FarmPolicy

September 26, 2017

Farm Bill; and the Ag Economy

Farm Bill: House Agriculture Committee Advances Legislation

DTN Ag Policy Editor Chris Clayton reported yesterday that, “The battle over dairy policy took center stage in the House Agriculture Committee’s early debate on the farm bill Wednesday as committee reforms to commodity and conservation programs were approved relatively unscathed.”

Mr. Clayton explained that, “Debate in the House put dairy policy front and center. The farm bill includes language from the Dairy Security Act, crafted by ranking member Collin Peterson, D-Minn., following the collapse of dairy prices in 2009. Peterson and others worked to successfully get the dairy act into both the House and Senate versions of the bill. The Dairy Security Act creates a margin protection between national milk prices and the average cost of feed. Producers get basic coverage and can buy higher coverage if they want. At the same time, the provision has more controversial language that creates a market stabilization program meant to manage the size of the national dairy herd.

“The market stabilization program kicks in when dairy prices are low and profit margins collapse. Producers whose herd size exceeds a base amount would lose payments unless they culled down the size of their milking herd.”

The DTN article added that, “The Dairy Security Act has the strong backing of the National Milk Producers Federation while being equally opposed by the International Dairy Foods Association. Caught in the middle are a broad array of producer and processor cooperatives and businesses.

“Reps. Bob Goodlatte, R-Va., and David Scott, D-Ga., sought to replace the Dairy Security Act in the bill with their own language that would avoid any attempts to limit supply. Their plan, supported by IDFA, would create a comparable margin insurance policy for dairy producers but eliminate any policy meant to manage dairy supplies. The Goodlatte-Scott amendment sparked the first major round of debate on the committee Wednesday.”

A FarmPolicy.com transcript of a portion of the debate on this issue is available here.  This debate including the following remarks:

Rep. Peterson– “And I just want to talk about the economics of the dairy industry a little bit more. A 2% oversupply in milk will collapse the system. We’ve seen that. That’s all it takes, is 2%. It means we can’t sell it in the U.S. and we can’t export it in the world market. If you get into that kind of a situation, the bottom falls out…Now, back in ’09 that problem was caused, to some extent, by the financial collapse and what happened within the economy at the time, and demand for dairy, for a lot of different things, went down, including dairy products. So we had an increase in production and we had a decrease in demand; it collapsed the market. And as Mr. Costa said, we had I don’t know how many bankruptcies. I don’t know how much equity was lost. It was a disaster. And if we get into that situation again, we’re going to lose 25% of the dairy farmers in this country.”

Rep. Goodlatte– “And yes, the prices fluctuate. Farmers have to deal with that and consumers have to deal with that. They make the decision whether they’re going to be consuming something or not consuming it based on the price. If you consistently attempt to fix the price based upon controlling the supply of the herd, it hurts farmers because they will not be able to grow, they will not be able to plan, they will not be able to tell new markets that they can consistently supply those markets, and it hurts consumers.”

Rep. David Scott– “I’ve listened to this, and I want to make a couple of points clear on the pricing. The CBO clearly states that under the language of the supply management program the price of milk will go up. And when you calculate in inflation, it could go up, over the next period of time before we get back to the next farm bill, just this cost for the supply management, up to 50 cents.”

Chairman Lucas– “In all respect, you have to vote your conscience, of course. But a farm bill is like a giant jigsaw puzzle. You have many pieces that have to fit together in order to create that final product. I am in good faith opposing one friend’s amendment and sustaining another friend’s work. I have to move that puzzle forward…I believe the base text is the best opportunity to complete that. Vote your conscience, but remember, we have to have a farm bill when all this is over with.”

The Goodlatte-Scott amendment failed by a vote of 20 “yeas” to 26 “nays,” a joint statement released yesterday by the two lawmakers indicated that, “The outcome of today’s vote in the Agriculture Committee on this amendment was disappointing.  Supply management is antithetical to the future growth of the dairy industry. Government bureaucracy should not control the size of your herd.  A supply control program that will directly intervene in markets and increase milk prices will ultimately hurt dairy producers and consumers as well as dairy food manufacturers by stifling industry growth.  This program is contrary to the reforms already in the Farm Bill.”

And a statement yesterday from Jerry Slominski, of the International Dairy Food Association, noted that, “We expect that the Goodlatte-Scott amendment will be brought to a floor vote and that the House will ultimately take a strong position against a supply management policy that would restrict job growth, hurt middle-income families and add additional costs to nutrition programs that are losing funding in the Farm Bill. Also, the Goodlatte-Scott amendment would cost taxpayers less than the Dairy Security Act, according to the Congressional Budget Office.”

Meanwhile, Daniel Looker reported yesterday at Agriculture.com that, “The ranking Democrat, Representative Collin Peterson (R-MN), said he’s more optimistic than a year ago that the committee’s bill will come up for a vote on the floor the House.

“‘One of the reasons I’m optimistic is that the Speaker of the House has started to lobby people on the dairy program. That tells me, he is serious,’ said Peterson, referring to Representative John Boehner (R-OH). Last year, Boehner called a new dairy program championed by Peterson a ‘Soviet-style’ supply management system.”

Mr. Looker added that, “Another more contentious issue will be food stamps.

“Representative Jim McGovern (D-MA) offered an amendment to withdraw the committee’s cuts to its nutrition title.

“‘If this stands, two million people will be cut from the SNAP program,’ he said [related audio from Rep. McGovern here (MP3- 2:38)].

Mr. Looker noted that, “[Rep. Steve King (R., Iowa)] said it appears that a goal of the Obama Administration has been to get more people on the food stamp program or SNAP and to ‘expand the dependency class’ [Rep. King audio here (MP3- 1:39)].

The Agriculture.com article pointed out, “[Rep. Reid Ribble (R., Wis.)] said that during the recession and slow recovery, poverty has increased by 16%, but SNAP spending is up by more than 100% [Rep. Ribble audio here (MP3- 0:59)].

And in an update yesterday at the DTN Ag Policy Blog, Chris Clayton pointed out that, “As debate around SNAP got heated Wednesday, Rep. Juan Vargas, a freshman Democrat from southern California, invoked Jesus in his arguments against cutting the program [Rep. Vargas audio here (MP3- 1:54)].

The DTN update noted that, “Rep. Doug LaMalfa, a freshman Republican and a rice grower from northern California, also cited a Bible quote in arguing that Christians should be helping the poor. That’s not necessarily the role of the government.”

Rep. Mike Conaway (R., Tex.) echoed a similar theme regarding the role of individual charity versus government administration- audio here (MP3- 0:47).

In the end, this amendment by Rep. McGovern failed.  Bloomberg writer Alan Bjerga reported yesterday that, “Democrats on the House Agriculture Committee failed in a bid to restore cuts in federal food-stamp spending as the panel debates a $940 billion bill reauthorizing U.S. Department of Agriculture programs.

“The measure would cut $40 billion in the next decade by eliminating $20.5 billion for nutrition programs over that period including food stamps, or five times as much as proposed in a Senate Agriculture Committee plan approved yesterday.”

AP writer Mary Clare Jalonick indicated yesterday that, “The House bill would cut about $2.5 billion a year — or a little more than 3 percent — from the food stamp program, which is used by 1 in 7 Americans…The committee rejected an amendment by Democrats to strike the cuts 27-17, keeping them in the bill.”

Later at yesterday’s hearing, Rep. Jim McGovern offered an amendment that would prevent SNAP cuts from going into effect until the waste, fraud and abuse rate in the federal crop insurance program was equal to, or less than the fraud rate for the SNAP program.

As additional background, during the 2008 Farm Bill debate, Rep. McGovern also sought to attain a legislative link between crop insurance and nutrition.

In late July of 2007, Dan Morgan reported on unfolding Farm Bill developments in The Washington Post, and noted: “Recalling that a similar [Rep. Ron Kind] amendment garnered 200 votes in 2001, the Agriculture Committee loaded the bill with billions of dollars for nutrition programs, conservation, black farmers, and the Florida and California fruit and vegetable industries, in an effort to attract broad support. As late as 1 a.m. yesterday, Democratic leaders were adding money for nutrition programs.

About $840 million in mandatory spending was added for the McGovern-Dole food aid program, after nearly $1 billion was shifted out of government payments to private crop insurance companies to offset the cost.

“The new funding was sought by Rep. Jim McGovern (D-Mass.), a key member of the House Rules Committee. McGovern said it was ‘a good thing’ that the crop insurance industry would be contributing to feeding hungry children abroad.”

Likewise, Philip Brasher, who then worked for The Des Moines Register, added that, “And to get the final votes for the bill, Democrats had to cut the crop insurance program by another $1 billion to pay for a boost in international food aid. That cut will come from insurers and agents, who have some powerful friends in the Senate.”

And AP writer Julie Hirschfeld Davis reported at the time that, “They won over Rep. Jim McGovern, D-Mass., with the promise of more funding for an international food aid program.”

A FarmPolicy.com transcript of a portion of the debate on Rep. McGovern’s crop insurance- SNAP amendment from yesterday is available here.

In part, Rep. Peterson noted that, “Frankly, we should put more money into data mining, both in SNAP and in crop insurance so we can…because it kind of tells you where the problem is…[S]o I just… I just think your amendment is unworkable. I’d be happy to try to work with you to see if we can do a better job of getting at the bottom of this, but I don’t see how you would ever be able to figure out what this level of fraud is to compare the two.”

Rep. Peterson added that, “[Y]ou know, we keep talking about like somehow or another we’re cutting SNAP. We’re not actually cutting any benefits. What we’re doing is we’re…what they’re doing here is changing how you qualify for SNAP… [H]alf of the people in my district who qualify for [SNAP] benefits, more than half of the people that qualify don’t get the benefits. And I can tell you a number of them, it’s because they don’t want the benefits. That’s just not what they want to do.”

Rep. McGovern indicated that, “Part of the benefit of categorical eligibility is that there are multiple programs out there for poor people, and when they go to one, they can automatically get enrolled in the other. So without it, I mean, I think there’s a fear that people who are eligible for benefits will not get them, people who deserve them.”

Meanwhile, in a separate aspect of the Ag. Comm. debate yesterday, a news release late yesterday from Rep. Steve King (R., Iowa) stated that, “The first King amendment prohibits states from enacting laws that place conditions on the means of production for agricultural goods that are sold within its own borders, but are produced in other states.

“‘The Constitution of the United States reserves the regulation of interstate commerce to the Congress, not the states,’ said King. ‘The Protect Interstate Commerce Act (PICA) prohibits states from entering into trade protectionism by forcing cost prohibitive production methods on farmers in other states. PICA covers all agriculture products listed in section 206 of the Agriculture Marketing Act of 1946. By 2015, California will allow only eggs to be sold from hens housed in cages specified by California. The impact of their large market would compel producers in other states to invest billions to meet the California standard of ‘means of production.’ PICA will also shut down the Humane Society of the United States (HSUS), PETA and other radical organizations from creating a network of restrictive state laws that will slowly push agriculture production towards the demise.’”

A video replay of the debate on PICA, which lasted almost an hour, is available here, at FarmPolicy.com Online.

After defeating an alternative amendment on a roll call vote, the Committee passed Rep. King’s PICA amendment on a voice vote.

Chad Gregory, the president of the United Egg Producers issued the following statement last night regarding the King Amendment:

“The Egg Products Inspection Act Amendments (H.R. 1731) introduced by Reps. Kurt Schrader (D-Oregon) and Jeff Denham (R-California) is a preferable solution to the interstate commerce calamity in eggs rather than Rep. Steve King’s (R-Iowa) amendment which was included in the Farm Bill by the House Agriculture Committee today.

“Historically, when Congress preempts state laws it replaces them with a uniform national standard, such as the Egg Bill that egg farmers nationwide support. Rep. King’s amendment does not set a level playing field for farmers.

“It could affect interstate commerce in a wide variety of agricultural products, from eggs, to the sale of raw milk, to the labeling of farm-raised fish or artificial sweeteners, to restrictions of firewood transported into a state in order to protect against invasive pests and potential damage to local forests. As many as 150 different state laws from Alabama to Wisconsin could be preempted or affected by the King amendment.

“We believe that the Egg Bill is the best solution to insure orderly and efficient interstate commerce in eggs, protecting egg farmers in every state with uniform national standard that is fair for everyone.”

And Ron Nixon reported this morning at The Caucus Blog (New York Times) that, “After a late-night session Wednesday, the House Agriculture Committee voted to approve a $940 billion farm bill, a day after the Senate passed its version, setting the stage for Congress to finally begin work on a new five-year bill.

“The vote was 36 to 10, with mostly Democrats voting against the bill after nine hours of debate.”

Chris Clayton noted last night at the DTN Ag Policy Blog that, “Part of the ability to pass the bill may come down to the rules for debating it on the floor. Peterson said the bill needs a rule that would manage the number of amendments that would be brought and debated on the floor. ‘Otherwise it would just be chaos and you would have 600 amendments to deal with,’ Peterson said. He added, ‘There has to be some limitations.’”

Also, David Rogers reported yesterday at Politico that, “Moving in tandem with the Senate, the House Agriculture Committee approved its own new farm bill late Wednesday, promising billions in savings but also embracing a greater government role in farm policy than many free-market Republicans are likely to accept.

The bipartisan 36-10 roll call shortly before midnight capped 48 hours of intense activity in which first the Senate Agriculture Committee and next the House panel have approved competing five-year farm bills to take effect this fall.

Senate floor debate is expected to begin next week, and if the House can act in June, it would clear the way for the two sides to begin final negotiations and break the often bitter impasse that has hung over agriculture policy since last summer.”

Mr. Rogers noted that, “The chairman’s affable style gives him a genuine reservoir of personal support he can tap into going to the floor. And he has long argued that it will only be in a cauldron of floor debate that he can really test ideas and hone the coalition he needs to prevail.

But the splits on the left and right are real. And before the long night had ended, his jigsaw puzzle only got more complicated.

“In a coming of age, of sorts, the organic foods industry won— over Lucas’ objections — the right to have its own promotional check-off program such as those now enjoyed by pork and beef under the Agriculture Department. At the same time, the chairman was on the losing end of a fight over catfish inspections, and he had to sit through a long tortured debate over interstate commerce and the ‘balkanization’ of American agriculture as individual states, especially California, impose tougher standards on the treatment of livestock such as hens and breeding sows.”

 

Farm Bill- Senate

Chris Clayton reported yesterday at DTN (link requires subscription) that, “While members of the Senate Agriculture Committee held an intense debate over the impact of target prices on Tuesday, an amendment that restructured the target-price program was largely overlooked.

“Under the original structure of the Senate bill, target prices for all commodities with the exception of rice and peanuts stayed the same as the current counter-cyclical program. But an amendment to the bill by Sen. Charles Grassley, R-Iowa, completely restructures the proposed Senate target-price plan, known as Adverse Market Payments. The amendment was included as part of a broad group of ‘en bloc’ amendments added to the bill without committee debate.

“The Grassley amendment would create a new formula for target prices for every commodity with the exception of rice and peanuts. The proposal creates a five-year rolling average for target prices that would exclude the high and low years, which is typically called the “Olympic average.” That Olympic average for commodities would then be multiplied by 55%. That would create the target price for a particular crop.”

Also, Chad Gregory, President of United Egg Producers, issued this statement on Wednesday:

“The Farm Bill passed yesterday by the Senate Agriculture Committee, is designed to provide America’s agriculture sector with ‘five years of certainty.’  It is a travesty that a few senators blocked efforts to provide that same certainty for America’s egg farmers.”

 

Agricultural Economy

Mark Peters reported in today’s Wall Street Journal that, “The rise in prices for agricultural land slowed somewhat to start the year in parts of the U.S. Farm Belt, new reports showed, signaling a boom in land values might be moderating as commodity prices cool and incomes for farmers are expected to weaken.

“The Kansas City Federal Reserve Bank said in a report Wednesday that prices for nonirrigated farmland in its region rose 3.4% in the first quarter from the fourth quarter of 2012. That was much slower than the 7.7% quarter-to-quarter increase recorded for the same region a year earlier.

“A separate report from the St. Louis Federal Reserve Bank also released Wednesday showed that land values in parts of the Midwest and Southeast regions fell by an average of 2.3% in the first quarter compared with the previous quarter.”

Keith Good

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