FarmPolicy

August 17, 2019

Farm Bill; Ag Economy; and, Biofuels

Farm Bill- Policy Issues

David Rogers reported yesterday at Politico that, “Maybe it’s time to admit that whatever comes out of the great Farm Bill Wars in Congress will be — an experiment.

“Indeed, it’s a whole new world already compared to the last enacted bill in 2008, which passed by veto-proof margins and was helped along then by added money for nutrition and continued direct cash payments to farmers.

This time the mandate is entirely different: requiring a major rewrite of the commodity title while also tackling food stamps — all in the name of reform and deficit reduction.”

“So why is it so hard?” Mr. Rogers asked, “One big reason is that everyone seems to have underestimated the challenge of replacing the current system of direct cash payments that’s been the backbone of the commodity title since 1996.”

Yesterday’s article noted that, “The new farm bill will include two options in its commodity title: a Senate plan geared to revenues, a House alternative keyed more to production costs. Both promise to save money on balance and are accompanied by tighter payment caps. But each runs into trouble for trying to be more honest than the artificial ‘base acre’ formula that has guided direct payments.

“The great flashpoint is the World Trade Organization and fears that American producers will face complaints if government payments are tied too closely to what a farmer actually plants.”

Mr. Rogers explained that, “But beneath all the jockeying is a conflict of two genuine values. One speaks to the goal of providing a safety net without distorting planting decisions. The other argues that any aid should be a function of a farmer’s real risks and needs — not some artificial template that invites its own distortions.

“To bridge this gap, the [National Corn Growers Association] and [American Soybean Association] have offered a variety of proposals to create a more honest ‘base’ that reflects a farmer’s recent plantings. But critics contend it’s still the same old rabbit hole — which Congress can’t go down again after the Alice-in-Wonderland experience of direct payments.”

After additional analysis, Mr. Rogers indicated that, “All this suggests some better compromise needs to be found that requires a closer match with real plantings.

One option would be to establish the best current base possible and then pay farmers on planted acres but only to the extent to which they conform to those crops. If a farmer wanted more flexibility to switch crops within his total farm acreage, he could. But he would then be paid at a lower percentage rate to reduce the marginal impact of his changes.

“For example, direct payments are now distributed on 85 percent of a farm’s base. The new bill could pay on planted acres but up to 80 percent of the base — if the crops conform. If the farmer wants more flexibility, his government support could be lowered to 70 percent or some other number.”

The Politico article concluded with a closer look at Farm Bill nutrition issues.

An update posted yesterday at the National Corn Growers (NCGA) webpage indicated that, “Frustrated by inaction, the [NCGA] joined with two other farmer-led organizations to call on Congressional leaders to take the right steps quickly on the 2013 farm bill, or extend the 2008 law.

“‘We very much hope that conferees on the farm bill will find common ground that can be supported by producers of all crops in all regions of the country,’ representatives of NCGA, the American Soybean Association and the U.S. Canola Association wrote in a joint letter. ‘If such a resolution is not possible, we would support a two-year extension of the 2008 farm bill including, if necessary, a reduction in direct payments to achieve savings equivalent to the bills passed by both the Senate and the House. While difficult, this approach would leave sufficient funding in the commodities title to write a new farm program at such time as consensus can be achieved.’

The three organizations reiterated their strong opposition to recoupling payments to planted acres under a price-based program.”

Also yesterday, Rick Tolman, the Chief Executive Officer of the NCGA was a guest on the AgriTalk radio program with Mike Adams where he discussed Farm Bill issues; a portion of that conversation can be heard here (MP3- 2:10).

In other developments, a White House news release yesterday stated that, “Today, as Americans across the country prepare to celebrate Thanksgiving, the White House released a new report highlighting the importance of the Supplemental Nutrition Assistance Program (SNAP), which helps millions of Americans put food on the table.”

Following the release of yesterday’s report, Gene Sperling, the Director of the National Economic Council, and Cecilia Munoz the Director of the White House Domestic Policy Council, held a press briefing with reporters to discuss the SNAP paper.

During the briefing, Ms. Munoz indicated that, “But, as we point — as both Gene and I have pointed out in this conversation and as the report we’re releasing today points out, the SNAP program is absolutely fundamental. The people that it serves are children and elders and — and veterans.

There is no reason to be having a conversation about cutting the SNAP program. This is an efficient program. It has huge benefits for families that are struggling economically. As we indicate, it has huge benefits for lifting children out of poverty.

There is simply no reason to be having a conversation about making cuts in it, especially not deep cuts in the SNAP program.”

Later in yesterday’s briefing, Ms. Munoz reiterated that, “We continue to believe that there is no need to be cutting the food stamp program, the SNAP program. We recognize how important it is, as we’ve indicated, with respect to child poverty and other really important indicators of our economic and social health. There is no reason that we need to be focused on the SNAP program in terms of cuts. It’s a tremendously important, efficient program which does a lot of good for Americans.”

Mr. Sperling added: “But also recognizing that, you know, when the Senate bill was put out the administration did put out a statement of administration support. And we did recognize that what is in the — that, you know — that this administration is generally supportive of the bipartisan compromise that was worked out in the — in the Senate bill. And, as the president said, you know, all — says, we all need to compromise to move forward. We think the Senate bill does reflect that, and our administration put out what we call a SAS — a Statement of Administration Support — that — a policy that did support the compromises that were in — within the Senate bill.”

Justin Sink reported yesterday at The Hill’s Briefing Blog that, “Republicans argue the food stamp program is bloated because of the recession and badly in need of reform. They say it has doubled in size under the Obama administration.

“‘There’s no denying that SNAP provides important support for many Americans who are struggling,’ said House Agriculture Committee Chairman Frank Lucas (R-Okla.). ‘It serves a noble purpose to help you when you hit bottom. But it’s not meant to keep you at the bottom.’”

Also yesterday on the nutrition issue, a news release from Sen. Bob Casey (D., Pa.) indicated that, “With Thanksgiving approaching, [Sen. Casey] called on Congress to increase emergency assistance to food banks that are already struggling to keep up with demand. Currently, Congress has entered a critical stage in farm bill negotiations that will feature significant decisions on food security programs such as the Emergency Food Assistance Program (TEFAP) and [SNAP].”

Meanwhile in additional perspective from the executive branch, Roger Simon, in a column posted yesterday at Politico, highlighted a recent conversation he had with Sec. of Agriculture Tom Vilsack regarding agriculture, food issues and farm policy.

The column noted: “‘It’s tied to national security,’ [Sec. Vilsack] says. ‘In 40 years, we will have to increase agriculture by 70 percent globally to feed the world.’ But the amount of land devoted to agriculture is shrinking — think climate change and urban development — and because of that, farmers will have to produce more food with less land and less water.

“‘And if you think the world is unsafe today, wait until we have serious fights over food and water,’ Vilsack says.

“Enter the American farmer. ‘Farming is under-appreciated and misunderstood,’ Vilsack says. ‘It is a sophisticated business.’”

In addition, Sec. Vilsack also sat down recently with USA Today writer Susan Page for a discussion about the Farm Bill and politics; a replay of this Capital Download interview is available here, at FarmPolicy.com Online.

In other Farm Bill news from lawmakers, a news release yesterday from Sen. John Thune (R., S.D.) stated in part that, “[Sen. Thune] today sent a letter to Farm Bill conferees strongly urging them to reach an agreement on the controversial Farm Bill provisions rather than consider another long-term extension of the expired 2008 Farm Bill. Thune said in his letter, ‘An unfinished Farm Bill will continue the highly uncertain future for agriculture producers, ag-related businesses, consumers, rural economies, and the stewardship of our land and water brought about by last year’s extension.’”

Also, a news release yesterday from Sen. Chuck Grassley (R., Iowa) indicated that, “[Sen. Grassley] made the following statement after the U.S. Department of Agriculture made available additional information about farm payments being received by general partnerships and joint ventures through people using the ‘active personal management only.’

“The figures are a more detailed look at information provided in a Government Accountability Office report that Grassley released last month.  According to the GAO report, entities set up as General Partnerships received about $159 million while entities set up as Joint Ventures received $12 million in 2012 through extra ‘active personal management only’ persons.  Click here to see the breakdown of the information by state provided by the Department of Agriculture.  The amounts going to states through this loophole range from more than $52 million per year to nearly $1,000 per year.

“‘More than $172 million went out the door in 2012 through this loophole.  The data provided by the Department of Agriculture shows that the loophole is exploited by some states more than others.  The loophole is closed in both the House and Senate bills, yet it’s still a discussion point.’”

In more specific developments regarding dairy issues, a news release yesterday from the National Milk Producers Federation indicated that, “A recent analysis by the Congressional Research Service (CRS) of the competing House and Senate farm bills shows that the Senate’s dairy program costs less than the House version, the [NMPF] said today, helping fortify the case for the Senate‘s dairy title as negotiations continue in the congressional farm bill committee.”

And an update yesterday from the National Farmers Union (NFU) indicated that, “‘NFU continues to support the Senate’s version of dairy programs in the farm bill,’ said NFU Vice President of Government Relations Chandler Goule. ‘Dairy policy ought to include risk management tools for dairy farmers to protect themselves against rising production costs and market collapse. The farm bill should also establish a responsible inventory management program that helps reduce costs for taxpayers. The Senate dairy provisions do this and should be included in the farm bill conference report.’”

In other policy news, Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “Dozens of members of Congress have told the Food and Drug Administration (FDA) that its proposed food safety rules could force businesses around the country to go out of business — and that it needs to try again.

“‘We believe the rules as currently proposed would result in a multitude of unintended consequences that would be severely detrimental to national, regional and local agriculture,’ 75 members of the House and Senate told the FDA in a letter released this week.”

 

Agricultural Economy

Jesse Newman reported yesterday at The Wall Street Journal Online that, “Farm incomes in America are expected to hit their highest level in four decades this year, the U.S. Department of Agriculture said Tuesday, thanks to a bumper crop of corn and soybeans that followed two years of drought.

The USDA forecasts that net farm income will rise 15.1% this year to $131 billion, the highest level since 1973 on an inflation-adjusted basis. The expected increase extends years of prosperity in the Farm Belt—but many analysts say the good times are likely to ebb next year as falling crop prices take hold.”

The Journal article pointed out that, “Many growers were able to lock in higher prices earlier this year through contracts—a tactic that is unlikely to be repeatable next year. ‘Anyone watching the futures market knows that next year’s income is going to be a lot softer,’ said [Michael Swanson, an agricultural economist at Wells Fargo & Co.]. ‘You won’t start out the year with $6 or $7 corn; you’ll start it off with $4 corn. That’s like picking up a couple of D’s on your report card.’”

Yesterday’s forecast from USDA’s Economic Research Service (ERS) also noted that, “The projected increase of 3 percent in total expenses in 2013 continues a string of annual increases since 2002, with the exception of 2009, as expenses are forecast to reach another nominal (and inflation-adjusted) record-high, at $352 billion. However, the expected rise in 2013 is less than half of the increases in 2012 and 2011. The smaller expected increase in 2013 is due to a slowdown in the rise of prices paid for farm inputs [related graph].”

The ERS update indicated that, “Government payments paid directly to producers are expected to total $11.4 billion in 2013, representing a 6.8-percent increase from 2012. Fixed direct payments under the Direct and Countercyclical Program and the Average Crop Revenue Election Program (ACRE) are forecast at $4.39 billion for 2013, down 6.3 percent from 2012. The decline is largely due to sequestration.

“Despite recent price downturns, 2013 commodity prices are above levels that would trigger countercyclical payments, marketing loan gains, and loan deficiency payments. However, based on 2012 crop-year revenue losses, farmers are currently expected to receive $250 million in ACRE revenue payments, mostly for corn and soybeans that were hardest hit by drought [related graph].”

ERS also pointed out yesterday that, “Projected median total farm household income is expected to remain essentially unchanged in 2013, at $68,414. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. With sectorwide net cash farm income forecast to decline in 2013, median farm income is expected to decline to -$2,000 (down from -$1,453 in 2012). Most farm households earn all of their income from off-farm sources—median off-farm income is projected to increase by 2.9 percent in 2013, to $60,437.”

Meanwhile, Bloomberg writer Jeff Wilson pointed out yesterday that, “Corn prices on the Chicago Board of Trade slumped 39 percent this year, the biggest decline among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index.”

In addition, Gregory Meyer reported yesterday at The Financial Times Online that, “Food prices have dropped further from last year’s record highs as farmers encountered favourable weather around the globe, the World Bank said.”

The FT article noted that, “The World Bank food price index was 12 per cent lower than a year ago and 16 per cent below its all-time high reached in August of last year [related graph].”

Mr. Meyer explained that, “Wholesale maize prices have fallen by 36 per cent from a year ago in Russia and Ukraine, the World Bank said. Ukraine’s corn production has quadrupled from a decade ago and is expected to grow another 38 per cent next year, USDA forecasts.

CBOT December corn fell 1.8 per cent to $4.1725 per bushel on Tuesday, while CBOT December wheat was off 0.9 per cent at $6.4675. CBOT January soyabeans were 0.6 per cent lower at $13.2150 per bushel.”

Also from an international perspective, Mitsuru Obe reported yesterday at The Wall Street Journal Online that, “As the Japanese government eyes scrapping a decades-old subsidy program at the heart of its rice policy, farmers are preparing to ditch old practices for new business models to cope with market liberalization and greater global competition expected ahead…Prime Minister Shinzo Abe’s administration on Tuesday approved a plan to end production quota and across-the-board cash handouts for farmers in five years.

“The move comes as Tokyo negotiates the conditions of the U.S.-led Trans-Pacific Partnership free trade agreement with 11 other nations. The trade pact seeks to abolish tariffs among member nations and would likely result in less protection for farmers and an influx of inexpensive imported rice.”

 

Biofuels

William Petroski reported in yesterday’s Des Moines Register that, “President Barack Obama, a Democrat who campaigned as a supporter of renewable fuels, has an obligation to the country and to the nation’s agricultural heartland to support the ethanol industry, [Iowa] Gov. Terry Branstad said Monday.

“Branstad told reporters at his weekly news briefing he strongly opposes the U.S. Environmental Protection Agency’s proposal last week to scale back how much ethanol must be blended into gasoline. The mandate is known as the Renewable Fuel Standard, or RFS.”

The article stated that, “The Republican governor described Obama as someone who backed the Renewable Fuel Standard while campaigning in the Iowa caucuses. Obama also carried Iowa in the 2008 and 2012 presidential elections. At the same time, 2008 Republican presidential candidate John McCain did not support the ethanol industry, he noted.

“Asked if presidential candidates should be asked their stance on ethanol when the campaign in Iowa, Branstad said, ‘I think that anybody who aspires to be president of the United States also should make a commitment to continuing …the reduction of our dependency on foreign oil and our commitment to having more and more of our energy coming from renewable sources like ethanol and biodiesel.’”

Keith Good

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