FarmPolicy

October 24, 2014

Farm Bill- Budget; Ag Economy; and, Senator Johanns

Farm Bill- Budget Issues

A news release yesterday from University of Missouri Extension indicated that, “There is a lot of uncertainty about farm policy in Washington, and current budget debates will determine whether there will be a farm bill and what it will look like, said Pat Westhoff, director of the University of Missouri Food and Agricultural Policy Research Institute.

“‘The sequester that is scheduled to take effect on March 1 will cut many spending programs, and some people have proposed farm programs cuts as well as other programs to try and avoid some parts of the sequester and pay for delaying it,’ said Westhoff at Ag Unlimited, an annual banquet held by the MU College of Agriculture, Food and Natural Resources.

“‘Other things that are coming up are appropriations bills for fiscal year 2013 that need to be resolved fairly soon, and the specter of the debt limit will have to be discussed,’ he said.”

Yesterday’s news item noted that, “‘Things are changing by the hour, but it appears that getting a five-year farm bill this year is far from a sure thing,’ Westhoff said. ‘There is maybe a one-in-four chance of passing a bill that looks sort of like the bills that were discussed in Congress last year; a one-in-four chance of passing something that is much more severe in terms of budget cuts affecting agriculture; and maybe a 50-50 chance of simply extending current legislation yet another year.’”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “While appearing to wreak havoc on USDA’s ability to provide a number of services, the across-the-board cuts known as sequestration coming in March won’t prevent USDA from holding a new enrollment period for the Conservation Reserve Program.

“At the annual Pheasant Fest and Quail Classic over the weekend in Minnesota, Agriculture Secretary Tom Vilsack announced USDA will have a new enrollment period for CRP from May 20 until June 14. The pheasant and quail hunting show has become a traditional spot for Vilsack to announce a new CRP enrollment.”

Mr. Clayton explained that, “Contracts on about 3.3 million acres will expire this fall. CRP now has 27 million acres, one of its lowest acreage levels since the program began after the 1985 farm bill.

“Vilsack added that additional sign-ups for continuous CRP programs will be announced later this spring for programs such as the Highly Erodible Land Initiative and Initiative to Restore Grasslands, Wetlands and Wildlife.”

More specifically on sequester issues, Colin Woodall, Vice President of Government Affairs at the National Cattlemen’s Beef Association, was a guest on yesterday’s AgriTalk radio program with Mike Adams, where in part, the conversation focused on the potential impacts of the sequester on meat inspectors.

To listen to a portion of yesterday’s conversation on AgriTalk, just click here (MP3- 2:58).

Mr. Woodall noted that, “We really feel that there are other people at USDA that are less essential than inspectors that have to be in these plants each time they are open.  We have been in this situation before.  All you have to do is look back at the 95-96 government shut-down in the Clinton administration, even back then, which was really kind of a worst case scenario, we had inspectors in these plants; we feel that we need them now.

“And even though [Sec. of Ag. Tom Vilsack] is telling us now he doesn’t have discretion [to implement sequester cuts], we can’t find anything in the sequestration law that was passed that would keep him from making this designation.  So we are encouraging him to really step up, be a leader here, and not cripple our industry.”

Meanwhile, Sen. Mary Landrieu (D., La.) noted in an update yesterday at The Hill’s Congress Blog that, “When Hurricane Katrina ripped through New Orleans and the region, she crippled the nation’s largest sugar refinery, the Domino Sugar refinery in Chalmette.

“Weeks later, Hurricane Rita landed to the west of the city and left much of the country’s sugar cane crop covered in saltwater and mud from the ocean floor. In some cases, houses, dead livestock, and even fishing boats from miles away had to be removed before crops could be tended.

Despite it all, grocery store shelves were not empty and sugar did not become an unaffordable luxury. Restaurants and coffee houses nationwide still gave it away for free. That is a testament to our nation’s strong sugar policy, which helped sugar producers get back on their feet quickly.”

After discussing recent EU sugar policy reforms, Sen. Landrieu stated that, “Should we move to a European model for our sugar policy, we would threaten over 142,000 well-paying sugar jobs and outsource production of a food staple to nations like Mexico and Brazil. Now is not the time to threaten a stable source of jobs and potentially deepen our already dire trade deficit.”

On the other hand, The Wisconsin State Journal editorial board opined yesterday that, “To see why Congress should reform federal farm policy, look no further than the program that covers sugar production.

The federal sugar program costs American consumers $2.4 billion to $3.5 billion a year and produces a net loss of 10,000 to 20,000 U.S. jobs, according to studies from North Carolina State University, Iowa State University and the U.S. Commerce Department.”

The opinion item added that, “The sugar program deserves top priority because of its negative effects. It limits the amount of sugar that mills and processors can produce, and it limits the amount of sugar imported into the country. Together, these market constraints squelch competition.

“As a result, American buyers pay 30 percent to 50 percent more for sugar than do buyers in other countries. That is costly for consumers and also puts food and beverage producers at a competitive disadvantage unless they move abroad to get lower sugar prices.”

And The Washington Post editorial board noted in today’s paper that, “Farmers are wealthy, the U.S. food supply is not remotely at risk — and yet the government still piles on the subsidies. They totaled an annual average of $11.5 billion over the past four years, according to USDA. Farmers get direct payments for growing certain commodities, deeply subsidized crop insurance, cash rewards for practicing soil conservation — you name it. The programs distort markets and shift resources to agriculture that might find more efficient use elsewhere.”

The Wall Street Journal editorial board stated today that, “President Obama has been a reluctant free-trader, but last week he declared his support for a potentially growth-spurring pact between the Europe and the U.S.”

The Journal stated that, “But the biggest potential prize is the elimination of nontariff trade barriers, such as farm subsidies. The EU spends about €39 billion ($52 billion) in direct farm payments alone. The U.S. is third among global sinners, after Japan, forking over $11 billion a year in direct payments, on top of such benefits as subsidized crop insurance. All of this whacks consumers twice, once with taxes to pay the subsidies, and again with artificially high prices.

A free-trade deal is a rare opportunity to offer increased market access for farm exports in return for reducing or even eliminating subsidy payments. The danger is that negotiators could get rolled by the farm lobbies, locking in payments as the price of not scuppering a larger deal.”

An update yesterday at The Oklahoma Farm Report Online indicated that, “The Chairman of the US House Agriculture Committee, Frank Lucas, R-OK, received American Farm Bureau’s Golden Plow Award on Monday evening, during Oklahoma Farm Bureau’s annual leadership conference at the Skirvin Hotel, Oklahoma City.”

The update added that, “The President of the American Farm Bureau, Bob Stallman, flew in from Washington to present this highest honor from AFBF to Chairman Lucas in front of his home state farmers and ranchers.”

Yesterday’s report also included “the full audio of the remarks given by Chairman Frank Lucas in response to being honored by the general farm organization.”

A brief portion of the Chairman’s remarks yesterday, relating specifically to the Farm Bill, can be heard here (MP3- 2:03).

 

Agricultural Economy

University of Illinois Agricultural Economist Darrel Good noted yesterday at the farmdoc daily blog (“Soybean Price Prospects – Near Term and Long Term”) that, “Soybean prices reached record high levels in late August and early September 2012. Those high prices were generated by a combination of a drought-reduced harvest in South America earlier in the year, drought conditions in much of the U.S. production region, and on-going strong Chinese demand for soybeans. Prices declined by about $2.00 per bushel in September and October as the U.S. crop turned out to be larger than expected.”

After additional analysis, yesterday’s update indicated that, “An increase in vegetable oil demand for biodiesel production could support soybean oil and soybean prices during the 2013-14 marketing year at higher levels than now anticipated. Such an outcome could result in a very interesting dynamic in future years. Higher soybean oil and soybean prices relative to other crop prices in 2014 would be expected to stimulate more soybean production if biodiesel demand was expected to remain strong. This would be in contrast to the ethanol driven increase in corn acreage since 2007. The increase in soybean production and processing in order to meet expanding soybean oil demand could then result in a surplus of soybean meal and lower prices for that product, with an indeterminate effect on soybean prices beyond 2014.

There is considerable uncertainty about U.S. biodiesel production beyond 2013 since production is primarily policy driven. That is another factor that can be added to the long list of factors that will impact soybean prices over the next 18 months.”

In other news, Alison Snider and Paul Rekoff reported in today’s Wall Street Journal that, “Prices at U.S. gasoline pumps have climbed for 32 consecutive days to a four-month high, as refinery closures cut output and higher crude prices raise costs.”

 

Sen. Johanns

Manu Raju and Patrick Reis reported yesterday at Politico that, “Nebraska Sen. Mike Johanns announced Monday that he would retire in January 2015, a surprise decision by a first-term Republican senator who was considered in a strong position for reelection next year.”

The article added that, “In an emotional letter to constituents, Johanns said it is time to quit after more than three decades in public life.”

In addition, yesterday’s article pointed out that, “Attention immediately turned to [Republican Gov. David Heineman], who succeeded Johanns as governor when he became agriculture secretary in 2005.”

All three GOP members of the House delegation are potential candidates. Jeff Fortenberry, elected to the House in 2004, is seen as the most likely of the three Republicans to enter the race. Reps. Lee Terry and Adrian Smith are the other two House Republicans from Nebraska,” the Politico article said.

Abby Livingston reported yesterday at Roll Call Online that, “Nebraska Gov. Dave Heineman will take ‘a few days’ to consider a run to succeed fellow Republican Sen. Mike Johanns, according to the Omaha World-Herald.”

The Roll Call item added that, “‘I will consider a run for the United States Senate,’ Rep. Jeff Fortenberry said in a statement on Monday. ‘I will listen to Nebraskans, explore the questions of how I might most effectively serve, and weigh the demands of such an endeavor with my family.’”

Keith Good

Comments are closed.