FarmPolicy

July 16, 2019

Farm Bill; Budget; Trade; and, Biofuels

Farm Bill Issues

On Friday, the President’s Council of Economic Advisers released its annual Economic Report of the President (full report), this year’s report contains a chapter on Agriculture, which can be found here, “Chapter 8: Challenges and Opportunities in U.S. Agriculture.”

The report provided this brief overview of how agriculture fits into the rest of the U.S. economy, which also has inherent political ramifications: “In the 1920s, farm households accounted for more than 25 percent of the U.S. workforce and generated approximately 8 percent of gross domestic product (GDP). Today they account for only 1.6 percent of the work force and generate approximately 1 percent of GDP. Over the same period, the rural share of the population has fallen far less, from 49 percent to 19 percent, suggesting that rural areas are less dependent on farming’s contribution to the rural economy (Table 8-1) . The agricultural sector is still vital to our country, but because of growth in other sectors of the economy and rapid gains in agricultural productivity that have lowered the relative prices of agricultural products, it has become a smaller share of the U.S. economy.”

In reference to U.S. farm policy the report indicated that, “Highly volatile agricultural commodity prices can create significant income risk for farmers. At the same time, the current farm safety net is inefficient and unfair, creating distortions in production and crowding out market-based risk management options.”

Adding provisions that make lands that have not previously been used to grow crops ineligible for crop insurance or other Federal benefits would help protect the nation’s prairies and forests from being converted into marginal cropland,” the report added.

Also, the report noted that, “For example, the increasing reliance of farm families on income earned from sources other than their farms and a shift toward market-oriented farm policies have made farms and commodity markets less vulnerable to adverse price changes than before. These changes imply that moving away from traditional commodity support programs would have a much smaller impact on farm household income than in previous decades. Nonetheless, substantial government support of agriculture remains.”

And, the report also pointed out that, “One-third of beginning farmers are over age 55, indicating that many farmers move into agriculture only after retiring from a different career.”

Meanwhile, Tom Lutey reported on Friday at the Billings Gazette (Mont.) Online that, “Federal belt tightening and new political players are redrawing the ground rules for the 2013 farm bill, say agriculture groups who expect weaker subsidies than were offered in 2012.

“‘There’s less money. There’s more focus on making deeper cuts and there’s a different ranking member on the Senate Agriculture Committee and I think that’s important to understand,’ said Roger Johnson, National Farmers Union president, who like others expects a leaner farm bill than lawmakers proposed in 2012.”

In a tweet on Saturday that included a reference to Mr. Lutey’s article, Sen. Max Baucus (D., Mont.) indicated that, “I’m going to do everything in my power to pass the strongest Farm Bill for Montana.”

And a news item Friday from the National Corn Growers Association (NCGA) stated that, “At its recent Corn Congress policy meeting and in a board meeting held this week in Washington, the [NCGA] upheld its call for a new, substantive five-year farm bill that includes a strong federal crop insurance program and a market-oriented risk-management program.”

Meanwhile, Alexandra Wexler reported late last week at The Wall Street Journal Online that, “The U.S. sugar processors that could be at a higher risk of default took out the bulk of government loans to the industry, according to a Wall Street Journal analysis of data from the U.S. Department of Agriculture.

“Of the $859 million in loans to processors made during the current crop year ending on Sept. 30, $580.3 million, or 68%, went to companies that refine sugar beets into sweetener, according to the analysis. These firms have higher costs than competitors that process sugar cane.

The USDA is considering buying as much as 400,000 tons of sugar and selling it to ethanol producers to boost prices and prevent processors from defaulting. The move would likely result in an $80 million loss for the agency, said Barbara Fecso, an economist at the USDA.”

The Journal article pointed out that, “Sugar beets are mostly grown in northern states stretching from Idaho to Michigan, and most of the USDA’s sugar loans are in those states. One of the largest was for $84.6 million in Bay County, Mich., for which 331 million pounds of sugar were put up as collateral, according to data from the USDA. The loans are due in September.

Michigan Sugar Co., one of the largest sugar-beet processors in the U.S., is the only sugar processor in Bay County. The company produces nearly one billion pounds of sugar under its Pioneer and Big Chief brands annually, according to its website. Michigan Sugar Co. declined to comment.”

This development prompted the Chicago Tribune editorial board to say on Saturday that, “The best course would be to eliminate the sugar program altogether.”

In Farm Bill news regarding nutrition, Ellyn Ferguson reported on Friday at Roll Call Online that, “Senators pursuing a legislative fix to a new school meal nutrition standard say they are not out to undermine efforts to combat child obesity but that they do believe the Agriculture Department erred in setting limits on the amount of grains and proteins cafeterias could serve students.

“The lead sponsors — Sens. John Hoeven, R-N.D., and Mark Pryor, D-Ark. — say they do not want to make major changes to the federally subsidized school lunch and breakfast programs that feed 32 million children a day. Instead, they hope to make permanent a short-term waiver the Agriculture Department issued last year to allow school cafeterias more time to adjust to limits on grains and proteins, especially meat.”

In a separate Roll Call article on Friday, Ms. Ferguson pointed out that, “In the early years politicians disagreed over whether feeding children was a federal responsibility; today some lawmakers believe the Agriculture Department has gone too far with diet guidelines.

“Even so, bipartisan support for the school lunch, and eventually the school breakfast, program grew and remain strong today.”

With respect to the SNAP program (food stamps), on Friday Rep. Diane Black (R., Tenn.) offered an amendment during floor debate on the SKILLS Act relating to funding for USDA outreach for the program.

Rep. Black stated that, “My amendment would express the sentiment of the House that the funding for the United States Department of Agriculture, USDA, marketing and outreach program currently used to increase participation in the Supplemental Nutrition Assistance Program, SNAP, better known as ‘food stamps,’ would instead be used to fund job training programs contained in the SKILLS Act. These precious taxpayer dollars should be used to facilitate upward mobility and employment, not dependence.”

During a brief discussion of the issue on the floor (video replay), House Ag. Comm. Chairman Frank Lucas (R., Okla.) noted that, “I appreciate the gentlelady from Tennessee’s attempt at reform here. In fact, the farm bill passed by the Agriculture Committee last Congress accomplished the goal of her amendment by preventing USDA from promoting the SNAP program…I pledge to work with the gentlelady to include language in the farm bill we intend to bring to the floor later this year to accomplish her goals.”

Rep. Black then withdrew her amendment.

Also on Friday the USDA’s Economic Research Service (ERS) released its Food Assistance Landscape: FY 2012 Annual Report – “In this report, [ERS] uses preliminary data from USDA’s Food and Nutrition Service (FNS) and several ERS reports to examine trends in U.S. food and nutrition assistance programs through fiscal 2012 (October 1, 2011 to September 30, 2012).”

Eli Saslow reported in yesterday’s Washington Post that, “At precisely one second after midnight, on March 1, Woonsocket [R.I.] would experience its monthly financial windfall — nearly $2 million from the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. Federal money would be electronically transferred to the broke residents of a nearly bankrupt town, where it would flow first into grocery stores and then on to food companies, employees and banks, beginning the monthly cycle that has helped Woonsocket survive.

“Three years into an economic recovery, this is the lasting scar of collapse: a federal program that began as a last resort for a few million hungry people has grown into an economic lifeline for entire towns. Spending on SNAP has doubled in the past four years and tripled in the past decade, surpassing $78 billion last year. A record 47 million Americans receive the benefit — including 13,752 in Woonsocket, one-third of the town’s population, where the first of each month now reveals twin shortcomings of the U.S. economy:

“So many people are forced to rely on government support.

“The government is forced to support so many people.”

 

Budget

Pete Kasperowicz reported on Friday at The Hill’s Floor Action Blog that, “For the first time in four years, the House and Senate will each bring a budget plan to the floor.”

The update added that, “The House should be able to pass its budget by the end of the week, after dismissing alternatives from mainstream Democrats, the Republican Study Committee and possibly others.

“The Senate is in more of a timing bind. Senators will start the week trying to finish work on the continuing resolution for 2013.

“That could still take time, as the Senate left this week with dozens of amendments left to sort through. However, House Republicans said they anticipate getting back a Senate-amended CR, and passing it next week. Without a CR, government funding expires March 27.”

With respect to the CR, a news release late last week from Sen. Roy Blunt (R., Mo.) stated that, “[Sens. Blunt] and Mark Pryor (Ark.) introduced a bipartisan amendment to the Continuing Resolution (CR) today to protect private sector jobs by solving a funding gap for the Food Safety and Inspection Service (FSIS). The Senators serve as the top members of the Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies.

The Pryor/Blunt amendment would transfer $55 million in existing agriculture funds to FSIS in order to ensure food inspectors are not furloughed. These facilities are required by law to have federal inspectors on the production line in order to operate.”

The release added that, “The Pryor/Blunt amendment adds no additional cost to the bill. Instead, it moves one-time funding for school equipment grants and deferred maintenance on buildings and facilities at USDA.”

Also on the budget, Damian Paletta reported in Saturday’s Wall Street Journal that, “Two weeks of bipartisan meals, closed-door meetings and dueling budget proposals have opened perhaps one last window for the White House and Congress to reach a deficit-reduction deal before a likely fight over the debt ceiling this summer.

“Lawmakers say they now see a small opportunity to forge a comprehensive fiscal plan between now and July or August. That’s because the dynamics in recent days have changed, with a slow, steady process replacing repeated crisis-driven fights.”

Carlo Muñoz reported yesterday at The Hill Online that, “There is still time for Republicans to find common ground with the White House and congressional Democrats for a grand bargain on the deficit, a top Senate Democrat said Sunday.

“When asked point-blank on CBS’s ‘Face the Nation,’ whether she believed a grand bargain could be reached, Minnesota Sen. Amy Klobuchar (D) replied: ‘I do.’”

 

Trade

Jonathan Soble and James Politi reported on Friday at The Financial Times Online that, “Shinzo Abe, Japan’s prime minister, has committed to joining talks on a proposed trade deal with the US and 10 other countries, in a big step for a nation where rice farmers and other groups have long blocked efforts to lower import barriers…[B]arack Obama, US president, has put trade agreements including TPP [the trans-Pacific Partnership] at the heart of his second-term agenda, and negotiators hope to seal a deal by September.”

The FT article noted that, “An official from one country already involved in the TPP talks said ‘substantial’ concessions would be expected from Japan, including on agriculture.

Japanese farmers are among the most protected in the world, with half of average incomes coming from subsidies and price supports, according to the OECD.

“In Washington, Mr Abe’s announcement drew mixed responses. Demetrios Marantis, acting US trade representative, said the US ‘welcomes’ Japan’s interest in joining TPP talks, but noted that there were ‘issues of concern’ and ‘important work remains to be done’ in bilateral consultations.”

Senate Ag. Comm. Chairwoman Debbie Stabenow (D., Mich.), American Farm Bureau Federation President Bob Stallman, The U.S. Dairy Export Council and National Milk Producers Federation, and the National Pork Producers Council all issued news items on Friday regarding the TPP developments.

Hiroko Tabuchi reported in Saturday’s New York Times that, “With strong opposition from Japan’s farming lobby and other powerful groups, Mr. Abe is taking a big political risk in embracing the free-trade talks. Japan’s largest agricultural cooperative has campaigned against trade liberalization. It says such a change would devastate the nation’s farms, a plea that has resonated in the wider public. A majority of the lawmakers in his own Liberal Democratic Party depend on the rural vote and object to the free-trade deal.

“Mr. Abe is betting, however, that his strong popularity will help him ride out the furor. He will face his first test at the polls this summer, when national elections for Parliament’s upper house are scheduled.”

And The Washington Post editorial board indicated on Saturday that, “Actually, the potential opening of Japan’s agricultural and other markets to U.S. goods under TPP could offset deficits that might persist in the auto market.”

 

Biofuels

John Eligon and Matthew L. Wald reported in yesterday’s New York Times that, “Five years ago, rural America was giddy for ethanol.

“Backed by government subsidies and mandates, hundreds of ethanol plants rose among the golden fields of the Corn Belt, bringing jobs and business to small towns, providing farmers with a new market for their crops and generating billions of dollars in revenue for the producers of this corn-based fuel blend.”

The article noted that, “Those days of promise and prosperity are vanishing.

“Nearly 10 percent of the nation’s ethanol plants have stopped production over the past year, in part because the drought that has ravaged much of the nation’s crops pushed commodity prices so high that ethanol has become too expensive to produce.”

“Thousands of barrels of ethanol now sit in storage because there is not enough gasoline in the market to blend it with — and blends calling for a higher percentage of ethanol have yet to catch on widely in the marketplace. Advanced biofuels from waste like corn stalks and wood chips have also yet to reach commercial-level production as some had predicted they would by now,” the article said.

Keith Good

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