- FarmPolicy - http://farmpolicy.com -

Farm Bill; Ag Economy; Budget; Immigration; and, Regulation

Farm Bill Issues

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Political pundits were quick to report last week that passage of the House nutrition measure brings the Congress a step closer to a new farm bill –– an assessment that at least a few others dispute. All agree that it will set up a ‘fierce battle between the House and Senate over social policy.’ But, how that may play out remains to be seen.

“At least for now, last week’s vote does seem to mean the fight is focusing ever more tightly on the supplemental food programs rather than farm policy and safety nets –– although a number of those controversies remain.

“The reason is that many House conservatives, prodded by the Heritage Foundation and a few other conservative groups, say they regard this farm bill fight as their main chance to implement another round of welfare reform, an opportunity they welcome in spite of the fact that it forces them to defend significant cuts in anti-poverty programs while pushing for new, increasingly expensive safety nets for an already prosperous sector.”

The DTN update pointed out that, “However, since both sides in the conflict say they are happy in their positions, it is difficult if not impossible to see a path to compromise. ‘All this bill is going to do is make our job harder, if not impossible, to pass a new farm bill,’ complained House Ag Committee’s ranking Democrat, Collin Peterson of Minnesota.

In fact, the House bill would do more: in its current form, it would effectively sever nutrition spending from future farm bills. Its new 2016 expiration date for nutrition programs would mean that they would need reauthorization on a separate cycle, two years ahead of farm programs.”

After additional analysis, yesterday’s DTN item indicated that, “So, this is a fight like no other in farm bill memory. In addition to the nutrition funding fight, there are several ag and trade policy issues that appear to be attracting new questions and controversies. And, the conference most likely will be held in the midst of the last ditch fight over the budget and the debt ceiling and health care, any one of which could spin off deals that affect farm issues.

“Right now, it seems that the vote last Thursday did bring Congress one step closer to something –– yet another fight that is almost too bitter to allow description, and which could turn in unexpected directions as it proceeds.”

Brad Blumer reported yesterday at the Wonk Blog (Washington Post) that, “There’s a fairly basic question at the core of the current food-stamp debate in Congress. Why has the program grown so rapidly over the past few years — to the point where 47 million Americans, one-sixth of the country, now receive food stamps?

“Defenders of the program typically argue that enrollment rose because we had a horrific recession and unemployment hit the stratosphere. The Supplemental Nutrition Assistance Program (SNAP) is supposed to kick in to help families hit by economic distress. The program has kept 4.7 million people out of poverty. There’s no problem here. And so on.”

Mr. Plumer noted that, “Some conservatives, meanwhile, have emphasized that a big chunk of the increase is due to policy changes by Washington. In 2008, Congress allowed states to relax their standards for who could join the program. (Jobless adults could stay in the program if they lived in high-unemployment areas, for instance.) Then, as part of the 2009 stimulus bill, Congress temporarily boosted food-stamp benefits — the average benefit was $133 per month last year, although that increase expires this November.

“So which explanation is right? Most evidence suggests that food-stamp enrollment has mainly risen due to the recession — although policy changes have played a smaller role.”

A separate update from The Washington Post In Play Online video series recently noted that, “In Play posed the same questions about the food stamp program to two lawmakers, Jim McGovern (D-Mass.) and Steve Southerland (R-Fla.), with very different views. Their answers may surprise you. (The Washington Post)”

A replay of this brief discussion with the two lawmakers (2:00) can be viewed here.

Meanwhile, Jim Weill, president of the Food Research and Action Center and Robert Rector, senior research fellow at the Heritage Foundation were guests on yesterday’s Diane Rehm Show (WAMU- NPR) were the discussion focused on “The Politics of Food Stamps.”

And Niraj Chokshi reported in today’s Washington Post that, “The bill the House passed late last week to slash $39 billion in food aid was all about reducing the scope of the federal government, but it could do the opposite for states.

“The Republican bill eliminates a shortcut states have long used to determine eligibility for food aid provided under the Supplemental Nutrition Assistance Program. Rather than check whether each a household qualifies for SNAP benefits directly, states have for years been making that determination based on whether they already receive other low-income assistance.”

The article noted that, “‘Categorical eligibility was seen as advancing the goals of simplifying administration, easing entry to the program for eligible households, emphasizing coordination among low-income assistance programs, and reducing the potential for errors in establishing eligibility for benefits,’ Congress’s research arm, the Congressional Research Service, wrote in a report about the practice last week. Forty states—red ones and blue ones—have embraced the broadest form of categorical eligibility, it found…‘This limitation in categorical eligibility would increase state administrative costs in SNAP and significantly curtail state flexibility,’ the nonpartisan National Conference of State Legislatures wrote in a May letter responding to a similar provision.

“Earlier this month, the American Public Human Services Association, a group whose membership includes SNAP administrators, echoed the sentiment. States have become more efficient in determining eligibility under the current SNAP rules, APHSA wrote in a letter to House and Senate leadership.”

The Post article added that, “While it may not be likely to make its way through the Senate, the House bill, if passed, would succeed in both limiting the federal government while also likely forcing an expansion in state bureaucracy.”

In other Farm Bill news, an update yesterday from the International Dairy Foods Association indicated that, “Food manufacturer, restaurant and retailer groups recently voiced their strong support for the dairy provisions as included in the House-passed Farm Bill. In a letter to Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Thad Cochran (R-MS), the groups urged the senators to reject “any new government dairy ‘supply management’ program.” A new program to impose quotas on milk supplies, called the Dairy Market Stabilization Program, was included in the Farm Bill as passed by the Senate in June.”

And The New York Times editorial board indicated today that, “Senator Charles Schumer of New York last week offered a long list of horror stories of contaminated food in China — ranging from eggs with toxic levels of melamine to rat labeled as lamb in Shanghai. And then there is the threat of another bird-flu outbreak, one of the reasons the United States still does not import chickens grown and slaughtered in China.

“Mr. Schumer gave these examples in raising questions about the recent decision by the Department of Agriculture to allow chicken processed in China to be sold in America.”

The opinion item added that, “The department announced late last month that it had certified four production facilities in China as equivalent to similar plants in the United States. As a result, chicken growers in the United States, Canada and Chile could soon send their poultry to these Chinese facilities where the meat could be processed and then shipped back to the United States primarily for use in products like potpies or noodle soups. In most cases, consumers will not know where the chicken was processed; labels could be necessary if the frozen chicken parts are sold directly to consumers.

“Mr. Schumer and Representative Rosa DeLauro are right to question this change. At the very least, government officials should make more frequent unannounced inspections of the Chinese facilities. In addition, consumers should have the right to know more about where their food comes from. If the chicken from Chinese processing plants is as safe as the Agriculture Department says, proper labeling shouldn’t be a problem.”

 

Agricultural Economy

Cheri Zagurski and Anthony Greder reported yesterday at DTN (link requires subscription) that, “Three percent of the nation’s soybean crop was harvested in the week ended Sept. 22, according to USDA’s latest Crop Progress report.  That compares to a five-year average of 9%.”

The DTN article noted that, “Corn is now 7% harvested, compared to 4% last week and a 16% five-year average. Forty percent of the corn is mature, compared to 22% last week an a 55% five-year average.”

University of Illinois Agricultural Economist Darrel Good indicated yesterday at the farmdoc daily blog (“Potential Changes in Corn and Soybean Acreage Estimates”) that, “As the Midwest corn and soybean harvest accelerates, most of the production attention is focused on yield reports. Still, last week’s report of planted acreage from the USDA’s Farm Service Agency (FSA) leaves some uncertainty about the magnitude of planted and harvested acreage of those crops.

“For corn, acreage that had been reported to FSA as planted totaled 91.428 million, 2.657 million more than reported the previous month. Based on survey data, the USDA’s National Agricultural Statistics Service (NASS) has estimated planted acreage at 97.379 million acres. Acreage reported to FSA is expected to be less than the NASS estimate since not all producers are enrolled in programs that require reporting of planted acreage to the FSA. Planted acreage reported to FSA as of the September report accounted for 93.9 percent of the total estimated by NASS and the difference was 5.951 million acres.  Over the previous six years, the final total corn acreage reported to FSA averaged 96.9 percent of the final NASS estimate, in a range of 96.4 to 97.5 percent. The difference between the FSA and NASS acreage estimates averaged 2.785 million acres, in a range of 2.381 in 2007 to 3.295 million in 2011.

“Recent history suggests that the difference between the corn acreage reported to FSA and acreage estimated by NASS this year will be smaller when final estimates are available.”

After more detailed analysis, that included a look at soybean acre issues, yesterday’s farmdoc update noted that, “Depending on average yield, the potential change in the estimate of harvested acreage of corn is not likely to be large enough to alter prospects of surplus supplies, but could be large enough to stabilize corn prices. Any change in the estimate of harvested acreage of soybeans is not expected to be large, but could confirm prospects for another year of very tight stocks that would support prices at or above the current level.”

Meanwhile, Reuters writer David Randall reported yesterday that, “Farmer Mac – the farm loan equivalent of its cousins Freddie Mac and Fannie Mae – owes its existence to the last time a U.S. farm bubble burst. Now, the company is trying to convince investors it would survive another one.

“The market isn’t giving the company a vote of confidence yet. Just five years ago, Farmer Mac had to be rescued by its creditors after its large positions in Lehman Brothers and Fannie Mae went sour. Now, the revived company must prove to skeptical investors that it can withstand a sharp decline in the price of farmland that analysts expect to come in the next year. That open question – and the inability of Congress to pass an updated five-year farm bill, which provides crop insurance and other subsidies that farmers rely on – has been weighing on the company’s stock price.”

The article pointed out that, “The Kansas City Fed estimates that the debt to asset ratio in the farm sector is currently around 10 percent, well below the 25 percent mark associated with the collapse of the 1980s. By comparison, debt to asset ratios topped 25 percent in the residential mortgage sector leading up to the 2008 financial crisis.”

With respect to biofuels, Gregory Meyer reported yesterday at The Financial Times Online that, “The US ethanol industry is reaching for a stronger brew in a last, best hope to avert a looming quandary in federal biofuels policy.

“‘E85’ – fuel made with up to 85 per cent ethanol and a relative tincture of petroleum-based gasoline – is finally becoming competitive with conventional petrol in some parts of the US, analysts say.

“Better sales of the little-used fuel could reignite stagnant production at refineries owned by companies including Archer Daniels Midland, Koch Industries, Louis Dreyfus Commodities and Poet.”

The FT article indicated that, “But higher volumes would depend in part on the soaring price of government-authorised biofuel credits that some oil refiners complain will cost them hundreds of millions of dollars.

E85’s prospects are brightening as the Obama administration prepares its biofuels blending requirements for 2014. For the first time, the Environmental Protection Agency has said it will reduce targets from statutory levels as consumption falls short.

“‘Higher sales of E85 is one of the easy ways you can break the ‘blend wall,’’ says Tom Buis of Growth Energy, an ethanol industry group.”

Yesterday’s article also pointed out that, “However, E85 faces multiple hurdles. Only about 3,000 service stations sell it and only ‘flexible fuel vehicles,’ numbering between 8m-14m depending on the data source, are designed to burn it. E85 also contains about 25 per cent less energy per gallon than regular petrol, forcing drivers to fill up more often.

But the US Energy Information Administration wrote last week that in the Midwest, the heart of the Corn Belt, recent declines have made E85 prices almost equal to regular gasoline on an energy-adjusted basis.”

Budget

Ed O’Keefe reported in today’s Washington Post that, “The Senate’s top two Republicans announced Monday that they will not support a conservative revolt in the GOP ranks that seeks to dismantle President Obama’s 2010 health-care law.

“Minority Leader Mitch McConnell (Ky.) and his deputy, John Cornyn (Tex.), said they will not join a band of senators attempting a week-long assault on the legislation. The announcement was a setback for Sens. Ted Cruz (R-Tex.) and Mike Lee (R-Utah), who plan to use whatever limited Senate procedural leverage is available to them to thwart funding for the Affordable Care Act, commonly referred to as Obamacare.

“Majority Leader Harry M. Reid (D-Nev.) vowed Monday that he will strip any defunding language from the House bill, accusing Republican ‘fanatics’ of trying ‘to take the federal government and our economy hostage to their demands.’”

Mr. O’Keefe noted that, “The full Senate will return just before noon Tuesday and the House is scheduled to reconvene Wednesday. Senate debate on the spending measure, formally known as a continuing resolution, is expected to last through the weekend, with final passage coming as late as Sunday evening. The bill would then head to the House, with about 30 hours left until government funding expires Oct. 1.”

 

Immigration

Seung Min Kim and Jonathan Allen reported yesterday at Politico that, “House Minority Leader Nancy Pelosi is spearheading a plan to advance comprehensive immigration reform in the chamber.

The California Democrat’s strategy includes introducing legislation combining the comprehensive bill that passed the Senate Judiciary Committee in May with a bipartisan border-security bill from the House Homeland Security Committee, according to sources familiar with the plans.

“The strategy was detailed at a meeting hosted by Pelosi last week with top House Democrats and several immigration-rights advocates, the sources said. The plan would be to publicly release the bill timed to the Oct. 5 National Day of Action that is meant to mobilize grass-roots support and pressure the House Republican leadership to take up immigration reform that includes a pathway to citizenship.”

 

Regulation

DTN Ag Policy Editor Chris Clayton reported yesterday that, “EPA must provide a more detailed defense for its role in letting states take the lead on water-quality controls in the Mississippi River watershed.

Depending on the outcome, farmers across the Midwest and Great Plains could be staring at the same kind of water-quality pressures that farmers face in the Chesapeake Bay.

“A federal judge in Louisiana has ruled that EPA must respond to a five-year-old request from environmental groups to consider tougher pollution controls on chemicals just as nitrogen and phosphorus in the Mississippi River basin.”

Yesterday’s article pointed out that, “In the federal court for the Eastern District of Louisiana, Judge Jay Zainey ruled EPA has to explain to groups such as the Gulf Restoration Network why EPA has refused to exert its authority under the Clean Water Act to require tougher actions by states.”

Mr. Clayton noted that, “It’s the second time in as many weeks a federal judge has handed down a ruling on EPA regulation in a major watershed. On Sept. 13, a federal judge in Pennsylvania ruled that EPA has authority to supervise how seven states carry out their management plans to meet the water-quality standards.

Much like the Chesapeake Bay court case out of Pennsylvania, the Mississippi River case in Louisiana pits farm organizations against environmental groups. In the Mississippi River case, however, farmers backed EPA’s claim that the agency should leave water-quality regulation to the states.”

Keith Good