FarmPolicy

May 24, 2019

Farm Bill; Ag Economy; and, Immigration

Farm Bill

Jim Harger reported yesterday at Michigan Live Online that, “U.S. Sen. Debbie Stabenow is confident her colleagues in the Senate will pass the Farm Bill her committee has been working on for the past two years.

“The Michigan Democrat said she is not as sure about the U.S. House, where some conservatives and the ‘tea party wing’ of the Republican caucus don’t believe a Farm Bill is needed, Stabenow said during a visit to a Sparta apple orchard Tuesday, May 28.

“‘The problem has always been folks who don’t think we should be helping farmers at all,’ said Stabenow, who chairs the Senate Committee on Agriculture, Nutrition and Forestry.”

Mr. Harger added that, “Opponents of the Farm Bill are ‘very, very right wing, the tea party wing of the Republican Caucus who believe we shouldn’t be providing any kind of crop insurance, or help, or research, or conservation or nutritional services or anything like that,’ said Stabenow, who said she expects Senate passage next week.

“‘I think there is enough of a bi-partisan group in the house who understand that this is a jobs bill,’ she said. ‘Sixteen million people in the country work because of agriculture – one out of four in Michigan – and we need to get it done.’”

Chairwoman Stabenow also indicated yesterday that, “When we grow things here and make things here, we create jobs here in Michigan. Agriculture supports nearly one in four Michigan jobs and 16 million jobs nationwide. The 2013 Farm Bill will reform agriculture programs to save taxpayers billions of dollars while helping Michigan farmers and small businesses create jobs. I’m proud that the Agriculture Committee was once again able to work across the aisle to pass a bipartisan Farm Bill, and it’s time for Congress to do the same.”

And Mark Tower, also writing yesterday at Michigan Live Online, reported that, “U.S. Sen. Debbie Stabenow gathered with local conservation and agriculture leaders at Bavarian Inn Restaurant in Frankenmuth Tuesday, May 28, to call for the passage of the 2013 Farm Bill.”

Mr. Tower noted that, “The senator said she is optimistic that the effort will be more likely to succeed this time, saying supporters are ‘in a strong position’ to pass the bill.

“‘The House of Representatives received a lot of pressure because they basically let the Farm Bill die at the end of the year,’ Stabenow said. ‘Farmers need the certainty of a five-year bill. There was such pressure on the speaker of the House and on leadership that the speaker has now said that he will give time for the bill to be taken up in June.’”

The article pointed out that, “‘There was a time when those subsidies [federal subsidies in past farm bills] were very important to the survival of my farm,’ [Dennis Engelhard, who operates a fourth-generation farm near Unionville] said.

But he said the switch to crop insurance is a better use of federal resources and better for farmers as well.

“‘It’s just much better of a risk management tool,’ Engelhard said. ‘We face so much instability, so much uncertainty, as farmers. It eliminates a lot of that.’”

The Michigan Live article added that, “During the event in Frankenmuth Tuesday, the senator touted the fact that farmers signing up for crop insurance will also be required to agree to best practices for conservation.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “A senior senator on the Agriculture Committee [Charles Grassley (R., Iowa)] said he would like to see the farm bill get to the president’s desk before the congressional break in August, but not before lawmakers further debate the need for target prices.

“The battle over target prices remains a sticking point in commodity programs as Midwest senators now try to extract them from the farm bill, even though the House version of the farm bill also includes a comparable target-price proposal.

“‘Our concern is target price programs are ill-suited for America’s farm economy,’ Sen. Charles Grassley, R-Iowa, told reporters in a conference call Tuesday morning. Grassley argues farm programs have been shifting away from price guarantees since Freedom to Farm was passed in the mid-1990s.”

Mr. Clayton noted that, “Grassley added he wasn’t willing to accept that it’s a foregone conclusion the final farm bill will include a target-price program even though the House Agriculture Committee bill builds its commodity program around higher guaranteed target prices than the Senate bill.

“‘I think they are going to do everything they can to keep us out of the queue,’ Grassley said.”

Christopher Doering reported yesterday at The Des Moines Register Online that, “A major divide between the House and Senate bills last year was the difference in proposed food stamp cuts. This year is shaping up to be no different. Spending for food stamp programs would be cut by $4 billion in the Senate bill with even steeper food stamp cuts of around $20 billion in the House. Grassley said he expected the House and Senate to ultimately reach a compromise on food stamps.”

Meanwhile, Brad Lubben, a Policy Specialist at the University of Nebraska-Lincoln, indicated yesterday at the AgChallenge2050 Blog (Farm Foundation) that, “Crop insurance is also a primary target for changes, but the biggest challenges are likely to come during floor debate. The Senate bill contains conservation compliance provisions for crop insurance, something that now appears acceptable to a broad farm-conservation coalition. The bigger debate for the floor is likely the level of premium assistance or subsidy. Crop insurance has become the biggest part of the safety net for producers and the biggest budget item in federal farm spending after direct payments, which are proposed to end. As such, it is also the biggest bank account for any and all proposals that would require additional funding.”

Mary Kay Thatcher, Senior Director of Congressional Relations for the American Farm Bureau Federation, was a guest on yesterday’s AgriTalk radio program with Mike Adams where she commented on the Durbin-Coburn amendment, an amendment to reduce the premium subsidy by 15% for farmers with an annual adjusted gross income of $750,000 or higher- that was added to the Farm Bill on the Senate floor last week.

“Now what happens when we get to the House floor, I strongly suspect we’ll have a very similar, if not a worse amendment once we get to the House floor.  And then you’ve always got the conference committee, so nobody knows what the end outlook is,” Ms. Thatcher said.

Also, Kansas State University Agricultural Economist Art Barnaby indicated in a recent update (“Farm Bill Means Testing Amendment”) that, “[Chairwoman] Stabenow said that limiting crop insurance support would cause producers with large pieces of land to leave the insurance system, losing the conservation benefits, and possibly increasing the cost of crop insurance to smaller producers.

“‘If everybody is not in, the costs go up for who is in,’ she said.

She is correct. In most years farmers are writing checks for premiums. Minnesota corn farmers have been writing premiums checks for more than 21 years including 2012 and those aggregated premium checks exceeded all of the corn claims in Minnesota for the past 21 years. Minnesota corn growers have netted none of the subsidy, but that could change in one year. Illinois corn growers collected the entire subsidy from the past 20 years and then some in just one year, 2012. While some ag economists have claimed farmers were better off without a crop and collecting insurance, one would doubt there are very many corn growers in Minnesota who would have traded their crop for a crop insurance check. The one exception is if they had significant crop damage, but did not trigger a payment. The one thing these ‘experts’ left out of their argument is that all farmers (except those on group plans) are required to suffer a yield loss before they can collect any indemnity payment, even with the higher price. For most farmers in the Corn Belt that means they had to suffer a 20% to 25% yield loss to trigger any insurance payments. In the Great Plains, most farmers needed a 30% yield loss or greater to trigger payments, because most Great Plains farmers buy lower coverage due to farmer-paid rates that are 2 to 2 1/2 times higher than Corn Belt rates. Farmers who meet the first payment trigger of a yield loss must then meet the second payment trigger of a higher price to collect the indemnity payment from the Harvest Price Option.”

An update yesterday at the Iowa Agribusiness Radio Network reported that Sen. Grassley voted for the Durbin-Coburn amendment; the update stated that, “Senator Grassley is a long-time proponent of limiting payments to large farmers, and says he voted for the amendment, but not without some hesitation.  A concern I have, even though I voted for it, is ‘Is it going to cause larger farmers to maybe not participate in the crop insurance program. Would that increase the price for everybody else?’”

In a separate update on crop insurance policy (“Replacing the Harvest Price with a Private Harvest Price will Double Farmer Paid Premiums at Some Coverage Levels”) Dr. Barnaby explained that, “Many crop insurance critics want to eliminate the harvest price from the Revenue Protection (RP) contract. Without the harvest price, many Corn Belt farmers would not have been paid for 2012 crop losses, the largest loss since 1993.

Corn Belt farmers are paying 50% higher premiums for the harvest price, but over the past 20 years, there have been only two years when there were both large yield losses and a significant price increase, 2012 and 1993 (Table 1). Both conditions must be met to trigger, net of farmer-paid premium, indemnity payments. However, farmers pay the extra premium every year. So if policy makers eliminate the harvest price, it may not produce the result that the critics expect. Crop insurance has provided yield coverage since 1980, but only after the introduction of Crop Revenue Coverage (CRC) in 1996 that included the harvest price did the U.S. have large scale Corn Belt participation.

These same critics also want to return crop insurance to a Federal-only program and eliminate the private sector. Prior to 1980, it was a Federal program, but most of the innovation in crop insurance came from the private sector, including the harvest price and revenue insurance. CRC was at or near the top seller in both Iowa and Nebraska in its two-state introduction year of 1996. The private sector had a profit motive to create a better product that farmers would buy. In the 1988 drought, when it was a yield guarantee only, less than 25% of the acres were insured.”

Meanwhile, with respect to House action on the Farm Bill, in her appearance yesterday on AgriTalk, Mary Kay Thatcher indicated that, “There will be—the House operates differently than the Senate, and they will have to go to Rules Committee, and Rules Committee will say this is how many amendments, and exactly which amendments can be offered, and that’s yet to be seen.

“So there will have to be a notice that will come out next week saying if you’ve got amendments you plan to offer, file them.  We’ll go to Rules Committee, we’ll determine what happens there.  It will not be, in my opinion, a closed rule.  I don’t think that Speaker Boehner and his leadership could ever withstand that.  I think there are way too many people that want to offer amendments, either restoring food stamp cuts or making even more.”

Ms. Thatcher added that, “They’re going to let people offer amendments to crop insurance and offer amendments to food stamps, and offer them to rural development programs, so it’s more about how the Rules Committee views thisBut if you were a betting person, you’d bet that somewhere in the range of ten to 20 amendments would be offered on the House floor.”

 

Agricultural Economy

Cheri Zagurski and Emily Garnett reported yesterday at DTN (link requires subscription) that, “Corn planting reached 86% complete in the week ended May 26, according to USDA’s weekly Crop Progress report, and emergence passed the hallway mark, reaching 54% out of the ground…[S]oybean planting increased to 44% complete, compared to 24% last week and a 61% 5-year average.”

University of Illinois Agricultural Economist Darrel Good indicated yesterday at the farmdoc daily blog (“Focus Shifts to Soybean Planting Progress”) that, “The late start to the 2013 corn planting season has created concerns about the likely magnitude of planted acreage and likely yield potential. The rapid planting progress during the week ended May 19 alleviated some of the corn production concerns. Still, a larger than average percentage of the crop will be planted later than is considered optimal for maximum yield potential. Recent and upcoming heavy precipitation, particularly in Iowa and parts of Illinois and Missouri, suggest that some corn acreage will be planted extremely late, switched to soybeans, or not planted at all so that production uncertainty persists.

“Until recently, there was little concern about the timeliness of soybean planting. However, the same weather that will delay the completion of corn planting may also result in more than the average amount of late planting for soybeans. As with corn, there is not agreement on what constitutes late planting for soybeans.”

After more detailed analysis, yesterday’s farmdoc update indicated that, “The USDA’s weekly Crop Progress report indicated that 24 percent of the U.S. soybean acreage had been planted as of May 19. That compares to the previous 5-year average planting progress of 42 percent. The slowest progress relative to the previous 5-year average was in Iowa and delays are likely to continue there due to recent and upcoming precipitation. The report to be released on June 3 will allow a calculation of the percentage of the crop planted late by our definition. It appears that percentage will be above the long term average of 32 percent, but well below the historical extreme of 66 percent. November 2013 soybean futures have increased about $0.75 from the low on May 10. Much of that increase is apparently based on production concerns related to prospects of more than the average amount of late planting. History suggests that those concerns, particularly from the yield side, are probably premature. The USDA’s June 28 Acreage report will provide a clearer picture of the magnitude of planted acreage.”

A tweet yesterday from University of Illinois Agricultural Economist Gary Schnitkey, which included a link to this chart, indicated that, “Planting progress (5/26): IN, OH, MI ahead, rest of cornbelt behind.”

Recent news items point to rain adversely impacting planting in IllinoisIowa, and Minnesota, while a report yesterday at The Des Moines Register Online (“Threat of flooding looms across Iowa”) stated that, “Daily deluges closed highways and forced Iowans out of homes and campgrounds over the weekend, and with no end apparent to the widespread heavy rain, residents and officials statewide braced for more serious flooding.

The ground is saturated almost everywhere, meaning that any place a thunderstorm decides to stop and dispense a 4- to 5-inch downpour this week is likely to have flooding problems.”

Ian Berry and Andrew Johnson Jr. reported in today’s Wall Street Journal that, “Corn and soybean prices climbed Tuesday as heavy rainfall in parts of the Midwest kept farmers from planting crops on schedule.

“Excessive rains in portions of Iowa, Minnesota and Illinois revived concern that farmers won’t be able to sow as much as corn as they had intended, which could reduce the size of this fall’s harvest. Traders also are worried about soybeans, which have a later growing season than corn, because further planting delays could result in lower yields.”

An update yesterday from the Extension Service at Iowa State University (“Producers Have Options under Crop Insurance Coverage”) noted that, “The frequent rains that have soaked Iowa this year have left many corn and soybean fields unplanted or with flooded areas. Many producers are wondering what options they have under their multiple peril crop insurance policies.

“Agricultural economist Williams Edwards and farm management specialist Steve Johnson with Iowa State University Extension and Outreach offer the following update.

“In Iowa, the crop insurance ‘late planting period’ for corn begins on June 1. Corn can still be planted after this date, but the insurance guarantee on those acres is reduced by 1 percent per day until they are planted. Corn acres planted after June 25 will receive insurance coverage equal to 60 percent of their original guarantee. Producers should keep accurate records of planting dates on all remaining acres. The late planting period for soybeans is from June 16 through July 10 in Iowa.”

See also, “Delayed and Prevented Planting Provisions,” from Iowa State Extension.

 

Immigration

Niels Lesniewski reported yesterday at Roll Call Online that, “Senate Majority Leader Harry Reid says he thinks there will be no trouble getting the all-important 60 votes for the immigration overhaul.

“‘I think we have 60 votes. Remember, we start out at 55 Democrats. I think the most I’ll lose is two or three. Let’s say I wind up with 52 Democrats,’ Reid told the Nevada TV program ‘To the Point.’

“‘I only need eight Republicans, and I already have four, so that should be pretty easy,’ the Nevada Democrat said in reference to the four GOP senators in the ‘gang of eight’ that drafted the bill. He may very well pick up the vote of his Republican junior colleague from his home state, Dean Heller, as well.”

Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “Senate Finance Committee ranking member Orrin Hatch (R-Utah) said Monday that the bipartisan Senate immigration bill can pass the upper chamber if it includes his taxpayer protection amendments.”

And in a separate update yesterday at the Floor Action Blog, Mr. Kasperowicz reported that, “House Minority Leader Nancy Pelosi (D-Calif.) told a reporter on Monday that there is enough ‘general agreement’ to pass an immigration deal in Congress by August.”

Keith Good

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