FarmPolicy

April 19, 2014

Farm Bill; Ag Economy; Budget; and, Immigration

Farm Bill Issues

A recent update at the Red River Farm Network (RRFN) Online indicated that, “The House needs to pass a procedural motion to combine the farm bill and the just-passed nutrition bill before farm bill conferees can be named. ‘Once that is done, the legislation will go to the United States Senate,’ said House Agriculture Committee Chairman Frank Lucas, ‘They would have the option of accepting it. I think that’s not very likely to occur. They’ll reject, I would assume. At that point, they’ll ask for a conference. We’ll agree to a conference. They’ll appoint conferees. We’ll appoint conferees. So mechanically, because we’re not in session until Wednesday, it’s probably the following week before we can get the conferees appointed.’ The House and Senate both make cuts in food stamps, but the level of those cuts is far apart. Both chambers also take a different policy approach to the commodity title.  ‘The Senate has a major focus on what many of us call shallow loss crop revenue,’ Lucas told RRFN, ‘The United States House version has passed and sent to the Senate, for their consideration, a very strong choice proposal.’ The House plan includes a shallow loss option and ‘what we call a price protection option.’ RRFN’s exclusive interview with Lucas can be heard online [MP3- 3:44].”

David Rogers reported on Friday at Politico that, “Having put down their marker on food stamp cuts, House Republican leaders are promising to end the delays and move toward a formal farm bill conference with the Senate ‘as soon as we can’ Speaker John Boehner pledged this week.

“Agriculture Committee Chairman Frank Lucas (R-Okla.) still hopes to take the first steps next week when the House could vote on a procedural motion to marry the newly-passed nutrition title with the rest of the farm bill already sent to the Senate in July.

It sounds simple enough but little is so straightforward in Congress these days. The House Rules Committee, which is virtually controlled by Boehner (R-Ohio), suddenly backed away from beginning the process this past Wednesday. When the House returns the middle of next week, the political waters may be no calmer.”

Mr. Rogers explained that, “Washington could be just days away from another government shutdown crisis Oct. 1. The leadership is sure to be distracted and reluctant to do anything to aggravate its right.

“Indeed, with all the uncertainty, what’s most remarkable are the almost polar-opposite visions of what lies ahead for the farm bill at this stage.

“On one side, the new conventional wisdom is that Thursday’s food stamp vote dashed any chance of getting to a bill this year. On the other, veteran agriculture lobbyists take heart that a conference will at last begin — after all the frustration of the past two years.”

AP writer Mary Clare Jalonick reported on Friday that, “Republicans said Thursday that one more step is needed — the House will have to hold a procedural vote to allow both the farm and food stamp bills to go to conference. It is unclear if Republicans who pushed to split the two bills will oppose that effort.

“Most of current farm law expires at the end of this month, but its effects won’t be felt until the end of the year when some dairy supports expire. Without those supports, milk prices are expected to rise.”

Meanwhile, Matt Fuller reported on Friday at Roll Call Online that, “To understand what [Leader Cantor] had at stake [with the House GOP nutrition measure], you have to go back to January, to the Republican retreat at a golf resort in Williamsburg, Va. That’s where Cantor laid out a plan to apply the principles of welfare reform to programs such as food stamps and housing.

“‘Requiring able-bodied food stamp recipients to work or be in job training has an 89% approval. Work requirements for welfare programs generally has a 93% approval,’ a slide from the retreat read.”

Noting that the House had passed the farm portion of the Farm Bill, Mr. Fuller indicated that, “But then there was the matter of the more than $700 billion nutrition title. No matter how much the bill cut, Cantor knew there would be some on the right unhappy that the cuts weren’t larger.

“He also knew any cut would be condemned by Democrats as balancing the budget on the backs of the poor.”

After additional efforts to secure GOP votes for the nutrition measure, Mr. Fuller explained that, “And that’s when they got creative — only authorizing food stamps for three years.

Different expiration dates for farm and nutrition bills would truly break the farm bill/food stamp alliance — or it would be solid negotiating leverage in conference. At the very least, it was a solid sales pitch to House Republicans.

“‘That was it, that was brilliant,’ [Rep. Marlin Stutzman (R., Ind.)] said. ‘That’s actually a big selling point for me and for a lot of other conservatives.’”

The Roll Call article stated that, “Aides theorize that the decoupling reauthorization maneuver won over more than 20 Republicans.

“And with that whip count, which was still south of 200 Republicans, Cantor decided to bring the bill to the floor.”

Ted Booker reported on Saturday at The Watertown Daily Times (N.Y.) Online that, “‘We all knew we were moving into this $40 billion number in the House,’ [Rep. Bill Owens (D., N.Y.)] said during a telephone interview Friday. ‘I think the silver lining now is we’re actually going to get to conference on the farm bill.’”

Late last week Senate Ag Committee Chairwoman Debbie Stabenow (D., Mich.) was a guest on the MSNBC Hardball television program with Chris Matthews (video replay), where she commented on the GOP SNAP measure and noted that, “This is nothing but a partisan, mean spirited effort frankly, not only to attack poor children and families, but to tank the whole Farm Bill.  Those of us who care about supporting farmers and conservation and jobs and nutrition understand what Eric Cantor is all about.  Just one more time trying to stop us from doing anything.”

Also last week, Leader Cantor appeared on the Fox News Channel program On the Record with Greta Van Susteren (video replay), where he stated that, “Nobody chooses to be on food stamps. I think most people would say they want a job. People who are in need of help should have it, and this bill does provide for anyone that is in need of that help will get it. But what it also says is the dignity of a job is what things should be about in these programs. In fact, going back to 1996, when a Republican Congress worked with President Bill Clinton, they overhauled the welfare program in this country and instituted a workfare requirement.  And that’s all this does.”

At his blog Saturday, New York Times columnist Paul Krugman provided a graph depicting SNAP payments as a percent of GDP (graph here), and noted that, “Spending as a percentage of GDP was no higher in 2007 than it had been in 1990. It then soared when we experienced the worst economic crisis since the Great Depression — which is exactly what should have happened. True, spending didn’t fall during the Bush-era economic expansion, but as I’ve already explained, that expansion didn’t trickle down to the people who use food stamps.”

Secretary of Agriculture Tom Vilsack noted recently in the Chicago Tribune that, “Research shows that the majority of SNAP recipients who can work want to be employed. A recent analysis by the Center on Budget and Policy Priorities showed that among SNAP households with at least one working-age, nondisabled adult, about half work while receiving food-assistance benefits. In addition, more than 80 percent of those who work, worked the year before or after they received assistance. Perhaps most telling is the fact that just 8 percent of SNAP recipients receive welfare.”

Sec. Vilsack also pointed out that, “By decoupling nutrition assistance from the rest of the bill, the House jeopardized important efforts that have been the trademark of this legislation for many years.”

Meanwhile, Juliet Eilperin reported in today’s Washington Post that, “While North Dakota’s oil bonanza has garnered national attention, its farming boom is transforming the state’s landscape just as dramatically. Nebraska and four other states in the Great Plains prairie pothole region — called that because of its thousands of shallow wetlands — lost 1.3 million acres of grasslands between 2006 and 2011, according to a recent study in the Proceedings of the National Academy of Sciences.”

The article noted that, “But ranchers and farmers are increasingly opting out of the federal Conservation Reserve Program (CRP), which pays landowners not to develop parts of their property for 15 years. Its level of compensation — about $40 an acre — can’t compete with the $60 or $65 an acre owners can get for renting their land for crops.”

Ms. Eilperin stated that, “In the farm bill — whose extension is set to expire Sept. 30 — the Senate is trying to include provisions that would penalize farmers who convert native prairie to cropland or wetlands, or who farm on highly erodible land without a conservation plan. Between 1985 and 1996, the farm bill had provisions under which farmers who tilled highly erodible lands without a conservation plan or drained wetlands to plant crops risked losing their federal crop insurance subsidy.

“House Agriculture Committee Chairman Frank D. Lucas (R-Okla.) opposed putting the restrictions back in during House consideration of the bill. In a statement, he said that ‘in the spirit of compromise’ he accepted a narrower provision that would impose penalties on prairie conversion in portions of five states: Iowa, Minnesota, Montana, North Dakota and South Dakota.”

In other policy developments, Thomas P. Zacharias and Keith J. Collins penned a recent article at Choices Online titled, “Ten Considerations Regarding the Role of Crop Insurance in the Agricultural Safety Net.”

In part, the article pointed out that, “Total taxpayer expenditures on the farm safety net—as measured by a deflated index of prices received for crops—have trended down since the late 1990s (Figure 1). The next major funding cut is expected to be direct payments. Congressional funding targets are measured as cuts from a ‘baseline’ of projected spending. The baseline for the safety net plays out on a couple of levels for the crop insurance program. One level is on the supply side, how much to spend on the delivery system? Recent renegotiations of the Standard Reinsurance Agreement (SRA) between USDA and the approved insurance providers (AIPs) reduced baseline funding for the delivery system. Administrative and Operating (A&O) expense payments have been reduced and capped. Potential underwriting gains for the AIPs have also been reduced. At the same time, the program coverage and complexity has generally expanded. From an industry perspective, this means ‘more bricks, less straw.’ However, high commodity prices and low loss ratios in the late 2000s led to unsupportable increases in A&O payments and raised questions as to the true level of industry expected underwriting gains.

“On the demand side, how much is the taxpayer willing to subsidize the producer to purchase crop insurance? Beginning with the 1994 Crop Insurance Reform Act, most legislation has increased subsidy levels to encourage greater participation. Critics are challenging these support levels and have proposed alternatives to roll back producer subsidies. Just as funding for AIPs has been reduced in SRA renegotiations and the 2008 Farm Bill, continuing federal budget pressures are likely to result in increasing political interest to reconsider the level and form of premium support. In summary, there is now less willingness and ability to support the safety net.”

Michael Catalini noted last week at National Journal Online that, “Keith Collins, a former chief economist at USDA who works with National Crop Insurance Services, a nonprofit that advocates for the program, pointed to the drought that hit the Southwest last year. Compensation for drought-related damage amounted to about $17 billion. If it weren’t for the crop-insurance program, advocates say, the cost of that crisis would have been passed on to consumers.

“‘If you didn’t have a subsidy, you’d have to charge for that. And so your premium rates for insurance for the kinds of risk that crop insurance covers would be very high,’ Collins said. ‘It’s not like an automobile accident that sort of occurs randomly throughout society. But once you have a drought or you have a major flood or a hurricane, you get these systemic losses.’”

Also, a brief overview of industry talking points reflects on recent press coverage regarding the crop insurance business, a link to this summary is available here.

In news regarding food safety issues, Kimberly Kindy reported on Friday at the Federal Eye Blog (Washington Post) that, “A group of food safety organizations sent a letter Friday to USDA Secretary Tom Vilsack asking that he cancel agreements with three foreign countries that are allowed to use a controversial alternative meat inspection system for products they export to the United States.”

 

Agricultural Economy

Donnelle Eller reported on the front page of Friday’s Des Moines Register that, “Iowa farmland values are beginning to show signs of softening, a new report Thursday showed, fueling concerns that the air is seeping out of the state’s rapidly rising farmland prices.

Iowa cropland values were mostly flat over the past six months, pushing just 1.2 percent higher, according to the Iowa Chapter of the Realtors Land Institute.

“Still, Iowa cropland values posted a healthy 10.6 percent average increase in the last year, driven by large gains in the first half of the year, the report showed.”

And, Ben Fox Rubin reported on Friday at The Wall Street Journal Online that, “Activist hedge fund Starboard Value LP all but abandoned its effort to block Shuanghui International Holdings Ltd.’s $4.7 billion acquisition of Smithfield Foods Inc. smoothing the way for shareholder approval of the landmark deal next week.”

Bloomberg writer Elizabeth Campbell reported on Friday that, “U.S. feedlot owners reduced the number of cattle added to herds in August by 10.9 percent from a year earlier, when drought-parched pastures forced ranchers to sell animals as feed costs surged, a government report showed.

“Placements into herds totaled 1.788 million head, down from 2.007 million in August 2012 and the lowest on records dating back to 1996, the U.S. Department of Agriculture said today in Washington” [related graph from Friday’s USDA report].

 

Budget

David Lauter and Lisa Mascaro reported on the front page of Friday’s Los Angeles Times that, “Outside the capital the prospect might seem unthinkable, but inside it seems increasingly likely, and to some inevitable: In less than two weeks, the federal government, from the Agriculture Department to the Weather Service, may shut its doors.”

Janet Hook and Siobhan Hughes reported in Saturday’s Wall Street Journal that, “The budget that currently allocates funds to the federal government expires Sept. 30. Then, by mid-October, Congress would need to raise the federal debt limit or the government will run out of ways to keep paying its bills.”

Jonathan Weisman reported in Saturday’s New York Times that, “House Republicans muscled through a stopgap bill Friday that would fund the government only if all spending for President Obama’s health care law is eliminated. Senate Democrats and President Obama quickly made it clear they had no intention of going along, putting the government on a course toward a shutdown unless one side relents.”

Lori Montgomery and Philip Rucker reported on the front page of Saturday’s Washington Post that, “The [House] funding bill now moves to the Senate, where Republicans are relying on [Ted Cruz (R., Tex.)] and [Mike Lee (R., Utah)] to continue the fight next week…[B]ut Senate Majority Leader Harry M. Reid (D-Nev.) can arrange the debate so that Cruz would be forced to filibuster the entire House bill, including the anti-Obamacare provisions. Those would come out later, just before final passage, when a filibuster was no longer possible and Reid could move to win approval of the funding solely with Democratic votes.

“‘Republicans are simply postponing for a few days the inevitable choice they must face: pass a clean bill to fund the government or force a shutdown,’ Reid said in a statement.”

The Post article noted that, “Depending on how long Cruz and his allies hold up the bill, Senate Democrats say they may be unable to send it back to the House until Sept. 29, leaving Boehner barely 24 hours to avoid a shutdown. Some House Republicans said that at that point, they would be ready to give in.”

The Post writers also explained that, “Friday’s vote was Step One in the GOP crusade to undermine the health law. Step Two comes next week, when House leaders hope to advance a separate measure that will demand a one-year delay in the law’s implementation in exchange for an agreement to avoid a first-ever default on the nation’s debts sometime next month.”

However, Holly Yeager and Aaron Blake reported in today’s Washington Post that, “Key lawmakers from both parties said Sunday that they expected Congress to avoid a government shutdown, but a path out of the standoff remained unclear. ‘We all know that the government is going to be funded. The question is whether it will be funded with Obamacare or without,’ [Sen. Mike Lee said] on NBC’s ‘Meet the Press.’”

 

Immigration

Seung Min Kim reported on Friday at Politico that, “Two House Republicans who had been trying to craft a comprehensive immigration package said Friday they were dropping out of bipartisan negotiations.

“In a joint statement, Texas Republican Reps. John Carter and Sam Johnson said that they had ‘reached a tipping point’ in the talks and ‘can no longer continue’ working on a ‘broad approach’ to a rewrite of the nation’s immigration laws.”

Also, Damien Cave reported on the front page of yesterday’s New York Times that, “The shift with Mexico’s northern neighbor is especially stark. Americans now make up more than three-quarters of Mexico’s roughly one million documented foreigners, up from around two-thirds in 2000, leading to a historic milestone: more Americans have been added to the population of Mexico over the past few years than Mexicans have been added to the population of the United States, according to government data in both nations.”

And David Nakamura reported in today’s Washington Post that, “House Republicans intensified their outreach to Latino groups last week, offering renewed pledges that the House will deal with immigration reform this year. The effort has revived hope among advocates that a bipartisan deal can be reached to address the fate of the nation’s 11 million undocumented workers and students.”

Keith Good

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