FarmPolicy

April 29, 2017

Farm Bill; Ag Economy; Smithfield; and, Immigration

Farm Bill

David Rogers reported yesterday at Politico that, “A landmark five-year Farm Bill cleared the Senate on Monday evening, setting the stage for a long-delayed fight on the House floor next week over major revisions in agriculture policy and the future of food stamps.

“The 66-27 roll call exceeded last year’s margin with 18 Republicans joining Democrats on passage. And the increased GOP support makes it more difficult for Speaker John Boehner to walk away from the choices before him — as he did last summer.”

Mr. Rogers explained that, “Republicans are genuinely divided over the role of government in farm policy, with the speaker — a veteran of the House Agriculture Committee — engaged in his own personal war against a new milk- supply management proposal in both the House and Senate bills.

“Food-stamp reform and the deep cuts demanded by the House raise fundamental questions for both parties. On top of all this, nearly 200 of the 435 House members have never before been part of a farm bill debate given the immense turnover of recent years.

The result could be a bloody free-for-all, driven by regional and ideological differences.”

The Politico article noted that, “Nonetheless, after last year’s stall, it would be a major embarrassment for Republicans if the bill were to die on the House floor. And Majority Whip Kevin McCarthy (R-Calif.) is working actively with House Agriculture Committee Chairman Frank Lucas (R-Okla.) to get to conference with the Senate and then see whether a final package can be brought back for enactment by the August recess.”

Yesterday’s lengthy and detailed article also indicated that, “Cost is less the issue with dairy subsidies, measured in millions not billions. But after taking a pass on the Senate, powerful dairy processors are aligned with Boehner in the House to try to kill the new program — a lightning rod for those who believe government already has too great a role in agriculture.

“Boehner brings an animosity, honed by past fights with a late Ohio dairyman from his district. But he is matched against Rep. Collin Peterson (D-Minn.), a former House Agriculture Committee chairman who crafted the milk plan and has been an indispensable ally for Lucas.

“Peterson’s proposal is to scrap much of the current dairy-support system in favor of one that tries to guarantee a farmer a minimum $4 margin between average feed costs and milk prices per hundredweight.”

Ramsey Cox reported yesterday at The Hill’s Floor Action Blog that, “‘Hopefully the House this time will complete this work and we’ll have an opportunity to go to conference,’ [Senate Ag Comm. Chairwoman Debbie Stabenow] said.”

On the Senate floor yesterday, Chairwoman Stabenow noted that: “We started this last year. We had three weeks that the farm bill was on the floor of the Senate. We had 73 votes, adopted 42 amendments, and we took that as the basis for the bill this year. Once the House did not take up the bill—and, in my judgment, walked away from rural America last year—we had to come back and do it again, so we used the work product the Senate did last year as the basis of our work, and we had 2 weeks of debate on the floor of the Senate. We have added 14 more amendments to the bill that is in front of us.”

In a news release yesterday, Speaker Boehner stated that, “The Majority Leader has announced that the House will consider the Farm Bill this month.  The Leader and I will encourage the Rules Committee to provide a fair process that will allow for a vigorous and open debate – the kind of process I pledged we would have more of in the House when I became speaker.”

He added that, “As a longtime proponent of top-to-bottom reform, my concerns about our country’s farm programs are well known.  But as I said on the day I became speaker, my job isn’t to impose my personal will on this institution or its members.  Rather, it’s to ensure we have a fair process and an open debate, leading to a product that reflects the will of our majority, the will of our members, and the will of those we represent.  That’s the commitment I intend to keep as this process proceeds.”

Niels Lesniewski reported yesterday that, “Boehner’s statement didn’t use the technical term ‘open rule,’ which is the process the House generally uses to consider spending bills and any germane amendment may be offered.”

And Ed O’Keefe reported yesterday at The Washington Post Online that, “But [Speaker Boehner] said he remains opposed to the House bill’s current proposal for a new dairy insurance program that would reduce payments to some farmers depending on overall milk supply, because he would prefer to further limit the government’s role in the process.

The speaker ‘wants a simpler approach with less government intervention than the convoluted current system and the proposal put forth in the committee-passed farm bill,’ his spokesman, Michael Steel, said in an e-mail.”

In a statement yesterday, House Agriculture Committee Ranking Member Collin Peterson (D., Minn.) noted in part that, “It’s going to be difficult but if everything stays on track, I believe it’s possible to get a bill to the President before the August recess, finally providing some certainty for our farmers, ranchers and consumers.”

Ron Nixon reported yesterday at The New York Times Online that, “In the House, the farm bill faces a much tougher road. Last year, conservative lawmakers helped kill the bill because of their desire for deeper cuts in the food stamp program, which serves about 45 million Americans.

Hoping to satisfy conservatives, the House Agriculture Committee recently increased the amount of cuts to the program to the $20 billion mark over the next 10 years, up from $16 billion in last year’s bill.”

Bloomberg writers Derek Wallbank and Alan Bjerga reported yesterday that, “‘Unless there are some significant changes and some significant effort, I don’t think this’ll get across the floor,’ Kansas Republican Tim Huelskamp said in an interview. ‘People in Kansas get it — just because it’s the farm bill doesn’t mean you have to vote for it,’ said Huelskamp…”

The Bloomberg writers added that, “Unless the bill is changed, ‘It could potentially cause problems for the farm bill passing, because you’ll have Republican leadership and a good deal of Republicans you’ll need to have to pass the farm bill angry at a provision that’s going to be in there,’ Jerry Slominski, International Dairy Foods Association senior vice president for legislative and economic affairs, said in an interview.”

Speaking yesterday on the AgriTalk radio program with Mike Adams, National Milk Producers Federation President and CEO Jerry Kozak noted that, “All indications are, though, that [Rep. Bob Goodlatte (R., Va.)] intends to submit his amendment to the House floor to strip out the stabilization, and so we will have to deal with that.  I’m hoping others in the House see that the House Agriculture Committee last year and this year did not support his amendment and that it’s time for processors who are advocating the Goodlatte-Scott amendment to end the divisiveness that they’ve created and to recognize that farmers need a program that contains the market stabilization, as well as taxpayers.”

Mary Kay Thatcher, Senior Director of Congressional Relations for the American Farm Bureau Federation, noted on yesterday’s AgriTalk program that, “We may have a little bit better view of where we are on that later this week.  The Republican leadership is going to whip the [Farm] bill on Wednesday, meaning they’ll be making their calls around to the other offices asking where they’re going to be.”

She noted that, “So most speculation is that we require at least 150 Republican votes, at least 70 Democratic votes to get the necessary 218, and I don’t think we’re there on either count right now.”

Ms. Thatcher added that, “You really didn’t have the nutrition community saying we’ve got to do this because none of the nutrition programs have to be reauthorized.  They just continue on.

“So the fact is if they continue on as is right now, they don’t take either the $20 billion cut that the House has or the $4 billion cut that the Senate has.  There’s really no incentive for them to want to move forward with consideration of this farm bill.  So it’s difficult when you don’t have a constituency that’s that big and that organized helping you push for the farm bill to get done.”

Reuters writer Charles Abbott reported yesterday that, “Agricultural lobbyists and analysts said the Senate vote made a new farm law more likely but not certain this year…[A] bruising fight was possible in the House over food stamps. Some 134 of the 201 Democrats in the House signed a resolution against any cuts. And some Republicans want steeper cuts in farm programs as well as in food stamps, which could jeopardize passage of a bill.”

Also yesterday, the Congressional Budget Office released an update regarding the House Farm Bill.

Meanwhile, an update yesterday by Kansas State University Agricultural Economist Art Barnaby (“Means Testing is Good Politics, But Economic Sense?”) noted that, “One would doubt that many in Congress really understand the administrative cost for a means test that will likely exceed any savings. The real definition of a big farm is ‘anyone who farms an acre more than I farm’. However, Congress continually tries to define a ‘big’ farm based on payment limits and Adjusted Gross Income (AGI), because it makes good politics. Unlike commodity programs where subsidy checks are sent to farmers, crop insurance only provides a subsidy payment in cash if there is a claim. Otherwise, crop insurance is a production expense and farmers are the ones writing checks.

If the proposed means test of a $750,000 ($750K) AGI limit is applied to crop insurance, it will require farmers over the limit to pay a 15 point increase in their share of the crop insurance premium. Most Washington observers expect any means testing for crop insurance will be determined by the Farm Service Agency (FSA) because FSA already has means testing for their programs. One would think the AGI limit would be a simple administrative process. But one only needs to read the 430 pages of FSA handbook on AGI limits, titled ‘Payment Eligibility, Payment Limitation, and Average Adjusted Gross Income’ to figure out this is more complicated than expected.”

Dr. Barnaby added that, “It appears some policymakers are starting to understand that only a few farmers would be over the $750K limit, but they account for a very large share of the production. If these ‘big’ farms drop out of the insurance pool, it would increase rates on the remaining farmers, if these large farmers are producing underwriting gains. The administration is making the opposite argument on the health insurance pool, where they want everyone in the insurance pool to make ‘rates affordable.’”

Ohio State University Agricultural Economist Carl Zulauf indicated on Friday at the farmdoc daily blog (“Market Distortion and Farm Program Design: A Case Examination of the Proposed Farm Price Support Programs”) that, “This post examines the potential for market distortions caused by the price support programs currently proposed in the House and Senate 2013 Farm Bills. It is common for discussion of market distortion to focus on the level of price supports, but the degree of distortion reflects the interaction of all of a program’s parameters.”

Also with respect to agricultural programs, the full House Appropriations Committee is scheduled to markup the FY 2014 Agriculture Appropriations Bill on Thursday morning.

 

Agricultural Economy

Anthony Greder and Emily Garnett reported yesterday at DTN (link requires subscription) that, “U.S. corn planting continued to inch toward the finish line this past week, progressing 4 percentage points to reach 95% complete by Sunday, June 9, according to USDA’s latest Crop Progress report. That’s 3 percentage points behind the average pace of 98%.

“Concerns remain about how many acres that have already been planted will be drowned out by recent heavy rains.”

The DTN update added that, “Soybeans were 71% planted, compared to 57% last week and a 84% five-year average.”

Reuters writer Sam Nelson reported yesterday that, “U.S. farmers will struggle planting the final stages of this season’s corn and soy crops this week due to occasional rains, but crops that have been sown should grow rapidly, an agricultural meteorologist said on Monday.”

University of Illinois Agricultural Economist Darrel Good indicated yesterday at the farmdoc daily blog (“Difficult to Anticipate Corn Production”) that, “A large number of acreage, yield, consumption, and price scenarios are still possible at this time. Importantly, there is room for a much smaller crop than the early prospects of 14 billion bushels before rationing would be required during the upcoming marketing year. A crop of 13 billion bushels would be sufficient to meet expected needs at current new crop price levels. If harvested acreage is near 85.5 million acres (four million below the early forecast), as an example, a crop of that size would require an average yield of 152 bushels, about 10 bushels below trend value. The USDA will provide updated projections in the June 12 WASDE report.”

 

Smithfield

Christopher Doering reported earlier this week at USA Today Online that, “The fate of a Chinese company’s controversial $4.7 billion purchase of U.S. pork giant Smithfield Foods could rest in the hands of a secretive and powerful government panel little known outside of the nation’s capital.

“The proposed takeover announced last month of Virginia-based Smithfield, the world’s largest pork processor and hog producer, by China’s Shuanghui International Holdings has thrust the government’s Committee on Foreign Investment in the United States (CFIUS) into the spotlight, highlighting the growing concern about U.S. companies being purchased by foreign entities.”

Mr. Doering indicated that, “The committee was given the authority in 1988 to review the impact that foreign purchases of American companies have on national security. CFIUS, which is headed by the Treasury secretary, includes members from the departments of Justice, Homeland Security and Energy, along with five other agencies.

“The government panel is notorious for operating in secret and is not permitted by law to talk about or comment publicly on any transaction, largely because of the sensitive information it is given to review. In 2011, the most recent year data from CFIUS (pronounced sif-e-us) are available, it reviewed 111 cases, and 10 of them were from China. The panel does not reject deals outright. Instead, it tells the companies it is going to recommend the president of the United States block their deal, which usually causes the parties to drop their proposed merger before the White House intervenes.”

The article noted that, “Companies usually ask CFIUS to review their cases, but in rare instances, they can be told they have to file. Once a decision is reached, usually after 30 days, committee officials tell the businesses, which have the option of making it public.

Larry Pope, chief executive of Smithfield, told investors after the deal was announced on May 29 that the company plans to file with CFIUS ‘out of an abundance of caution.’”

Ian Berry reported in today’s Wall Street Journal that, “Hog prices jumped to a nearly two-year high, bolstered by strong U.S. consumer demand for pork and tight near-term supplies of slaughter-ready hogs.

“Hog futures also continued to draw support from sentiment that U.S. pork exports will increase if China’s largest pork processor completes its planned $4.7 billion takeover of Smithfield Foods Inc.”

 

Immigration

Sara Murray and Corey Boles reported in today’s Wall Street Journal that, “Efforts to secure the border with Mexico will be a central focus as a sweeping overhaul of the nation’s immigration laws moves to the Senate floor this week, the start of a marathon month of debate on the bill.

Senators are set to vote Tuesday on a procedural motion to formally bring the bill to the floor, which requires 60 votes to pass and would open debate on a stream of amendments, including many that could split the coalition of senators backing the bill and endanger its chances of passage.”

The Journal writers explained that, “The bipartisan group of eight senators that crafted the bill is still torn over how much to adjust the legislation to win additional support, particularly from Republicans looking to strengthen requirements for border security. Border security is a particularly sensitive issue, because the legislation sets security benchmarks that must be met before anyone currently in the country illegally can receive green cards and become legal permanent residents…[I]n addition to tougher border-security provisions, Democrats expect Republicans to try to bolster a provision requiring the payment of back taxes by illegal immigrants who are seeking to become legal residents.”

Bloomberg writers Roxana Tiron and Kathleen Hunter reported yesterday that, “House Republican leaders are seeking to speed up efforts to craft U.S. immigration-law proposals as the Senate nears the first test votes on its own plan.

“House Speaker John Boehner and other leaders have decided to focus on immigration before the August recess, three Republican aides said yesterday. The aides asked not to be quoted by name because official deadlines haven’t been set.”

Sen. Jeff Sessions (R., Ala.) penned a column on immigration issues in yesterday’s Los Angeles Times, while House Judiciary Committee Chairman Bob Goodlatte (R., Va.) had an opinion item posted on Sunday at The Roanoke Times (Va.) Online.”

Keith Good

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