FarmPolicy

September 2, 2014

Farm Bill; and, the Ag Economy

Farm Bill Issues

House Ag Committee Chairman Frank Lucas (R., Okla.) was a guest yesterday on the AgriTalk radio program with Mike Adams, where the conversation focused on the Farm Bill.  An unofficial FarmPolicy.com transcript of yesterday’s discussion is available here.

Chairman Lucas indicated that, “I think my colleague Chairwoman Stabenow said so, so I’ll repeat it again, we have another principals meeting tomorrow [Wednesday]—Senator Stabenow, Senator Cochran, Congressman and Ranking Member Peterson and myself. I look forward to see what the Senate will put on the table tomorrow.  But we’re at the point in time where it should be possible to conclude this process.

“But as you and I have discussed many times, Mike, there are some very philosophical differences. The House perspective on how many dollars in the nutrition savings, reforms to have, the difference between the House and Senate perspective on what kind of a safety net we have in the commodity title.”

Chairman Lucas indicated that, “But the bottom line is this: it’s time, Mike, for this to be over with. I think it’s doable, I think it’s achievable. Can I have a bill passed across the floor of the United States House in the next ten days? Man, that’s a lot of drafting and CBO scoring and a lot of things to do. But it is possible to have an understanding, a set of principles laid out, a text that the lawyers could work on with the economists to complete so we’d be back next January to finish the final job.

“But once again, you and I have discussed before, this is a body that moves like a snail, the United States Congress, House and Senate. But sometimes it’s amazing the light speed with which things can be accomplished if everyone agrees. We’re just not quite to that light speed position yet.”

In terms of larger budget issues, Chairman Lucas noted that, “Any kind of a budget deal that sorts out sequestration, that enables the appropriators to do their work this year and for the coming year requires substantial savings. I’ve always known that when we achieved our objectives here that those resources would be available in other areas. But the bottom line remains, Mike, you can’t have my money ‘til you have my policies.

“And I think Speaker Boehner’s acknowledged that by saying in recent days repeatedly that the budget process is not driving the farm bill, the farm bill is driving the farm bill.”

And near the conclusion of yesterday’s AgriTalk discussion with Mike Adams, Chairman Lucas pointed out that, “I think a set of understandings about the final draft of the bill can be achieved. I think it is possible then to leave, for the remainder of December, the final drafting, and the scoring, and the verification of the details by CBO and USDA in the hands of folks so that when we would return that first week in January, that it could be implemented. It is possible to do that, even if I can’t now physically get a conference report across the floor of the United States House in the next ten days.”

Also yesterday in a briefing with House GOP Leaders, Speaker John Boehner indicated that, “I want the farm bill conference to be completed. Chairman Lucas has — has made a number of good-faith efforts. We can’t get Senate Democrats to the point of saying yes.

“But we get the same problem when it comes to the budget conference. Chairman Ryan has done a very good job of outlining very serious offers, but we can’t get Senate Democrats to say yes.

It — it is time for the other chamber to get serious by getting this work finished.”

At a briefing yesterday with House Democrats, Rep. Robert Andrews (D., N.J.) stated that, “There are farmers today, toiling across America, who don’t know the rules under which they’re going to be working because a farm bill has not yet been passed because of a single-minded desire by the most reckless elements of the Republican Party to take food and nutrition benefits away from the poorest and most vulnerable Americans…[N]ow it is time for Speaker Boehner and the House majority to drop their complaint, roll up their sleeves and get to work so the House can pass a budget that is balanced and fair, that ends sequestration, so that we can finish our work on fixing a broken immigration system with a sensible and humane, comprehensive immigration reform bill, and so that we can honor the hard work of America’s farmers and America’s unemployed and pass legislation that would help them before the year is over.”

Tom Steever reported yesterday at Brownfield that, “Iowa Senator Charles Grassley says he is not giving up on passing a farm bill this year. He adds that he won’t give up until December 19.”

The Brownfield update indicated that, “There are still differences to be settled by the Farm Bill Conference Committee, such as payment limits, defining a farmer, base acres versus planted acres and the values assigned to target prices, [Sen. Grassley] said.”

And an update yesterday from Rep. Randy Neugebauer (R., Tex.) stated that, “The Farm Bill Conference Committee is continuing to work on reconciling the differences between the House and Senate bills.  We’ve ironed out a lot of the details already in areas like rural development, research, and trade programs.  What’s left?  Commodity support and nutrition assistance.  These have always been the toughest issues to agree on, but we’re making some progress… [O]ur goal is to get the Senate to agree on reforms to nutrition assistance that stop program abuse and ensure your taxpayer dollars are going to families in need – not people who are gaming the system.  We also want to make sure the commodity support in the bill works for every region in the country, and not just a few select crops.  We’ll continue working on this, and my hope is that we’ll have a long-term Farm Bill in place before Christmas.”

Also, an update earlier this week at WNAX (Yankton, S.D.) Online reported that, “Extending the present farm bill won’t provide any assistance to West River South Dakota ranchers hurt by the October Blizzard.  South Dakota Senator John Thune says because of that it’s important conferees agree to a new five year farm bill.

“Thune says he’s spoken to Senate farm bill conferees and is hoping they’ll be able to finish up the farm bill before the end of the year.”

Meanwhile, Jonathan Weisman reported in yesterday’s New York Times that, “The farm bill is a more difficult lift. House Republicans continue to press for $40 billion in cuts to the Supplemental Nutrition Assistance Program, or food stamps, while Senate negotiators are sticking to their $4 billion in cuts.

“At the same time, it is an issue Republican constituents care about. Representative Tim Griffin of Arkansas said he got an email on Monday from his neighbor across the street saying her father cares nothing about politics but wants to know the farm bill’s prospects.”

The article added that, “But Democrats are digging in, putting Republican leaders between the demands of their Tea Party wing and the bipartisan clamor for a deal without deep cuts.

“‘If they want my vote, they ought to stop beating up on poor people,’ [Rep. Jim McGovern (D., Mass.)] said. ‘I don’t think it’s too much to ask to have a farm bill that doesn’t increase hunger in America.’”

Also yesterday, Vicki Needham, Erik Wasson and Bernie Becker reported at The Hill’s On the Money Blog that, “On Tuesday, House Agriculture Committee member Rep. Kurt Schrader (D-Ore.) said a deal on food stamps and commodity programs is very close, while GOP panel member Rep. Steve King (Iowa) said Chairman Frank Lucas (R-Okla.) and Stabenow just need to get behind a food stamp budget-cut number and force their will on the conference.

“King and Schrader are not in agreement, however, on King’s amendment to stop states from banning products likes eggs based on production. King predicted it will be in any chairman’s mark of the $1 trillion farm bill.

Schrader said it would be out and voted down in the full committee.”

The Hill update added that, “Senate Democrats suggested on Tuesday that both sides will need to move off their positions to reach an agreement.

“‘In the Senate, Republicans and Democrats have worked together to pass a bipartisan farm bill two years in a row,’ said Ben Becker, spokesman for the Senate Agriculture Democrats.

“‘Agriculture Committee leaders are continuing to work together, and everyone needs to rise above partisan politics if we are going to continue making bipartisan progress.’”

Also with respect to the King Amendment, Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Top Iowa state officials are asking Sen. Tom Harkin to support a provision by Iowa Rep. Steve King meant to protect Iowa’s egg industry.

“Gov. Terry Branstad and state Agriculture Secretary Bill Northey, both Republicans, sent the letter to Harkin and member of the press on Tuesday. Harkin, a Democrat, is a conferee in negotiations on the farm bill, as is King, who is a Republican.”

And Reuters writer Charles Abbott reported yesterday that, “The Senate’s farm bill would cut food stamps by $4.5 billion over a decade, mostly by narrowing a loophole on utility costs. House Republicans proposed tighter eligibility rules that would end benefits to about 4 million people in 2014. Some 47.7 million people received food stamps at latest count – about one in seven Americans.

“On Tuesday, two Republican aides said Stabenow was unwilling to consider reforms that were good policy and would save money. The utility loophole could be tightened further to generate $9 billion in savings, for example, they said.”

Mr. Abbott also pointed out that, “‘We’ve had this uncertainty for far too long. It’s time for Congress to finish its work,’ Agriculture Secretary Tom Vilsack told reporters on Tuesday.

But Vilsack dismissed the idea the White House and congressional leaders should take over the stalled talks, as did House Speaker John Boehner at a news conference.”

Chris Clayton reported yesterday at DTN (link requires subscription) that, “Agriculture Secretary Tom Vilsack and the top executive of Ducks Unlimited on Tuesday championed conservation provisions in one more push to complete a farm bill, but lack of movement is now leading to talk of carrying over conference negotiations into 2014.”

Mr. Clayton pointed out that, “Vilsack credited the chairs and ranking members of the House and Senate Agriculture Committees for their work thus far in the negotiations, but more commitment is needed to getting the bill done, he said. ‘These are obviously difficult issues, but at the end of the day we don’t want to make the perfect become the enemy of the good,’ Vilsack said.”

Yesterday’s article also noted that, “Vilsack also reiterated the Obama administration’s support for tying conservation compliance to the premium subsidy.

“‘When you do away with direct payments, you obviously do away with the linkage between direct payments and conservation compliance, and that’s why it’s important to reinstate the linkage with crop insurance,’ Vilsack said. ‘It’s very clear where the administration is on this.’”

Sec. Vilsack also noted yesterday in response to a question regarding potential WTO issues that, “Well, first of all, let me say that an important reason for getting a farm bill done soon is to avoid retaliation from Brazil on the WTO cotton case we lost some time ago.  And obviously I think it’s incumbent upon Congress—and I’m sure people are sensitive to this—not to create yet another opportunity for the WTO to criticize the way in which we are supporting producers and reducing the risk associated with farming, which is pretty significant.  So we were obviously encouraging folks to find that compromise that allows them to respond to the needs of all different types of commodities.

“It’s historic, it’s traditional that there are differences of opinion about what those support programs should be, depending upon the commodity that you raise and grow, but there needs to be a blend, there needs to be a balance, there needs to be a sensitivity to the commodities.  At the same time there needs to be an awareness that we are engaged in a global economic activity and that we have to make sure that we are abiding by the rules if we want others to abide by the rules.  So I’m confident that they’re going to find the sweet spot in all of this.”

Also yesterday, DTN Editor Emeritus Urban C. Lehner noted at his blog that, “A compromise between $4 billion and $40 billion is going to require big concessions, probably on both sides. If they can ever be swallowed — and there’s no guarantee that compromise is possible — it will only be when there’s no more talking time left. Which raises the question: What is the real farm-bill deadline?

“Is it December 13, to coincide with the budget negotiators’ ostensible deadline?

“Is it December 31, when the current extension of the 2008 farm bill expires?

“Is it January 15, which many think is Congress’s real budget deadline?

Is it the day before whatever day USDA’s new permanent-law milk-price regime kicks in?”

Mr. Lehner added that, “If Congress has a negotiating idiosyncrasy, it’s creative rescheduling of supposedly final deadlines. Lawmakers have that power. We just might see some of this deadline sleight of hand in the next few weeks.”

In other developments, David Rogers reported yesterday at Politico that, “As House-Senate talks resume Wednesday, the bad blood among rival commodity groups is becoming an embarrassment for farm bill advocates and a threat to getting legislation through Congress this winter.

Cotton and rice recently took a shot at corn and soybeans in a letter about proposed payment limits in both bills. Corn and beans went directly after House Agriculture Committee Chairman Frank Lucas (R-Okla.) last week — threatening to kill the farm bill and seek a two-year extension that would run past his tenure as chairman.

“If J.P. Morgan had written such a letter to a tax-writing chairman in Congress, it would have stirred an immense fuss. But given the poor state of affairs in the farm world, the corn-and-beans threats drew little notice.”

The Politico article indicated that, “‘The traditional coalition has broken down,’ Lucas told POLITICO. And to a surprising degree, commodity groups are instead picking sides between Lucas and Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.).

“Even sugar seems split. Southern cane growers showed up Monday at a House strategy meeting in the Capitol basement even as sugar beet growers remain leery of challenging Stabenow.

“‘This has gotten out of hand, and it doesn’t need to be,’ said Randy Russell, a veteran agriculture lobbyist.”

Yesterday’s article added that, “‘This is not helping to get a farm bill,’ said Rep. Collin Peterson (D-Minn.), one of the four principal negotiators and the House chairman when the most recent farm bill was enacted five years ago. ‘I didn’t have this in 2008. The attitude among the commodity groups this time seems to be: Line up and shoot.’”

Mr. Rogers also explained that, “In Wednesday’s meeting, Stabenow is expected to outline a full-fledged Senate framework in response to Lucas. But it’s almost certain 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, but each has run into trouble for insisting that farmers be paid on what they actually plant — not according to the artificial ‘base acre’ formula used now for direct payments.

“For many House lawmakers, this is a necessary reform to make the subsidies more open and defensible to their urban colleagues. But it has run square into fears that all government aid be ‘decoupled’ from planted acres to avoid World Trade Organization complaints.”

 

Agricultural Economy

In more specific trade related news, Doug Palmer reported yesterday at Politico that, “The World Trade Organization is under intense pressure at a major conference in Indonesia this week to come up with a trade deal that proves its members can actually finalize a global trade pact instead of just bickering.

“But that prospect, which could salvage the WTO’s reputation as a negotiating forum and potentially boost world economic output by as much as $1 trillion, is uncertain at best, largely due to clashes between developed and developing nations over controversial agriculture provisions.”

Mr. Palmer explained that, “By far the most controversial issue in the Bali agricultural talks has been a push by India and other G-33 nations for a change to WTO rules that would let them exceed the cap on trade-distorting farm subsidies.

India says it needs the increased subsidies to comply with a new ‘food security’ law mandating it provide food grains to about two-thirds of the country’s 1.2 billion people. The subsidies also allow New Delhi to pay higher-than-market prices to farmers to encourage production for its grain stockpiling programs, Indian officials say.

“But the United States objects to the proposed increase in subsidies, saying stockpiling drives up prices in the short term, making it harder for the poorest countries to meet their own food needs, and leads to a grain surplus in the long term that later can be dumped on the market, driving down the prices farmers around the world can command for their crops.”

The Politico article added that, “In addition, developing nations have pushed for rules to reduce U.S. and European Union spending on agricultural export subsidies, which are considered the most distorting to trade because they depress world market prices, encouraging exports by reducing the prices foreign importers pay. But the opposing nations have been frustrated since the Doha round by the WTO’s failure to reach a deal on the subject. Although WTO members did agree in 2005 to eliminate all forms of agricultural export subsidies by 2013, that was contingent on a final Doha deal, which hasn’t materialized.”

And Mr. Palmer also pointed out that, “In addition to conflict over food subsidies and agricultural exports, African cotton has emerged as a sticking point in the Bali negotiations.”

Meanwhile, Emiko Terazono reported yesterday at The Financial Times Online that, “Agricultural food prices are expected to post double digit price falls this year and next, thanks to plentiful supplies of cereals, sugar and vegetable oil, according to Macquarie, the investment bank.

“Macquarie, which has launched a new benchmark for global food prices, said it expected food prices to decline by 11 per cent in 2013 and by 10 per cent in 2014.”

And University of Illinois Agricultural Economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“High Cash Rents and Farmer Returns”) that, “An open question is:  How long will it take before ‘high’ cash rents are lowered? The answer to this question will depend on the willingness of farmers to sustain losses on ‘high’ cash rent farmland.  In this post, farmer returns are estimated for average and ‘high’ cash rents.  Farmers with average cash rents are projected to have marginal returns in 2014.  Losses around $60 per acre range are projected to occur with ‘high’ cash rents.”

Keith Good

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