FarmPolicy

September 3, 2014

Ag Economy; Budget; and, the Farm Bill

Agricultural Economy- Trade

Jack Healy reported in Saturday’s New York Times that, “After enduring last summer’s destructive drought, farmers, ranchers and officials across the parched Western states had hoped that plentiful winter snows would replenish the ground and refill their rivers, breaking the grip of one of the worst dry spells in American history. No such luck.”

The article explained that, “This week’s blizzard brought a measure of relief to the Plains when it dumped more than a foot of snow. But it did not change the basic calculus for forecasters and officials in the drought-scarred West. Ranchers are straining to find hay — it is scarce and expensive — to feed cattle. And farmers are fretting about whether they will have enough water to irrigate their fields.

“‘It’s approaching a critical situation,’ said Mike Hungenberg, who grows carrots and cabbage on a 3,000-acre farm in Northern Colorado. There is so little water available this year, he said, that he may scale back his planting by a third, and sow less thirsty crops, like beans.”

Tom Lutey reported yesterday at the Billings Gazette Online that, “Ted Flikkema is picking up the tab for another very expensive meal.

The farmer’s Holsteins are chewing through another 23,000 pounds of corn and hay, for which the daily bill is nearly $2,900. Given what farmers are being paid for milk these days, the cost is hard to swallow.”

The article pointed out that, “‘All the feed prices are up,’ Flikkema said. ‘We used to pay $90 a ton for corn. Now, we’re paying $300 a ton. We’re paying $200 a ton for dairy hay.’

The sharp rise in feed costs has all but taken the profit out of dairy farming, Flikkema said. And though he loves the business, he’s not crazy about producing milk for free.”

Rick Barrett reported on Saturday at the Milwaukee Journal Sentinel Online that, “Hay supplies in parts of Wisconsin are at the lowest level in more than 50 years, according to some estimates, and the shortages are likely to get worse before summer.”

Bloomberg writer Elizabeth Campbell reported on Friday that, “U.S. feedlots purchased or placed 1.6 percent more young cattle in January than a year earlier as persistent dry conditions spurred ranchers to move animals off pastures.

“About 1.876 million head of cattle were taken in by feedlots last month, up from 1.847 million in January 2012, the U.S. Department of Agriculture said [Friday] in a report.”

The article noted that, “‘It’s been pretty dry in the Kansas, Oklahoma, Texas area,’ Ron Plain, a livestock economist at the University of Missouri in Columbia, said in a telephone interview before the report. In some areas, cattle aren’t able to graze on winter- wheat fields, so they’re being sold, he said. ‘The cattle gotta go someplace else.’”

In other news, Bloomberg writer Mark Drajem reported last week that, “The Missouri and upper Mississippi rivers have a greater chance of returning to drought-depleted levels because of dry soil and low reservoirs, forecasters said, signaling fresh limits for barges on the busiest U.S. waterway.

The rivers ‘will have to have greater-than-normal’ rain to avoid repeating near-record low levels this year, Steve Buan, a hydrologist at the National Weather Service, said today at a congressional staff briefing. ‘We are going to have to have rain in spring and fall, so we don’t have a situation like we had last year.’”

And Bloomberg writer Alan Bjerga reported on Friday that, “The drought that almost halted barge traffic on the Mississippi River illustrates that the U.S. must improve inland waterways to remain competitive in export markets, a Cargill Inc. shipping executive said.

“‘Our locks and dams are aging, and they’re not aging very gracefully,’ Rick Calhoun, the president of Cargill’s marine and terminal division, said today in a presentation at the U.S. Department of Agriculture’s annual outlook forum in Arlington, Virginia.”

A news update last week from Rep. Tim Walz (D., Minn.) stated that, “[Reps. Tim Walz] and Ron Kind (D-WI), former member of the House Natural Resources Committee from 1997-2011, were recently selected as Co-Chairs of the Mississippi River Caucus.

“The Mississippi River Caucus leadership is made up of six co-chairs: Walz, Kind, U.S. Representatives Stephen Fincher (R-TN) and Rick Crawford (R-AR) as well as Senators Roy Blunt (R-MO) and Tom Harkin (D-IA).”

An update last week from Sen. Claire McCaskill (D., Mo.) stated that, [Sen. McCaskill] officially signed onto the Mississippi River Caucus, joining colleagues Tom Harkin of Iowa and fellow Missouri Senator Roy Blunt.”

In trade news, Reuters writer Theopolis Waters reported on Friday that, “U.S. beef export sales to Japan soared to the highest in more than two years last week following Tokyo’s decision to ease import rules related to the outbreak of mad cow disease in 2003, government data showed on Friday.”

Don Lee reported in Saturday’s Los Angeles Times that, “[Pres.] Obama would like to see Japan join the U.S., Canada, Mexico, Australia and seven other countries in negotiations for an Asia-Pacific free-trade agreement. The administration sees the pact as an important part of its ‘pivot to Asia’ to secure American strength in an increasingly wealthy region of the world, where China’s influence has grown.

“But the American auto sector and Japanese farmers, important constituents for Obama and [Japanese Prime Minister Shinzo Abe], have balked at Japan entering negotiations that could expose their industries to greater foreign competition.”

However, Jackie Calmes reported in Saturday’s New York Times that, “Mr. Abe also seemed to move closer to committing Japan to join the United States and other Pacific Rim nations in negotiating the regional free-trade agreement — and in a way that seemed intended to satisfy both leaders’ separate domestic political concerns. The proposed Trans-Pacific Partnership has been a priority of Mr. Obama’s economic and foreign policy agenda since late 2011.

“While Mr. Abe’s advisers have said he has personally favored joining the talks, in keeping with his emphasis on an economic stimulus program that has become known as ‘Abenomics’ in Tokyo, he faces domestic political risks: Mr. Abe regained office less than two months ago, and his party faces critical parliamentary elections in July, when it will need the support of rice farmers skeptical of more open markets.

“In a joint statement, the two governments agreed that if Japan does participate in the trade talks, there would be no exemptions stopping discussions on any products, a starting point the United States had insisted upon. But the statement also recognized ‘that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States’ and held that Japan would not have to commit to ending all tariffs upon joining the talks. Even so, the goal of the trade talks is a comprehensive agreement that eliminates tariffs.”

Reuters writer Doug Palmer reported on Friday that, “The United States and Japan on Friday agreed on language aimed at giving Japanese Prime Minister Shinzo Abe political cover to bring the world’s third-largest economy into negotiations on a U.S.-led free trade agreement in the Asia Pacific region.”

The article added that, “‘The United States and Japan agreed that the deal has to be comprehensive, but you don’t commit to the final terms before you even get into the negotiations,’ [Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics] said.”

And Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “Pressure is building behind a push for Congress to renew President Obama’s authority to negotiate trade agreements amid an expanding global agenda.

Efforts by business groups and lawmakers to renew trade promotion authority have picked up pace in the nearly two weeks since Obama announced plans to start negotiations this summer on a trade deal between the United States and the European Union (EU).”

 

Budget Issues- Sequestration

Peter Nicholas and Damian Paletta reported in Saturday’s Wall Street Journal that, “Lawmakers in both parties anticipate that a looming set of spending cuts will take effect next week and won’t be quickly reversed, likely leading to protracted political uncertainty that presents risks both to Congress and President Barack Obama.”

Kevin Diaz reported yesterday at The Minneapolis Star Tribune Online that, “‘I think it’s [sequestration] going to happen,’ said U.S. Rep. Collin Peterson, D-Minn.”

Mr. Diaz added that, “Peterson, a realist, sees sequestration as the only viable way to make painful budget cuts in the current weak-kneed political climate. But even he holds out hope for something more rational. ‘Depending on how it sorts out,’ he said, ‘that may build some pressure to do something.’”

Janet Hook reported in Friday’s Wall Street Journal that, “Faced with the likelihood that Congress will fail to avert impending budget cuts set to start March 1, some Republicans are turning their attention to blunting their impact.

“Sen. Jim Inhofe (R., Okla.) is crafting legislation to give federal-agency heads more flexibility to administer the cuts, which are supposed to apply indiscriminately to defense and domestic programs.”

The Journal article explained that, “Mr. Inhofe last month drafted a bill to give the Pentagon more latitude to make the March 1 cuts in a more targeted fashion rather than taking the same percentage from every program. He wanted to offer it as an amendment to legislation suspending the federal debt limit, but he withdrew it rather than jeopardize passage of the bill.

Now he is seeking bipartisan support for the bill, which could be broadened to cover all agencies. The legislation could be introduced next week, while, or after, the Senate debates a Democratic bill to replace the sequester with a deficit-reduction package that raises taxes on millionaires and cuts farm subsidies. The Democrats’ bill isn’t expected to pass, but is considered mostly a political statement to show what they would do instead of the sequester.”

However, the Journal article noted that, “‘The administration would oppose a solution that kept sequestration in place and tried to reconstruct it in a way that would dull some of the pain,’ said Danny Werfel, controller of the Office of Management and Budget.

“Meanwhile, House Republicans are looking ahead to the next fiscal battle—the March 27 expiration of funding for most federal agencies. House Appropriations Chairman Hal Rogers (R., Ky.) is planning a bill to extend funding at the lower, post-sequester level but in a way that gives the Pentagon more opportunity to reorder its priorities.”

Meredith Shiner reported on Friday at Roll Call Online that, “Behind the rhetorical war over who is to blame for the sequester, Senate Democrats and Republicans are putting forward proposals that could be the foundation of a future deal to replace the automatic spending cuts likely to take effect Friday.

“Lawmakers have long been targeting the March 27 deadline for keeping the government funded as the more pivotal cutoff date for action. But Senate leaders this week will vote on dueling sequester replacement packages that appear designed to test the bipartisan appeal of their general frameworks.”

Ms. Shiner pointed out that, “Although Senate Democrats will take cues from the White House on how to proceed after the sequester kicks in, they are set this week to vote on a plan that replaces one year of the sequester, or $110 billion of cuts, with a 50-50 split of targeted cuts and new revenue. That includes eliminating direct payments to farmers — a provision that received bipartisan support in the Senate in 2012.

“Although Democrats feel confident about their bipartisan approach, Senate Minority Leader Mitch McConnell, R-Ky., already stripped the direct payment provision from legislation during the fiscal-cliff debate, and he likely would not support such a measure now. According to the Farm Service Agency, 42,027 Kentucky farms received a historic, cumulative $42,962,487 in direct payments in 2011.”

Jonathan Weisman and Michael D. Shear reported in Saturday’s New York Times that, “Senate Republicans have not yet decided which alternative they will offer. One would pay off this year’s cuts by imposing a 10-year hiring freeze on federal workers. Republicans may also offer legislation to give federal agencies more flexibility to impose the cuts and choose which programs to hit and which to spare. White House officials say they oppose that bill, fearing it would give lawmakers a false sense that they had taken the sting out of the cuts. But opposing such a measure would be difficult for Democrats.”

And Janet Hook and Peter Nicholas reported in today’s Wall Street Journal that, “Attention is beginning to shift from Friday, when the broad cuts known as the sequester kick in, to the next budget deadline: Congress must pass a so-called continuing resolution by the end of March to keep funding government operations.

“Senior aides to House Speaker John Boehner (R., Ohio) and Senate Majority Leader Harry Reid (D., Nev.) have begun discussing a bill being prepared by House Republicans to fund government operations through September. Republicans want the bill to extend operating funds at the lower levels set to kick in Friday and to give more flexibility to the Pentagon to manage its cuts.”

Meanwhile, Bloomberg writer Heidi Przybyla reported on Friday that, “Four-year-old children in low-income families who receive free milk, fruit and vegetables through a U.S. government nutrition program might be turned away within weeks if federal spending cuts take effect March 1.

“Administrators with the Women, Infants and Children program say they would have to trim their caseloads by 600,000 applicants or participants across the country because of the spending cuts. Four- and five-year-olds would probably be affected before infants and toddlers, said Douglas Greenaway, president of the National WIC Association, a Washington nonprofit group.”

 

Farm Bill- Policy Issues

DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “Amidst rumors that the Obama administration’s draft budget for fiscal year 2014 would eliminate food aid programs that provide U.S. commodities in low-income countries and replace them with a smaller program to provide money to buy commodities on the international markets, 21 senators are urging President Barack Obama to maintain funding for the Food for Peace program.”

Also, a news release late last week from the American Soybean Association (ASA) stated that, “The [ASA] expressed its strong opposition today to a plan it understands will be proposed as part of the White House’s 2014 budget that would restructure the nation’s foreign aid programs by eliminating the Food for Peace and Food for Progress programs and replace them with a much smaller cash account managed by the U.S. Agency for International Development (USAID).”

“ASA is among the leading drivers of a broad-based coalition to oppose the restructuring that includes representative groups in the agriculture, supply chain and logistics, labor, non-governmental organization (NGO), and development industries…[T]he groups collaborated on a series of letters to President Obama and to Senate leaders expressing opposition to the plan and citing the positive impacts of both programs both at home and abroad.”

Meanwhile, Agricultural Economists Carl Zulauf (Ohio State University) and Gary Schnitkey (University of Illinois) noted in an update Friday at the farmdoc daily blog (“2013 Farm Program Choice: An Initial Perspective”) that, “Congress extended the 2008 Farm Bill to the 2013 crop. Thus, farms will have the decision to enroll in either the Direct and Counter-Cyclical Program (DCP) or Average Crop Revenue Election (ACRE) program. Enrollment status in the 2012 farm program does not matter. Any Farm Service Agency farm serial number, hereafter simply referred to as a farm, can enroll or not enroll in the 2013 ACRE program. This post discusses this decision.”

In other news, Ross Farrow reported last week at the Lodi News-Sentinel (Calif.) Online that, “A congressman who is hoping to become the next House Agriculture Committee chairman came to San Joaquin County on Wednesday. Rep. Mike Conaway, R-Texas, who is also a certified public accountant, came to attend a fundraiser and learn more about agricultural issues specific to California.”

A side-bar in the article pointed out that, “Rep. Frank Lucas, R-Okla., is required to step down as chairman [in 2014] due to term limits imposed on committees.”

Keith Good

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