FarmPolicy

September 3, 2014

Farm Bill; Ag Economy; and, Biofuels

Farm Bill

Secretary of Agriculture Tom Vilsack was a guest on Wednesday’s AgriTalk radio program with Mike Adams where the conversation focused on Farm Bill issues.  An unofficial FarmPolicy.com transcript of the conversation with Sec. Vilsack and Mike Adams is available here.

Sec. Vilsack pointed out that, “Well, I think we have to be realistic about this. If there is no appearance that there’s going to be a deal or if things break down and folks continue to be sort of in their corners and there isn’t a middle ground to be had, then obviously we’re going to have to start working towards and triggering permanent law.

“Some people have suggested that’s going to take a while to implement, but the reality is it’s not that we haven’t been thinking about this at USDA, we have been. We have a pretty good sense of what we would need to do. We’ve reached out to some of the folks, particularly in the dairy industry, to get their views about this. So we would be in a position, in short order—I don’t want to put a timeline on it—but in short order to get something done on the permanent law side.

“But boy, I tell you, that’s not something that I want to do, I’m reasonably certain that’s not anything that anybody in Congress would want to have happen, and I’m sure that no consumer is anxious to see that happen. So hopefully we continue to see progress.”

Sec. Vilsack also noted that, “It’s not just the permanent law issue, it’s also the Brazilian cotton issue, which is a trade dispute that we lost in the WTO, and there are consequences for inaction there. They can begin assessing retaliatory tariffs against many of our products, including exposing some of our intellectual property and destroying the protections that intellectual property has, which would be a first, frankly, in trade discussions, as I understand it.”

On the issue of a potential Farm Bill extension, Sec. Vilsack stated that, “And the fact that people are talking about the possibility of another extension I think is unrealistic, given, number one, there don’t appear to be the votes for an extension; number two, if there are votes for the extension, it’s probably at the risk of losing direct payments, and if you lose direct payments without using some of the savings from losing direct payments to reconstruct a new safety net, you will find it very difficult, if not impossible, to fashion a new farm bill. So it’s clear to me that there’s really only one option here, and that is that they’ve got to get their work done.”

Mr. Adams also asked Sec. Vilsack about the King Amendment- a legislative amendment to the Farm Bill sponsored by Steve King (R., Iowa) dealing with interstate commerce and animal production.   More information on the King Amendment from the House Ag Committee markup can be found here, while more details on the amendment provided by Rep. King during a recent AgriTalk interview can be found here.

Sec. Vilsack indicated that, “Well, candidly, this is an effort to try to create a standard that is very difficult to create in a way that doesn’t have implications in other parts of our economy, in other parts of commerce. And there are clearly constitutional issues that would be raised about the appropriateness and propriety of this action by Congress.

“And with due respect to Congressman King, it’s very, very difficult for Congress to craft something this complex in a way that is tight enough to avoid any challenge and to successfully resolve any challenge. So I think what you would be doing is you would be creating a great deal of uncertainty in terms of precisely what the rules and standards are going to be. It would have unintended consequences, no doubt about that. It would be tied up in litigation for an extended period of time.

And it clearly makes the passage of a farm bill far more complex and more difficult. To me, we’ve had enough difficulty dealing with the traditional issues of a farm bill—whether it’s the commodity title, whether it’s conservation compliance, whether it’s the dairy provisions, or the SNAP and nutrition assistance programs—that’s enough difficulty for one conference committee to assume.

Sec. Vilscak added that, “But then when you start adding these extraneous issues in trying to solve an individual state’s issue, I think it just becomes very, very difficult, and I just think it’s very, very difficult for the legislative body to fully understand and appreciate all of the unintended consequences, all of the advantages some would take of language that’s not very, very specifically and narrowly crafted.

“It’s been my experience as a state senator, my experience as a governor, now my experience as the USDA secretary, and meaning no disrespect to folks in Congress, legislators don’t necessarily always do a particularly good job of crafting things. That’s why we have regulations and that’s why we have the fuss over regulations, because of the lack of clarity. And if anybody doubts that, I would just simply direct them to another issue that’s being discussed in the context of the farm bill, and that’s catfish inspection. We still have uncertainty about precisely what Congress meant when they passed catfish inspection years ago.”

Sen. Chuck Grassley (R., Iowa) was also a guest on Wednesday’s AgriTalk program with Mike Adams; he also addressed Farm Bill issues and indicated that, “But, you know, I talked to you a week ago about that, maybe two weeks ago, and here’s where we are a little bit different than where I talked to you then.  There’s a little bit talk about a two-year extension of the existing farm bill.  Now this is contrary to what Chairman Stabenow—and by the way, Chairman Stabenow and Reid are not talking about a two-year farm bill, but there’s a lot of talk about a two-year extension.

“But the leaders said that there wasn’t going to be any extension.  But now when you start hearing about it, and then you have Chairman Lucas say that he can’t meet the December 13th deadline, and they’re going home for Christmas at that particular time, and the House conferees are not willing to consider compromises on planted acres and on target prices, and then you got the big food stamp program, when you get into December, then things that I was so positive about back in October look a little bit different now.”

When asked: “So would a two-year extension include direct payments?” Sen. Grassley responded by noting that, “No, I don’t think so.  I think that with the budget problems we have and everything else, and farmers themselves with a new farm bill willing to give up direct payments, and the fact that you have a two-year farm bill, it’s almost a foregone conclusion, with the budget deficit, that money would go.  Now, Southern agriculture isn’t going to like that, and of course that’s why they’re after planted acres, and after the higher target prices.  But they kind of come from a philosophy it’s okay to farm the farm program rather than farm it according to the marketplace.”

With respect to dairy issues, a news release on Wednesday from the International Dairy Foods Association (IDFA) indicated in part that, “While Members of Congress, including House and Senate Farm Bill conferees, returned to their home states to celebrate the Thanksgiving holiday, a large and growing group opposed to the dairy supply management provision included in the Senate version of the Farm Bill continues to press their case.  Views on the Farm Bill budget are also impacting the debate.

“‘Both the Senate and House dairy titles reflect a negligible difference in spending, according to the Congressional Research Service (CRS),’ stated Ruth Saunders, vice president of policy and legislative affairs for the International Dairy Foods Association.  ‘Overall, both bills spend more than $40 billion over ten years for commodity programs, of which only 1 percent goes to provide a safety net for dairy farmers.’

“The Congressional Research Service report is available here.”

The release added that, “‘Analysis shows that the Senate could drop their supply management program and save money if they also included the higher premium rates for the largest dairy farms that are in the House Bill,’ according to Saunders.”

And on the issue of nutrition, Erika Eichelberger reported on Wednesday at Mother Jones Online that, “A Democratic aide tells Mother Jones that House Speaker John Boehner shot down several informal compromise farm bill proposals because the food stamps cuts were not deep enough. Boehner’s spokesman denies this.

“The Democratic aide says the joint House-Senate panel that is trying to work out a deal presented Boehner with a few proposals that contained food stamps levels close to what the Senate wants. Even though Rep. Frank Lucas (R-Okla.)—the chairman of the House agriculture committee and a top member of the compromise panel—was willing to give a lot of ground to the Senate on food stamps, he says, Boehner rejected the proposals. ‘Boehner is playing spoiler,’ he adds. ‘That’s why [negotiations] fell apart.’

“Another source familiar with the negotiations echoes the Dem aide’s claim, saying that the House leadership has Lucas on a tight leash. Sen. Tom Harkin (D-Iowa), who is on the compromise committee, told Congressional Quarterly the same thing last week. ‘I’m hearing that the speaker still keeps inserting his people into the process,’ and that House members on the farm bill compromise panel ‘have to go and check with the speaker’s people [who] say they want this and this and this. I hear that’s one of our major problems.’”

The update added that, “But a spokesman for Boehner says the assertion that Boehner shot down the food stamps proposals ‘is absurd.’ He adds that ‘the Speaker has full confidence’ in Lucas and the rest of the House GOP team that is working out a compromise farm bill. On Friday, Lucas said negotiations stalled because of differences over the crop subsidy provisions in the legislation.”

The Boston Globe editorial board noted yesterday that, “But the political will to pay for food stamps is waning. Funding was once guaranteed by a coalition of urban Democrats and rural Republicans who voted together to pass the farm bill, which tied food stamps and agricultural subsidies together. But that coalition has unraveled…[T]he good news is that demand for food stamps is leveling off. As the economy recovers, the Congressional Budget Office expects federal spending on food stamps to drop over the next seven years to 1995 levels. Still, as the income gap widens, it is useful for elected officials to get a taste of what it is like to live on food stamps. Everybody in office who will vote on this issue ought to do so.”

And on the issue of conservation, Kevin Diaz reported on Wednesday at the Minneapolis Star Tribune Online that, “Among the sticking points in the farm bill talks, long stalled on crop subsidies and food stamps, are provisions protecting grasslands that naturalists say are being depleted at a rate not seen since the Dust Bowl days.

“Although the losses have been greater in other Midwestern states such as Nebraska, Iowa and South Dakota, a pair of Minnesota Democrats have taken the lead in pressing for compliance measures and ‘sodsaver’ protections meant to stem the conversion of wetlands and grasslands to agriculture.

“But the conservation provisions backed by Sen. Amy Klobuchar and Rep. Tim Walz are so far part of only the Senate version of the farm bill. Decades-old requirements linking certain conservation practices to farm subsidies have been dropped in the bill passed by the Republican-led House, alarming environmentalists who have tracked the loss of prairie during a period of strong commodity prices.”

Mr. Diaz noted that, “House Agriculture Committee Chairman Frank Lucas, R-Okla., issued a statement in the lead-up to the final 2013 farm bill negotiations, calling the compliance measures ‘a redundant regulatory burden on people who are already the best caretakers of our natural resources and who already have conservation practices in place.’

“Some negotiators on the farm bill’s secretive House-Senate conference committee have proposed a more limited program restricted to parts of Minnesota, Iowa, Montana and the Dakotas.

“But Walz, one of the House negotiators, is pushing for a nationwide sodsaver program that would serve as a broad disincentive to plow up grasslands. He remains ‘cautiously optimistic’ that it will be included in the final farm bill, spokesman Tony Ufkin said.”

Also this week, Ohio State University Agricultural Economist Carl Zulauf noted at the farmdoc daily blog (“Insurance Coverage of Corn and Soybean Production Cost since 1980”) that, “Last, this study reinforces why credit lenders are vocal supporters of crop insurance.  For corn and in particular soybeans, crop insurance offers significant coverage of cash costs associated with producing a crop.  A growing policy concern has been the perceived increasing role of dealer credit to farms for purchasing inputs.  While we certainly do not understand the potential implications of this situation, crop insurance, especially at high levels of insurance, potentially mitigates this concern, at least for the initial year.  But, insurance prices are reset each year and will fully follow prices lowerThus, high cash cost producers may ultimately find themselves in trouble if they cannot adjust costs to lower prices in one year.  Hence, it is important for farms to have a strategic plan for cost flexibility.  An associated policy implication is that crop insurance has a hole as a safety net program — multiple year declines in price and revenue.  Thus, it is important for the current farm policy debate to consider what is the appropriate multiple year safety net that complements insurance.”

And on the issue of country of origin labeling (COOL), the Los Angeles Times editorial board noted this week that, “On Saturday, after years of wrangling, new, more stringent labeling rules took full effect, letting consumers in the U.S. know where the meat in their stores is from so that they can make informed decisions about whether to buy it. The law requires meat to be labeled with information not only about its country of origin but also all the places it has traveled on the way to the supermarket. (It’s not unheard of for livestock to be born in one country, raised in another and slaughtered in a third.) Similar rules covering seafood have been in effect since 2005 and for produce since 2009.

After a lawsuit to stop the new meat-labeling regulations was unsuccessful, the meatpacking industry, arguing that the law’s tracking and record-keeping requirements are too onerous, embarked on a 13th-hour campaign to weaken or undo them, using the federal farm bill that is being negotiated in Congress as a vehicle. The country-of-origin rules also have been challenged by some nations through the World Trade Organization; they contend that the law is a protectionist ploy. The Department of Agriculture won a recent round after a WTO judge ruled that labeling the countries of origin was not inherently anti-trade. But other challenges remain.

“Food imports have been rising for more than a decade, and China is expected in coming years to seek permission to export chicken raised in that country to the United States. Of course, U.S. food production is far from perfect, and many other nations have excellent records. But consumers should at least be given the opportunity to decide for themselves whether they want to buy meat from a particular country. And they can’t do that if they don’t have the information in the first place.”

With respect to budget issues, Janet Hook reported in today’s Wall Street Journal that, “Negotiators in Congress are moving toward a narrow agreement on this year’s federal budget that would scale back some spending cuts set to take effect in January but likely wouldn’t ask either party to compromise on its core stands on taxes and entitlements.

“Sen. Patty Murray, the Democrats’ leading Senate negotiator, is returning early from a recess next week to continue talks with her House GOP counterpart, Rep. Paul Ryan. The two lawmakers have been mum about their discussions, and important elements have yet to be resolved. But officials close to the talks say the building blocks for a deal have come into view—if only because some of the most controversial issues have been taken off the table.”

The Journal article added that, “To replace the sequester cuts, officials close to the talks said, lawmakers are looking at increasing airport-security fees, cutting costs in federal-employee retirement programs and drawing on revenue from the auction of broadband spectrum. Democrats also want to count savings from program changes in a farm bill, which is being negotiated in a separate process, to offset sequester cuts, but Republicans say those savings should go to general deficit reduction.”

 

Agricultural Economy

On Wednesday, USDA’s National Agricultural Statistics Service released its monthly Agricultural Prices report, which stated in part that, “The corn price, at $4.29 per bushel, is down 32 cents from last month and $2.72 below November 2012 [related graph]…The soybean price, at $12.70 per bushel, increased 20 cents from October but is $1.60 below November 2012 [related graph]…and…The November price for all wheat, at $6.80 per bushel, is down 20 cents from October and $1.67 below November 2012 [related graph].”

Also on Wednesday, USDA’s Economic Research Service (ERS) indicated that, “Based on current conditions, ERS’s 2013 inflation forecast predicts increases of 1.5 to 2.5 percent for all food prices, with food-at-home prices predicted to increase 1.0 to 2.0 percent. This means that prices are likely to increase less than they did in 2012 and that annual inflation should be lower than the 20-year historical average of 2.8 percent. The impact of the 2012 drought on retail food prices has been less than initially forecast.”

ERS added that, “Looking ahead to 2014, ERS forecasts that food price inflation will return to a range closer to the historical norm. Inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories, and ongoing export trends.”

Meanwhile, Julian Pecquet reported on Wednesday at The Hill’s Global Affairs Blog that, “The administration is latching onto the Thanksgiving holiday to tout U.S. agriculture exports under President Obama….[A]s part of its effort to boost support for free trade, America’s chief trade negotiating agency is highlighting exports of Thanksgiving staples such as turkeys, potatoes, cranberries — and beer.”

 

Biofuels

Julian Hattem reported on Wednesday at The Hill’s RegWatch Blog that, “A number of new regulations and proposals will be issued on Friday, after the Thanksgiving holiday.”

The update stated that, “The Environmental Protection Agency (EPA) is publishing is proposed 2014 standards for a biofuel program that requires fuel refiners to mix some ethanol and other renewable fuels in with conventional gasoline.

“The agency lowered the ethanol mandate in the draft rule, partly in response to concerns from the oil-and-gas industry. They said that refiners were being asked to mix a blend of gasoline that cars can’t use…[T]he public will have 60 days to comment on the draft regulation.”

Writing yesterday at The Hill’s RegWatch Blog, Julian Hattem noted that, “Turkey farmers’ feathers are being ruffled by a federal biofuel mandate they say is increasing the cost of the corn they feed their birds and making it harder for them to turn a profit.”

Yesterday’s update added that, “The Renewable Fuel Standard (RFS) calls for petroleum refiners to mix a certain amount of biofuel like ethanol, which is made from corn, in with conventional gasoline. Congress created the program in 2005 to reduce the country’s dependence on foreign oil, combat climate change and expand the nation’s renewable fuels sector.

“Proponents of ethanol, which has been one of the largest beneficiaries of the program, say that the $5.4 billion turkey industry is exaggerating the effect the fuel standard has on corn prices.”

And earlier this week, Reuters writer Michael Hirtzer reported that, “A month ago, Steve Walk was on the brink of deals to sell two big oil refiners some of his company’s specialized oil pumps, which serve up fuel that is 85 percent ethanol, a biofuel made mostly from corn.

“Walk’s company, Protec Fuel, sells and installs the equipment needed to dispense so-called E85. The deals would have nearly doubled Protec’s business, he said. The number of stations across the United States dispensing E85, which is a rarity despite the growing use of biofuels, would have jumped by 10 percent.

But those deals are on hold after the U.S. Environmental Protection Agency’s proposal earlier this month to slash the minimum volume of ethanol to be used in the country’s gasoline supply next year. The surprise move by the Obama administration marks a retreat from the 2007 Energy Independence and Security Act meant to push increased sales of biofuel. The proposal could be approved following a 60-day period for public comment.”

Also with respect to the EPA-RFS proposal, on Wednesday’s AgriTalk program with Mike Adams, Sen. Chuck Grassley (R., Iowa) indicated that, “But I said there’s one person in Washington that we need to be talking to that can turn this around, and that’s the President of the United States, who brags about being for biofuels, and being for green energy.  And there’s everything about ethanol that’s good for agriculture, good for jobs, good for the environment, good for our national defense—everything about it is good, good, good.  He can turn this around, and he ought to go to the EPA director and say, you know, forget it, let the program go ahead as usual.”

In other news regarding the EPA, Pete Kasperowicz reported on Wednesday at The Hill’s Floor Action Blog that, “Rep. Morgan Griffith (R-Va.) is planning to write legislation that would cut the Environmental Protection Agency’s staff by 15 percent.

“Griffith told a local paper in southwest Virginia that his motivation for the bill was the decision to list nearly 94 percent of all EPA staff as “nonessential” during the government shutdown in early October.”

Keith Good

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