FarmPolicy

December 21, 2014

Farm Bill- Policy Issues; Biofuels; and, the Ag Economy

Farm Bill- Budget Issues- Sequestration

Secretary of Agriculture Tom Vilsack spoke yesterday at the National Ethanol Conference in Las Vegas.

During the “Q and A” portion of his remarks, in response to a question regarding the Farm Bill, Sec. Vilsack elaborated on the sequester and budget issues (audio, (MP3- 4:07), FarmPolicy.com transcript) and noted that, “Sequester could have an impact on the farm bill, because in order to avoid sequester, some folks may say, well, you know what, here’s what we’re going to do. We’re going to do some deficit reduction. We’re going to take some money from those farm programs and we’ll use it for deficit reduction now, not in the context of a new farm bill, but just to avoid sequester.

But when they do that, it makes it more difficult to write that farm bill, because if you’re going to do away with direct payments and you’re going to try to save the $48 billion that direct payments represents, and you’re going to try to plow some of that back into a new system that takes care of rice producers, and cotton producers, and soybean producers, and corn producers, and wheat producers, etc., but yet you also have to have some for deficit reduction, the smaller that pie is, the more difficult it is to write those programs.”

Others have expressed caution about budgetary variables providing impetus for lawmakers to make policy changes.

Recall that Pat Westhoff, the director of the Food and Agricultural Policy Research Institute at the University of Missouri, pointed out late last month that,  “There’s a very good chance there could be changes in this legislation long before we get to September.  Not because we’ll necessarily pass a new five-year farm bill right away, but because upcoming negotiations on fiscal issues may cause us to make further cuts in programs to try to meet budgetary targets. That can mean changes in farm bill provisions even for the crop we harvest this fall.”

The U.S. Department of Agriculture’s Farm Service Agency (FSA) has indicated that, “FSA will begin sign-ups for [Direct and Counter-Cyclical Payment Program] DCP and [the Average Crop Revenue Election Program] ACRE for the 2013 crops on Feb. 19, 2013.”

In an interview last month (Jan. 23), Ron Hays of the Oklahoma Farm Report asked House Agriculture Committee Chairman Frank Lucas (R., Okla.) specifically about this issue:  “At this point, would you envision probably some cuts to this current year that folks will be signing up for here starting February 19?

Chairman Lucas noted that, “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?

Direct payments have been targeted in the House since the first of the year.

Rep. Mick Mulvaney (R-S.C.) and Rep. Tom McClintock (R-Calif.) considered a proposal to offset disaster funding for Hurricane Sandy by targeting direct payments, although this legislative idea was ultimately unsuccessful.

And Rep. Chris Van Hollen (D., Md.), the Budget Committee Ranking Member noted on the House floor Tuesday (Congressional Record, at H359) that, “We brought a substitute amendment to the Rules Committee that would have prevented those across-the-board cuts [the sequester], that would have replaced them with balanced and sensible alternatives like, for example, eliminating direct payments in agricultural subsidies, like getting rid of the taxpayer subsidies for big oil companies, that we would replace the across-the-board, meat-ax cuts, which would do great harm to our economy, with those sensible measures.

“The response from our Republican colleagues: You don’t get a vote.”

Sec. Vilsack noted yesterday in Las Vegas that risks for changes could persist until a long-term Farm Bill is passed: “And then if you can’t solve the dairy issue, where the Speaker of the House has some concerns about supply side management, then all of a sudden you get stuck, nothing happens, they continue the programs, but as they do, the risk of that direct payment money going away for some other purpose increases. So it’s a dicey time. It’s a very dicey time.”

With this background in mind, David Rogers reported yesterday evening at Politico that, “Farm subsidies are back in play as a possible offset in sequester bargaining, this time as a way for Senate Democrats to help forestall automatic spending cuts for the remainder of this fiscal year or into December.”

Mr. Rogers pointed out that, “In the Ag world, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) confirmed that the prime target for spending cuts is an outdated system of direct cash payments to producers that still costs taxpayers close to $5 billion a year and has long been a target for reformers.

“‘I would prefer obviously to do it in the context of the farm bill but I cannot defend direct payments,’ she told POLITICO.

“She said a final decision had not been made yet on the level of cuts, but she has been promised that her committee will be credited with the savings when she begins her new farm bill markup in late March or April — after the sequester dust settles. ‘Whatever is done has to be agriculture’s contribution to deficit reduction,’ Stabenow said.”

Mr. Rogers explained that, “Subsidies are a tempting target for Democrats though they will have to tread carefully for fear of undercutting efforts to write a new five-year farm bill in this Congress. And in the case of the new crop year, tampering with the 2013 payment levels significantly could impact the ability of especially Southern producers to get financing.”

Meanwhile, Chris Clayton examined the sequester, budget issues and farm policy in an update yesterday at the DTN Ag Policy Blog, “Sequestration Cuts Just One More Federal Merry-go-Round.”

More broadly on the sequester issue, Bernie Becker and Amie Parnes reported yesterday at The Hill Online that, “President Obama told House Democrats on Thursday that he is ‘prepared, eager and anxious’ to produce the broad fiscal package that has eluded Washington.

“A pugnacious Obama told House Democrats at their annual retreat that, with $85 billion in automatic spending cuts looming in three weeks, he is ready to end the current ‘governance in crisis.’”

In other Farm Bill related news, an update from The USA Rice Federation that was posted earlier this week at the Delta Farm Press Online indicated that, “Oklahoma Rep. Frank Lucas, House Agriculture Committee Chairman, addressed rice industry members during the opening general session of the USA Rice Federation Government Affairs Conference…Lucas told the attendees that this was a new Congress and new opportunity to pass a five-year farm bill. ‘My driving principles for a successful farm bill have not changed. We must have one that works for all commodities in all regions. And, we must have a unified voice in the agriculture community to get it done.’”

An update yesterday from the Senate Agriculture Committee indicated that a hearing titled, “Drought, Fire and Freeze: The Economics of Disasters for America’s Agricultural Producers,” has been scheduled for February 14.  “Witnesses will include Dr. Joe Glauber, Chief Economist at the U. S. Department of Agriculture, and Dr. Roger Pulwarty, Director of the National Integrated Drought Information System at the National Oceanic and Atmospheric Administration, as well as farmers and ranchers from across the country,” the update said.

In a teleconference with reporters yesterday, Senator Mike Johanns (R., Neb.) stated that, “Let me shift gears now and talk about what’s facing us back home that is very serious. We continue to see some of the driest conditions in generations. I’ve carefully followed the drought monitor and the weather predictions from the drought mitigation center at UNL, and I’ve met with a number of Nebraska ag producers over the last few days whose livelihoods depend on better weather. I wish I could make it rain, but that ability, of course, is reserved for a much higher power than me.

“I’m looking forward to being home for a few days in the coming weeks and sitting down with farmers and ranchers from around the state as they share their experiences in managing this very, very challenging situation. This situation highlights the need for an updating ag policy. I’m looking forward to getting the ball rolling on a new five-year farm bill to provide certainty in risk management for producers who deal with drought and the other effects of Mother Nature.”

In other policy analysis, recall that last summer, when the House Agriculture Committee was debating the 2012 Farm Bill, Rep. Steve King (R., Iowa) introduced an amendment regarding interstate commerce and egg production.

As the Hill’s Erik Wasson explained back in July, “King, in a midnight vote, got an amendment attached to the 2012 farm bill aimed at stopping a California law banning the sale of eggs harvested from hens living in tiny cages where they cannot spread their wings.”

Mr. Wasson noted that, “The California legislature also applied the egg restrictions to imported eggs after local farmers argued they were at a competitive disadvantage.

“King argues states can’t make such a ban, saying states can’t apply a law to imported products on the grounds that only the federal government can regulate interstate commerce under the Constitution.”

An audio replay of the debate regarding the King amendment at the House Committee markup from July is available here (MP3- 23:00).

A detailed slide presentation on this issue (“State Sovereignty and the Interstate Commerce Clause”) by Nancy S. Bryson of Holland & Hart, that was delivered earlier this month at the National Association of State Departments of Agriculture (NASDA) Winter Policy Conference, has been posted here.

A news release yesterday from Sen. John Barrasso (R., Wyo.) stated that, “Today, [Sen. Barrasso] re-introduced legislation that provides greater certainty and stability to the livestock grazing community in the face of constant environmental legal challenges…The ‘Grazing Improvement Act’ (S. 258) helps ranching communities by preserving the use of livestock grazing permits.  It allows the Bureau of Land Management (BLM) and Forest Service to continue issuing grazing permits while required environmental analysis is pending.  The Act would also extend grazing permit terms from 10 to 20 years before requiring renewal.”

 

Biofuels- Renewable Fuel Standard (RFS)

A news release on Wednesday from Rep. Gregg Harper (R., Miss.) stated that, “U.S. Reps. [Harper] and Jim Matheson (D–Utah) introduced a bill today that seeks to relieve businesses and consumers from an unattainable federal energy mandate.

“The U.S. Environmental Protection Agency (EPA) has required the nation’s petroleum supply to contain a blend of more than 20 million gallons of renewable fuel additives, commonly referred to as cellulosic biofuel, since 2010.”

The release added that, “However, the nonpartisan Congressional Research Service recently reported that cellulosic biofuel is not estimated to reach commercial volumes until at least 2015.

“‘This legislation simply requires the EPA to rely on actual industry production instead of bureaucratic predictions,’ said the lawmakers, who serve on the House Energy and Commerce Committee.”

During an interview yesterday on the AgriTalk Radio program with Mike Adams, Geoff Cooper, Vice President of Research and Analysis at the Renewable Fuels Association, commented briefly on this legislative development- audio (MP3- 1:00).

Meanwhile, Dan Piller and Christopher Doering reported in yesterday’s Des Moines Register that, “The ethanol industry declared all-out war on its critics Wednesday, taking aim at those who have aggressively campaigned to end the country’s renewable fuels mandate.

“‘The state of the ethanol industry can be summed up in five words: under siege and fighting back,’ Bob Dinneen, president of the Renewable Fuels Association, said in prepared remarks at the National Ethanol Conference in Las Vegas on Wednesday. ‘The stakes are high; our adversaries are well-funded; and our challenges are legion.’”

And Bloomberg writer Mario Parker reported yesterday that, “President Barack Obama’s administration won’t abandon the nation’s ethanol program and will encourage Congress to maintain it, Agriculture Secretary Tom Vilsack said…‘Our position is that we are strong supporters of he RFS,’ Vilsack said in an interview with reporters at the National Ethanol Conference in Las Vegas. ‘It’s working. It’s doing what it’s supposed to do. We would hope Congress will continue to allow it to work.’”

 

Agricultural Economy

A news release yesterday from Purdue University stated that, “Total variable input costs for the 2013 corn and soybean crops are likely to stay about the same as last year, a Purdue Extension farm business management specialist says…[S]eed prices will make the biggest jump in the coming year, Alan Miller said. Corn seed is expected to increase by an average of 5-7 percent, and soybean seed prices are likely to increase more than corn.”

The update explained that, “Miller estimated seed costs per acre on average-yield farmland would increase by $8 for corn and $7 for soybeans.

“Nitrogen fertilizer prices are climbing, too. Tight supplies and transportation problems could contribute to an increase of about 2-5 percent over last year’s already pricey nitrogen fertilizers, such as urea, liquid nitrogen (28 percent), or anhydrous ammonia.”

A news release yesterday from the Food and Agriculture Organization of the United Nations stated that, “The FAO Food Price Index held steady at 210 points in January 2013 after three straight months of decline. Increases in oil and fats prices offset lower cereals and sugar quotations while dairy and meat values remained substantially unchanged.”

And in trade developments, a news release yesterday from Sen. Thad Cochran (R., Miss.) stated that, “[Sen. Cochran] today called on the U.S. Department of Commerce to promptly act to protect Gulf Coast shrimpers from unlawfully subsidized shrimp imports from seven different nations.

“Cochran, ranking member on the Senate Agriculture, Nutrition and Forestry Committee, encouraged the Department of Commerce’s International Trade Administration to act on the determination from the U.S. International Trade Commission (USITC) that the U.S. shrimp industry is being harmed by imported frozen warmwater shrimp.”

Keith Good

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