FarmPolicy

July 22, 2014

Farm Bill; Ag Economy; RFS; and, Smithfield

Farm Bill- Variables Pressure Legislative Agenda

Michael D. Shear and Jonathan Weisman reported in Thursday’s New York Times that, “The intensifying debate over military action in Syria is threatening to consume the limited amount of time that Congress had allocated this month for dealing with a budget clash and the rest of President Obama’s domestic agenda.

“Lawmakers are scheduled to return to reconvene Congress on Monday after their annual summer break. With a budget and debt limit clash looming in October, the legislative window had already narrowed for any action on immigration, energy efficiency, a new Federal Reserve chairman and an examination of surveillance laws.

“Now, with Mr. Obama’s surprise decision to request Congressional authorization for a Syria strike, the political casualties are mounting quickly.”

The Times article noted that, “The problem is especially striking in the House, which will barely be in session this month.”

Carrie Budoff Brown and Jake Sherman reported earlier this week at Politico that, “President Barack Obama faced a heavy lift in Congress this fall when his agenda included only budget issues and immigration reform.

Now with Syria in the mix, the president appears ready to spend a lot of the political capital that he would have kept in reserve for his domestic priorities.”

The reporters added that, “No matter how it plays out, the sudden emergence of a fight over Syria presents both political and logistical challenges for Congress and the White House.”

 

Farm Bill- Lawmaker Perspectives

Jill Schramm reported yesterday at the Minot Daily News (N.D.) Online that, “Passage of a farm bill is his priority, said [Sen. John Hoeven (R., N.D.)], who will serve on the conference committee looking to find a House and Senate consensus on legislation.”

The article noted that, “[Rep. Kevin Cramer (R., N.D.) said passage of a nutrition program and referral to conference committee should occur next week. A final bill could be enacted ‘if not by the end of September, certainly early October,’ he said.

“‘That, however, is starting to look like the easy lift these days,’ Cramer said, referring to tougher issues that include the budget.”

Dave Russell reported yesterday at Brownfield that, “During an Agriculture Roundtable discussion at Mike Farm Enterprises near Dayton on Wednesday, September 4, U.S. Senator Rob Portman said they only way he would vote for the Farm Bill is if there are reforms to the Food Stamp program.

“‘Now I believe in the Conference between the House and the Senate they are going to address those issues,’ Portman said. ‘So when it comes back out of the Conference between the House and Senate I think it will be in there and I’m gonna support it.’

The Senator said he likes the Senate version of the Commodity Title and he supports a strong safety net in the form of crop insurance.”

A news update this week from Rep. Mike Rogers (R., Ala.) noted that, “[Rogers] hosted a Third Congressional District Agriculture Advisory Committee meeting [Wednesday] with local farmers and leaders in the agriculture industry from across East Alabama…[R]ogers discussed H.R. 2642, the Federal Agriculture Reform and Risk Management Act of 2013 (the FARM bill), which passed the House of Representatives in July with Rogers’ support. He said the bill offers certainty to our farmers and helps ensure America’s food will be grown in America.

Rogers also discussed the importance to reform the out-of-control spending in the Food Stamp program.  He talked about the issues the House of Representatives and Agriculture committee will deal with for the September 30th deadline.”

Doug Finke reported yesterday at The State Journal-Register (Springfield, Il.) Online that, “U.S. Rep. Rodney Davis said Thursday he thinks Congress will pass a farm bill by the end of September dealing with agriculture programs such as crop insurance.

“Whether a bill passes that also deals with the food stamp program is another question.”

Mr. Finke indicated that, “Speaking to The State Journal-Register editorial board, the Taylorville Republican said his preference is for Congress to pass a bill that deals with both agriculture programs and nutritional programs that help low-income households pay for food. He said that is the only way to guarantee that ‘common-sense reforms’ will be made to the Supplemental Nutrition Assistance Program, known as SNAP.

“‘My preference would be to marry them back up again,’ Davis said. ‘If we don’t, we get no common-sense reforms. There’s no incentive for those on the other side who don’t want to see any cuts. There’s no hammer.’”

 

Farm Bill- Nutrition, Sugar, Crop Insurance, and Other Issues

Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “Rep. Tim Huelskamp (R-Kan.) on Wednesday welcomed a decision by his home state to force 20,000 unemployed residents to work in order to stay eligible to receive food stamps.

“‘Adults who aren’t disabled and have no dependents should not get food stamps unless they’re working, looking for work, being trained for work, or performing volunteer work,’ Huelskamp said.”

And a news release this week from the Vermont Governor’s Office indicated that, “As the school year gets underway, Gov. Peter Shumlin and Education Secretary Armando Vilaseca today visited Barre Town Elementary School to herald a new law making Vermont the first state in the nation to provide school meals –breakfast and lunch — at no charge for all students qualifying for the federal reduced-price meals program…[P]reviously, children whose families earned over 130% percent of the federal poverty level (roughly $30,620 for a family of four) were ineligible for free schools meals. The new law means that 37,000 children are now able to have breakfast and lunch at no charge during the school day.”

In other news, Gregory Meyer reported today at The Financial Times Online that, “The US government has taken ownership of a mountain of sugar, due to a glut of the commodity in the US and Mexico, after domestic processors defaulted on federal loans for the first time in nine years.

Processors handed over 85,000 short tons of sugar, worth about $35m, to the government in lieu of repaying the loans in cash, the US Department of Agriculture said on Thursday. It gave warning of ‘substantial risk’ of additional defaults at the end of September, when more than $300m in loans mature.”

The FT article noted that, “The forfeitures are a direct impact of the pioneering 1994 North American Free Trade Agreement between Canada, Mexico and the US. Since the pact took effect for sugar in 2008, Mexican exports across its northern border have surged.

“The flood of Mexican sugar has strained the US government’s longstanding efforts to keep domestic sugar prices higher than world sugar prices.”

Alexandra Wexler reported in today’s Wall Street Journal that, “U.S. sugar futures are down 23% from a year ago, pressured by near-record domestic production and record imports from Mexico. Falling sugar prices have posed the greatest challenge in over a decade to the government’s sugar program, which guarantees domestic processors a minimum price through loans and import restrictions.

“The final cost of the government’s sugar program could rise. Traders and analysts estimate another 200,000 tons to 400,000 tons of sugar must be removed from the market to prevent defaults on $307 million in loans due at the end of September.”

Bloomberg writer Isis Almeida reported yesterday that, “The global sugar surpluses for this year and the next are narrowing as rising population means accelerating demand in developing nations from China to Indonesia, the world’s largest raw sugar importer.”

Also, Bill Wheelhouse reported recently at Harvest Public Media Online that, “Farmer Doug Wilson has been buying crop insurance since 1980.

“‘You carry home insurance, hoping your house doesn’t burn down. We carry crop insurance, hoping our crops don’t burn down,’ Wilson said on a sweltering day in mid-August as he walked among the healthy 8-foot corn stalks in one his fields in central Illinois. ‘But last year, they burned down — kind of literally.’”

Mr. Wheelhouse noted that, “Wilson and other crop farmers in Livingston County, Illinois, took a direct hit from last year’s record drought. But although it was his worst harvest ever, Wilson did not suffer a long-lasting financial impact. Or much of a short-term impact, for that matter.

“That’s largely because here in Livingston County, government-subsidized crop insurance paid big. In fact, the county led the nation with $154 million in crop insurance indemnities. (Overall, more than $17 billion was paid to U.S. farmers.) That payout far exceeds the $124 million that went to county No. 2 — Hutchison County in South Dakota.”

The update added that, “‘We had individuals, without the crop insurance, they probably would have had a third of a normal year’s gross income last year, relative to them have a relatively normal year because of insurance,’ said Gary Bressner, a banker in the county seat of Pontiac. ‘We’re going to be better off for quite some time because of last year’s safety net.’”

Meanwhile, The Denver Post editorial board recently noted: “And as The Denver Post’s Allison Sherry reported, milk and food prices would increase if a new farm bill is not approved. That’s because the nation would revert to a 1949 bill that was written for a vastly different time.

“Ironically, there is not much disagreement on the agriculture portion of the farm bill. Moreover, it includes important reforms, such as ending anachronistic direct payments to farmers regardless of crop production.

Rather than tearing apart a coalition that has served the nation well, lawmakers should find a way to do what has become increasingly rare: Give a little ground and accept something that is perhaps not perfect in order to achieve a greater good.”

And Leighton Woodhouse penned a column yesterday at The Hill’s Congress Blog regarding the “King Amendment” to the Farm Bill: “Steve King’s Farm Bill amendment hurts animals — and California farmers.”

An update yesterday from the Congressional Budget Office noted that, “S. 376 would amend the National Integrated Drought Information System Act of 2006. The bill would authorize the appropriation of $14.5 million annually over the 2014-2018 period for the National Oceanic and Atmospheric Administration (NOAA) to maintain a system to provide early warnings of droughts by collecting and disseminating information and coordinating research on drought conditions. In 2013, the agency received $12 million to carry out similar activities.

“Assuming appropriation of the authorized amounts, CBO estimates that implementing the legislation would cost $65 million over the 2014-2018 period and $8 million after 2018.”

 

Agricultural Economy

An update yesterday from the National Drought Mitigation Center stated that, “A late growing season drought intensified in Iowa and neighboring states in the week that ended Sept. 4 on the U.S. Drought Monitor map.”

“The portion of the U.S. corn production area in drought increased from 45 to 52 percent during the week ending September 3, said Brad Rippey, a meteorologist in the U.S. Department of Agriculture’s Office of the Chief Economist. Soybeans in drought also increased in the last week, from 38 to 42 percent. Corn and soybeans in drought bottomed out in July at 17 and 8 percent, respectively.”

An update yesterday from Purdue University noted that, “‘We were expecting moderate drought to be introduced into the state this week,’ said Ken Scheeringa, associate climatologist with the Indiana State Climate office, based at Purdue University. ‘Rainfall has been scarce in most counties for a few weeks now. Drought conditions in Illinois were worsening and on the move eastward and have now reached Indiana.’”

However, Bloomberg writer Tony C. Dreibus reported yesterday that, “Corn futures fell to a three-week low on speculation that rain will help boost yields in Iowa and Illinois, the largest U.S. growers. Wheat posted the longest slump in nine weeks, while soybeans gained.

“Precipitation may fall in the ‘heart of the Corn Belt’ from Nebraska through Illinois in the next five days, QT Weather said in a report.”

From a more broader, global perspective, Dow Jones writer Shane Romig reported yesterday that, “Argentina’s corn planting kicked off this week, with expectations for a bumper crop despite dry weather that is slowing progress in some areas…[A]rgentina is the world’s third-largest corn exporter behind the U.S. and Brazil and markets are expecting record or near record crops from all three this season. Global corn stocks in 2013-14 are set to rise to the highest level in more than a decade, which has sent prices plummeting recently, according to the U.S. Department of Agriculture.

“The USDA forecasts Argentina’s 2013-14 corn production at a record 27 million tons.”

Bloomberg writer Rudy Ruitenberg reported yesterday that, “Bigger harvests of corn, rice, wheat and soybeans are forecast to boost world stockpiles of the crops in the 2013-14 season, according to the Agricultural Market Information System set up by Group of 20 countries.

Corn inventories will jump the most among the four agricultural commodities tracked by AMIS as bigger crops more than make up for a gain in usage of almost 6 percent on higher feed and industrial demand, according to a report published online today.”

And a news update yesterday from the Food and Agriculture Organization of the United Nations indicated that, “The FAO Food Price Index dropped for the fourth month in a row in August reaching its lowest level since June 2012.

“The index, which measures the monthly change in the international prices of a basket of food commodities, averaged 201.8 points in August 2013, nearly 4 points (1.9 percent) below its July value and 11 points (or 5.1 percent) less than in August 2012.”

With respect to trade, Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “Top U.S. and Japanese leaders once again renewed their desire to complete an Asia-Pacific trade deal this year.

President Obama and Prime Minister Shinzo Abe met on Thursday to discuss a range of issues from trade, jobs and the situation in Syria as part of the Group of 20 meeting in St. Petersburg, Russia.”

 

RFS- Renewable Fuel Standard

University of Illinois Agricultural Economists Scott Irwin and Darrel Good indicated yesterday at the farmdoc daily blog (“Decision Time for the RFS?”) that, “There has been much discussion over the last year about problems in implementing the Renewable Fuels Standards (RFS) due to the expanding gap between the implied mandate for renewable biofuels (ethanol) and the E10 blend wall. Our previous posts on this issue can be found here, here, and here. In this post we update our previous analysis of EPA options for implementing the RFS for 2014 and 2015. The main focus is to highlight the constraints faced by the EPA as it considers potentially momentous decisions about the RFS rules for 2014 and 2015.”

The authors noted that, “We examine here the three main alternatives that the EPA can choose from for implementing the RFS in 2014 and 2015:

“1. Status Quo: No change to volume levels in the RFS statute except writing down cellulosic mandate to the (low) levels of actual cellulosic ethanol production.

“2. Writedown: Reduce the advanced and total RFS volume levels in parallel to the reduction of the cellulosic mandate.

“3. Freeze: Keep the advanced, total, and renewable RFS volumes frozen at 2013 levels.”

After detailed analysis, yesterday’s farmdoc update concluded by noting that, “The EPA appeared to send strong signals in their recent 2013 RFS rulemaking that the agency will implement some sort of writedown of RFS volumes starting in 2014. If this is true, then the status quo option is off the table and compliance in 2014 becomes feasible under either the writedown or freeze options because of the very large stock of RINs that have been built up. The real fireworks start in 2015 when the stock of RINs is presumably exhausted. If EPA’s statutory authority is limited to writing down the total RFS by the amount that the cellulosic mandate is written down, then compliance may become problematic in 2015 because the required quantities of biodiesel and/or E85 in 2015 may exceed the capacity to produce or distribute those fuels. The only way to assure that compliance is not likely to be problematic in 2015 is under the freeze option, and even this option can require nearly a billion gallons of E85 use. However, it is not clear whether the EPA has the authority to implement this option since it requires writing down the (implied) renewable mandate to 13.8 billion gallons in 2014 and 2015. It is probably no accident that discussion of this issue has appeared in the press in recent weeks. Much will depend on how the EPA interprets its authority in this regard.”

 

Smithfield

Gina Chon and Neil Munshi reported yesterday at The Financial Times Online that, “The $4.7bn acquisition of Smithfield Foods by Shuanghui International is likely to be cleared by the US Treasury department, moving it a step closer to what would be the largest ever Chinese takeover of a US company, according to people familiar with the matter.

The Committee on Foreign Investment in the United States has signalled it is leaning towards clearing the deal and the companies could learn of the body’s decision as early as Thursday, the people said. Cfius declined to comment. Smithfield, the US’s largest pig farmer, said it could not comment on the Cfius review.”

William Mauldin and David Kesmodel reported yesterday at the MoneyBeat Blog (Wall Street Journal) that, “As a part of the U.S. approval, some U.S. senators have called for the Department of Agriculture and the Food and Drug Administration, not normally part of CFIUS deliberations, to provide input to the committee to look for any risks to the U.S. food supply.

“But asked whether the government’s system for reviewing international deals needs extra input or additional steps when the target is a U.S. food and agricultural producer such as Smithfield, Agriculture Secretary Tom Vilsack told The Wall Street Journal last month that ‘from a USDA perspective, I don’t know if it would make any difference.’”

Keith Good

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