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Farm Bill; Policy Issues; and, Ag Economy

Farm Bill, Budget Issues, Crop Insurance

Ron Hays, of the Oklahoma Farm Report and Radio Oklahoma Network, spoke yesterday with House Agriculture Committee Chairman Frank Lucas (R., Okla.) about a variety of current policy variables including the Farm Bill, budget issues and the agricultural economy.

An audio replay and summary of the Chairman’s remarks from yesterday can be found here, while an unofficial FarmPolicy.com transcript of the conversation with Ron Hays and Chairman Lucas is available here.

Yesterday’s interview occurred after a Business Meeting at the House Agriculture Committee, where the Members met to formally organize and to adopt the Committee’s rules for the 113th Congress.

Mr. Hays referenced the Business Meeting and noted that, “One thing that Mr. Peterson mentioned with his opening comments that I thought was very, very enlightening, he indicated that he had had a conversation a couple times, in fact just in the last little while, with the Speaker, and kind of seemed to be saying we’ll work something out in regards to trying to get regular order moving on a farm bill this go around in 2013. Your thoughts about what Mr. Peterson was saying, and anything that you’ve had in conversations with John Boehner, Eric Cantor and the like.”

(Note that an audio replay of Ranking Member Collin Peterson’s remarks on this issue from yesterday’s Business Meeting can be heard here (MP3- 0:52)).

Chairman Lucas pointed out that, “I think what Collin was reflecting is the ongoing effort that both he and I have been engaged in, trying, whether it’s the Speaker, the Majority Floor Leader or the Whip, trying to get the attention of leadership, the majority leadership, and to get them to understand that while there are a lot of important things going on here— budget issues, CRs, and sequestration, and war and peace, nonetheless a comprehensive farm bill affects not only everybody in rural America that produced that food and fiber, but every consumer.

Collin has been very, very focused on the dairy portion of the bill, and has spent a lot of time, in particular, trying to work with the Speaker on that subject. The Speaker did serve on the Ag Committee for, I think, 16 years, perhaps. But I’ve also put my effort into that.

“And right now we’re in a position where, like certain parts of the last session, it’s hard to get the attention span of what I call management because there’s so many things going on all around them simultaneously.”

Chairman Lucas also explained that, “From my perspective, that’s part of why, when this budget process sorts out over the next few months, that gives us a better lay of the land, a better perspective. Remember, the Senate hasn’t passed a budget in three years. If they are actually forced to do one, which is what the language that’s included in the present debt increase ceiling we’ll vote on this week, if they’re forced to do it, then we’ll actually have spending guidelines in both the House and Senate. Because we’ve been passing our budgets in the House. That will give us a blueprint to work from. That, along with how sequestration is addressed.

“The bottom line is this, Ron. There’s so many pieces in play, literally I don’t know…sadly, I don’t believe we’ll know the lay of the land for several months. That’s why you didn’t hear Collin or myself today, in our business session, call for an immediate markup, because I think it would be foolish to start down the process now when we just don’t know what the obstacles are, or what the opportunities may be yet.”

On the issue of the persistent drought in the Southwest, Chairman Lucas noted that, “I understand completely what my neighbors are going through, and I’m trying everything I can do to fill that hole that was created by the lack of funding in the fifth year of the old farm bill. This was before I was Chairman or Ranking Member. The livestock disaster money was only funded the first four years of the five-year farm bill. And I thought Senator Stabenow and I had come to an understanding to fix that problem in the extension of the farm bill. But when the final draft was put together in the United States Senate, lo and behold the drought money was not in it. And that’s sad for Oklahoma, Kansas, Texas, New Mexico, Colorado, Arkansas, all of our neighbors in the region.”

Reuters writer Charles Abbott reported yesterday that, “Fiscal battles in Congress could prevent lawmakers from writing a new farm bill for weeks or months, prolonging disputes over farm subsidy reforms and cuts in food stamps for the poor that together could save up to $35 billion.

“Agricultural leaders in Congress originally hoped for speedy work on the overdue farm bill – the 2008 law expired last year – but are unable to give a timeline for action in the Senate or House of Representatives.”

Mr. Abbott explained that, “Farm-state lawmakers expect that congressional leaders will order larger spending cuts in the five-year farm bill that otherwise would cost $500 billion, with the bulk of the money going to food stamps.

The scope of the cuts could be determined by modifications to the $1.2 trillion in cuts in federal spending that are due in early March, as well the budget baseline issued in March and federal debt ceiling. The House voted on Wednesday to delay until May 19 a decision on the debt limit.”

More specifically on the debt limit issue, Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “The House on Wednesday approved a bill extending the nation’s debt limit, raising pressure on the Senate to pass its first budget in nearly four years.”

Yesterday’s Hill article added that, “The bill extends the debt ceiling through May 18, and requires each chamber to pass a budget by April 15 or have its members face a suspension of pay. Republicans are hoping the bill gives Congress a few months to find a longer-term debt-ceiling agreement that includes significant spending cuts.”

The White House has indicated that it will support the short-term debt measure, after it passes the Senate.

With this additional background in mind, an update earlier this week at the National Sustainable Agriculture Coalition (NSAC) Blog noted that, “One hope for the proposed budget-debt ceiling showdown in May openly spoken about by House GOP leaders is for the adoption of a budget resolution that would include a fast-track spending cut process.  That fast track process is known in Hill-speak as ‘budget reconciliation.’  Under reconciliation, authorizing committees with jurisdiction over one or more pots of mandatory federal spending are given a deficit reduction target and a date, and are told to approve legislation to cut spending by the requisite amount by date certain.  The rules for budget reconciliation generally prevent policy measures from being attached to the bill that do not increase or decrease spending and generally are subject to fewer amendments when they reach the floor.

If the House and Senate were able to agree on a budget resolution, a very big if, and if the resolution called for budget reconciliation, that set of circumstances might be among the very best for getting a five-year farm bill authorization completed in 2013 after failing to do so in 2012.  Under that scenario, both the House and Senate Agriculture Committees would be working on the same level of savings, as opposed to the two different targets ($35 billion and $23 billion, respectively) in 2012.  They would also have the same target date to submit their product to the Budget Committees, and their bills would come to the floor with a much greater degree of protection, and would likely face far fewer floor amendments and votes.”

Nonetheless, the NSAC update added that, “So while budget reconciliation might be the easiest path to a new farm bill, it does not appear, at this early date at least, to be the most likely.  In any event, if the new timetable for dealing with the budget and the debt ceiling in May is adopted in the coming weeks, it would appear to put Committee markup of a new farm bill off until late May or June at the earliest.”

“While action on raising the debt ceiling gets worked out in the coming weeks, remember that the automatic budget cuts still loom on March 1.  If Congress cannot agree on de-triggering the cuts, either by getting rid of sequestration altogether or by kicking the can down the road again, then $85 billion in budget cuts will kick in March 1…” the NSAC update said.

Jonathan Weisman reported in today’s New York Times that, “‘The sequester is going to go into effect on March 1 unless there are cuts and reforms that get us on a plan to balance the budget over the next 10 years. It’s as simple as that,’ [House Speaker John] Boehner said.

The next real showdown will come by March 27, when the stopgap measure financing the government expires. Republicans have made clear that they are willing to let the government shut down at that time to force deep spending cuts or changes to Medicare and Social Security that would bring down deficits in the long run.”

Recall that in yesterday’s interview with Chairman Lucas, Ron Hays asked more specifically about budget considerations: “At this point, would you envision probably some cuts to this current year that folks will be signing up for here starting February 19?

“Rep. Lucas: I wish I had a crystal ball that was clear enough to look in and say one way or the other. I think we start off on the assumption that by signing up for that direct payment that it’s coming. We start off by assuming that the resources that are in crop insurance will be there. We start off with those assumptions. Who knows what kind of twists and turns the whole process will take?

“But if there are cuts in broad federal spending, whether it’s sequestration or whatever the ultimate budget CR deal is, at least I’m confident this time that it will affect the whole of the federal budget, and that’s better, because as few of us as are out in the countryside now, we become more and more of a political target because we have the fewest votes to cast, even though we still do one of the most important things for this country, which is feed the nation and the world. So yes, every step down the road we go I think is that much better towards securing our resources. But there are a lot of things in play this year.”

On the Issue of crop insurance, Daniel Looker reported yesterday at Agriculture Online that, “On a blustery Wednesday morning in Des Moines, [Kansas State University economist Art Barnaby] listed nine possible crop insurance outcomes while speaking to the Independent Insurance Agents of Iowa.

“Barnaby acknowledged that crop insurance is under attack in Washington from both the right and the left…[B]arnaby isn’t one of the critics. Over the past 25 years, the crop insurance has paid out roughly the same amount of money for crop losses as it takes in from premiums, he said.”

The article noted that, “[Barnaby] listed ‘Ten Alternative Methods to Reduce Taxpayer Cost for Crop Insurance.’ Barnaby actually outlined nine, leaving a tenth open for suggestions from his audience. He didn’t get any.”

The nine points made by Dr. Barnaby were outlined in Mr. Looker’s article.


Policy Issues- EU Farm Policy- Biofuels, Animal Agriculture

A news release yesterday from the European Parliament indicated that, “EU farm policy reform must distribute EU funding more fairly, make ‘greening’ measures mandatory but flexible and better equip farmers to cope with market challenges. So says the Agriculture Committee’s opening position for negotiations with EU member states, as set out in texts voted on Wednesday. This will be the first EU farm policy reform shaped by Parliament as a full co-legislator with member states.

“The Common Agricultural Policy (CAP), one of the EU’s oldest, must be properly funded to continue to ensure secure supply of high-quality food to EU citizens and enable farmers to protect the environment better, said MEPs, voting on the four legislative proposals.”

Chris Clayton provided more details on the EU policy developments yesterday at the DTN Ag Policy Blog, “EU Ag Committee Approves CAP Changes.”

Meanwhile, Reuters news reported yesterday that, “The United States on Wednesday objected to proposed European Union import duties on U.S. ethanol that EU officials said are intended to offset subsidies given to U.S. producers…The European Commission has proposed a rare duty on all U.S. producers of ethanol after an investigation concluded that U.S. exporters sell the fuel to Europe at illegally low prices after receiving subsidies.

“The European Union is seeking anti-dumping duties of 9.5 percent on all ethanol coming from the United States, according to a proposal seen by Reuters this week.”

In domestic developments regarding animal production, a news release this week from The Humane Society of the United States (HSUS) indicated that, “[HSUS] applauds Minneapolis-based General Mills, one of America’s leading food companies, for announcing that it will eliminate gestation crates—small cages used to confine breeding pigs—from its pork supply chains.”

And Neha Rustagi noted yesterday at The Hill’s Congress Blog that, “As the 113th Congress unfolds, I’d like to bring some attention to H.R. 3798, a bill that was introduced in the House exactly one year ago… Over the course of 15 years, H.R. 3798 would have effectively transitioned hen housing to ‘enriched cages’ that would have allowed hens nearly double the floor space they are allowed today, and been equipped with environmental features, such as perches and nesting boxes. The bill was moreover only predicted to raise retail prices by 6.1 cents/dozen by the year 2030. The terms of the bill were the result of a compromise between the United Egg Producers (UEP) and the Humane Society of the United States (HSUS), two parties that have historically been at drastic odds but came together in support of the bill because doing so was far more economical than continuing to fight individual battles over state initiatives.”

Yesterday’s update added that, “Federal legislation establishing reasonable standards for layer hen cages will not only protect hens, but also prevent states from taking the national egg industry into their own hands. Ohio, Michigan, and California have already enacted various bans and moratoria on the construction or continued use of battery cages.”


Agricultural Economy

Ricardo Lopez reported yesterday at the Los Angeles Times Online that, “For months, state dairy producers had urged the California Department of Food and Agriculture to raise prices paid for milk and dairy products.

“And on Tuesday, the state agency agreed to raise prices by as much as 30 cents per hundredweight for certain dairy products. That’s roughly 3 cents per gallon as there are about 12 gallons in one hundredweight, as milk is measured in the industry.

“But farmers Wednesday said the new prices are still too low, calling the change ‘too little, too late.’”

The update added that, “State dairy producers were hard hit by last year’s drought as farmers struggled to cope with skyrocketing feed costs.

“Some dairies culled the number of cows by selling them, and others shut down their operations, according to the California Dairy Campaign, which represents farmers in the state.”

And, University of Illinois Agricultural Economist Gary Schnitkey noted yesterday at the farmdoc daily blog (“More Corn in 2013?”) that, “In the next several months, planting decisions will be finalized, with one of the central question being how much corn will be planted. Herein, the corn versus soybean planting decision for 2013 is examined for high-productivity farmland. If more corn acres are to be planted in 2013, more corn likely needs to be planted on high-productivity farmland. In most cases, switching to more corn on high productivity farmland means a reduction in 2013 soybean acres. While planting corn is projected more profitable in 2013, a longer run perspective indicates that planting more corn in 2013 may reduce profits in future years.”

Keith Good