January 23, 2020

Budget- Policy Issues; Farm Bill; Ag Economy; and, CFTC

Budget (Sequestration)- Policy Issues

Alan K. Ota reported yesterday at Roll Call Online that, “The Senate is expected to defeat Thursday competing Democratic and Republican alternatives to the $85.3 billion in automatic spending cuts scheduled to begin Friday.

“Majority Leader Harry Reid, D-Nev., proposes to replace the percentage cuts imposed by a provision of the 2011 debt limit agreement with a package of revenue increases and alternative savings [Congressional Budget Office score of this plan available here, while a more detailed discussion of the specific agricultural provisions of this package from the National Sustainable Agriculture Coalition (NSAC) can be found here].

“Senate Republicans settled late Wednesday on a sequester substitute that would give President Barack Obama until March 15 to send Congress an alternative package of targeted spending cuts. Lawmakers could block the president’s plan only by adopting within seven days a resolution of disapproval that would require Obama’s signature or the support of a veto-proof majority.”

The NSAC noted yesterday that, “Unlike the Democratic plan, the GOP plan would not address the Farm Bill.”

Meanwhile, Peter Nicholas and Janet Hook reported in today’s Wall Street Journal that, “With mandatory across-the-board spending cuts set to begin Friday, the White House and congressional Republicans are poised to let the deadline pass, each calculating that their hand in negotiations only grows stronger if they scorn a quick compromise.

“The first face-to-face meeting on the issue between President Barack Obama and congressional leaders won’t happen until Friday —the deadline for Mr. Obama to set in motion $85 billion in broad spending cuts. None of the participants expect the morning meeting at the White House to produce a breakthrough.”

The Journal article added that, “What could backfire for the White House is if weeks go by and the impact of the cuts seems overstated. Administration officials, therefore, also are cautioning that people might not notice the cuts right away. ‘It’s not all going to happen Saturday,’ a White House official said.

“So far, investors don’t appear rattled by the prospect of the cuts. The Dow Jones Industrial Average reached a five-year high on Wednesday.”

More specifically on agricultural related programs and the sequester, Neil Munshi reported yesterday at The Financial Times Online that, “Trade groups are warning of widespread shortages of meat, poultry and eggs in the US as the meat industry braces for painful cuts that could cost it an estimated $10bn in lost production and $400m in lost wages.

“The $2bn in automatic cuts to the US Department of Agriculture’s budget would cause it to furlough food inspectors for up to 15 days later this year at the country’s more than 6,000 meat and poultry plants, according to Tom Vilsack, agriculture secretary.”

The FT article pointed out that, “If the sequestration is enacted in its current form, the USDA could spread out the furloughs over a longer period of time – say one day off every few weeks – and the effects on the meat and restaurant industries could be lessened, [Scott DeFife, head of policy for the National Restaurant Association] said. But consumers may still feel the pinch.”

In addition, Reuters writer Mark Weinraub reported yesterday that, “Trading in Chicago livestock futures has declined this week as traders worry that furloughs at the U.S. Agriculture Department, due to federal automatic spending cuts, will disrupt cattle and hog marketings and price reporting.”

Secretary of Agriculture Tom Vilsack discussed sequester issues yesterday on CNN’s “The Situation Room,” where host Wolf Blitzer asked the Secretary, “Why not eliminate some of those huge subsidies for the wealthy farmers out there and not eliminate jobs for meat inspectors or food for poor people?”

Sec. Vilsack stated that, “Well, the way the sequester law and the Budget Control Act was crafted, Wolf, we don’t have that capacity or flexibility to do that. Every line item of the budget, with the exception of some of the nutrition programs, is subject to the same amount of cut, the same percentage cut. Indeed, farm subsidies may very well get cut at the same percentage as the food safety budget gets cut because it’s every line item. And the food safety budget, unfortunately, is mostly people.”

Later, Sec. Vilsack noted that, “There’s no wiggle room, especially in food safety because most of what food safety is is people. And most of the people are the folks who actually inspect your meat, your poultry and your processed eggs. When they walk off the floor because they have to be furloughed because the way in which this is structured, they essentially will shut down the entire production facility.”

Bloomberg writer Alan Bjerga also discussed sequester issues and agriculture on C-SPAN’s “Washington Journal” program yesterday- video replay here.

Looking ahead, on the issue of the continuing resolution, Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “Conservative House Republicans on Wednesday signaled support for their leadership’s plan to pass a six-month government-funding measure that would reflect the budget cuts from the sequester.

“The stamp of approval — mixed with only tepid skepticism from a few members who have bucked Speaker John Boehner (R-Ohio) in the past —increases the likelihood a government shutdown will be avoided after March 27, when the current stopgap funding bill runs out.”


Farm Bill Issues

House Agriculture Committee Chairman Frank Lucas (R., Okla.), writing in a column earlier this week at The Hill Online, noted that, “What piece of legislation would have saved taxpayers $35 billion, eliminated old and duplicative government programs, closed wasteful loopholes and provided regulatory relief for small businesses while giving certainty to an economic sector that has managed to be successful in the midst of economic darkness?

“Not many would guess the legislation I just described is the farm bill that advanced out of the House Agriculture Committee last summer. But, then again, it was not a typical farm bill.”

After explaining the Bill’s cuts to traditional commodity programs, and reforms to the food stamp program (SNAP), Chairman Lucas stated that, “Moving forward, the committee will continue to look for ways to improve upon this common-sense, reform-minded and fiscally responsible bill. But, we cannot act alone. Faced with the decision of either passing a bill with significant savings or extending current policy without any, I hope this Congress will learn from the past and make the right and obvious choice.”

Hembree Brandon reported recently at The Delta Farm Press Online that, “Delays in getting a new farm bill through Congress have been ‘very frustrating,’ says Mississippi Republican Congressman Alan Nunnelee, ‘and while I have every confidence that between now and fall we’ll get the magic 218 votes required to pass a bill, we’ve got a tough job in front of us.’

“A bone of contention between Republicans and Democrats, he said at the annual meeting of the Northeast Mississippi Producer Advisory Council, is the cost of federally-supported nutrition programs.”

The article added that, “About half the people receiving food stamps, Nunnelee said, have been doing so for seven years, and the number of food stamp recipients has ‘almost doubled’ in the last four years. ‘If we’re going to effectively get control of spending in our country, we’re going to have to deal with issues like this.’

“He says a number of his Republican colleagues have said ‘they’re not going to vote for any farm bill — period,’ and that the challenge is to get enough support on both sides of the aisle to get legislation approved.”

Also with respect to nutrition, Mara Gay reported yesterday at the Metropolis Blog (Wall Street Journal) that, “The push for free breakfast inside New York City classrooms gained a powerful ally this week in U.S. Agriculture Secretary Tom Vilsack, who came out in support of a policy Mayor Michael Bloomberg has resisted — and one likely to change under the next mayor.

“‘There’s good rationale for having breakfast in the classroom to reduce the stigma that can occur,’ Mr. Vilsack said in an interview ahead of a forum on childhood hunger in Manhattan on Wednesday afternoon. ‘If you have breakfast in the cafeteria and only a limited number of students are utilizing that program, it creates some issues of sort of stigmatizing those youngsters.’”

In other nutrition related news, First Lady Michelle Obama penned a column in today’s Wall Street Journal titled, “The Business Case for Healthier Food Options.”

Meanwhile, a Senate Ag Committee news release yesterday noted that, “[Chairwoman Debbie Stabenow (D., Mich.)] today commended the U.S. Department of Agriculture for prioritizing rural communities through its release of a report on streamlining rural programs and making them easier for rural communities to use.

“‘I commend Secretary Vilsack and USDA for prioritizing rural communities and addressing an issue that has long frustrated small town mayors and other members of rural communities. Under current law, USDA uses 11 different definitions of ‘rural,’ creating red tape and making programs unnecessarily difficult to use. The Senate last year passed a Farm Bill with overwhelming bipartisan support that eliminated the 11 different definitions of ‘rural’ and replaced it with just one. This is a common-sense solution that will help our rural communities and small businesses grow and create jobs.’”

And Dave Russell reported yesterday at Brownfield that, “Congressman John Boehner will host his 8th District Farm Forum on Saturday, March 2nd at Edison Community College in Piqua. The program will include former Secretary of Agriculture Ed Schafer as the keynote speaker.”


Agricultural Economy- Trade- Biofuels

University of Illinois Agricultural Economists Scott Irwin and Darrel Good noted yesterday at the farmdoc daily blog (“The New Era of Crop Prices — A Five-Year Review”) that, “In a 2008 report and a 2009 article we addressed whether the trend towards higher crop prices that started in the Fall of 2006 was here to stay. Our analysis was motivated by the need of farmers, landowners, and others in the agricultural industry to have some reasonable way of assessing long-term price prospects. From a farmer’s standpoint, the question basically came down to this, ‘What is a good price for corn, soybeans and wheat?’ We argued that corn, soybean, and wheat prices moved to a new, higher nominal price level beginning in about December 2006. We suggested that the new price level would persist for an extended period of time and we projected the likely average Illinois monthly price and range in monthly prices for those commodities in the first five years of new era. Based on average monthly prices through February 2011, we evaluated the accuracy of those projections in a post on March 29, 2011. The projection of the expected distribution of monthly average prices was presented in a post on November 18, 2011. Here, we briefly review the methodology for projecting the average monthly prices, the range in monthly prices, and the distribution of monthly prices and then provide an evaluation of those projections based on average monthly prices in Illinois for the 73-month period from December 2006 through December 2012. The prices used are those reported by the USDA’s National Agricultural Statistics Service in the monthly Agricultural Prices report.”

After a brief but detailed analysis, including several graphical depictions, the authors stated that, “Despite some differences between projections and actuals, the new era projections for the price of corn, soybeans, and wheat that we made almost five years ago have held up remarkably well. While the approach is certainly simple, it appears to provide robust expectations for crop prices in this new era.”

In other news, AP writer Jim Suhr reported yesterday that, “Mississippi River shippers have returned to hauling full loads after several storms and aggressive rock-clearing helped deepen the waterway, eliminating worries about barge traffic shutting down, the river’s stewards and barge operators said Wednesday.”

Meanwhile, Manny Fernandez reported in today’s New York Times that, “After two years of drought, people are starting to leave this parched West Texas town [Plainview].

“The lack of significant rainfall has slowed the rush of cattle that came to the largest employer here, a beef processing plant that employed 2,300 people in a town of 22,343. When the plant shut this month, it took with it an annual payroll of $15.5 million.”

The Times article noted that, “The drought — the third-worst in Texas since 1895 — has dried up pastures and increased the costs of hay and feed, forcing some ranchers to sell off their herds to reduce expenses.

“Cargill executives said they were idling the plant and not permanently closing it, and it could reopen if the drought breaks and the cattle herd rebounds, a process that would take years.”

With respect to trade issues, Mitsuru Obe reported yesterday at The Wall Street Journal Online that, “Riding on a wave of strong public support, Japanese Prime Minister Shinzo Abe is expected to soon announce a decision to join U.S.-led free-trade talks, a move that is favored by industry but fiercely opposed by the nation’s agriculture lobby.

“The move would signal that Mr. Abe is using his popularity for a bold step that other administrations have avoided. It comes as the farm lobby’s influence has weakened amid a shrinking and aging rural population and just after Mr. Abe secured a crucial pledge from President Barack Obama in talks last week that rice farmers, the strongest faction of the farm bloc, could be exempted.”

The Journal article explained that, “The Central Union of Agricultural Cooperatives, which represents most farmers nationwide, says that it remains against TPP [the Trans-Pacific Partnership], saying a ‘hasty decision would undermine Japan’s national interests.’

But the farm lobby is facing its own issues. Like Japan overall, its members are aging and now constitute just 2% of the population with an average age for farmers of 66, according to the Ministry of Agriculture.”

On the issue of biofuels, Christopher Doering reported in yesterday’s Des Moines Register that, “The ethanol industry criticized a U.S. House subcommittee for holding a ‘one-sided’ hearing on a higher ethanol blend that included only testimony from opponents who have spoken out against the corn-based fuel.

The hearing, held Tuesday by the House science subcommittee on the environment, included testimony from the leader of the American Automobile Association, a vice president with the American Motorcyclist Association and a member of the board of directors from the Coordinating Research Council, a nonprofit that has the American Petroleum Institute, Ford and General Motors as its members.”


Senate Agriculture Committee Hearing- CFTC Issues

A news release yesterday from the Sen. Ag. Committee stated in part that, “[Chairwoman Stabenow] today announced that she and Ranking Member Sen. Thad Cochran (R-MS) will begin the process of reauthorizing the Commodity Futures Trading Commission later this year. She also encouraged CFTC officials to finalize rules and finish implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act. Stabenow said both efforts would help create transparency and ensure markets are safe for trading and free of manipulation.”

Also, CFTC Chairman Gary Gensler testified before the Sen. Ag. Committee yesterday.

A news item yesterday from Sen. Pat Roberts (R., Kans.) noted that, “[Sen. Roberts] today said [CFTC] proposed regulations on ‘residual risk’ are far-reaching and concerning and may drive farmers and ranchers from managing risk in the futures market due to costs and red tape.”

Katie Micik reported yesterday at DTN (link requires subscription) that, “CFTC Chairman Gary Gensler told the Senate Agriculture Committee on Wednesday he was surprised by the industry concern about the residual interest provisions of a proposed rule to enhance customer protections.”

The DTN article noted that, “Several senators echoed concerns from the public comments that CFTC didn’t do a thorough enough cost-benefit analysis of the rules, particularly in regard to its proposals on residual interest.

“Gensler said the proposed rule did include a theoretical cost-benefit analysis, and the CFTC will revisit its analysis with the comments about residual interest.”

Dow Jones writer Jamila Trindle reported yesterday that, “[CFTC] Chairman Gary Gensler said Wednesday that a lack of funding is affecting the agency’s enforcement, oversight of clearinghouses and could also affect approval of new trading platforms.”

Keith Good

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