FarmPolicy

July 22, 2014

Budget; Farm Bill; Livestock Production; and, Trade

Categories: Budget /Farm Bill /Trade

Budget Issues

Zachary A. Goldfarb reported in Saturday’s Washington Post that, “President Obama acknowledged Friday that deep federal budget cuts are here with no end in sight, an outcome that he warned would harm the economy but said he lacked the power to stop.

A final attempt to find common ground with congressional leaders at a White House meeting proved fruitless. The president continued to press for higher taxes as part of a deal, and Republicans continued to refuse — clearing the way for $85 billion in cuts this fiscal year and $1.2 trillion over the next decade.

“The reductions, which Obama formally ordered late Friday, are likely to remain in place for the foreseeable future. There had been speculation that they might be adjusted later this month, when lawmakers must agree on a new deal to fund the government or risk a shutdown. But Obama made clear Friday that he would seek to avoid a shutdown even if that means allowing the across-the-board cuts, known as the sequester, to continue.”

Janet Hook, Colleen McCain Nelson and Damian Paletta reported in Saturday’s Wall Street Journal that, “In an 83-page report [released on Friday, The White House's Office of Management and Budget] detailed the hundreds of budget accounts that would be affected. They include things such as the $2.501 billion account for Wildland Fire Management to be reduced by $125 million, the $22.803 billion Air Force aircraft procurement budget reduced by $1.779 billion, and the $2.442 billion Energy Department’s nuclear nonproliferation budget reduced by $191 million.”

More specific to agriculture, Chris Clayton reported on Friday at the DTN Ag Policy Blog that, “For USDA, the cuts are effectively 5% across the board for the rest of the budget year. As stressed over the past several weeks, one of the biggest impacts could be furloughs of meat inspectors for the Federal Safety and Inspection Service, which has a $1.05 billion budget. FSIS will face about $53 million in cuts.

“At Commodity Classic on Friday, Agriculture Secretary Tom Vilsack pointed out 87% of the budget for FSIS is payroll for inspectors. That means FSIS inspectors could face up to 22 days of furloughs. ‘So you could furlough everyone else for 22 days and you would still have to furlough inspectors,’ Vilsack said.

“According to the OMB, commodity programs and disaster spending will face $329 million and $70 million in cuts, respectively.”

Mr. Clayton pointed out that, “The Women, Infants and Children program, or WIC, will take a $333 million cut.

“In his speech Friday, Vilsack said the budget cuts could disrupt and cut agriculture by as much as $8 billion, affecting as many as 60,000 jobs.

“‘I have to apologize to all of you because this is crazing what is happening,’ Vilsack told farmers.”

The DTN update noted that, “Distributing direct payments among producers will be equitable. USDA is prepared to operate the program and also committed to giving farmers in the Average Crop Revenue Election program options to stay in or withdraw from ACRE.

“‘I think there will be an impact on the program with the sequester,’ Vilsack said. ‘Sequester may impact the amount of payments, but I don’t think it will affect whether people get payments. And I think anything that Congress does relative to removing, reducing or modifying direct payments, as they either formulate a response to sequester or formulate a farm bill, I suspect will be in future years and won’t be this particular this year. I think it would be very difficult to change the game in the middle of the game.’

“The secretary said it is also possible that some producers could be asked to return a percentage of commodity or conservation payments made to them. In other words they would see a ‘clawback.’”

Daniel Looker reported on Friday at Agriculture.com that, “As [Sec.] Vilsack told commodity group members, and reporters later, letters will be going out next week to USDA employees advising them of the unpaid furloughs they’ll be facing and in two or three weeks, land grant universities will be informed that they will receive about $60 million less in research funds than they expected this year. The cuts will possibly trim the amount of money received by farmers for direct payments and USDA is trying to decide how to deal with other payments that have already gone out. Crop insurance indemnity payments won’t be affected. Meat inspectors will, and being furloughed will temporarily shut down more than 6,000 USDA-inspected processing plants.”

Mr. Looker noted that, “Earlier this week, a group of Republican senators led by Senator Chuck Grassley of Iowa, wrote a letter to Vilsack asking whether his department has done all it can to reduce expenses before cutting the hours of inspectors. And it asked for the legal basis for reducing USDA’s time spent enforcing laws designed to protect food safety.”

The article added that, “Vilsack said he hasn’t yet sent Grassley an answer because ‘he’s asking for a legal opinion,’ which isn’t finished yet.

“The Food Safety and Inspection Service doesn’t have money left over to cut, Vilsack told reporters. Some 87% of the FSIS budget is for its staff. Nearly all of that is for the inspectors, or the support services such as laboratories that the inspectors need. And, because the law limits furloughs to 22 days, FSIS can’t idle enough other workers to spare the inspectors, Vilsack told Agriculture.com

“‘With due respect to Senator Grassley, whom I have a lot of respect for, we will answer his letter fully and completely,’ Vilsack said.”

Meanwhile, Kristina Peterson reported in today’s Wall Street Journal that, “The next big budget push in Congress begins this week, with lawmakers of both parties pledging to avert a government shutdown later this month.

“A bill funding government operations expires March 27, and without an extension or replacement, the government will be unable to spend money to keep certain operations running. House Republicans are expected to introduce a bill Monday to extend routine government funding through September, with passage expected Wednesday or Thursday.

“To secure the support of conservatives in the House, GOP leaders included a provision dictating the across-the-board spending reductions known as the sequester would apply, bringing the bill’s cost down to about $982 billion. The sequester’s $85 billion in spending cuts began Friday.”

More broadly on the budget, Michael D. Shear and Jonathan Weisman reported in Saturday’s New York Times that, “The two parties will now move to a broader argument over the right level of taxes and spending as they seek to develop a new budget for the coming year and beyond. Republicans said they welcomed a return to a more orderly budget process but warned they would not give in on their basic principles.”

And, Vicki Needham reported on Friday at The Hill’s On the Money Blog that, “The Senate Budget Committee is expected to mark up its budget blueprint the week of March 11, ahead of the arrival of President Obama’s plan to Capitol Hill.

“So far, specific dates have not been announced, but if the panel marks up a resolution that week it would be on track toward Senate approval before lawmakers leave town for a two-week Easter recess on March 22, according to a Senate aide.

Senate Budget Chairwoman Patty Murray (D-Wash.) has vowed to mark up a budget resolution, which would be the first budget markup in four years for the panel.”

The Hill update noted that, “The president’s budget for fiscal 2014 is expected to reach Capitol Hill by March 25, seven weeks behind schedule.”

 

Farm Bill

David Rogers reported on Friday at Politico that, “Like sequestration wasn’t bad enough.

Writing a new farm bill just got harder as well on Friday as the Congressional Budget Office released new estimates substantially downgrading the promised savings from House and Senate proposals last summer.

“CBO says the Senate-passed farm bill will save only $13.1 billion over 10 years, compared with a promised $23.1 billion last July. The House Agriculture Committee plan, which never made it to the floor, fares better but comes down as well from $35.1 billion to $26.6 billion in 10 year savings.”

Mr. Rogers explained that, “In core farm support programs, both bills pay a price for market changes out of Congress’s control, but the estimates point up two trouble spots.

“In the case of the Senate, costs attributed to its ambitious new Agriculture Risk Coverage program are up because CBO says that higher commodity prices have increased the expense of promised revenue guarantees for farmers. ARC’s 10-year cost is now pegged at almost $31 billion compared to $28.5 billion last July.

“The House plan has problems too with its Supplemental Coverage Option, or SCO, in the crop insurance title. Industry analysts have warned that this program — a sleeper in the larger farm bill debate — has the risk of ballooning because the House makes it easier to enroll under favorable terms. The new CBO estimates bear this out, showing that the 10 year costs for SCO would be as high as $5.26 billion compared to just under $4 billion last July.”

Meanwhile, Daniel Looker reported on Saturday at Agriculture.com that, “Three major commodity groups will leave the Commodity Classic in Florida without making big changes to their top goals for farm policy–getting a farm bill passed this year and defending crop insurance from cuts.

“But as the amount of money available for commodity programs appears to be shrinking, one of the three, the American Soybean Association, softened its support for a revenue program that would protect farmers from part of the shallow loss not covered by crop insurance. A program to do that, called the Agriculture Risk Coverage (ARC) was included in a Senate farm bill last year that didn’t become law. ASA delegates agreed without any debate Saturday that ‘funding may be insufficient to cover the cost of ARC or another acceptable revenue-based risk management program.’

“ASA is now willing to throw its weight behind other programs, the supplemental coverage option, which would enhance crop insurance, or a target price program, if it doesn’t distort planting decisions.”

The article pointed out that, “Crop insurance remains high on the list of programs the groups want to protect.

“‘Federal Crop Insurance is our top priority,’ said Wheat Growers president [Bin] Von Bergen.

Neither the ASA nor the Corn Growers changed their opposition to linking eligibility for crop insurance to the conservation compliance rules that apply to commodity programs.”

During his speech on Friday at the Commodity Classic, Sec. Vilsack noted the importance of crop insurance in providing producers with a strong safety net- audio MP3- 1:20).

Tom Zacharias, the President of National Crop Insurance Services, noted on Friday at The Hill’s Congress Blog that, “There is a huge story playing out right before our very eyes this year in agriculture that nearly everyone is missing: Despite the fact that this nation has faced two of the worst farming years in decades – with devastating drought in the Southern Plains and flooding in the Midwest in 2011, and widespread drought over major corn and soybean growing regions in 2012 – there has not been a single call for an ad hoc disaster bill from America’s crop farmers.

“And why no calls for disaster assistance from crop farmers? Because 86 percent of planted farmland in 2012 was protected by crop insurance, the best risk management tool available to farmers. Before crop insurance was widely available, natural disasters like we have just experienced would have triggered a very costly, unbudgeted ad hoc disaster bill. Forty-two such emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989, according to the Congressional Research Service.”

Dr. Zacharias pointed out that, “Farmers rely on crop insurance, and they show their support by voting with their pocketbooks. In fact, since 2000, farmers have spent nearly $30 billion out of their own pockets to purchase crop insurance protection. Yes, crop insurance premiums are partially discounted by the federal government, but first and foremost, farmers must put skin in the game to gain coverage.”

Also, Philip Brasher reported on Friday at Roll Call Online that, “Crop insurance is now on the verge of becoming the primary means, and in some cases the exclusive means, of supporting farm income, supplanting traditional subsidies.

“But farmers and their allies are worried congressional budget cutters will go after the program in their search for ways to cut the deficit. ‘There’s a big target on crop insurance now,’ said former Texas Rep. Charles W. Stenholm, who was the ranking Democrat on the House Agriculture Committee in 2000.

“President Barack Obama and House Budget Chairman Paul D. Ryan, R-Wis., both proposed last year to slash spending on crop insurance. The House Agriculture Committee, in a Feb. 26 letter to Ryan laying out the panel’s budget priorities this year, said the insurance system already had been cut enough in recent years and ‘must not be weakened.’”

The Roll Call article noted that, “The rival farm bills that the Senate passed and the House Agriculture Committee approved last year both would have expanded the crop insurance program, using savings from eliminating the $5 billion in annual direct payments that are now given to grain and cotton growers. Among other things, the bills would have provided for new subsidized policies to cover revenue losses not covered by conventional insurance.

Many farmers, like bankers, argue that it’s critical to maintain the premium subsidies.”

In other Farm Bill issues, Forrest Laws reported on Friday at the Southeast Farm Press Online that, “The U.S. cotton industry has a lot at stake in the debate over writing a new farm bill, but U.S. cotton producers have more to lose than other U.S. commodity group if Congress fails to address one overriding issue.

“That was the message Jimmy Dodson, a Robstown, Texas, cotton producer and the new chairman of the National Cotton Council, delivered to attendees at the Mid-South Farm and Gin Show in Memphis, Tenn., March 1.

Besides providing a much-needed safety net for an industry that is reeling from a greater-than-50-percent reduction in cotton prices over the last two years, policymakers also face the challenge of ultimately settling the WTO case filed by the government of Brazil nearly a decade ago.”

The article added that, “‘All of us are frustrated with this ongoing challenge,’ Dodson told farmers. ‘However, it is critical that we reach a settlement of this case during this farm bill debate. A separate challenge by Brazil after this farm bill is concluded would be disastrous for U.S. cotton policy.’

“Dodson, who became the Council’s chairman during its recent annual meeting in Memphis, said the NCC believes the STAX program and the changes it has proposed to the marketing loan and GSM credit programs will provide a path to a settlement of the longstanding issues with Brazil.”

Meanwhile, Melanie Yingst reported yesterday at The Troy Daily News (Ohio) Online that, “Less than 24 hours after meeting with President Barack Obama about pending government cuts, Speaker of the House John Boehner sat among his Eighth District friends and supporters at the 22nd annual Farm Forum at Edison State Community College Saturday.”

The article stated that, “When Boehner was asked about the Farm Bill and if it would take another year to pass, Boehner quipped, ‘I hope not.’

“‘I’ve talked to the chairman and the ranking member of the (agriculture) committee, I’m very hopeful we’ll get the Farm Bill finished this year,’ Boehner said.”

 

Livestock Production

And in more specific news regarding livestock production, a news release last week from Rep. Henry Waxman (D., Calif.) stated that, “Today [Rep. Waxman] and Rules Committee Ranking Member Louise M. Slaughter [D., N.Y.] introduced legislation to provide better information on the amount and use of antibiotics and other antimicrobials given to animals raised for human consumption, H.R. 820, the Delivering Antimicrobial Transparency in Animals (DATA) Act…[T]he DATA Act will require large-scale producers of poultry, swine, and livestock to submit data to FDA detailing the type and amount of antibiotics contained in the feed given to their animals.”

And a news release Friday from the American Farm Bureau Federation (AFBF) stated in part that, “The [AFBF] and other members of the Coalition for Animal Health this week hosted an educational briefing for congressional staff on meat production, public health and the importance of antibiotics. The briefing focused on helping legislators understand how and why farmers and ranchers use antibiotics.”

 

Agricultural Economy- Trade

Vicki Needham reported on Friday at The Hill’s On the Money Blog that, “Lawmakers and business groups continued their push for a renewal of the fast-track process for trade deals following the Obama administration’s request for the authority in its comprehensive agenda.

“Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, and the National Association of Manufacturers (NAM) argued on Friday that trade promotion authority, which gives the White House the ability to negotiate free-trade agreements and allows Congress to quickly approve them, is crucial to achieving lofty trade goals.”

Keith Good

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