budget) reminded readers that, “Although labeled as the ‘fiscal cliff deal,’ the American Taxpayer Relief Act (ATRA) enacted into law left many budget issues unresolved or only temporarily resolved. While the deal permanently addressed the expiring tax cuts and AMT patches, many other provisions were only extended temporarily. The sequester, one of the largest components of the cliff, was delayed for only two months. In addition, the debt ceiling and FY 2013 budget were left up to the 113th Congress.”

With respect to these three budget variables (sequester, debt ceiling, FY 2013 Continuing Resolution expiring) and the Farm Bill, an article Friday from Inside U.S. Trade reported in part that, “Generally speaking, many Washington observers expect that a legislative package will be assembled in the next two months to try to address all or some of these looming deadlines, and that in the process, congressional Republicans will demand deeper cuts to government spending in return for their cooperation. Stakeholders fear that farm bill programs could therefore be impacted if a new process is put in place to reduce the deficit that requires the agriculture committees, along with other congressional panels, to craft policy making larger cuts than they earlier envisioned.

“But that possibility is far from clear, and there are many alternative possibilities. For instance, it’s possible that Republicans will focus their energy on cutting spending on entitlement programs, which are a bigger cause of the growing U.S. deficit, rather than on discretionary spending by the administration. In that case, the congressional agriculture committees may come under no new pressure to go beyond the cuts they have already committed to.

“It’s also possible that no package will come together at all, meaning that across-the-board sequestration cuts will go into effect in March. In this scenario, cuts would be triggered that are actually estimated to be smaller than those that the committees have proposed, but would obviously not include readjustments to make policy more effective.”

In more specific developments regarding the debt ceiling, Janet Hook reported in Saturday’s Wall Street Journal that, “House Republican leaders Friday proposed extending the federal debt limit by three months, marking a significant shift in GOP strategy that could reduce the market-rattling risk of the U.S. running out of cash to pay its bills.

“The GOP proposal, which is expected to go before the House next week, includes a requirement that the House and Senate pass formal budgets by mid-April, but it does not include specific spending cuts. That marks a retreat from Republicans’ long-standing insistence that any debt-level increase be accompanied by comparable spending cuts.”

The move represents the clearest sign yet Republicans are backing away from using the debt ceiling as the battlefield for their next budget fight with President Barack Obama.”

The Journal article explained that, “It’s not clear if this particular measure will become law, and any similar move wouldn’t put an end to Washington’s penchant for putting off tough budget choices. Instead, the concession indicates that GOP leaders would prefer to wage a budget fight with the White House on different and less fraught grounds: the automatic spending cuts that take effect on March 1 and a government-funding measure that expires weeks later.

“By including a requirement that both chambers pass formal budgets by April 15, GOP leaders are also seeking to lay the groundwork for longer-term deficit-reduction negotiations. A big part of the goal is to pressure Democrats in the Senate to identify deficit-reduction measures.”

Saturday’s article added that, “Republicans complain that Senate Democrats, by not writing a budget, have dodged responsibility for making the painful choices that are needed to reduce the deficit, while House Republicans have advanced their own plans.

“Senate Budget Committee Chairwoman Patty Murray (D., Wash.) was noncommittal about whether the Senate would pass a budget, citing the many fiscal deadlines looming.”

Lisa Mascaro and Michael A. Memoli reported in Saturday’s Los Angeles Times that, “To compel senators to comply with the budget requirement, the plan calls for their pay to be withheld if the deadline passes without action.”

And Jonathan Weisman reported in Saturday’s New York Times that, “The White House press secretary, Jay Carney, said he was encouraged by the offer; Senate Democrats, while bristling at the demand for a budget, were also reassured and viewed it as a de-escalation of the debt fight.”

Meanwhile, Erik Wasson reported on Friday at The Hill’s On the Money Blog that, “House Minority Leader Nancy Pelosi (D-Calif.) on Friday rejected the House GOP’s three-month plan to increase the debt ceiling.”

Kate Nocera reported yesterday at Politico that, “Sen. Chuck Schumer (D-N.Y.) said Sunday the Senate would pass a budget this year but it would include tax reform to add revenue.”

 

Biofuels

DTN writer Todd Neeley reported on Friday that, “With the American Petroleum Institute openly announcing a national campaign to eliminate the Renewable Fuels Standard, advanced biofuels industry officials said Thursday they are prepared to counter API’s money with strong grassroots support and political capital in Washington.

“Members of the Biotechnology Industry Organization, or BIO, and the newly formed Fuels America told reporters that pulling the plug on the RFS would derail a cellulosic ethanol industry that is on the cusp of commercialization — beginning this year.

“Advanced biofuels companies eagerly await EPA’s release of the 2013 RFS volumes for advanced biofuels. In recent years, cellulosic ethanol production has been low, prompting opponents of the RFS to call for its demise. A new report from the Energy Information Administration, however, said U.S. cellulosic ethanol production could reach 9.7 million gallons in 2013 and 2014.”

Mr. Neeley pointed out that, “The RFS mandates the use of 21 billion gallons of cellulosic ethanol and other advanced biofuels by 2022.”

 

Immigration

Anna Fifield reported late last week at The Financial Times Online that, “President Barack Obama has put immigration reform at the top of his second-term legislative agenda, saying a bill will be introduced in Congress soon after his inauguration this month.

The article noted that, “Mr Obama had made clear that he wants one big overarching package that includes a pathway to citizenship for people already in the US illegally, continued strong border security measures and serious penalties for companies purposely hiring undocumented workers and taking advantage of them.

“High-skilled visas were important for business, as are visas for workers at the other end of the spectrum, particularly in agriculture, he has said.”

David Nakamura reported in Saturday’s Washington Post that, “A growing number of Republicans and conservative groups have begun pushing for comprehensive immigration changes on the eve of President Obama’s inauguration, joining liberal Democrats in hopes of propelling the politically fraught issue forward early in his second term.

“The pressure from the right — including the U.S. Chamber of Commerce and the Southern Baptist Convention — has given immigration advocates hope that a sweeping overhaul can gain bipartisan support in Congress more easily than other polarizing issues such as gun control, the federal deficit and taxes.”

Speaking yesterday on CNN’s “State of the Union” program, White House Advisor David Plouffe indicated that, “the stars seemed to be aligned to finally get comprehensive immigration reform.”- Related audio (MP3- 0:17).

However, Jennifer Epstein noted yesterday at Politico that, “President Barack Obama should make immigration reform his first legislative priority in a second term and show that he isn’t bluffing on the issue, former Republican presidential candidate Rick Santorum said Sunday.

“Santorum, a former Pennsylvania senator, said on ABC’s ‘This Week’ that he expects the president to push ahead on gun control and climate change legislation, ‘both of which are nonstarters up on Capitol Hill and he knows it.’

But if he ‘really wants to make a difference, he’ll lead with immigration,’ Santorum said. ‘There’s not a single Republican up on Capitol Hill who believes he wants to get it done. They all believe … he will put [forward a] measure that the Republicans can’t accept.’ When it fails to pass, Obama will ‘blame Republicans and then continue to drive a wedge between Republicans and Hispanics.’”

Fawn Johnson reported on Friday at National Journal Online that, “The debate buzzing in immigration circles these days isn’t so much about what President Obama will propose on one of his top domestic policy agenda items, but how he will do it. Should he send a draft bill to Congress or a simple outline of proposed changes? (He picked the latter in unveiling his gun proposals last week.)

“No matter what Obama decides, the immigration bill will start in the Senate Judiciary Committee, which has spent months debating similar legislation in the past. Committee Chairman Patrick Leahy, D-Vt., wants Obama to ease that process by sending Congress a draft bill.”

 

Agricultural Economy

Bloomberg writer Whitney McFerron reported on Friday that, “Agriculture prices may be firm through 2022 as demand increases for food and biofuels while productivity growth slows, the European Commission said.

Grain supplies may be tight with ‘prices remaining above historical levels,’ the commission, the EU’s executive arm, said today in a report on its website outlining the agricultural industry’s prospects by 2022. Production in the 27-country bloc may become more concentrated in wheat and corn at the expense of other grains including barley.”

And Bloomberg writer Rudy Ruitenberg reported yesterday that, “The experience of African countries shows peace is a basic condition for food security, said Ken Ash, director for trade and agriculture at the Organisation for Economic Cooperation and Development.”

The article included “comments he [Ash] made at the Global Forum for Food and Agriculture in Berlin yesterday,” including: “‘If you take out of the picture in sub-Saharan Africa those countries that are in conflict, the remaining countries have made tremendous progress in food security. Peace is a basic condition.’”

Keith Good

Comments are closed.