FarmPolicy

October 31, 2014

Farm Bill- Policy Issues; Ag Economy; and, Trade

Farm Bill- Policy Issues, Budget- Sequestration

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “While possible sequestration cuts could begin as soon as March 1, USDA is still examining the possible effects on farm programs, a senior USDA official said Tuesday.

Michael Scuse, the department’s undersecretary for Farm and Foreign Agricultural Services, spoke at the crop insurance industry’s annual meeting near Palm Springs, Calif. During the question-and-answer session, DTN asked Scuse about how farmers would be affected by possible cuts to commodity and conservation programs.

“‘We still have all of the attorneys at USDA looking at all of the programs and how they will in fact be affected if the sequester does kick in on March 1,’ Scuse said.”

Mr. Clayton noted that, “One element that gives USDA pause is that the across-the-board cuts take effect March 1, but USDA’s signup period for the direct and counter-cyclical payment programs begins Feb. 19. Under the sequestration, agencies are expected to honor legal agreements, such as Conservation Reserve Program contracts. That could be interpreted to include a producer’s current enrollment in farm programs as well.

“Thus, USDA’s legal team is looking at the impact of the sequester cuts across all areas of the department’s budget, Scuse said.”

Yesterday’s DTN article pointed out that, “Sequestration is expected to require agencies to cut 5.3% from their budgets for the remainder of the year. With that, Scuse added that the federal budget resolution ends March 27. Without an actual budget or new resolution from Congress, the federal government once again risks a shutdown. Also, a budget agreement could once again demand more cuts. ‘That’s also an unknown,’ he said.”

Meanwhile, Hembree Brandon reported yesterday at the Southeast Farm Press Online that, “Congress’ failure to enact a new farm bill last year ‘isn’t all bad,’ says Daniel Ulmer, legislative assistant to Sen. Thad Cochran, R-Miss., because the extension of the 2008 legislation continues direct and counter-cyclical payments and milk supports.

“‘The USDA recently announced that signups for the programs will begin Feb. 19,’ he said via a video link to the Mississippi Farm Bureau Federation’s annual commodity conference.

“‘While direct payments are not guaranteed this year, I think this extension makes it very likely. We’re very pleased with this; we feel our producers, lenders, and others in agriculture industry can relax a little bit.’”

The Farm Press article added that, “While there are some budget matters to be addressed in the next several weeks that could potentially affect direct payments, Ulmer says, ‘I think the USDA will fulfill its obligations.’”

Yesterday’s article also pointed out that, “While he says Cochran ‘hasn’t gone into detail yet about what he wants to change in the farm bill passed by the Senate last year, I think we can expect he will continue to oppose its regional inequities and its one-size-fits-all approach in the commodity title.

“‘It would eliminate everything in Title 1 except a new program called ARC, Average Revenue Coverage. Based on economic projections, this coverage model looks very good for certain crops and not so good for others. The senator has great concern about its potential impact on Mississippi producers who grow a lot of different crops.’”

In a separate update yesterday at DTN, Chris Clayton reported (link requires subscription) that, “Right now, there is no fiscal road map. The House and Senate Agriculture Committees appear to be waiting for the outcome of the across-the-board budget cuts known as sequestration, as well as the end result of the 2013 budget resolution that must be addressed by the end of March.”

More specifically on the sequester issue, Erik Wasson and Bernie Becker reported yesterday at The Hill’s On the Money Blog that, “Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday that $85 billion in automatic spending cuts will likely go into effect on March 1 despite opposition in both parties.

President Obama has demanded that at least some of the cuts be turned off, but McConnell said Democrats and Republicans were unlikely to reach a last-minute deal.”

The Hill article noted that, “Rank-and-file Democrats expect to be briefed Thursday on the Senate Democratic sequester-replacement proposal, which [Senate Majority Leader Harry Reid (D-Nev.)], Finance Chairman Max Baucus (D-Mont.), Appropriations Chairwoman Barbara Mikulski (D-Md.) and Budget Chairwoman Patty Murray (D-Wash.) are all working on…[I]n addition to the Buffett Rule, Democrats are discussing a variety of ways to reach the $120 billion in deficit reduction, including cutting farm subsidies known as direct payments.

“Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) told The Hill that she is talking with leaders to ensure the sequester bill does not hurt her effort to pass a five-year farm bill.”

Erik Wasson reported yesterday at The Hill’s One the Money Blog that, “President Obama used the State of the Union to call on Congress to go beyond small fiscal fights, such as delaying the $85 billion sequester, and return to a grand bargain on the deficit.”

Scott Wilson reported in today’s Washington Post that, “[Pres.] Obama and congressional leaders have been unable to reach agreement on how to avert the cuts, which the president warned Tuesday would fall hardest on those who can least afford them.

“He called for ‘bipartisan, comprehensive tax reform’ and emphasized that his proposals would not add to the $854 billion deficit, only reallocate money already in the budget to finance them.”

 

Farm Bill- Payment Limits

Ramsey Cox reported yesterday at The Hill’s Floor Action Blog that, “Sen. Chuck Grassley (R-Iowa) announced Tuesday that he would introduce a bill to place a cap on payments an individual farmer receives in a year.

“On the Senate floor [video replay], Grassley said the idea was part of last year’s Senate-passed farm bill, but that it did not become law because the House failed to pass a farm bill during the 112th Congress.”

The Hill item noted that, “The Farm Program Integrity Act would establish a per-farm subsidy cap maximum at $250,000, which would apply to whatever programs were developed as part of the new farm bill. Grassley said the bill would also close loopholes that allow non-farmers claiming to manage farms to qualify for federal farm payments…[T]he bill is a bipartisan measure cosponsored by Sens. Tim Johnson (D-S.D.), Mike Enzi (R-Wyo.) and Sherrod Brown (D-Ohio).”

For more information on the proposed legislation, see this brief summary, as well as this “Q and A” item.

An update yesterday at the National Sustainable Agriculture Coalition (NSAC) Blog stated in part that, “‘Adoption of the Farm Program Integrity Act would put an end to widespread abuse in farm programs,’ according to NSAC Policy Director Ferd Hoefner.  ‘As currently structured, farm programs make mega payments to mega farms and absentee passive investors, subsidizing farm consolidation and the demise of family farms.  The Farm Program Integrity Act ensures that scarce federal dollars would flow to working farmers instead of to passive investors and general partners whose primary purpose in the operation is simply to collect additional government checks.’”

 

Crop Insurance

Chris Clayton reported yesterday at DTN that, “A reoccurring theme at the Crop Insurance Industry annual meeting this week is ‘do no harm’ as insurance agents, company officials, farmers and agricultural lobbyists gather to talk about the state of the industry.

“Without passage of a farm bill last year, crop insurers see a greater risk of more cuts to their programs despite taking billions of dollars in cuts three years ago when USDA renegotiated its contract with the industry. Insurers also took cuts in the 2008 farm bill.

“But crop insurance premiums and indemnities continue to soar, costing more taxpayer dollars in the process. Thus, the industry is advocating a more forceful approach of stressing the value of crop insurance to average producers who face not only weather disasters but volatile markets.”

An update yesterday from National Crop Insurance Services noted that, “Last year’s drought put the country’s crop insurance system to the test, but the public-private partnership passed with flying colors, USDA Under Secretary Michael Scuse said today at the 2013 crop insurance annual conference.

“During the disaster, Scuse traveled across rural America and gave farmers business cards with instruction to call if there were any problems or concerns about crop insurance or the speed of assistance delivery.

“‘To this day, I have yet to have a single producer call me with a complaint about crop insurance,’ he said. ‘That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.’”

 

Agricultural Economy: Mississippi River, Crop Production Variables

Bloomberg writer Brian Wingfield reported earlier this week that, “An Iowa senator demanded the U.S. Army Corps of Engineers explain why it refused to use Missouri River water to replenish the drought-stricken Mississippi a day after it approved releasing water for oil drilling.

“‘Corps leaders have a responsibility to explain this turn of events — and not just to Congress, but to Iowa communities and others like them up and down the Mississippi River that rely on the river for moving goods,’ Senator Tom Harkin, an Iowa Democrat, said today in an e-mailed statement.”

Meanwhile, Gregory Meyer reported yesterday at The Financial Times Online that, “Agricultural markets retreated on Tuesday, with corn falling for the eighth session in a row as rising expectations for South American crops relieved worries about tight supplies in the northern hemisphere.”

The FT article stated that, “Selling has snowballed since the US Department of Agriculture raised estimates of global corn, soyabean and wheat stocks in a report late last week. South America is expected to produce record corn and soyabean harvests just as stocks in the US run low.

Brazil will overtake the drought-plagued US as the world’s largest corn exporter this year, with export prices at the port of Paranagua consistently cheaper than corn along the US Gulf of Mexico, USDA said.”

Owen Fletcher reported in today’s Wall Street Journal that, “Wheat prices fell to a seven-month low [related graph] as rain and snow in the southern Great Plains eased concerns over drought in the region.”

And Bloomberg writers Luzi Ann Javier & Oliver Renick reported yesterday that, “In the U.S., the world’s largest exporter, [cotton] planting will slump 16 percent this year to 10.32 million acres, the least since 2009, according to the average of 13 analyst estimates compiled by Bloomberg. Acreage may plunge 27 percent as farmers shift to more profitable crops, the Memphis, Tennessee-based National Cotton Council said on Feb. 9.

“A farmer in Arkansas, the third-largest cotton-growing state in U.S., can earn $385 an acre growing corn this year and $320 on soybeans, based on an analysis of prices and costs as of Feb. 8 by the University of Arkansas division of agriculture. Even after a rally in prices this year, cotton would fetch only $200 an acre, according to the December study of surface- irrigation farms, the most common type in the state. The figures exclude land costs, including rent.”

 

Trade

Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “Two of the Senate’s top trade lawmakers outlined their priorities for a free-trade agreement between the United States and the European Union ahead of the expected start of talks.

“Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Orrin Hatch (R-Utah) sent a letter on Tuesday to U.S. Trade Representative Ron Kirk urging him to press for greater access for U.S. agricultural and service exports, improved intellectual property protection, regulatory compliance and a mechanism for dispute settlement in any U.S.-EU trade deal.”

The Hill update stated that, “The lawmakers specifically pointed to barriers on agricultural market access, including the EU’s restrictions on genetically engineered crops, a ban on the use of hormones in cattle, restrictions on pathogen reduction treatments in poultry, pork and beef, unscientific restrictions on the use of safe feed additives such as ractopamine in beef and pork;” and added that, “They also said they will ramp up their efforts to renew Trade Promotion Authority (TPA), which will allow for the consideration and completion of any future trade deals, including one between the U.S. and Europe and the Trans-Pacific Partnership (TPP), which is expected to be completed this year.”

Also yesterday, Julie Harker reported at Brownfield that, “The National Farmers Union (NFU) and the United States Cattlemen’s Association (USCA) say changes to Country of Origin Labeling (COOL) legislation are not needed to comply with the recent WTO ruling on COOL.

“A legal analysis released by the two groups today says the USDA can come into compliance with the World Trade Organization appeals panel by ‘amending the COOL regulations.’”

Courtney Weaver and Emiko Terazono reported yesterday at the Financial Times Online that, “Russia is likely to suspend duties on grain imports by the end of March, lifting the import tariff until the summer as domestic wheat prices [related graph] hit record levels following last year’s poor harvest.

“Although the country imports grains free from import tariffs from Kazakhstan, Moscow last imported large amounts of wheat from the west in the crop season of 1999-2000, when it bought almost 1m tonnes from the US.”

Vicki Needham reported last night at The Hill’s On the Money Blog that, “The United States and Europe will launch talks on a trade deal that if completed would form a $5 trillion trans-Atlantic free-trade zone.

President Obama announced the negotiations Tuesday night during his State of the Union address.”

The Hill update added that, “Obama also vowed to complete negotiations on a Trans-Pacific Partnership (TPP), a trade deal being worked on by a dozen nations including Canada, Mexico, Australia, Vietnam, Singapore, Chile and Peru.”

American Soybean Association President Danny Murphy noted yesterday that, “Also encouraging are President Obama’s comments on growing our valuable trade relationships. ASA applauds the president’s commitment to completing negotiations on the Trans-Pacific Partnership (TPP). This is a key priority for American soybean farmers, who ship their product to many of the countries in the TPP. Additionally, ASA welcomes the president’s announcement of talks on a potential trade agreement with the European Union. We hope that these talks will take into account the unique nature of agricultural trade and provide solutions to many of the barriers that soybeans and other American agricultural exports face in the European marketplace.”

Keith Good

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