February 25, 2020

Farm Bill; Ag Economy; and, Budget Issues

Farm Bill Issues

An update at the Red River Farm Network Online (viewed earlier this morning), reported that, “The farm bill conference committee has finally been named, but House Agriculture Committee ranking member Collin Peterson says there are still a lot of problems. One big one everybody knows about is food stamps, but Peterson says there’s one problem we don’t know about. ‘What people don’t know about is this kind of knock-down, drag out war between the Speaker and I over the dairy situation. What he did was he expanded the committee to a much bigger level than has ever been done before so he could get enough votes to outvote me on the dairy stuff.’ Peterson informed House Minority Leader Nancy Pelosi that this would impact her dairy farmers in California, so she removed Georgia Democrat David Scott from the conference committee, thus removing one no vote on dairy. Another big problem, according to Peterson, is what to replace direct payments with. ‘(Ag Committee Chairman Frank) Lucas and I want to go to planted acres and target prices to put a floor underneath things and actually help producers more than land owners. The Senate is going a different direction. They want to basically help landowners and make payments when people are actually making money, which we think is a mistake. So there are some other issues that are a big hang up.’ Peterson says there is no indication when the farm bill conference committee will get together.”

The Red River Farm Network’s Agriculture Today radio program included a report yesterday by Mike Hergert that featured remarks on the Farm Bill process from Ranking Member Peterson- related audio here (MP3- 2:00).

Meanwhile, Senator John Hoeven (R., N.D.) continued to point to the substantial budget savings that could be achieved in a Farm Bill agreement, savings that could potentially be utilized in a larger agreement on budgetary issues.

On the Senate floor yesterday Sen. Hoeven indicated that, “Now is the time to implement those savings and reforms to those mandatory spending programs.  I’ll give you an example of one that I have been hard at work on for the last two years.  That’s the Farm Bill.”

Sen. Hoeven added that, “The Farm Bill is a mandatory spending program.  I’m a member of the Ag Committee.  We have worked hard on changes, on improvements, on actually strengthening the Farm Bill by strengthening crop insurance under the Farm Bill, which is what our farmers and ranchers want.

“And as we work through that, at the same time we have identified on the order of $25 billion to $30 billion in savings that we can generate by reforming the farm program.

“I’m a member of the Conference Committee on the Senate side.  The House has now appointed their conferees.  We’re ready to go.  We’re ready to resolve the differences between the House and the Senate versions of the Farm Bill, and we can have a stronger farm program and save billions of dollars.

Those are the kind of mandatory spending program reforms that we need to put in place as part of the debt ceiling agreement…”

A video replay of a portion of Sen. Hoeven’s floor presentation yesterday can be viewed here, at Online.

Also yesterday, Reuters writer Charles Abbott reported that, “Farm subsidy reformers praised a vote by the U.S. House of Representatives to make the wealthiest growers pay more for federally subsidized crop insurance, the first eligibility limit on a program that costs $9 billion a year.

“The non binding House vote late on Friday will be a factor in upcoming negotiations with the Senate on a final version of the new farm bill, which is a year overdue. Senators put a similar restriction on farmers with more than $750,000 adjusted gross income (AGI) a year in their bill.”

Mr. Abbott noted that, “Farm bill negotiations were expected to begin soon, although no date was set;” and added that, “Crop insurance reform was the only farm bill ‘instruction’ approved by the House during a series of votes that cleared the way to negotiations with the Senate. The ‘sense of the House’ resolution, approved on a voice vote, is an indication of lawmaker sentiment but conferees are not bound by it.”

Recall that a transcript of the House debate on this instruction measure from the Congressional Record can be viewed here (six pages).

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “One strategy now being suggested is that the ‘savings’ in the farm bill could go a ways toward softening some of the pain of the expected stand down in the budget-debt ceiling standoff. The problem with that, of course, is that it is uncertain what will actually be in the farm bill, so the savings-as-savior idea seems premature, at best.

“With regard to the conference, the most frequently discussed question is how tough the House leadership will be in its push for large cuts for supplemental nutrition. One possible tea-leaf regarding leadership posture is the inclusion of nutrition program hard-liner Steve Southerland, R-Fla., as the leadership’s representative — a sign it intends to hold tight to its deep cuts.

“House Agriculture Committee Chairman Frank Lucas, R-Okla., tried to downplay Southerland’s role, but House Ag’s ranking Democrat, Collin Peterson of Minnesota, was eager to tell the press that the nutrition fight might cripple the negotiations.”

The DTN item stated that, “In the meantime, internal fights among ag leaders and their followers appear to be doing a pretty good job of reducing the bill’s chances on their own. The American Soybean Association is expressing deep concerns that the House conferees won’t include Bob Gibbs, R-Ohio, who ASA counts on to fight against price guarantees in the House-passed bill. ASA is concerned that target prices have the potential to skew farmer planting decisions in the future — as they did in the past, a prospect soy producers see as threatening.

“And then, there is the intensifying fight over expanded, subsidized crop insurance. House Budget Chairman Paul Ryan, R-Wis., now has included a non-binding resolution backing a reduction in crop insurance premium subsidies for high-income farmers, a provision the Senate added but that Lucas kept off the House floor.”

Yesterday’s DTN update pointed out that, “Finally, if the farm side of the farm, conservation and nutrition wars weren’t murky enough, a key deal between farm groups, conservationists and the crop insurance industry seems to have unraveled this week as the American Farm Bureau Federation rescinded its support.  This is seen as yet another hurdle for the conference since Senate Agriculture Chairwoman, Debbie Stabenow, D-Mich., seems determined to keep the provision and expects strong support from environmentalists and small-farm advocates to do so…[T]hen, there’s the matter of the gap between the Senate’s $4 billion proposed cut for supplemental nutrition and the House bill’s $40 billion — and, signs that both sides are firmly dug in on that.

“And, finally, there is the ‘rest’ of the bill, including, especially, the dairy supply management proposal and the role and level of the proposed target price programs.”

In other news, AP writer Dirk Lammers reported yesterday that, “Two 20-foot-deep disposal pits opened in western South Dakota on Monday to help ranchers dispose of tens of thousands of livestock carcasses piling up since an early October blizzard decimated herds.

“Up to 4 feet of snow fell in the Black Hills area during the storm, killing at least 10,000 to 20,000 head of livestock, state officials say. The South Dakota Stockgrowers Association estimates this part of the state lost at least 5 percent of its cattle, which is mostly raised for beef.”

Rep. Kristi Noem (R., S.D.) recently met with ranchers in her state that suffered losses during this month’s storm.

And Julian Hattem reported yesterday at The Hill’s RegWatch Blog that, “A California retailer is recalling thousands of rotisserie chicken products that it warns might be contaminated with a strain of salmonella.

“The Department of Agriculture (USDA) announced late Sunday that a Costco store in South San Francisco, Calif., is recalling nearly 40,000 pounds of chicken to prevent the outbreak from spreading.”


Agricultural Economy

An update yesterday at the farmdoc daily blog by University of Illinois Agricultural Economists Darrel Good and Scott Irwin (“Corn Prices Pressured by Both Supply and Demand Factors”) noted in part that, “Corn prices continue the long retreat from the peak of September 2012, declining to the lowest level since late August 2010. The most recent price weakness reflects both supply and demand considerations.

“On the supply side, ongoing reports of yields that exceed expectations in many areas suggest that the next USDA forecast of the U.S. average yield will be at least equal and perhaps exceed the September forecast of 155.3 bushels. There is still some uncertainty about the magnitude of harvested acreage that will not be cleared up, at least partially, until the USDA releases the next Crop Production report. Even so, it appears that production will be large enough to result in a sizable build-up in stocks by the end of the current marketing year.

“On the demand side, the partial shutdown of federal government activities leaves a void in the usual flow of weekly data including export sales, export inspections, livestock slaughter, and broiler chick placements. The U.S. Energy Information Administration has also discontinued weekly estimates of ethanol production, imports, and stocks. The primary news on the demand side has been the leaked report of an apparent EPA proposal to reduce the magnitude of biofuels mandates, including renewable (ethanol) mandates, under the RFS beginning in calendar year 2014. The RFS currently calls for a total of 18.15 billion gallons of renewable fuels in 2014, including 3.75 billion gallons of advanced biofuels. The remaining 14.4 billion gallons can be satisfied with either advanced or renewable biofuels. The rumored proposal for 2014 is for a total of 15.21 billion gallons of biofuels, including only 2.21 billion gallons of advanced biofuels and a maximum of 13 billion gallons of renewable biofuels. The possibility of dropping the overall mandate by almost three billion gallons was not widely anticipated. The reduction in the non-advanced component of the mandate from 14.4 to13 billion gallons has been interpreted as a negative development for corn demand in 2014 and beyond.”

Gregory Meyer reported yesterday at The Financial Times Online that, “A precipitous decline in the market for US ethanol credits accelerated after a leaked proposal showed Washington examining deep cuts to its biofuels mandate.

“Renewable Identification Numbers, or Rins, traded at about 32 cents per gallon early on Monday, down 25 per cent from last week.”

The FT article explained that, “The decline gathered pace after the Financial Times and other news organisations reported the White House may for the first time cut the amount of corn ethanol that must be blended into petrol.

“In leaked documents, the US Environmental Protection Agency outlined a plan to require only 13bn gallons of corn ethanol use next year, well below the 14.4bn dictated by law. This would let oil refiners purchase fewer Rins.

The EPA said in response that it had made ‘no final decision’ on the proposed mandate.”

A news release yesterday from the International Food Policy Research Institute (IFPRI) stated that, “The developing world is becoming more vulnerable to a variety of shocks and stressors, from extreme weather events, climate change and environmental degradation to population pressures, macroeconomic crises, conflict, and poor governance. The traditional approach to dealing with shocks is temporary infusions of aid, with separate development efforts focused on mitigating stresses and making people less vulnerable in the longer run. Yet the persistent vulnerability of regions—such as the Sahel and the Horn of Africa—suggests the traditional separation of relief and development efforts is not working.

“In recognition of this situation, the 2013 Global Hunger Index (GHI), released for the eighth year by the [IFPRI], Welthungerhilfe, and Concern Worldwide, calls for greater resilience-building efforts to boost food and nutrition security.”

In other news, Mari Iwata reported in today’s Wall Street Journal that, “In Japan’s high-end food shops, an apple can cost $15 and a bunch of grapes $100. Now, Prime Minister Shinzo Abe wants to turn the nation’s reputation for expensive but high-quality food products into a new export opportunity.

“Just as France exports fine wine, backers of Mr. Abe’s plan hope Japan will become world famous for its painstakingly cultivated fruit, rice, beef and sake.”

The Journal article stated that, “For decades Japan’s agriculture sector, protected by rice-import tariffs as high as 778%, has done little to reach out to new markets. It has instead lived off a drip-feed of government subsidies that guaranteed a healthy income for the small but politically powerful group farmers. Figures from the Organization for Economic Cooperation and Development show that Japanese farmers now rely on government support for 56% of their total receipts, compared with just 7% in the U.S. and 19% in the European Union.

Mr. Abe now appears willing to overturn the long-cozy relationship between farmers and politicians. As part of his economic program, he is looking to slash import tariffs as part of his commitment to a U.S.-led trade pact for Asia known as the Trans-Pacific Partnership. That could provide a big boost for Japan’s big industrial exporters. But the partnership could also provide opportunities for food importers, attracted by Japanese retail prices that are more than double the global average for potatoes and three times higher for apples.”

Meanwhile, Ben Goad reported yesterday at The Hill’s RegWatch Blog that, “The government shutdown has choked the flow of U.S. exports, blocking overseas shipments of everything from fruits and vegetables to high-tech products, the White House said Monday.

“Chief of staff Denis McDonough and other senior staff are scheduled to brief President Obama this afternoon on the impacts of the budget impasse on international trade.”


Budget Issues

Lisa Mascaro, Michael A. Memoli and Brian Bennett reported yesterday at the Los Angeles Times Online that, “Two weeks into a budget impasse that has left Americans dismayed by Washington brinkmanship, an outline of a deal emerged Monday as Senate leaders worked to prevent a potentially catastrophic debt default and end the damage inflicted by the lingering government shutdown.

“Details remained in flux, but Senate aides said the plan would give the government authority to borrow to pay its bills into February and would reopen federal agencies until Jan. 15.”

The article indicated that, “In the meantime, to prevent another shutdown, a House-Senate committee would negotiate an overarching budget agreement by Dec. 13 that would allow Congress to pass its regular bills to fund the government.

“The proposal would not make significant changes in President Obama’s healthcare law. But it could include a pair of tweaks: the delay of a new tax opposed by labor unions and an income verification requirement for customers who buy insurance through the new online marketplaces.”

Lori Montgomery and Rosalind S. Helderman reported in today’s Washington Post that, “Despite those points of contention, Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) appeared confident that they had developed a framework that could win the approval of Congress and spare the country from a first-ever default on the national debt.”

The Post writers pointed out that, “The big question mark Monday evening was whether the emerging agreement could win the approval of the Republican-controlled House, where a small bloc of conservatives has managed to direct GOP strategy.

“While McConnell and Reid were at work on a bipartisan compromise, House Budget Committee Chairman Paul Ryan (R-Wis.) was continuing to promote a more partisan bill that would lift the debt limit for only six weeks.”

Kristina Peterson and Janet Hook reported in today’s Wall Street Journal that, “By setting up yet another series of fiscal deadlines, the agreement, if embraced, would carry the hallmark of other deadline-driven deals that have become typical of the increasingly polarized Capitol.

“‘Everybody realizes that whatever happens, we’re going to be litigating this another day,’ said Sen. John Thune of South Dakota, a member of the Senate GOP leadership.

“Still, a deal would mark a major breakthrough in the impasse that has gripped Washington for weeks, shutting federal agencies and threatening the government with a debt default.”

And Michael D. Shear and Jeremy W. Peters reported in today’s New York Times that, “Officials in several states said a default would mean unprecedented but unknown consequences to federal programs that are administered by the states, like Medicaid and food stamps. They also said that a market collapse could undermine state pension plans. And higher interest rates from a default on federal bonds could make short-term borrowing more difficult and costly for states.”

Keith Good

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