FarmPolicy

August 21, 2014

Farm Bill; Ag Economy; Immigration; and, CFTC- CORRECTED

Farm Bill

(Note: An article in the Agricultural Economy section of this report has been corrected).

Yesterday’s AgriTalk radio program with Mike Adams included an interview with House Ag. Committee Chairman Frank Lucas (R., Okla.).

The AgriTalk interview was played in two segments.  An audio replay of the longer portion of yesterday’s discussion can be heard here (MP3), and an unofficial FarmPolicy.com transcript of this part of the interview can also be viewed here.

Chairman Lucas indicated that, “Mike, my understanding is that the staff of the U.S. House—I believe that would be the clerk’s office—have transmitted to the United States Senate our copy of H.R. 2642 that we passed last week in the United States House. That means we’re now at a point in time where the Senate has to take the next step. They passed their bill substantially earlier.

“But unfortunately, because of a constitutional issue dealing with revenue, their bill cannot be heard on the floor of the House in its present form. It’s been blue slipped by the Ways and Means Committee. So now the Senate either has to pass our bill, which of course I think would be a great idea, or reject our bill, and I suppose insert their language into our bill and send it back, which would lead to a conference.

But at this moment the United States Senate has the House passed version of what I call the farm bill farm bill, and we’re waiting on them to take action.”

Chairman Lucas noted that, “I’ve had a conversation with Senator Stabenow about beginning what would be termed up here as the pre conference process, discussing the things that the House and the Senate could sort out in the language that we have passed.  Clearly I’m still working on trying to come up with some kind of a consensus bill on nutrition.  I’m trying very hard to do that.

“But very soon, one way or the other—matter of fact, the majority leader has appointed a working group to work on that process with me—sooner or later we’ll get to that point.  But for conferees to be appointed, the Senate has to take action.  And I guess if they passed our bill it would go to the President.  If they reject it, I assume they would substitute their language to send back.  At that point then it would be time for conferees.  But technically it’s not possible to appoint conferees yet because we’re not procedurally at that point.”

More specifically with respect to nutrition related issues, Chairman Lucas stated that, “Well, I begin, as we speak today, working to try to put language together.  I would say this: it’s going to be a bit of a challenge, because if you looked at the House [Committee] passed bill, we ended automatic food stamps categorical eligibility.  We made the Northern states that have something called head and eat, LIHEAP, put 20 times as much money into the program as they’re presently putting.  Those two things saved about $20 billion.

“We ended advertising in the United States and outside of the country.  We ended the hiring of recruiters that push food stamps.  And on the floor of the House, language was added to give states very clear authority to require drug testing to qualify for food stamps, to have a work requirement, workfare for food stamps, and by voice vote, language which actually matches very closely Senate passed language forbidding convicted felons drawing food stamps.

If that’s not enough reform, then the question I have for a lot of my colleagues, Mike, and I am working on this week as we speak, is then what additional reform do you need?  Do you pursue Paul Ryan, the chairman of the House Budget Committee’s proposal from earlier this year about block granting food stamps back to the states like Medicaid?  Which way do you go?  I’m just not sure what the final solution will be, and if I can secure a majority of the House for any particular plan.”

Chairman Lucas added that, “With that said, though, if the Senate chooses to pursue conferencing food stamps as part of the package, then they’re certainly able to do that.  It’s in their core bill right now.  But at this moment I would say I am working very hard, in good faith, as I promised the Rules Committee of the United States House and the members on the floor of the United States House, to try and craft that nutrition package.  But man, it’s pushing a big boulder up a tall hill.”

Also in yesterday’s AgriTalk interview, Chairman Lucas point out: “The better question is if we cannot agree on nutrition language in the House, will the Senate still insist on nutrition as a part of the bill or will they be willing to move the farm bill only?

“If you are a very liberal member of Congress and believe that the most important part of the farm bill are the feeding programs, the social nutrition programs, you could make the argument that in the way that food stamps work, because it’s an appropriated entitlement, that as long as the appropriators put the authorizing language in on a year-to-year basis, it would be authorized.  If you’re a liberal and you don’t want any cuts whatsoever, then I suspect you’d advocate a farm bill only, you’d leave food stamps in place where they are, and hope that Republicans aren’t in control after the next election day.

“By the same token, if you insist on having food stamp authorization—remember, we save $20.5 billion in the initial draft of the farm bill considered in the House, the Senate saved $4.5 billion—if you insist on a food stamp provision, then you’re almost guaranteed a cut, whether it’s the Senate’s four and a half billion or the earlier farm bill’s version in the House with 20.5Demand a comprehensive bill and take a cut, pass a farm bill farm bill and technically, in the way the law works right now, take no cut for the rest of this session.  But my liberal friends have to sort that out on their own.”

Also on this issue, Ag. Committee Member Rodney Davis (R., Il) noted in an interview yesterday on WDWS radio (Champaign, Il.) with Dave Gentry that, “What I think will happen, and I may be way off base here and I hope I am wrong.  I think the Democrats in the Senate will only want to conference the Ag side– no matter what they say publicly– because they don’t have to then accept any cuts, any structural reforms to the food and nutrition program because it’s mandatory spending and it will continue at today’s rates that right now have grown the program- like double in the last four years.” (Related WDWS audio here).

Also yesterday, in a KTOK (Okla. City) radio interview with Reid Mullins, Chairman Lucas pointed out that, “But in the Senate side it seems to be the food stamps are more important than raising the food.  I would say from the House perspective it doesn’t matter how much money you spend on electronic benefit cards, if you don’t raise any food to put on the shelves, there’s nothing to buy.  So you gotta have a farm bill farm bill in the farm bill.” (Related KTOK audio here).

And in a discussion yesterday on KKBS radio (Guymon, Okla.) with host Ramey Cozart, Chairman Lucas explained that, “So now I’m left to try and figure out, if we’re going to do a food stamp only bill, and the liberals don’t want any changes, they don’t want any cut in spending, they don’t want any reform, so that puts me back to my Republican sideWhat do I do to persuade 218 of my colleagues, a majority, to pass a standalone bill?  I just don’t know whether it’s possible.  I’m going to try, because I gave my word I would.  I’m going to try.  But ultimately, at some point, with the bill we’ve already passed, and whatever the Senate’s done, we’ve got to sit down and work out our differences.  We have to have a Farm Bill.” (Related KKBS audio here).

Meanwhile, House Ag. Committee Member Tim Walz (D., Minn.) tweeted yesterday that, “We need a #farmbill and we need it now. House leadership should finish the job and name conferees without delay.”

And Hill writer Erik Wasson tweeted yesterday that, “Rep Southerland (R-Fla.) will serve on #farmbill food stamp working group, meeting today. Dems say his amd blew up original House bill

An update yesterday at the National Sustainable Agriculture Coalition blog stated in part that, “The bottom line situation is now becoming increasingly clearStarting a conference now would be a sign of hope and momentum that a new five-year farm bill is possibleDelaying and going back to the House floor with a partisan food stamp bill effectively means the now three-year old effort to get a new farm bill is over for this year and that another farm bill extension will become necessary.

Another extension, however, will itself become a major new round of debate, as the chances for a straight extension this time, with no reform and lots of stranded, unfunded programs, are close to nil.   It is clearly the far better choice to do the new bill, and to start the conference committee to work on it right away.  As it was last year, the choice is in the hands of the House majority leadership.”

With respect to the Congressional schedule, the “Washington Insider” section of DTN pointed out yesterday (link requires subscription) that, “Portions of the current farm bill are scheduled to expire Sept. 30. Between now and that date, there are only 19 legislative days. (Congress will be on a five-week recess between Friday, Aug. 2 and Monday, Sept. 9.) Theoretically, there is adequate time to conference the bill and have a new law in place before Sept. 30. Realistically, it could prove difficult to develop a conference report that both houses of Congress will find acceptable.”

With respect to the political climate in which the Farm Bill debate is occurring, in a separate clip on yesterday’s AgriTalk radio program with Mike Adams, Chairman Lucas stated that, “I can explain things to my colleagues on the floor but the paid mercenaries that come from every perspective—they are earning their pay, they are not listening and they are not necessarily trying to craft thoughtful policy.”

In a related article regarding the issue of incumbent lawmakers being challenged in a primary, John Stanton reported this week at BuzzFeed Online that, “The raw data, in fact, suggests that Republican primaries are rarely a major problem for incumbents in the House.

Since 2006, only nine Republicans have lost primary challenges in which they were not running against another sitting Republican.  Over that period, dozens more members have retired or resigned, but aides and conservatives alike said only a few, such as former Rep. Geoff Davis, stepped aside rather than face a primary. For most, it was a simple question of fatigue, age, financial opportunity, or having been redistricted out of office.”

Meanwhile, Robert Costa reported yesterday at National Review Online that, “Inside the House, the era of pork, Tom DeLay–style intimidation, and backroom deals is over — in fact, it’s been dead for years. Republicans have sworn off earmarks, and they recoil at anything that’s comprehensive. This makes the job of whipping votes exceedingly difficult, and the leadership often has only a smile and handshake to offer wary members. But amid these circumstances, Kevin McCarthy of California, the House GOP’s whip, has emerged as a calming force. His bargaining powers are limited, but he has a light touch that helps keep the conference from imploding.”

The recent farm-bill drama was a window into McCarthy’s method — and a sign that on immigration, he may be the player capable of ushering legislation through the lower chamber. McCarthy wasn’t able to prevent a floor fiasco — the farm bill failed to pass on its initial vote. But at the eleventh hour, he was able to quietly corral conservatives around a revised farm bill and pass it with a slim majority. For a raucous Republican conference, it was a fleeting moment of cohesion; for McCarthy, it was reminder that patience and pacing are critical to his success.

“In an interview, McCarthy recalls how he spent days huddling with on-the-fence Republicans in his first-floor Capitol office, going over their concerns and trying to reach a consensus. Instead of needling them for breaking with the leadership on the first vote, he wooed them with camaraderie. There were meetings with the old bulls and morning bike rides with the younger exercise enthusiasts — anything to establish mutual trust. ‘It was tough,’ he says. ‘We had to find a way to stay together, not just for the farm bill, but to keep us together ahead of immigration and the debt ceiling.’”

Additionally on the political climate, Chris Cillizza pointed out yesterday at The Fix Blog (Washington Post): “So, how does this House stack up against past years when it comes to productivity? Not so well, according to the new Vital Statistics on Congress, which shows that the 112th Congress passed just 561 bills, the lowest number since they began keeping these stats way back in 1947.”

 

Agricultural Economy

Yesterday the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included several district observations with respect to the U.S. agricultural economy- a summary of those portions can be found here, at FarmPolicy.com Online.

And DTN’s Marcia Zarley Taylor reported yesterday that, “Get ready to say goodbye to the latest bonanza years of grain agriculture. The world may be adding billions of new mouths to feed over the next few decades, but population growth alone isn’t enough to sustain record-busting crop incomes that made farmers and landowners feel like princes the past decade, a growing number of ag economists and business leaders warn.

[CORRECTION] “‘World population is leveling off and about to decline,’ Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri, told an audience assembled for a Kansas City Federal Reserve forum on global agriculture here this week. [CORRECTED: 7.18- The number of people being ADDED to the world’s population each year is leveling off and about to decline.  Based on U.S. Census figures, the world’s population increased by 77 million/year between 2000 and 2010, and is expected to grow by 76 million this decade.  That drops to 69 million/yr. in the 2020s and 48 million/yr. by the 2040s] He’s not just skeptical that global population growth over the next few decades is over-inflated: Farmers here and abroad have ramped up corn and soybean production globally since 2000, putting a lid on how high prices will be able to go in the near future. This excess production could swamp markets at times.

“‘I won’t prejudge what will happen with this year’s U.S. corn crop, but in the future $5 corn will be the norm, not the exception, and we’re very likely to average below $5 corn for the next five years,’ Westhoff said, based on the institute’s long-term crop and economic models. The U.S. could see spikes to $6 to $7 corn if yields should fall from some widespread crop disaster, ‘but if the crops are as big as some think, we could certainly see $3 corn again … something that would cause a lot of consternation in agriculture.’”

The DTN item added that, “In the past, U.S. corn markets swayed world prices, but U.S. corn acres as a percent of world production peaked in the 1980s. Since 2006, ‘the world’s farmers have responded heroically to high prices’ and boosted their production capacity, [Ray Wyse, a senior director at Omaha-based Gavilon] said. ‘Now prices will be increasingly determined outside of our borders.’

“Westhoff agreed that concerns about overproduction are warranted. ‘We’ve been a little sanguine the last few years, but we’ve got to find a new source of demand to keep prices from going down,’ Westhoff added. Just two countries — the U.S. and China — accounted for the biggest demand shifts so far this century. But eventually, the ethanol market and China’s soybean demand will be accommodated. ‘If you have to invest 10 or 20 years into the future, you’ve got to think where those crop prices will land.’”

Meanwhile, Julian Hattem reported yesterday at The Hill’s RegWatch Blog that, “A group of House Republicans are urging an end to the federal program that calls for gasoline to be mixed with renewable biofuel like ethanol.

“Members of the conservative Republican Study Committee on Wednesday framed the program as an expensive and unwanted federal mandate that Americans don’t want and businesses can’t afford.

“‘The fact that the federal government would put its big thumb on one side of the scale between the use of corn for food and the use of corn for fuel, to me, is just a wrong approach to begin with,’ said Rep. Bob Goodlatte (R-Va.).”

 

Immigration

Seung Min Kim reported yesterday at Politico that, “Don’t expect the House immigration group to roll out its comprehensive reform bill this summer.

The bipartisan coalition of seven lawmakers has essentially agreed to punt the release of its legislation until at least September, according to several sources close to the private discussions.

“Multiple sources described the thinking as this: Unveiling the bill now, shortly before the August recess, would leave the House group little time to educate the public and fellow members about its bill before lawmakers head home to their districts for the month-long break. It could also potentially open up the bill to attack without defenders.”

 

CFTC- Commodity Futures Trading Commission

A Senate Ag. Committee news release yesterday indicated that, “Senator Debbie Stabenow (D-MI), Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, today said the Committee must examine lessons from past market failures as it reauthorizes the Commodity Futures Trading Commission (CFTC) to avoid repeat crises like the 2008 near-collapse of global financial markets that left 8 million men and women without jobs. Today’s hearing, the first official hearing in the Committee’s CFTC reauthorization effort, featured testimony from a range of witnesses including market participants, end users, and regulators.”

Chairwoman Stabenow noted at the hearing: “As this committee begins the process of reauthorizing the Commodity Futures Trading Commission, we need to examine the lessons from the past and consider ongoing challenges in the system. We want to make sure the agencies responsible for protecting the markets — these markets and that they have the authority, the staff, and modern technology that they need to do the job.

This committee’s been closely monitoring the MF Global case, where customers’ funds, money that rightly belonged to farmers and businesses and individuals all across the country, went missing. We continue to focus on three goals: getting customers their money back, and certainly there’s been terrific progress there; holding anyone engaged in wrongdoing accountable; and ensuring that proper customer protections are in place so that something like this doesn’t happen again. And I appreciate the important steps our trustees, market participants, and the commission have already taken toward that objective, but we all know there’s more work to do.

As several witnesses will testify today, there are lessons to be learned, not just from MF Global’s failure, but also that of Peregrine Financial Group.”

Bloomberg writer Matthew Leising reported yesterday that, “A proposed U.S. rule meant to protect futures customers’ money in a collapse like MF Global Holdings Ltd. could ‘fundamentally change’ how the market functions, according to Terrence Duffy, executive chairman of CME Group (CME) Inc.

“The Commodity Futures Trading Commission proposal that futures brokerages set aside enough of their own money to cover customers’ collateral deficits throughout the day may end up driving clients from the market and companies out of business, the Futures Industry Association and two Chicago firms, Rosenthal Collins Group LLC and RJ O’Brien & Associates LLC, told the agency earlier this year.”

The Bloomberg article added that, “The proposal is part of a series of regulatory changes designed to increase confidence in the futures industry after it suffered two of its largest failures in the last two years. MF Global collapsed in 2011 and reported a shortfall of $1.6 billion in customer funds. Russell Wasendorf Sr., founder and CEO of futures brokerage Peregrine Financial Group Inc., was sentenced in January to 50 years in prison after being convicted of stealing more than $215 million from his customers.

“While CME Group, owner of the world’s largest futures market, supports improving customer protections, ‘if a proposed ‘protective’ measure is so expensive or its impact on market structure is so severe that customers cannot effectively use futures markets to mitigate risk or discover prices, the reason to implement that measure needs to be re-examined,’ Duffy said in prepared testimony today for a Senate Committee on Agriculture, Nutrition and Forestry hearing on reauthorizing the CFTC.”

Keith Good

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