FarmPolicy

August 1, 2014

Farm Bill; Biofuels; and, the Ag Economy

Farm Bill- Policy Issues

Christopher Doering reported yesterday at The Des Moines Register Online that, “Iowa Sen. Chuck Grassley said he was still confident Congress could complete its much-delayed work on a five-year, $500 billion farm bill this month.

It looks ‘more like the end of the second week of January I would expect that we get a bill to the president,’ Grassley told reporters in a conference call Thursday. ‘I haven’t heard anything to the contrary.’

“Grassley said among the sticking points so far is a measure he has championed that would place limits on how much in federal subsidies an individual farmer may receive and revising the definition of a farmer to prevent non-farmers from receiving large benefit payouts.”

Sen. Grassley also highlighted these issues in a couple of tweets yesterday (see here and here).

Sen. Jerry Moran (R., Kans.) was a guest yesterday on the Kansas Ag Network where he discussed a variety of policy issues with Greg Akagi.

A brief audio clip from yesterday’s Kansas Ag Network interview with Sen. Moran is available here (MP3- 2:00).

And James Post reported earlier this week at The Leader (Corning, N.Y.) Online that, “U.S. Rep. Tom Reed [R., N.Y.] said Monday he’s hopeful the federal farm bill will see action early in the new year.

“‘My understanding is this is going to be one of the first things we take care of when we come back’ in January, Reed said. ‘(The) differences (between the two sides negotiating) are getting smaller and smaller every day.’”

Also, Thomas Roberts interviewed Rep. Tom Cole (R., Okla.) yesterday on MSNBC television where discussion focused mostly on yesterday’s front page New York Times article on immigration and Speaker John Boehner (R., Ohio).  However, during the conversation, Rep. Cole outlined three goals for Congress when lawmakers return: Passing an omnibus spending bill, finishing the Farm Bill, and addressing the debt ceiling.  (Related audio here (MP3- 0:33)).

And with respect to the executive branch, DTN Ag Policy Editor Chris Clayton reported yesterday that, “USDA will continue holding back on any effort to implement permanent law with expectations that Congress will move over the next few weeks to complete work on a farm bill.

“Agriculture Secretary Tom Vilsack told DTN earlier this week he has high hopes Congress will follow through on conference negotiations between the House and Senate. Such efforts allow USDA to avoid buying milk products at twice the market price because of provisions in permanent law, the secretary said.

“‘I honestly think right now what we are seeing are positive signs from the leadership of the conference committee on the House and the Senate side and some indication from the House and Senate leadership that there is a desire and interest to get this done,’ Vilsack said.”

The DTN item pointed out that, “A new political complication for the farm bill involves a push by Democratic lawmakers to extend unemployment insurance for people whose benefits expired at the end of 2013. Some House Democratic leaders want to use savings from the farm bill to offset the costs of re-establishing those jobless benefits. A one-year extension of unemployment benefits for roughly 1.3 million people would cost about $25 billion, roughly about the same as the 10-year savings would be on the farm bill.”

On unemployment insurance issue, Justin Sink reported yesterday at The Hill Online that, “Failing to extend emergency unemployment benefits for more than 1 million Americans when Congress returns would undoubtedly hurt the nation’s economy, White House adviser Gene Sperling argued Thursday.”

The Hill update added that, “But White House press secretary Jay Carney said the administration ‘absolutely expects’ Congress to address the issue upon returning from the holiday, and senior adviser Valerie Jarrett said the administration ‘strongly’ supported legislation offered by Sen. Jack Reed (D-R.I.) that would prolong the program for three months while Congress weighed a longer extension.”

Meanwhile, the “Washington Insider” section of DTN indicated yesterday (link requires subscription) that, “The inside scoop on the farm bill is often couched in make-or-break terms and describes negotiators working really hard to write a compromise bill that can pass both legislative chambers. Right now, the political gap on several issues seems about as large as it was when the talks began, although some of the key players have begun touting a ‘framework’ approach they expect to detail when Congress returns that would be followed by a full House-Senate farm bill conference debate and vote on outstanding issues.

“Still, the discussions have become increasingly contentious and the closely-held process is not popular in some quarters. Senate Republican conferee Pat Roberts of Kansas, a former chairman of the Intelligence Committee, said the four ‘principal’ conferees have ‘better covert capabilities in stopping leaks than maybe NSA or anybody else. There are those of us who think we could be helpful on things that we think are very important to us and our background experiences.’ Observers suggest this could mean that some of the current ‘agreements’ could come unstuck a little later.”

In an opinion column posted yesterday at The Hill’s Congress Blog, Mark Lange, the CEO of the National Cotton Council (NCC), indicated that, “In his recent op-ed on the Congress blog, Dr. Langevin implies there needs to be further changes to the extensive reforms to the cotton program contained in the House and Senate passed bills now in conference. Through the [NCC], U.S. cotton growers have had extensive discussions with ABRAPA and Brazilian cotton growers regarding the necessary changes to resolve the cotton portion of the long-standing trade dispute.  They have jointly informed the two governments that the current provisions in the Conference Committee are sufficient to resolve the dispute.  As a result of those discussions, the current provisions have eliminated any reference price component, reduced the coverage span and modified the marketing loan from provisions initially proposed by NCC. It now seems that the Brazilian government may be moving the goal posts.

The changes in cotton policy, supported by the U.S. cotton industry, satisfy the findings of the WTO panel. That panel found fault with the combined effect of the target price, the marketing loan, and a provision known as Step 2. The panel found no fault with Direct Payments or insurance products. The Step 2 provision was eliminated in 2006; the new farm bill will eliminate the target price; and the marketing loan is changed in a manner that will eliminate any adverse market effects. In place of these programs will be a new insurance product that producers must purchase in order to have a safety net.

“The U.S. cotton industry supports the Stacked Income Protection Plan (STAX) currently under consideration by the Farm Bill Conference Committee. Looking back, the proposed policies for upland cotton represent a 52 percent reduction from the levels of spending observed during the years evaluated by the WTO panel. Looking forward, relative to a continuation of the DCP program, STAX will contribute $2.8 billion towards deficit reduction. CBO estimates STAX budget outlays represent a 38 percent reduction relative to the expected spending under a continuation of the Direct and Counter-cyclical Payment (DCP) program.

Meanwhile, Kristina Peterson reported in today’s Wall Street Journal that, “When lawmakers unveil a bipartisan compromise on a new five-year farm bill this month, they likely will trumpet a major change in policy: ending the long-established and much-maligned system of direct payments to farmers.”

The Journal article noted that, “But the emerging compromise, which would replace direct payments with beefed-up crop insurance and other protections for farmers, has already triggered criticism from outside groups who say it won’t radically reduce the amount of risk the federal government assumes in the agriculture industry.”

Ms. Peterson pointed out that, “Negotiators say they are trying to modernize the system by balancing the needs of farmers with the interests of taxpayers. ‘With direct payments farmers get a check, but with crop insurance farmers get a bill, and that change will save taxpayers billions of dollars,’ said Ben Becker, Democratic spokesman for the Senate Agriculture Committee. But the early concerns illustrate the challenges lawmakers will face as they try to build support for any new program of subsidies.

“The new bill is expected to be built around a new kind of farm support system, including strengthened crop insurance, a new supplemental program to help with out-of-pocket losses not covered by insurance, and additional assistance to farmers when their revenue or crop prices drop below a certain level.”

The new assembly of support programs is expected to save tens of billions of dollars, though new cost estimates from the Congressional Budget Office haven’t been publicly released,” the Journal article said.

In conclusion, today’s Journal article indicated that, “Whether these changes will shift the financial burden away from the taxpayer will depend on a number of factors, experts say. Early estimates are that the new approach will save billions of dollars. But the new system would be more sensitive to market-price swings, weather, how many farmers sign up and details of how the programs are structured in the final bill.

“‘We know how much money we’re going to save from getting rid of direct payments,’ said Andrew Novakovic, an agricultural economics professor at Cornell University. ‘But we don’t how much money we’re going to spend.’”

And more specifically on nutrition issues, a news release yesterday from USDA stated in part that, “Agriculture Undersecretary for Food, Nutrition and Consumer Services Kevin Concannon today announced that USDA is making permanent the current flexibility that allows schools to serve larger portions of lean protein and whole grains at mealtime.

“‘Earlier this school year, USDA made a commitment to school nutrition professionals that we would make the meat and grain flexibility permanent and provide needed stability for long-term planning. We have delivered on that promise,’ said Concannon.”

In other news, Reuters writer Adam Jourdan reported yesterday that, “Wal-Mart Stores Inc, the world’s largest retailer, has recalled donkey meat sold at some outlets in China after tests showed the product contained the DNA of other animals, the U.S. company said.”

And Annie Gasparro reported yesterday at The Wall Street Journal Online that, “General Mills Inc. has started producing Cheerios free of genetically modified content, making the 73-year-old breakfast cereal one of the highest-profile brands to change in the face of growing complaints over such ingredients from activist groups and some consumers.

“The change—which only affects original Cheerios, not other varieties like Honey Nut Cheerios—has been in the works since about a year ago, when General Mills began working to change manufacturing for Cheerios to eliminate ingredients containing genetically modified organisms, or GMOs.”

 

Biofuels

Reuters writer Michael Hirtzer reported yesterday that, “Bunge North America Inc, a division of Bunge Ltd, has sold its stake in a Mississippi ethanol plant in what is likely to be the first a spate of industry deals amid uncertainty over biofuel use in the United States, analysts said on Thursday.

“Ethanol makers are turning big profits now, but the future is cloudy with the U.S. Environmental Protection agency expected early this year to reduce the mandate to mix biofuels with gasoline in what would be the first cut in the 2007 Renewable Fuel Standard, or RFS.”

The Reuters article noted that, “Margins for U.S. ethanol makers rose to their highest in at least five years recently as corn prices plunged.

But if the Obama administration moves to cut mandated biofuel use in the United States, further expansion is unlikely, even as the industry consolidates, analysts said.

“The EPA recommended reducing the biofuels mandate in November and the proposal now is under final review. For corn-based ethanol, the agency proposed to cut the mandate to about 13 billion gallons a year from around 14.4 billion.”

 

Agricultural Economy

Jim Carlton reported in today’s Wall Street Journal that, “Record-low precipitation in 2013 has worsened California’s drought, draining reservoirs, forcing farmers to keep fallow thousands of acres of fields and leaving some ski resorts high and dry during the busy holiday season.

“Urban and agricultural customers, including Southern California’s huge Metropolitan Water District, have been told by the state to expect to receive this year, on average, just 5% of the water they historically request, after a year in which rainfall totals hit record lows in many parts of the state. Last year, customers received 35% of requested supply, on average.”

In a Texas Tribune article posted yesterday at The New York Times Online, Corrie MacLaggan and Neena Satija reported that, “Small and midsize farms and ranches in Texas — those under 2,000 acres — have been declining at a rate of 250,000 acres a year, according to the Texas A&M Institute of Renewable Natural Resources. From 1997 to 2007, the institute estimates, Texas lost about 1.5 million acres of agricultural land and is expected to lose a million more by 2020.

“And while Texas as a whole is growing rapidly, the 96 counties that lost population from 2010 to 2012 are mostly in heavily agricultural West Texas and the Panhandle, the Office of the State Demographer said.

“In other areas, urban growth is taking over.”

Keith Good

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