FarmPolicy

November 21, 2019

Farm Bill; Trade; Budget; Biofuels; and, Immigration

Farm Bill

During a radio interview yesterday with J. Doug Williams (K-101-FM radio, Woodward, Okla.), House Agriculture Committee Chairman Frank Lucas (R., Okla.) indicated that, “And I am in the process, with my senior colleagues on the House side on the Ag Committee, to try to negotiate out the differences between us and the Senate. There are three big areas of difference, and in reverse order, food stamps. The Senate wants to save about $4 billion by basically making the Northeastern states that use food stamps to help pay for their citizens’ home heating oil to stay warm in the wintertime to pay more.”

The Senate essentially just doesn’t want to make any changes in food stamps. The House wants to do ten times as much, so working that out is going to be tough,” the Chairman added.

Chairman Lucas pointed out that, “The second area is the dairy program. The House leadership doesn’t want to do supply management, which makes the dairy insurance work better. The Senate insists on that. That’s a philosophical issue about supply management by the federal government.

And the biggest area, the one that matters probably the most, generally, to our listeners, is the commodity title. The Senate wants to do…they’ve finally come around to the fact that you have to have a safety net that works not just for the Midwest, but for everybody else. They want a program by which, when you sign up for five years, you’re automatically covered under either version of the safety net.

The problem is, when you take the responsibility out, you also reduce the quality of the safety net. The House perspective is we’re big boys and girls, we can make big decisions, let’s give people a choice between which way they go, let them choose for the five years. If they make the right decision, then the safety net will be stronger. If they make the wrong decision, well, they made the decision they made. So that’s a difference right now. And those are the three big things holding us up.”

In addition, Chairman Lucas noted that, “This really, really needs to be done by the end of the year, which is not that many weeks away. But if you can’t make it happen in that timely fashion, then you probably need an extension. Now the problem with an extension is so many of my friends on the left and the right up here are opposed to the direct payment system in the old farm bill, which, by the way, is the least trade distorting, most WTO compliant.

“It’s our best battling tool with the Australians and the Argentines and the Brazilians. It’s politically unsustainable, but it’s the best economic policy. A lot of folks I serve with won’t vote for an extension if it actually extends the whole present farm bill, which we did this year. So yes, I’m getting squeezed from several directions.”

Note that an audio replay of this portion of yesterday’s radio interview can be heard here (MP3- 5:23), and an unofficial FarmPolicy.com transcript of the Chairman’s Farm Bill remarks can be viewed here.

Also yesterday, Erik Wasson reported at The Hill’s On the Money Blog that, “The principal House negotiators on the farm bill conference cited progress Wednesday toward a deal.

“House Agriculture Committee Ranking Member Collin Peterson (D-Minn.) suggested a framework for a deal could emerge by next week.”

The article noted that, “[Chairman] Lucas said the discussions are ‘focused intensely’ on the title containing commodity subsidies.

“‘I think actually people are moving in the right direction toward progress,’ Lucas said.

He said however that no sections of the farm bill have been completely finalized and would not confirm that a framework could be done by next week.”

David Rogers reported yesterday at Politico that, “Consider the issue of target prices at the heart of a dispute over how to build a new safety net to replace the current system of direct cash payments to farmers — which has been the mainstay for the commodity title for almost two decades.

“The Senate tends to build its system from revenue on down. The House from production costs up. But each is prone to short cuts that can become a distraction in themselves.”

Mr. Rogers explained that, “For example, the Senate bill proposes to set its targets by using a five-year rolling average of market prices multiplied by 55 percent. When pressed, the authors admit there is no magic to the 55 percent number. But as a practical matter, it makes the program worthless to many growers, especially wheat.

“Calculations by POLITICO show that based on current market projections, wheat prices would have to drop 48 percent in 2014 before the Senate’s Adverse Market Payment plan would trigger. And the $3.66 per bushel reference price would still be 25 percent below a wheat farmer’s production costs — even after subtracting the value of his land and labor.

“On the opposite side, the House faces criticism for being too quick to count even a farmer’s labor and land investments in calculating production costs. Part of this is regional and reflects the House’s greater sensitivity to the almost feudal land ownership structure in some of Southern agriculture. But the end result is it pushes the House’s target prices up higher than the Senate is willing to go.”

The Politico article noted that, “The House has begun to scale back its target prices in the talks now. And those backing the Senate approach say that they will quickly move the 55 percent multiplier higher — if they can keep the concept of using a rolling five-year market average.”

Mr. Rogers pointed out in yesterday’s article that, “But the philosophical differences are real. The Senate focuses first on farm revenues — not costs. It concedes that the recent run of high commodity prices will end sometime, but the economic argument is that production costs — such as land and fertilizer — will also fall with time.

“The House would argue that it is better to err on the side of the farmer’s survival. And it is aggravated by the fact that the Senate invests so much in a ‘shallow loss’ program even as it is tamping down on target prices intended to build a floor against a real market collapse.”

Meanwhile, an update yesterday at The Wall Street Journal Online indicated that the cash price for corn (No. 2 yellow. Cent. Ill. bu-BP) on Tuesday was 4.1850; a year ago it was 7.2200.

Earlier this month, University of Illinois Agricultural Economist Gary Schnitkey pointed out that, “For farmland that is cash rented near average rent levels, break-even corn prices have increased from $1.67 per bushel in 2004 to the mid-$4.00 range in 2013 and 2014. Mid-$4.00 break-even prices will cause losses when corn prices are in the in the low-$4 range or below. There are good possibilities of prices being below break-even prices over the next several years.”

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Farmers currently don’t expect lower prices to be the trend. A farm survey in March asked farmers what they expect for corn prices over the next five years. Most farmers expected the average cash price to be slightly higher than $5 per bushel. Producers saw a 10% chance of $7 corn. They also saw a 10% chance corn would average $4 or less. The economists [Jason Henderson and Brent Gloy from Purdue University] noted at Monday’s meeting [American Bankers Association National Agricultural Bankers Conference in Minneapolis] how close we are now to going under $4 a bushel.”

Mr. Clayton noted that, “While prices are falling because of record production, the costs of production are inching higher. Forty percent of southwest Minnesota farmers have noted costs of production at $5.15 per bushel or higher, the economists said. That led to a series of ‘Whew!’ comments from the audience.”

More broadly, Lydia DePillis reported yesterday at the WonkBlog (Washington Post) that, “There’s been a lot of chatter in recent years about the ascendance of cities: They’re more fertile places for innovation and productivity, have higher-skilled and more remunerative employment bases, and they’ve started to network with one another and the international world to trade in goods and services.

There’s been less talk, however, about the flip side of that equation: the rural areas that are being left behind.

“Last week, the U.S. Department of Agriculture released its annual survey of rural America, which puts the divergence in stark relief [related graph].”

At a Joint Economic Committee hearing yesterday on the economic outlook, Vice-Chairwoman Sen. Amy Klobuchar (D., Minn.) noted that, “The farm bill — I felt good about our first conference committee meeting. It went well between the House and the Senate. And that would bring the debt down, at least the Senate side bill, $24 billion.”

And Dr. Jason Furman, the Chairman of the Council of Economic Advisers added that, “Finally, the president has identified immigration reform and the farm bill, both of which were mentioned by the vice chair here today, as two economically important priorities that he would like to work with Congress to get done.”

Speaking yesterday at the Ideas Forum in Washington, D.C., Sec. of Agriculture Tom Vilsack noted the impact the Farm Bill has on rural America and pointed to the need to “make sure that people do understand the extraordinary opportunities that this bill presents to grow the economy, to stabilize our energy security, to rebuild the infrastructure that’s important to rebuild in rural areas.”

On the issue of foreign food aid, Sec. Vilsack noted at the Ideas Forum that, “There are obviously vested interests who want to keep the status quo, but I think what we’re going to see is a recognition that there needs to be some basic change in those programs—still purchasing American commodities when it makes sense, still shipping them on American ships when it makes sense, but at least as far as emergency assistance is concerned, getting it to folks quickly means basically purchasing it more locally or regionally, where the disaster and need is, as opposed to shipping it and spending weeks, and some cases months, getting it to people in need.”

Sec. Vilsack also noted yesterday at the Forum that, “In terms of solving the issue, it is about focusing on the right policy.  If we are truly concerned about work, then let’s require states to do a better job for the $350 to $400 million we give them to put people to work and to match them with work opportunities.  Let’s do a better job of that.  Let’s demand greater accountability.

“That should, in part, placate the concerns of Republicans about the work issue.  Are there efficiencies in a program that can save money?  Sure.  But we’re not going to be looking at $40 billion, and frankly, we’re not going to look at $20 billion.  I’m not going to get into the numbers game because my focus is on the policy.  If you get the policy right, you’re going to get the number.”

Reuters writer Charles Abbott reported yesterday that, “Lawmakers writing the final version of the new U.S. farm bill should reject the ‘hatchet’ cuts that House Republicans want to make to food stamps for the poor, Agriculture Secretary Tom Vilsack said on Wednesday.”

Earlier this week, in two separate letters to the leaders of the Farm Bill conference, a variety of interest groups urged support for SNAP funding (see letters here and here); on the other hand, Michael Tanner, a senior fellow at the Cato Institute, penned a column yesterday at Roll Call Online titled, “It’s Time to Rein In the Growth of Food Stamps.”

And Melinda Henneberger noted in today’s Washington Post that, “‘What’s angered me,’ [Rep. Jim McGovern (D., Mass.)] said — and he did seem angry — ‘is we don’t even agree on the facts; SNAP is one of the most efficiently run programs in the federal government. The majority of people on it are children, the disabled or senior citizens,’ and most of the rest ‘are already working.’ Yet the Republican focus is imposing new work requirements on SNAP recipients.”

In other Farm Bill developments, Carolyn Lochhead reported earlier this week at the San Francisco Chronicle Online that, “Rep. Steve King, R-Iowa, who calls animal rights groups ‘the vegan lobby,’ won approval of a provision in the House version of the farm bill that would ban states from imposing stricter regulations for any farm product sold in interstate commerce beyond what other states require.”

The article noted that, “Rep. Jeff Denham, R-Turlock (Stanislaus County), who sits on the House-Senate conference committee along with King, called his fellow Republican’s provision ‘a major complication for the farm bill’ rivaling a huge fight over how much to cut food stamps.”

And a news release yesterday from the National Farmers Union (NFU) stated that, “A coalition of consumer organizations sent a letter to the 2013 Farm Bill Conference Committee members today in support of Country-of-Origin Labeling (COOL), urging members of Congress to defend the law and reject any calls for changes. As a longtime supporter of COOL, [NFU] applauds the support of the consumer groups.”

A news release yesterday from the National Milk Producers Federation (NMPF) noted that, “The head of the nation’s dairy farmer organization today blasted the dairy provisions in the pending House farm bill as costly to taxpayers, a bonanza for processors and not what’s needed to help farmers. The [NMPF], the voice of more than 32,000 dairy farmers in Washington, is wrapping up its annual meeting at the Arizona Biltmore Hotel.

Speaking at the meeting, board chair Randy Mooney, of Rogersville, Missouri, said the House of Representatives was dangerously close to repeating the mistakes of the early 1980s, when the federal dairy safety net was ‘far too generous.’”

Also, Ben Goad reported yesterday at The Hill’s RegWatch Blog that, “Crucial players in the American food industry are pressing for legislation that would institute a national voluntary labeling system for products that contain genetically engineered ingredients, according to documents obtained by The Hill.

“The effort follows expensive battles in California and Washington over state ballot initiatives seeking to impose mandatory labeling regulations for foodstuffs containing genetically modified organisms (GMOs).”

Mr. Goad noted that, “Federal legislation imposing voluntary standards is needed to ‘guard against a costly, unnecessary and inefficient state-by-state system,’ according to a memo being circulated among food industry trade groups.

“A coalition led by the Grocery Manufacturers Association (GMA) is behind the effort, industry officials said.”

 

Trade

Howard Schneider reported in today’s Washington Post that, “There isn’t much that would put tea party leaders such as Rep. Michele Bachmann (R-Minn.) in league with WikiLeaks and the left-leaning crowd at Public Citizen, the activist group founded by Ralph Nader.

But a proposed trade treaty with Pacific countries is stoking opposition among an unlikely cohort, drawing fire on Wednesday from a broad group of congressional Democrats and Republicans as well as a high-toned gaggle of PhD economists. It even earned a spot on the WikiLeaks circuit with the disclosure of internal negotiating documents.

The far-flung opponents all want more opportunity to review the 12-nation agreement known as the Trans-Pacific Partnership, and hope to prevent the Obama administration from getting ‘fast track’ approval from Congress.”

James Politi reported yesterday at The Financial Times Online that, “The Obama administration faced increasing pressure from Congress to push for aggressive currency measures in Pacific trade talks, amid mounting signs of US political unease over the negotiations and shape of a possible agreement.

Dave Camp, the Republican chairman of the House ways and means committee and the most senior US lawmaker on trade in the lower chamber, warned Barack Obama’s trade team to do ‘more’ to address currency as the Trans-Pacific Partnership talks approach their final stages.”

And Ron Nixon reported in today’s New York Times that, “A curious hurdle is threatening to complicate efforts by the United States to reach a major trade agreement with 11 Pacific nations by the end of the year: catfish.

“At issue is a pending new catfish inspection program at the Department of Agriculture that would replace but cost far more than an existing catfish inspection program in the Food and Drug Administration. American catfish farmers say the new inspection program would be more rigorous than the one at the F.D.A. and is needed to make sure all domestic and imported catfish is safe to eat.

Vietnam, a large exporter of catfish and one of the nations in the trade talks, says it is nothing more than a trade barrier in disguise.”

 

Budget

Ginger Gibson reported yesterday at Politico that, “The second public meeting of a House-Senate budget negotiating committee yielded few signs that lawmakers will be able to resolve deep differences over fiscal policy.

“Still, lawmakers on Wednesday offered overtures that they hope to strike a deal and the two lead negotiators indicated they have been talking behind the scenes.”

 

Biofuels

DTN writer Todd Neeley tweeted yesterday that, “#EPA spokesperson tells #DTN that RFS volumes will not be released today, ‘check back tomorrow.’”

Reuters news reported yesterday that, “U.S. production of corn-based ethanol could reach 14 billion gallons in 2014 because of positive margins for processors and demand from buyers, Archer Daniels Midland Co’s chief executive said on Wednesday.

Production could be ‘in the 14 billion range’ even if the U.S. Environmental Protection Agency (EPA) lowers its target for use of renewable fuels, ADM CEO Patricia Woertz said in a webcast of a Morgan Stanley conference. Illinois-based ADM is the top U.S. ethanol producer.”

The article explained that, “U.S. farmers are harvesting a record-large corn crop this year and replenishing inventories depleted by last year’s historic drought. The influx of supply has pushed corn futures to three-year lows and ethanol margins to their highest level since late 2009, the last year of a record corn harvest.

“The EPA has considered a proposal that would set next year’s target for use of renewable fuels at 15.21 billion gallons, according to a leaked draft of the proposal. That would be less than the 18.15-billion gallon 2014 target established in the law.”

 

Immigration

Laura Meckler and Kristina Peterson reported in today’s Wall Street Journal that, “The White House is intensifying its push to get an immigration overhaul through Congress this year, but House Speaker John Boehner cast new doubt Wednesday about the prospects for quick action.

“President Barack Obama brainstormed at the White House Wednesday with religious leaders over how to persuade House Republicans to move on the issue. Last week, the president met with business executives to urge them to speak out for action. He is planning other immigration events on the road, with a mix of national and local outreach, both behind the scenes and publicly. On Tuesday, Vice President Joe Biden talked to Roman Catholic leaders.

“But Mr. Boehner said House lawmakers wouldn’t vote on any immigration bills while Republicans work on ‘principles’ behind legislation. Many advocates for an immigration overhaul read the Ohio Republican’s announcement as a setback. Others saw hope that the speaker was setting a course that could lead the GOP House to take up legislation, which has stalled since the Senate passed a sweeping bill in June.”

Keith Good

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