February 24, 2020

Farm Bill; Budget; Ag Economy; Smithfield; and, CFTC

Farm Bill

Secretary of Agriculture Tom Vilsack was a guest on yesterday’s AgriTalk radio program with Mike Adams where the discussion focused on the Farm Bill.

A transcript of yesterday’s AgriTalk interview is available here.

Sec. Vilsack explained that, “Everybody in the country knows we’re not going to have a $40 billion cut in SNAP, and a lot of folks believe it’s a bad idea to separate the nutrition programs from the food programs, so we’ve wasted time, and frankly, that’s something we don’t have a lot of. It’s important for the House to get serious about this and get it done.”

“The reality is there are ways to get this program [SNAP] in better shape,” Sec. Vilsack noted, adding that, “The Senate has looked at certain steps that could be taken. I think we could ask states to do a bit more in terms of finding folks who are able-bodied and getting them to work and having less reliance on SNAP without disqualifying millions and millions of people who would otherwise be qualified for the program. I mean, there’s still a lot of hurt out there in the economy in certain segments, and that’s what this program is designed to provide help and assistance for.”

With respect to extending the Farm Bill, Sec. Vilsack stated that, “Mike, here’s the problem with an extension. Number one, it doesn’t solve the problems. Number two, it doesn’t resume disaster assistance. Number three, and this is the one that’s of most concern to me, the price for an extension may be the elimination of direct payments. And instead of taking the resources from that elimination of direct payments, a portion of them, and applying it to a new safety net, it could all be applied to deficit reduction.”

And on the issue of the WTO Brazilian Cotton case, Sec. Vilsack pointed out that, “I mean, sequester basically forces every line item of our budget to be reduced, and that includes the line item that has been paying the Brazilians not to retaliate. We’ve paid nearly a half a billion dollars of taxpayer money to avoid the Brazilians from using the retaliatory steps that they are allowed to take under the WTO because Congress hasn’t done its job.

Now I would think the American taxpayers would be awfully tired of making those payments every month just simply because Congress hasn’t gotten a farm bill done. And so are the Brazilians. And then come October 1, we won’t have any money in the budget to be able to make these payments, and we don’t have the authority or the permission to make these payments, so on October 1st, it’s not about getting less of a check, it’s about not getting a check at all, and we give the Brazilians basically no additional options.

“I mean, the expectation was that by October 1st of this year we were going to have a farm bill. Everybody basically indicated that was the intent, that was the desire, that was the goal. It still hasn’t happened. And I think the Brazilians’ patience is going to run out here at some point and they’re going to say okay, fine, here’s a list of things that we’re going to retaliate against, and American agriculture will suffer as a result.”

Sec. Vilsack also indicated yesterday that, “Mike, we need a five-year farm bill for certainty about the farm policy and we need a comprehensive immigration reform bill to have certainty about workforce. The tragic reality of American agriculture today is that we’re not producing at our top and our potential simply because growers and producers are not certain they’re going to have the workforce to harvest whatever it is they plant.”

Meanwhile, Scott Bomboy penned a Constitution Daily item yesterday at explaining that, “President Obama’s decision to ask for congressional approval about actions against Syria will add another obstacle to Washington gridlock in September.

“Senate Majority Leader Harry Reid now expects a formal vote on Syria to take place during the week of September 9- the first week Congress is back from a month-long recess.”

Mr. Bomboy added that, “For now, a favorable congressional vote seems in doubt, and the political reality is that Congress will devote much public time to Syria in September after it delayed many other key domestic policy decisions before its August recess.”

Yesterday’s update noted that progress on legislative items, including the Farm Bill and immigration reform, might be stymied.

Ben Geman reported yesterday at The Hill’s Energy Blog that, “Senate debate over military strikes against Syria has shoved aside a bipartisan energy efficiency bill that was poised for floor action after long delays, but Senate aides vowed Tuesday that the bill is next in line.”

And Laura Meckler reported in today’s Wall Street Journal that, “Prospects for an immigration overhaul have dimmed over the summer congressional recess, as a newly crowded agenda damps what already was tepid interest among House leaders in taking up the issue.

“House Speaker John Boehner (R., Ohio) said in July he hoped the House would consider immigration bills before turning to negotiations on raising the nation’s debt ceiling this fall. But as the House prepares to reconvene next week, GOP leaders have no plans to bring immigration bills to the floor, aides say.”

As an interesting side note on the immigration issue, Marc Caputo reported late last week at the Miami Herald Online that, “Conservative tea party Congressman Steve Southerland [Fla.] has become the latest Republican to voice support for the concept of a pathway to citizenship for some undocumented immigrants…[S]outherland’s support isn’t full-throated or guaranteed. He said he needs to see the details of actual legislation. He wants strict, real and fast border security.

But Southerland’s comments are another sign that immigration reform still has a shot in the GOP-held U.S. House of Representatives, where a handful of Republicans have indicated new support for immigration reform during congress’ August recess.”

In other policy related developments, a news release yesterday from American Farmland Trust (AFT) stated that, “A new study from [AFT] and the University of Nebraska-Lincoln shows that the Farm and Ranch Lands Protection Program (FRPP) improves agricultural viability, encourages on-farm conservation and helps farmers gain access to land. The FRPP is a USDA Natural Resources Conservation Service program that protects farm and ranch land from development by providing matching funds to eligible entities to purchase agricultural conservation easements.”

Also yesterday, Bill Tomson and Tarini Parti reported at Politico that, “The Department of Agriculture needs to hit the brakes on its plan to allow poultry plants to speed production lines by 25 percent while replacing government inspectors with plant employees, a congressional report advises.

“The U.S. Government Accountability Office, the research arm of Congress, says in a not-yet-published report that the USDA hasn’t done enough yet to address food safety-related concerns related to its proposed expansion of its HACCP-based Inspections Models Project, or ‘HIMP.’”

And Jeremy Weber and Jason Brown indicated yesterday at Amber Waves Online (USDA- Economic Research Service) that, “The median income of U.S. farm households has consistently exceeded the median income of U.S. households in general for the last 15 years. Most farm households earn income from nonfarm sources, and in 2011, roughly 56 percent of their nonfarm income came from off-farm jobs, on average. So, what do farm operators and their spouses do in their off-farm jobs that earns them higher wages?”

The authors pointed out that, “When working off-farm, 36 percent of farm operators and their spouses reported working in management and professional occupations. This share is much higher than that for nonmetropolitan area workers in general (25 percent) and is even higher than that for metropolitan area workers (32 percent). Among farm couples where the operator, spouse, or both reported working off-farm, operators of larger farms and their spouses reported the highest shares of employment in management and professional occupations, suggesting that many of them are able to apply the knowledge and skills used in managing a sizeable farm operation to other areas of employment.”

Also yesterday, a news release from Sen. Chuck Schumer (D., N.Y.) stated that, “Today, [Schumer] toured Stocking Hall at Cornell University and urged the Federal Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) to partner with Cornell University on a national scale in a joint effort to boost research and training programs for dairy safety and quality.  Schumer explained that the USDA and FDA fund many food-related initiatives and specialized centers throughout the country, and called on the agencies to explore a partnership with Cornell on matters of dairy safety and quality.”



House Speaker John Boehner (R., Ohio) noted in a column this week at USA Today Online that, “The American people know that Washington has a spending problem, and they won’t support another increase in the debt limit without meaningful action to reduce spending and reform government.”

Speaker Boehner stated that, “There is no need for market-rattling showdowns or brinksmanship in the discussion this fall. The sooner President Obama starts to work with both parties to solve Washington’s spending problem, the better it will be for our economy.”

And Annie Lowrey reported in today’s New York Times that, “The collision of the $1 trillion in budget cuts known as sequestration and the breakdown of the normal budgeting process is creating headaches not just for Washington but also for a vast web of offices dependent on federal financing. Many have been left uncertain as to how much money — if any — they will have to spend in the year ahead.”

The article stated that, “With lawmakers returning to Washington next week, Congress is expected to pass another stopgap bill, known as a continuing resolution, financing the government for a few more months, but it is unclear whether such funding will stay at current levels or shrink. And if the Republicans who control the House and the Democrats who hold sway in the Senate fail to come to a deal before October, many parts of the federal government could shut down.

“The breakdown of the Congressional budgeting process this summer has compounded the problems. Officials said that they had received no word about budget figures from Congressional appropriators — because such numbers do not yet exist.”


Agricultural Economy

Cheri Zagurski and Emily Garnett reported yesterday at DTN (link requires subscription) that, “As expected, corn and soybean ratings fell moderately in the week ended Sept. 1, according to USDA’s weekly Crop Progress and Condition reports. The week was highlighted with very high temps and little in the way of precipitation in many areas of the Corn Belt.

Soybean condition ratings fell to 15% poor to very poor and 31% only fair, compared to 13% and 29% last week.”

The DTN update added that, “Corn condition ratings fell to 16% poor to very poor and 28% only fair, compared to 14% and 27% last week.”

University of Illinois Agricultural Economist Darrel Good indicated yesterday at the farmdoc daily blog (“Another Year of Rationing for Corn or Soybeans?”) that, “The U.S. average corn yield was below trend value for three consecutive years from 2010 through 2012. The U.S. average soybean yield was below trend value in both 2011 and 2012.

The shortfall in corn yields resulted in declining year-ending stocks and higher prices in both the 2010-11 and 2011-12 marketing years. The small crop of 2012 required rationing of consumption and resulted in record high prices for the 2012-13 marketing year. Consumption during that marketing year is currently estimated at 11.215 billion bushels, 1.312 billion bushels (10.5 percent) less than consumption in the previous year. Year ending stocks are projected at 719 million bushels, only 6.4 percent of consumption during the year.”

Yesterday’s update stated that, “While the 2013 production season got off to a rocky start due to late planting in many areas, expectations into early August were for larger crops than in 2012, increased consumption during the 2013-14 marketing year, a build-up in stocks by the end of the year, and much lower prices than during the previous year. In the August 12 WASDE report, the USDA forecast a record corn crop of 13.763 billion bushels, a 1.46 billion bushel increase in consumption, and year ending stocks of 1.837 billion bushels (14.5 percent of projected consumption). The 2013-14 marketing year average farm price was projected in a range of $4.50 to $5.30 per bushel, compared to an average near $7.00 for the previous year. For soybeans, production was forecast at 3.255 billion bushels, 240 million larger than the 2012 crop. Consumption was forecast to increase by 82 million bushels and year ending stocks were projected at 220 million bushels (6.9 percent of projected consumption). The 2013-14 marketing year average farm price was projected in a range of $10.35 to $12.35 per bushel, compared to an average of $14.40 during the previous year.

Expectations began to change in early August as hot, dry weather conditions developed across a broad swath of the production area. It appears that average precipitation across Indiana, Illinois, and Iowa in August, for example, was the lowest since records began in 1895. The average for July and August in those three states may have been the third lowest since 1895. The adverse weather conditions have resulted in lower yield and production expectations for both crops, raising concerns that consumption may need to be rationed again in 2013-14. Rationing, however, does not appear likely for corn. Assuming that the size of the market is near the USDA projection of 12.675 billion bushels and that year-ending stocks can be reduced to about six percent of consumption, the crop would have to be less than 12.7 billion bushels to require rationing. If harvested area is near the forecast of 89.1 million acres, the U.S. average yield would need to be less than 142.5 bushels to produce a crop less than 12.7 billion bushels. Some believe that the FSA estimate of prevent planted acres points to less harvested area. If harvested area is only 88 million acres, for example, the yield would need to be less than 144.3 bushels to require rationing. The USDA’s August forecast was for a yield of 154.4 bushels.”

After additional analysis, the farmdoc update noted that, “There is more concern about the size of the soybean crop and prices have risen sharply over the past month. Unlike corn prices, soybean prices are expected to unfold in more of a short-crop pattern like that of last year. Under such a pattern, prices would be expected to peak very early in the marketing year in order to discourage consumption and decline as the year progresses, particularly if the South American crop is large again in 2014.”

Bloomberg writer Phoebe Sedgman reported today that, “The biggest grain-handler in Australia’s largest wheat-producing state has increased its crop forecast after late rains eased dryness before the harvest starts next month, boosting global supply prospects…[W]orld wheat production may increase 7.6 percent to a record 705.4 million tons in 2013-2014, the U.S. Department of Agriculture estimates. Canadian output will gain 8.5 percent and Russian production will climb 43 percent, countering a 6.8 percent drop in the U.S. crop, it predicts. The London-based IGC said that global wheat output will climb 5.7 percent to 691 million tons, according to an e-mailed report.”

In trade news, Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “President Obama reiterated on Tuesday his desire to complete an Asia-Pacific trade deal this year, arguing that it will not only boost economic growth but shore up global security.

“During a conversation with Japanese Prime Minister Shinzo Abe, the president once again underscored his stance that the 12 nations involved in negotiating the Trans-Pacific Partnership (TPP) should conclude talks this fall, the White House said.”

On the issue of biofuels, Bloomberg writer Alex Pashley reported yesterday that, “Global biodiesel production will advance to 24.7 million metric tons in 2013 as producers direct more soybean oil, the leading feedstock used for it, toward the fuel amid declining vegetable oil prices, Oil World said.”

And Steve Everly reported earlier this week at The Kansas City Star Online that, “As bureaucratic terms go, ‘Renewable Identification Numbers’ sound innocent enough. But the numbers, one for each gallon of ethanol, have become a flash point for ethanol and its role in the country’s energy policy.

“That’s because the numbers — RINs for short — also act as renewable energy credits for refiners, who have to blend a certain amount of ethanol into their gasoline to meet annual federal quotas.”

The article noted that, “The ethanol mandate has risen over time and is set to keep rising, but U.S. fuel consumption hasn’t. So concerns about meeting the steadily increasing mandate have caused the market price for RINs to soar.”

Mr. Everly stated that, “The oil companies, which have never been fond of ethanol, are screaming about the higher cost and say it’s causing gas prices to rise. The American Petroleum Institute, a trade group representing the companies, is calling on Congress to repeal the biofuel mandate.

“The biofuels industry is fighting back, saying the fears of higher fuel prices are hyped by the oil companies, who don’t like the competition. There is no need to repeal the mandate, ethanol producers say, and they argue that it has been crucial in reducing the country’s dependence on foreign oil.”



Christopher Doering reported yesterday at The Des Moines Register Online that, “Starboard Value LP, an activist investor group, told Smithfield Foods shareholders Tuesday it is working with interested buyers who may be willing to pay ‘substantially’ more than Shuanghui International Holdings offered in May to acquire the pork giant.

“Smithfield announced in May it would be acquired by Shuanghui for $4.7 billion, or $34 a share, the largest takeover of a U.S. company by a Chinese firm.

“In a letter to Smithfield shareholders, Starboard said it is talking with potential buyers to come up with a single bid for the company that ‘is likely to result in a superior proposal’ to Shuanghui‘s offer.”


CFTC- Commodity Futures Trading Commission

Bloomberg writers Silla Brush and Robert Schmidt reported yesterday in a lengthy and extensive article (“How the Bank Lobby Loosened U.S. Reins on Derivatives”) that, “The fate of one of [CFTC Chairman Gary Gensler’s] central goals shows why the U.S. attempt to rein in the world’s most secretive and profitable financial products falls short of the vision he promoted four years ago. While he won regulators the power to reach deep into a $633 trillion market, Wall Street preserved its dominance in derivatives trading with one of the largest sustained lobbying attacks on a single Washington agency.

In the end, the full force of the rules that the CFTC is writing under the authority of the 2010 Dodd-Frank financial regulatory law will apply to only a small share of the global market — possibly less than 20 percent, according to data compiled by Bloomberg.

Whole segments of the business have been carved out of the rules. Derivatives based on foreign-exchange rates are largely exempt. Some firms are modifying their products to escape new oversight. And after Gensler’s compromise with Europe, American banks will be able to sell derivatives overseas without direct U.S. scrutiny.”

Keith Good

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