FarmPolicy

October 1, 2014

Budget- Policy Issues; and, the Ag Economy

Budget- Policy Issues

Rosalind S. Helderman reported yesterday at The Post Politics Blog (Washington Post) that, “Congress has officially returned to business after a week-long recess, but there is no new sign of serious negotiations to avert sequestration on Friday.”

Yesterday’s update indicated that, “A Senate Republican aide said Monday that party Senate leaders plan to advance competing sequestration measures on Wednesday. By unanimous consent, both sides have agreed that either measure would need 60 votes to proceed, meaning that each measure is bound to fail.

“The Democratic version would delay the sequester until January, paid for in part by reducing agricultural subsidies and raising taxes on those making more than $1 million a year. The aide said the specifics of the Republican version would be unveiled later Monday and that it would leave the cuts in place but would allow more flexibility in how to implement them.”

Educational graphics regarding sequestration have been posted recently at The New York Times Online (“Where the Cuts Would Come From”) and The Washington Post Online (“White House estimates of state-by-state impacts of sequestration”).

Meredith Shiner and Steven T. Dennis reported yesterday at Roll Call Online that, “President Barack Obama on Monday called on the nation’s governors to lobby their respective congressional delegations to prevent the looming sequestration cuts set to kick in Friday.

“At the annual gathering of the National Governors Association, Obama urged the bipartisan group of state executives to review the state-by-state reports issued by the White House Sunday outlining how the more than $1 trillion in across-the-board cuts would affect their constituents. Obama also addressed state and federal partnerships in infrastructure and education.”

The Roll Call article added that, “Obama will travel to Virginia Tuesday to discuss the impacts of the cuts with regular citizens in an attempt to increase pressure inside the Beltway to act. So far, Republicans seem willing to accept the cuts rather than agree to closing tax loopholes or otherwise raising taxes.”

David A. Fahrenthold and David Nakamura reported in today’s Washington Post that, “Republicans on Monday rejected President Obama’s high-pressure push to avert a series of budget cuts called the sequester, saying that Obama is engaged in scare tactics and political campaigning when he should be seeking a deal.

“‘This is not time for a road-show president,’ Majority Whip Kevin McCarthy (Calif.) said at a news conference with other House Republicans. ‘This is time to look for someone who will lead and work with us, because we’re willing to work with them to solve America’s problems.’

“The lawmakers criticized Obama for a planned trip Tuesday to Newport News, Va., where he will highlight the impact of the cuts on the military-driven local economy.”

Also, Peter Nicholas and Damian Paletta reported in today’s Wall Street Journal that, “With across-the-board federal spending cuts likely to begin Friday, a growing question is how much discretion the Obama administration has to soften their blow.”

The Journal writers noted that, “The answer to how much the administration can control what exactly is cut may not be known until the deadline hits and agency heads begin making adjustments to live within the tighter budgets.”

And Jonathan Weisman and Michael D. Shear reported in today’s New York Times that, “Congressional Republicans are preparing to counter increasingly dire warnings from President Obama about the impact of automatic budget cuts with a plan to give the administration more flexibility in instituting $85 billion in cuts, a proposal they say could protect the most vital programs while shifting more of the political fallout to the White House.

The plan is vigorously opposed by the administration, which said Monday that it would do little to soften the blow to military and domestic programs. But it is also dividing Democrats, with lawmakers from the states facing the deepest cuts signaling that they may be prepared to go along with Republicans if it means avoiding indiscriminate cuts to military programs and social services.”

The article explained that, “Seeking to shift responsibility for the cuts to Mr. Obama and to defang attacks by the White House, Republicans were expected to unveil legislation on Tuesday that they said would mitigate some of the biggest concerns. The measure would let agencies and departments cull programs that were long ago proved to be ineffective, and would make sure critical federal functions like air traffic control and meat inspection were spared.

But White House budget officials are leery. If Congress grants the White House the authority to protect air traffic controllers, Border Patrol agents and national parks, the administration’s carefully devised high-pressure campaign that has been mounting for weeks could deflate. Moreover, the White House would take on the responsibility of deciding which programs to protect and which to expose — and the political consequences that go with that.”

Republicans had been expected to present their own package to replace the so-called sequestration. Instead, Republican leaders were expected to present the flexibility legislation,” the Times article said.

Meanwhile, a House Agriculture Committee Hearing scheduled for this morning, where the Committee was set to hear testimony from Sec. of Ag. Tom Vilsack, was postponed yesterday.

Although today’s hearing was officially scheduled “to review the state of the rural economy,” lawmakers were likely to pursue more executive branch perspectives on the specific nature of potential sequestration cuts at USDA from Sec. Vilsack.  The hearing has been rescheduled for Tuesday, March 5, 2013.

However, the House Agriculture Committee will be meeting this morning to “to consider the Budget Views and Estimates Letter of the Committee on Agriculture for the agencies and programs under jurisdiction of the Committee for FY 2014.”

In part, the letter stated that, “In addition we reaffirmed that crop insurance, which is distinct from traditional farm policy, has become the cornerstone of risk management in agriculture for a great many producers. At numerous hearings, both in the field and in D.C., the Committee heard about the importance of the federal crop insurance program and how it must not be weakened, particularly since it has already experienced billions of dollars of cuts in recent years. Last year’s drought exemplified exactly how important crop insurance is to producers and the rural economy. With almost half of the country experiencing severe to exceptional drought, there were no calls for ad hoc disaster assistance as there have been in the past, because of the protection crop insurance provides.”

Also on the crop insurance issue, Marcia Zarley Taylor reported yesterday at the DTN Minding’s Ag Business Blog that, “Attendees at last week’s USDA Outlook forum couldn’t help to notice the silence. Yes, U.S. agriculture just survived its near-death experience with the worst drought since the 1950s, but unlike comparable disaster years of 1983, 1988 and 1993–and scores of localized weather losses– there’s been no uprising or revolt from the nation’s crop farmers calling for supplemental aid. Ditto 2011, when Texas and much of the Plains experienced their own modern Dust Bowl.

“That calm should be a shock to observers, since Congress has a history of writing free disaster checks to farmers–especially in election years. It voted 42 separate times between 1989 and 2011 to cover $70 billion in farm disaster losses, according to the Congressional Budget Office. Crop insurance was supposed to kick that habit–and encourage growers to partially finance the cost of coverage with premiums rather than rely on free handouts.

“Private crop insurance companies have already written checks for $14.7 billion of indemnities on the 2012 crop–by far the largest claims in federal crop insurance’s 80-year history. Reimbursement has come in time to finance seed, fertilizer and rent for the 2013 crop–rather than the two-year delays common under most free disaster programs. Instead of a budget target, many industry supporters say that’s proof that the federal crop insurance program delivers what its architects first promised two decades ago.”

In other developments, a news release yesterday from the House Agriculture Committee indicated that, “Today, Chairman Frank Lucas and Ranking Member Collin Peterson issued the following statement in response to the recent release of the U.S. Department of Agriculture’s (USDA) report on the various definitions of rural used in programs administered by the agency. The 2008 Farm Bill required USDA to complete this report by June 18, 2010 to assess how the various definitions have impacted rural development programs and to make recommendations on ways to better target funds.”

In part, the statement noted that, “We are pleased that, more than two and a half years after it was due, USDA has finally fulfilled its statutory obligation to report on how the various definitions of rural have impacted our rural development programs. The report offers useful insights into issues such as how municipal entities are defined in various regions. But, we are disappointed in USDA’s proposals to shift funding away from the most rural areas by inflating the definition across the board. This will result in smaller communities competing with larger and more urban areas for funding.”

Also yesterday, Reuters writer Charles Abbott reported yesterday that, “The White House may soon propose the biggest change in U.S. food aid since the programs were created during the Cold War - donating cash for hunger relief instead of shipping American-grown food thousands of miles to global trouble spots, say farm groups and charities.

“Reformers have argued for years that cash donations, the method used by most nations, are more efficient and speedier. But food donation has been the favored U.S. approach since the Food for Peace program was enacted in 1954.”

The Reuters article noted that, “Oxfam and allies such as American Jewish World Service point to a 2012 Cornell University study as support for the idea that cash, used to buy local food near the recipients’ area, is more efficient than sending bags of flour or rice, bottles of vegetable oil, dried milk and other aid…[F]arm groups and agribusinesses said they opposed dramatic cuts or the elimination of Food for Peace.”

More broadly, David Rogers reported yesterday at Politico that, “Trying to sell Ram trucks, Chrysler made a splash in the Super Bowl this month with a two-minute television spot celebrating the American farmer — a montage of handsome still photos and a vintage Paul Harvey speech all ending with the pitch: ‘For the farmer in all of us.’

Nine days later, the picture was very different as President Barack Obama skipped over farmers entirely in his State of the Union address, never mentioning the yearlong farm bill stalemate in Congress nor even including ‘agriculture’ among the thousands of words spoken that night.

“‘It’s obviously not on their radar screen,’ said Minnesota Rep. Collin Peterson, the ranking Democrat on the House Agriculture Committee. ‘The president and his people I don’t think even get it.’”

Mr. Rogers pointed out that, “Chrysler’s marketers made a business decision to invest millions of dollars to identify with farmers, just as the automaker also aired a second two-minute spot for Jeep — this time celebrating U.S. troops coming home from wars overseas.

“‘We have used the largest television viewing audience to highlight the pride, the resilience and the determination that form an integral part of the American character,’ said Sergio Marchionne, CEO for both Chrysler Group LLC and its principal owner, Fiat S.p.A. An accompanying news release speaks of the troops and farmers as ‘two groups whose work ethic, dedication and service have sustained the very fabric of this nation.’

Contrast that with Washington where in the middle of the worst drought in a generation, no farm bill was even brought to the floor of the House — an unprecedented delay for which Republicans paid little at the ballot box. Indeed, the year ended with Obama washing his hands of the whole matter and allowing Senate Minority Leader Mitch McConnell (R-Ky.) to pen a nine-month extension that infuriated many dairy farmers and left the two Ag committees out in the cold.”

The Politico article noted: “What is it that Chrysler sees that Washington doesn’t? Are these just modern Mad Men selling pickups to suburban men with farm fantasies?

Or is something bigger happening here in power politics? And is there a lesson that farmers themselves must learn from if they are to better market their importance to American consumers — and voters?”

After additional observations, Mr. Rogers explained that, “Crop insurance payments — expected to reach close to $16 billion altogether — have helped offset losses from last summer’s drought. And as land prices rise, older Ag lawmakers complain that younger producers seem to have forgotten hard times and fret more about estate taxes — than the traditional safety net.

Indeed the cost of that safety net — as a percentage of federal spending — has shrunk considerably. The latest Congressional Budget Office estimates peg the 10-year costs at about $158 billion — less than 1 percent of what Washington will spend on other benefit programs.”

The Politico article noted that, “In this context, Keith Collins, a former chief economist of the Agriculture Department and now an adviser to the crop insurance industry, says the costs are almost the equivalent of paying an ‘annual premium’ on what amounts to food supply insurance for the nation.

“‘Agriculture has become so efficient, so few people actually raise the food … the American consumer has become almost like high school kids,’ Lucas said. ‘It’s always been there, it will always be there. Dad can I have the keys to the car? Does the car have gas in it? Oh, it will always have gas in it, right Dad?’”

The decline of regional newspapers — which were the heart of the old farm press — contributes to this isolation. Major publications largely ignored the farm bill debate last year, while many of the most experienced Ag reporters have migrated to more niche, subscriber-funded newsletters,” the Politico article said.

 

Agricultural Economy- Trade

AP writer Roxana Hegeman reported earlier this week that, “Years of drought are reshaping the U.S. beef industry with feedlots and a major meatpacking plant closing because there are too few cattle left in the United States to support them.

“Some feedlots in the nation’s major cattle-producing states have already been dismantled, and others are sitting empty. Operators say they don’t expect a recovery anytime soon, with high feed prices, much of the country still in drought and a long time needed to rebuild herds.

“The closures are the latest ripple in the shockwave the drought sent through rural communities. Most cattle in the U.S. are sent to feedlots for final fattening before slaughter. The dwindling number of animals also is hurting meatpackers, with their much larger workforces. For consumers, the impact will be felt in grocery and restaurant bills as a smaller meat supply means higher prices.”

Bloomberg writer Tony C. Dreibus reported today that, “The second major snowstorm in a week for the southern Great Plains is delivering moisture to U.S. wheat crops that went dormant in November in the worst condition since at least 1985 because of a drought.

“More than a foot (30 centimeters) of snow was expected to fall in parts of the region, four days after a storm brought as much as 20 inches, National Weather Service data show. The precipitation may boost crop prospects in areas where fields have deteriorated after the most-severe drought since the 1930s, said Kim Anderson, an agronomist at Oklahoma State University.

“‘It won’t break the drought, but this storm will be enough to get wheat that’s established up and out of the ground and set it up for the rest of the year,’ Anderson said in a telephone interview from Stillwater, Oklahoma.”

With respect to trade issues, The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “The House Ways and Means Committee plans to take up the issue of renewing the president’s fast-track trade promotion authority during the 113th Congress, according to committee Chairman Dave Camp, R-Mich. TPA was one of 15 items mentioned in a draft letter outlining the oversight hearings and oversight-related activities that the trade and tax panel and its subcommittees plan to conduct during over the next two years.

“TPA, which lapsed in 2007, provides for fast-track congressional consideration of trade agreements on an up-or-down basis under strict timelines for votes. Congress has not debated a TPA bill in 11 years.”

The DTN item added that, “Without a grant of trade promotion authority, any presidential administration would find it difficult to negotiate new agreements because other countries would know that absent TPA, Congress would be free to amend the agreement once it reached Capitol Hill.

“If Congress does decide to move forward with the fast-track trade legislation, the process is expected to be slow and the directions from Congress to the administration on how to proceed in future negotiations will be complex.”

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “While the Obama administration and others see great potential in spurring more exports to Europe through a new possible free-trade agreement, U.S. agriculture will be hard-pressed to see big gains unless Europe agrees to dramatically change its regulatory mindset.

U.S. agricultural experts in European trade and policy maintain U.S. agricultural products would remain at a disadvantage in Europe unless a free trade agreement requires reforms in Europe’s regulatory trade barriers on farm products. A panel discussion touched on the problems last week at the USDA Outlook Forum.”

Keith Good

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