FarmPolicy

November 1, 2014

Farm Bill; Climate; Ag Economy; and, Immigration

Farm Bill: Budget and Policy Issues

An update yesterday at the National Sustainable Agriculture Coalition (NSAC) Blog stated that, “The Congressional Budget Office (CBO) released its first snapshot of the budget projections for 2014 and beyond on Tuesday.  The snapshot includes projections for federal farm bill spending.  The final version of the projections, which will be published in late March, will be the version that is used for determining the costs and savings of competing budget resolutions and farm bill proposals to be debated later this year.  As a general rule, though, there are only rarely big differences between the early snapshot and the final projections.”

The NSAC update noted that, “The 2012 debate on a new farm bill used the March 2012 CBO baseline as its measuring rod.  Compared to that March 2012 baseline, several items stand out in the new version.

“First, the Supplemental Nutrition Assistance Program (SNAP), better known as the food stamp program, is projected to decline in cost by almost $8 billion in the next five years and by nearly $12 billion over the coming decade, relative to last year’s projection.  Those are decreases of 1.9 and 1.5 percent, respectively.”

“Second, CBO projects a decline in the cost of the crop insurance program, by close to $3 billion over the next decade relative to last year’s projection.  The insurance subsidies would still cost close to $9 billion a year, according to CBO.”

Yesterday’s NSAC analysis pointed out that, “Third, the current suite of commodity programs are projected to increase in cost by $1.6 billion over the next 10 years relative to last year’s projection.  The increase is largely due to projected increases in Average Crop Revenue Election (ACRE) payments for corn, soybeans, and wheat and projected increases in counter cyclical payments for cotton.  Dairy program costs drop dramatically after the current one-year extension of the Milk Income Loss Contract (MILC) program — included as part of the short-term farm bill extension enacted at the beginning of January — expires at the end of this year.”

After a look at the Conservation Reserve Program and other conservation programs, the NSAC report indicated that, “So for instance, measures to reconstruct the farm bill’s commodity title and replace direct, ACRE, and counter-cyclical payment programs will have a bit more funding to play with relative to last year’s farm bill proposalsOn the other hand, proposals to create a new dairy program will have considerably less money to play withProposals to add new subsidies to the crop insurance programs will fair about the same, or slightly better, than they did last year.  Re-arranging funding within the conservation title will be a bit more difficult due to the decline in CRP funding and the disappearance of any remaining WRP and GRP funding.

“CBO farm bill projections did not include the impact of automatic budget cuts (sequestration) scheduled to take effect on March 1 this year.”

Meanwhile, Josh Hicks reported yesterday at the Federal Eye Blog (Washington Post) that, “The White House Office of Management and Budget released a memo on Tuesday warning federal agencies that furloughs and steep cutbacks may be necessary if lawmakers fail to reach a comprehensive debt-reduction deal by March 1.”

Yesterday’s item explained that, “Avoiding sequestration will be tough with Republicans and Democrats disagreeing over whether a comprehensive debt-reduction package should include tax hikes. GOP lawmakers appear increasingly content to pocket the savings and move on to other battles, according to a Washington Post report.”

Jonathan Weisman and Elisabeth Bumiller reported in today’s New York Times that, “With at least one million jobs on the line, Senate Democrats on Wednesday said they were closing in on legislation to temporarily head off nearly $1 trillion in cuts that were already affecting Pentagon decision-making and could force significant reductions in staffing and services across the government.

“Despite strong resistance from Republican leaders to new tax revenues, Democrats said that they expected the onset of federal furloughs and layoffs on March 1 to make Republicans more receptive to an emerging solution that would combine spending cuts with revenue from closing tax loopholes. Lawmakers were being spurred by increasingly dire warnings from top Pentagon officials about the implications of the automatic reductions.”

Today’s article added that, “House Democrats produced legislation that would stave off the cuts through Sept. 30 by ending direct subsidy payments to agribusinesses, eliminating tax breaks for oil and gas companies, and establishing a minimum 30-percent effective tax rate on annual incomes over $1 million.”

And The Wall Street Journal editorial board opined on the sequester issue today, noting in part that, “As always in Washington when there is talk of cutting spending, most of the hysteria is baseless. The nearby table from the House Budget Committee shows that programs are hardly starved for money. In Mr. Obama’s first two years, while private businesses and households were spending less and deleveraging, federal domestic discretionary spending soared by 84% with some agencies doubling and tripling their budgets.”

With respect to providing government funding for the rest of the current fiscal year, Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “The House Appropriations Committee has started writing a stopgap spending bill as part of an effort to avert a government shutdown after March 27, when the current continuing resolution expires.”

Mr. Wasson pointed out that, “[House Appropriations Chairman Hal Rogers (R-Ky.)] has difficulty proceeding because he does not know whether the $85 billion cut to spending from sequestration will take effect on March 1. President Obama on Tuesday called for Congress to delay those cuts and find an alternative.

“The challenge for Rogers is that, of the $85 billion in sequester cuts for 2013, $70 billion would come from discretionary appropriations that are the purview of his committee.”

In other policy news, Tom Steever reported yesterday at Brownfield that, “Based on Congress’s failure to pass a farm bill last year, Senator Charles Grassley concedes that farmers may not have the political power that some might think they have. In a conference call with reporters Wednesday, the Iowa Republican said a farm bill won’t happen if the legislation is put only in the context of a subsidy to farmers.

“‘We have to start talking in terms of a sure supply of food to make sure that we have social peace in our country,’ said Grassley, during the conference call.”

Also yesterday, a DTN article (link requires subscription) reported that, “The month of February is important for corn growers in the key Corn Belt states who purchase revenue-based crop insurance policies. It’s when the projected price for those policies is set.

“Revenue policies with harvest-price protection cover losses caused by a difference in the harvest price (determined in October) from the projected price (determined in February). They also cover revenue losses in the event prices tumble between planting and harvest, as they did for corn in 2008.

“For producers in 31 states, the closing price of the December corn contract during each trading day of February is averaged to determine a revenue-insurance-projected price guarantee. The November contract closes are averaged during February for projected price for soybean revenue-based insurance contracts. The September Minneapolis spring wheat closes are averaged for wheat revenue insurance. States with earlier planting have their spring guarantees set at a different time.”

The DTN item added that, “You can also check out a running tally of RMA’s harvest prices and prices recently in discovery here.

And a news release this week from Rep. John Campbell (R., Calif.) noted that [Rep. Campbell] and Representative Jim Moran (D., Va.) officially marked the beginning of the Congressional Animal Protection Caucus (CAPC) for the 113th Congress this week.

“The [CAPC] is a bipartisan organization made up of 70 Members of Congress committed to raising awareness of animal welfare issues,” the release said.

 

Climate Issues and Agriculture

Jim Yong Kim, the president of the World Bank Group, indicated earlier this week that, “Climate trends have already affected food production around the world, driving up prices for everything from bread and tortillas to chicken wings.

“Crop yields are already down globally by 2 to 3 percent, and climate scientists tell us that for every 1 degree Celsius increase in average temperature around the world, crop yields will decrease by an average of 5 percent.”

Christopher Doering reported in yesterday’s Des Moines Register that, “Climate change could have a drastic and harmful effect on U.S. agriculture, forcing farmers and ranchers to alter where they grow crops and costing them millions of additional dollars needed to tackle weeds, pests and diseases that threaten their operations, a sweeping government report said Tuesday.

“The U.S. Department of Agriculture analysis said that while crops and livestock have been able to adapt to changes in their surroundings for close to 150 years, the accelerating pace and intensity of global warming during the next few decades may soon be too much for the sector to overcome.”

Likewise, AP writer Jeff Barnard reported on Tuesday that, “Big changes are in store for the nation’s forests as global warming increases wildfires and insect infestations, and generates more frequent floods and droughts, the U.S. Department of Agriculture warns in a new report.

A news release yesterday from the National Farmers Union (NFU) indicated that, “[NFU] sent a letter to the Bicameral Task Force on Climate Change, co-chaired by U.S. Rep. Henry A. Waxman, D-Calif., and Senator Sheldon Whitehouse, D.-R.I., in response to a call for suggestions on how the federal government can address climate change.  Responses will help inform Congress and the federal government about the menu of options that could be taken to address climate change.”

And Peter Nicholas and Keith Johnson reported in yesterday’s Wall Street Journal that, “President Barack Obama in next week’s State of the Union speech will lay out a renewed effort to combat climate change that is expected to include using his authority to curb emissions from existing power plants, people who have talked to the administration about its plans said.”

The Journal writers pointed out that, “In the run-up to the speech, Mr. Obama has been ‘pushing the team to get very specific about how to achieve the goals he set on reducing greenhouse-gas emissions,’ one former administration official said.”

Juliet Eilperin reported in today’s Washington Post that, “The United States is not on track to meet its international commitment to cut greenhouse gas emissions by 2020, according to an analysis released Wednesday by the World Resources Institute.”  The Post item also included this interesting graphic on emissions.

 

Agricultural Economy- Trade- Biofuels

Bloomberg writer Elizabeth Campbell reported yesterday that, “The U.S. needs more than average precipitation to end the worst drought since the 1930s, while normal to below-normal rainfall is forecast, said John Nielsen- Gammon, a state climatologist and a professor at Texas A&M University.

The dry spell means no incentive to expand the U.S. cattle herd, Nielsen-Gammon said in an interview after a presentation at a cattle industry conference in Tampa, Florida.”

The article noted that, “Producers are ready to expand ‘as soon as the weather cooperates,’ according to Ron Plain, a livestock economist at the University of Missouri in Columbia.”

In a separate update yesterday, Bloomberg’s Elizabeth Campbell reported that, “U.S. cattle feedlots will have ‘slightly negative margins’ this year amid high costs for livestock feed, said Michael Swanson, an agricultural economist at Wells Fargo & Co.”

However, the article added that, “If corn prices ‘drop like a stone,’ there will be ‘a swing to profitability,’ Swanson said.”

On the issue of U.S. infrastructure, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “The nation’s busiest ports are operating at less than peak efficiency about 65 percent of the time because harbors are not being kept dredged to their optimum depths and widths, according to an estimate by the U.S. Army Corps of Engineers. And a key reason may be because the federal Harbor Maintenance Trust Fund does not provide enough funding to pay for the needed upkeep.

“The trust fund collects a user fee of $1.25 per $1,000 on imported and domestic cargo for maintenance dredging at ports across the country. And since it annually collects more revenue than the Corps spends on maintenance projects, increasing spending to cover needed harbor dredging should not be a problem. But it is.

“Technically, the fund has a nearly $7 billion surplus. In reality, it contains no surplus because the fund is not a separate account within the federal budget. As a result, the ‘surplus’ already has been spent on general government activities. However, that may change later this year, according to Senate Environment and Public Works Committee Chairman Barbara Boxer, D-Calif. Boxer says she and Sen. David Vitter, R-La., the committee’s ranking Republican, plan to introduce legislation in the next few weeks that would authorize future Army Corps projects and also include language to reform the Harbor Maintenance Trust Fund.”

With respect to trade developments, an update yesterday at the Bridges Weekly Trade News Digest reported that, “Top officials from both the US and EU have been meeting over the past week to discuss the possibility of launching bilateral trade talks, leaving observers and analysts to speculate whether the long-awaited announcement might soon be on the horizon. However, questions remain over whether the two sides will be able to resolve long-standing differences that have blocked such negotiations in the past.

“EU Trade Commissioner Karel De Gucht spent Wednesday in Washington meeting with his counterpart – US Trade Representative Ron Kirk – with the goal of putting the finishing touches on a joint report by the EU-US High-Level Working Group on Jobs and Growth, which is expected to include recommendations regarding the potential negotiations. However, these efforts ultimately did not succeed, leaving the release date of the report up in the air.”

On the issue of biofuels, DTN writer Todd Neeley reported yesterday (link requires subscription) that, “For the first time in 17 years, total U.S. ethanol production in 2012 dropped from the previous year — this time by some 600 million gallons.

“An increasing number of ethanol plants have shut down operations in the face of low ethanol prices and high corn prices, and the new year has arrived with renewed efforts to repeal the Renewable Fuels Standard and to prevent the expansion of the E15 market.

“Renewable Fuels Association Chief Executive Officer and President Bob Dinneen said Wednesday the industry should be ready for a fight.”

Mr. Neeley noted that, “Because of drought and negative margin conditions, 36 of the 211 U.S. ethanol plants have shut down operations. Many others have scaled back operations.

Dinneen said the American Petroleum Institute has ‘declared war’ on the RFS and the AAA is campaigning against E15.

“‘Let me be blunt,’ he said. ‘Our adversaries are not dedicated to destroying the RFS because it has failed. Our adversaries are dedicated to destroying the RFS because it is succeeding.’”

 

Immigration

Ted Booker reported earlier this week at The Journal (Ogdensburg, N.Y.) Online that, “Dairy farmers in the north country long have found hiring reliable farm workers challenging. But that task soon could become less daunting, thanks to a retooled guest worker program being considered by Congress as a part of a larger immigration reform.

“U.S. Rep. William L. Owens, D-Plattsburgh, said overhauled guest-worker legislation could allow immigrant workers to stay here three to five years before having to return to their native countries; current visa programs, by contrast, allow workers to stay less than a year and are fraught with red tape.

“Right now, Mr. Owens said, dairy farmers who hire migrant workers know their work visas expire in less than a year, making them highly transient. By enabling the workers to stay here longer, he said, the proposed guest-worker program would allow farmers to count on some continuity of the workforce.”

The article added that, “Mr. Owens said obtaining a reliable, sufficient workforce is a hurdle that most dairy farms here face.”

Keith Good

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