FarmPolicy

August 29, 2014

Ag Economy; Farm Bill; Trade; Biofuels; and the Budget

Agricultural Economy

Donnelle Eller reported on the front page of yesterday’s Des Moines Register that, “Economists expect Iowa corn and soybean growers will lose money over the next four years, beginning with this year’s harvest, squeezed by low commodity prices and high production costs.

“The potential downturn follows a boom that saw growers worldwide bringing millions more acres into production to take advantage of record-high prices.

Experts in Iowa compare the downturn to the devastating 1980s farm crisis, the only time in at least 60 years that the state’s farm industry posted a loss. This correction is unlikely to be as severe, because farmers are coming off record-high net incomes. But enough similarities exist to cause concern.”

The Register article indicated that, “‘We’ll likely see some bad times moving forward,’ Chad Hart, an Iowa State University agriculture economist, told growers at the Iowa Farm Bureau annual meeting last week.

“Even with a hoped-for soft landing, Iowa is expected to see a $1.4 billion hit to farm income this year alone, a blow that will ripple through Iowa’s slowly recovering economy.”

Ms. Eller pointed out that, “Lower corn and soybean prices, though, will help Iowa livestock producers, who have suffered through recent losses as a result of high corn and soybean prices.”

Also posted yesterday at The Des Moines Register Online was in an interactive graph depicting history and projections for some aspects of the U.S. farm economy including profitability, land debt, farm income and land values.

One graph indicated that, “After a couple of years of high commodity prices, corn producers are expected to see possible losses.  Even though corn prices have tumbled about 45 percent from last year’s highs, production costs have failed to follow suit.  It could take four years before farmers see relief from high seed, fertilizer, rent and other production costs.”

In a separate item in yesterday’s Register, Donnelle Eller reported that, “But what will likely keep the next few years from becoming a crisis, experts say: Grain prices are lower, but not rock bottom.”

The article noted that, “Corn prices last year pushed over $8 a bushel. Last week, prices were around $4.20 a bushel.

“‘It’s not the price farmers are getting for corn — especially compared to five, six, seven years ago (when prices averaged $2 to $3 a bushel) — that’s the problem,’ Hart said. ‘The issue here is where the cost has gone. The cost structure has moved into the $4, $4.50 range.’”

In an item in yesterday’s Register titled, “Experts: Farmers aren’t as burdened with debt as before previous crises,” Ms. Eller indicated that, “The expected farm downturn could be steep, but experts doubt it will replicate the farm crisis that hit the state 30 years ago.”

Meanwhile, Shane Romig reported on Friday at The Wall Street Journal Online that, “South American farmers are gearing up for bumper soybean crops as planted area swells and cooperative weather is leading to expectations of a flood of the beans making their way to world markets early next year, according to analysts.

“Almost half of the world’s soybeans–a key feed for livestock across the globe–will be grown in South America in the upcoming season, and record production is likely to dampen prices for the beans world-wide, traders say.”

And Donnelle Eller reported in yesterday’s Des Moines Register that, “The squeeze in profits that U.S. farmers face comes as congressional leaders work to hammer out a new farm bill, agriculture’s traditional safety net.”

The Register article pointed out that, “Lawmakers seeking to cut the federal budget are moving to end a long-standing program of direct federal payments to farmers.

But leaders are at odds over how best to structure price support programs meant to help make up for the loss of those payments. Also weighing heavily in discussions are cuts to food stamp programs.”

Yesterday’s article added that, “Regardless of what form the bill takes, [Michael Boehlje, an agriculture economist at Purdue University] said the nation’s crop insurance program ‘will clearly be less supportive’ of farmers, with a lower price locked in for 2014.”

 

Farm Bill- Policy Issues

More specifically in Farm Bill news, Pete Kasperowicz reported on Friday at The Hill’s Floor Action Blog that, “Next week may end up being all about what doesn’t get done, instead of what does get done.

“In Congress’s last planned week of work in 2013, there’s not much ‘must-do’ legislation that has to pass. The closest thing might be a short-term extension of agricultural programs.

Congressional farm bill negotiators have said a deal is close, but maybe not close enough to pass something by December 13, the day House GOP leaders say they are going home. Instead, a one-month extension may be in the works.”

Mark Vanderhoff reported yesterday at the Louisville Courier-Journal Online that, “Despite record agricultural sales this year, Kentucky’s farmers and others in the state are being hurt by the Obama administration’s policies, U.S. Sen. Mitch McConnell said Saturday at the annual meeting of the Kentucky Farm Bureau Federation.

“Speaking to hundreds of farmers, insurance representatives and agricultural policy experts gathered at the Galt House, McConnell spoke on a wide range of issues, from the U.S. farm bill to guest worker programs to the tobacco buyout program, condemning the Democrats’ and President Barack Obama’s handling of each one.”

Mr. Vanderhoff noted that, “Eighty percent of the U.S. farm bill, for example, now consists of food stamps, [Sen. McConnell] said, referring to the former name of the Supplemental Nutrition Assistance Program, or SNAP.

The problem is the farm bill has become a food stamp bill,’ [Sen. McConnell] said.

House Republicans negotiating with Senate Democrats on a U.S. farm bill compromise will push for less of an emphasis on nutrition programs and more support for agricultural production, McConnell said.”

Kristina Peterson and Michael R. Crittenden reported in today’s Wall Street Journal that, “Lawmakers have yet to formally agree on the politically explosive topic of how much to trim from food-stamps funding, which has traditionally been part of the farm bill. House Republicans want to cut spending on food stamps by nearly $40 billion over a decade, while Senate Democrats agreed to cut just $4 billion in their bill.

“‘We won’t have a deal before the 13th [Friday], but we’ll have one I think in January,’ Rep. Collin Peterson of Minnesota, the top Democrat on the House Agriculture Committee, told reporters recently.”

David Montgomery reported late last week at the Argus Leader Online (Sioux Falls, S.D.) that, “After years of delays, Rep. Kristi Noem said Thursday that Congress might finally be on the verge of passing a farm bill, though it might not make its end-of-the-year deadline…‘There’s still a lot of work that needs to be done, but I do feel better about the progress today than I did two days ago,’ Noem said. ‘I’m cautiously optimistic that a common-sense compromise is just around the corner.’”

Dave Russell reported on Friday at Brownfield that, “Ohio Senator Sherrod Brown, a member of the House and Senate Farm Bill Conference Committee shared with members of the Ohio Farm Bureau Federation last evening that after a conversation with Senate Ag Committee Chairwoman Stabenow Thursday afternoon he’s much more optimistic that a Farm Bill will be completed.

“‘A week ago I was concerned we may not be able to get a Farm Bill passed,’ said Brown. ‘I’m more optimistic after talking with Chairwoman Stabenow on Thursday afternoon that things look like they’re coming together, I think it looks like we’re fairly close to an agreement and I’m optimistic.’”

And Bryan Horwath reported on Friday at The Dickinson Press (N.D.) Online that, “Predicting that a farm bill may not become reality until next year, Sen. John Hoeven, R-N.D., addressed members of the state’s farming and ranching community here Friday morning.

“‘What I’m pushing for is to get it out onto the floor for a vote in the next couple of weeks,’ Hoeven said following an hour-long forum with about two dozen visitors at the North Dakota State University Research Extension Center. ‘I’m hopeful that we can at least get it passed on the Senate floor. That would really set us up to get it done no later than the first part of January.’”

Also, Jo Dee Black reported on Thursday a the Great Falls Tribune (Mont.) Online that, “If the farm bill passes this year, and those closely involved are optimistic that will happen, farmers will spend more time in their insurance agent’s office than at the Farm Service Agency office, said Sen. Jon Tester, D-Mont.

“‘The safety net for farmers will be in the form of federal crop insurance and not direct payments,’ he said. ‘That’s what the Senate farm bill proposed, and I think it was a good bill. It got held up when the House cut the nutrition title (low-income food programs) to the bone, and that was not right. But I do think we will get the farm bill passed by mid-December.’”

With respect to the executive branch, White House Press Secretary Jay Carney indicated on Friday during a news briefing that, “Well, we talked about budget negotiations that are underway. And when it comes to the farm bill and the efforts to pass comprehensive immigration reform, the president still believes that Congress can act and should act as soon as possible. And could act right away. The House could, when it comes to these issues.”

Mr. Carney added that, “Well they’re not gone yet and they ought to do something between now and their departure that could signal to the American people that — on — in the case of the Farm Bill that we have all the necessary elements of — of that important legislation taken care of, on behalf of our agricultural sector, as well as on behalf of Americans who depend on food and nutrition assistance.”

On the issue of conservation, on Friday, over 300 groups sent a letter to Farm Bill Conferees in support of compliance and sodsaver provisions for crop insurance; a copy of that letter is available here.

And USDA’s Economic Research Service noted on Friday at its chart gallery webpage that, “Support for conservation through USDA programs increased by roughly 70 percent between 1996 and 2012 and now amounts to roughly $5 billion annually.  A large majority of the increase occurred in working land programs, including the Environmental Quality Incentives Program (EQIP), the Conservation Security Program (2004-2008) and the Conservation Stewardship Program (2009-present).” (See related chart).

Meanwhile, Peter Wallsten and Tom Hamburger reported in yesterday’s Washington Post that, “Washington politicians facing a year-end deadline to cut billions in agriculture spending are feuding over the future of food aid for the poor and crop subsidies for farmers.

“There is, however, one area of agreement in the contentious negotiations: sugar.

“Lawmakers decided to preserve the decades-old government safety net that boosts profits for a relatively small group of growers and has cost consumers billions through artificially high prices.”

In other policy developments, a news release Friday from Rep. Kevin Cramer (R., N.D.) indicated that, “Today [Rep. Cramer] announced the Science, Space, and Technology Committee approved legislation to strengthen weather research, and a bill to reauthorize a drought monitoring program which assists local governments, farmers, and ranchers.”

 

Trade

Howard Schneider reported in Saturday’s Washington Post Online that, “In April, U.S. World Trade Organization Ambassador Michael Punke issued what in the polite world of trade diplomacy amounted to a kidney punch — a blow meant to hurt — when he took public aim at India’s extensive agricultural subsidies.

“They distorted prices, he said, didn’t help India’s poorest, damaged the fortunes of farmers in the region — and, drawing a line in the sand, could not be accepted by the United States even if that meant scuttling a large global trade deal.”

The article noted that, “But as that deal was completed, the United States confronts this fact: India’s subsidies are still in place and probably will remain so for years to come, as a working group negotiates whether and how the country will conform with world trade standards for agricultural products.

“The outcome of the meeting is being hailed as a triumph by participants — the WTO’s first successful effort to change some aspects of global trade law. ‘For the first time in our history, the WTO has truly delivered,’ WTO chief Roberto Azevedo was quoted by Reuters as saying. However, its chief achievement may be that negotiators managed to avoid an outright meltdown.”

Reuters news reported on Saturday that, “The agreement is a milestone for the 159 members of the W.T.O., which was created in 1995.

“It rescues the W.T.O. from the brink of failure and will rekindle confidence in its ability to lower barriers to trade worldwide after 12 years of fruitless negotiations.”

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “President Obama on Sunday hailed the completion a day earlier of a new World Trade Organization trade deal…‘This new deal, and particularly the new trade facilitation agreement, will eliminate red tape and bureaucratic delay for goods shipped around the globe.  Small businesses will be among the biggest winners, since they encounter the greatest difficulties in navigating the current system,’ Obama said.”

The U.S. Trade Representatives Office issued a Fact Sheet regarding the agreement titled, “Promoting Food Security, Facilitating Competition, Enhancing Exports: New Multilateral Agriculture Provisions at the WTO,” which noted in part that, “Agriculture and trade in agricultural goods support families and communities around the world – and agriculture is a key part of almost every World Trade Organization Member’s trade.  The new multilateral agreement struck by the WTO Membership at the 9th Ministerial Conference in Bali, Indonesia takes important steps to address some key issues with regard to agricultural trade.”

In other trade news, an update Friday from Rep. Rosa DeLauro (D., Conn.) indicated that, “In light of reports that House and Senate Chairmen are close to an agreement to revive ‘fast-track’ procedures that would force the Trans-Pacific Partnership and other trade agreements through Congress, [Rep. DeLauro], Louise Slaughter (D-NY), and George Miller (D-CA) restated their opposition to fast-track procedures that deny Congress its Constitutional authority to amend trade agreements. The Representatives pointed to letters signed by 151 Democrats and 23 Republicans opposing the use of fast-track authority that usurp Congress’s authority over trade matters. The Trans-Pacific Partnership, which has been negotiated in secret, is widely understood to benefit foreign countries and multinational corporations at the expense of American manufacturers and American jobs.  The next round of TPP negotiations begin on December 7th in Singapore.”

 

Biofuels

The Des Moines Register editorial board recently indicated that, “This week Gov. Terry Branstad said the Obama administration’s plan to lower the country’s ethanol blending mandate makes Iowans feel as if a president they helped elect has turned his back on them.”

The Register added that, “It’s quite an assumption that Iowans who cast votes for Obama were doing so based on anything even remotely related to ethanol — or that those same people now feel ‘betrayed.’”

And Christopher Doering reported in yesterday’s Des Moines Register that, “After years of success in Washington, the ethanol industry’s power may be slipping.

“The Environmental Protection Agency’s proposal last month to slash for the first time ever the amount of ethanol that must be mixed into the nation’s gasoline supply marked just the latest blow to an industry that until recently had seen consumption of the largely corn-based fuel soar. Experts say the growth helped mask underlying problems that now threaten to slow or even halt the industry’s expansion.

Even if ethanol supporters persuade the Obama administration to reverse course on the renewable fuels mandate, they still face a long struggle to wrest away more market share from the powerful oil industry blamed by some for limiting the amount of the renewable fuel available to gas stations.”

Meanwhile, the Senate Committee on Environment and Public Works will hold a hearing on Wednesday titled, “Oversight Hearing on Domestic Renewable Fuels.”

 

Budget

Lori Montgomery reported in today’s Washington Post that, “House and Senate negotiators were putting the finishing touches Sunday on what would be the first successful budget accord since 2011, when the battle over a soaring national debt first paralyzed Washington.

“The deal expected to be sealed this week on Capitol Hill would not significantly reduce the debt, now $17.3 trillion and rising. It would not close corporate tax loopholes or reform expensive health-care and retirement programs. It would not even fully replace sharp spending cuts known as the sequester, the negotiators’ primary target.

After more than two years of constant crisis, the emerging agreement amounts to little more than a cease-fire. Republicans and Democrats are abandoning their debt-reduction goals, laying down arms and, for the moment, trying to avoid another economy-damaging standoff.”

The Post article added that, “Details of the agreement remained murky Sunday as aides to the principal negotiators, House Budget Committee Chairman Paul Ryan (R-Wis.) and Senate Budget Committee Chairman Patty Murray (D-Wash.), continued to work behind closed doors. Ryan and Murray chair a 29-member conference committee tasked with approving a plan to fund federal agencies through fiscal 2014, which began Oct. 1, and avoid another government shutdown when a temporary funding measure expires in January.

“With lawmakers due back in town Tuesday, aides said Ryan and Murray are likely to bypass the committee and take the deal, if finalized, straight to the full House and Senate. Congressional leaders hope to finish work quickly and leave town for the holidays as soon as Friday.”

Keith Good

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