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Farm Bill; Political Notes; Ag Economy; and, Regulations

Farm Bill Agreement Reached

David Rogers reported yesterday at Politico that, “House-Senate negotiators reached agreement and filed a new farm bill late Monday, a nearly 960-page measure [bill text, statement of managers, brief overview] that combines a landmark rewrite of commodity programs together with bipartisan reforms and savings from food stamps.

“As fast as the papers were signed, the meat industryspurned in the final deal making — was already organizing to try to kill the measure when it comes to the House floor Wednesday.

“But for a moment Monday night, the stage belonged to the leaders of the House and Senate Agriculture committees, who have struggled through two Congresses to hold together the frayed, often fractured coalition of agriculture and nutrition interests behind any farm bill.”

Yesterday’s article noted that, “Following his appearance before the House Rules Committee on Monday night, [House Ag Committee Chairman Frank Lucas (R., Okla.)] said an early procedural test could come as early as Tuesday, when the House votes on the rule making debate in order Wednesday’s consideration of the conference report.”

Mr. Rogers pointed out that, “The single largest savings come from ending the current system of direct cash payments to farmers, which cost more than $4 billion annually and are distributed at a fixed rate — whatever a farmer’s profits…[A]nd in the case of food stamps — the most-sensitive nerve for many urban Democrats — respected leaders in the anti-poverty field like Robert Greenstein of the Center on Budget and Policy Priorities said the compromise was ‘relatively favorable’ and better than rolling the dice into another Congress.”

The Politico article added that, “No friend of past farm bills, Speaker John Boehner (R-Ohio) came off the sidelines Monday night to embrace the deal as an improvement in current policy — for farms and food stamps.”

Also yesterday, Daniel Looker reported at Agriculture.com that, “A final draft of a 2014 farm bill worked out in closed-door negotiations between House and Senate ag committee leaders was released late Monday, with support from leading farm groups but not all livestock interests…[B]ut livestock commodity groups and food associations say that their members will face economic harm because in its current form the 2014 farm bill ‘fails to fix the U.S. Country of Origin Labeling law.’”

AP writer Mary Clare Jalonick reported yesterday that, “A coalition of powerful meat and poultry groups, generally strong supporters of the legislation, said Monday they would work against the bill after the heads of the agriculture panels did not include language to delay a labeling program that requires retailers to list the country of origin of meat. Meatpackers say it is too costly for the industry and have fought to have the program repealed in the farm bill.”

The AP article added that, “Negotiators on the final deal also left out a repeal of a catfish program that would have angered Mississippi lawmakers and language that would have thwarted a California law requiring all eggs sold in the state to come from hens living in larger cages. Striking out that provision was a priority for California lawmakers who did not want to see the state law changed.”

With respect to some of the remarks made by Chairman Lucas at the Rules Committee hearing yesterday evening, Sarah Mimms reported yesterday at National Journal Online that, “In testimony before the House Rules Committee, the Oklahoma Republican argued that the bill is the best possible deal for both parties, at one point even calling it ‘amazing.’ After months of work, though, Lucas admitted that he’s happiest that the whole process is over, noting that the negotiations around the dairy industry alone were incredibly taxing for negotiators.

“‘If I expire in the next three days, I want a glass of milk carved on my tombstone—because it’s what killed me,’ he said.”

DTN Special Correspondent Chuck Abbott reported yesterday (link requires subscription) that, “U.S. farmers will have the choice of traditional price supports or insurance-like protection against a drop in crop revenue under the farm bill headed for a final vote in Congress.”

The DTN article noted that, “The so-called shallow-loss revenue program and a $1-billion-a-year expansion of federally subsidized crop insurance are the bill’s salient reforms for producers. The cotton program, for example, would be converted largely to a revenue insurance plan called STAX.”

Mr. Abbott explained that, “Under the bill, growers will make a one-time choice for their corn, soybeans, wheat and other program crops whether to enroll for revenue protection, based on yields and season-average prices, or a program similar to target prices that sets a minimum price.

“‘Reference prices’ used in the bill to trigger payments are up sharply from current law. They would be $5.50 a bushel for wheat, $3.70 for corn and $8.40 for soybeans vs. the 2008 law’s $4.17 for wheat, $2.63 for corn and $6 for soybeans.

For farmers who choose revenue protection, payments would become available when crop revenue is less than 86% of the rolling five-year average. They would end when revenue falls below 76% of the average. Crop insurance would cover deeper losses.”

Yesterday’s article indicated that, “So-called Price Loss Coverage would operate similar to current law, with payments triggered when season-average prices are below the guaranteed price.

“Kansas Sen. Pat Roberts said he would vote against the farm bill because ‘it repeats a classic government subsidy mistake — setting high fixed target prices — which only guarantees overproduction.’

“Analysts say the shallow-loss program would be the first to respond when commodity prices, which ran at historically high levels for several years until this year’s harvest, fall but payments would taper off during a run of low prices.”

The DTN update added that, “Besides the shallow-loss program, the farm bill would create an insurance program called Supplemental Coverage Option that would operate in a similar way but with fewer limits on payments. It would be available to growers who opt for Price Loss Coverage.”

Note that in an interview yesterday morning with Mike Adams on the AgriTalk radio program, Mary Kay Thatcher, Senior Director, Congressional Relations with the American Farm Bureau Federation, indicated in response to a question about farm program critics that, “I think all that happens is while crop insurance may be a winner in this farm bill, the target moves squarely to crop insurance. It’s been trending that way. We’ve already had hits to the program. But certainly now that you’ve eliminated direct payments, I think you’ll see more hits at the crop insurance program than anything else.”

With respect to dairy issues, Ms. Thatcher noted that, “Dairy is just about there, and indeed we’re going to have that gross margin insurance program we’ve talked about for a long time, but there will not be supply management connected with it. So they’re actually setting up a base type program for dairy that would…you would have a base, the highest of the last three years level, and then you would be paid on a portion of that base, full indemnity.

“If you expanded production significantly, faster than the national average, then anything that you increased above that base would only be paid 25% of the indemnity instead of 100%. So the incentive will not be the supply management provision that Speaker Boehner so adamantly opposed. Instead it will be an incentive where you wouldn’t get as much coverage, and so if you decide to increase your production significantly, you’re only doing it for a market signal, you’re not doing it for a government program.”

Ms. Thatcher pointed out that, “You know, we were looking at $300 million baseline for dairy, and my understanding is the new baseline is somewhere in the range of 1.2 or $1.3 billion. That’s a huge win for dairy now and in the future, to be able, you know, if this program doesn’t work, there’s some money set aside so we can come up with something new.”

Billy House reported yesterday at National Journal Online that, “There was no official [Farm Bill] score yet as of early Monday night from the Congressional Budget Office.”

Jim Mulhern, President and Chief Executive Officer of the National Milk Producers Federation stated yesterday that, “Despite its limitations, we believe the revised program will help address the volatility in farmers’ milk prices, as well as feed costs, and provide appropriate signals to help address supply and demand.

“The program that we have worked to develop establishes a reasonable and responsible national risk management tool that will give farmers the opportunity to insure against catastrophic economic conditions, when milk prices drop, feed prices soar, or the combination. By limiting how much future milk production growth can be insured, the measure creates a disincentive to produce excess milk. The mechanism used is not what we would have preferred, but it will be better than just a stand-alone margin insurance program that lacks any means to disincentivize more milk production during periods of over-supply.”

Ed O’Keefe reported yesterday at The Washington Post Online that, “Another $6 billion will be saved by cutting from 23 to 13 the number of conservation programs operated by the Agriculture Department and its agencies.”

And Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “House Majority Leader Eric Cantor (R-Va.) said he will personally support the compromise bill, giving it further momentum ahead of the House vote.”

“Although House Agriculture Ranking Member Collin Peterson (D-Minn.) said he did not support all of the provisions, he also announced that he will vote for it. His support brings a significant contingent of rural Democrats that could be key to the bill’s passage this week,” The Hill article said.

Mr. Wasson pointed out that, “But in another hopeful sign for the bill, Rep. Steve Southerland (R-Fla.), a member of the conference committee and key proponent of new food stamp restrictions, said he would support the bill.”

Yesterday’s article added that, “Negotiators have altered payment limit provisions contained in both the House and Senate farm bills. The limits are now capped at $125,000 per individual or $250,000 per couple, but caps within that total for PLC [Price Loss Coverage], ARC [Agriculture Risk Coverage] or marketing loan deficiency payments have been removed.

The compromise also changes restrictions on the so-called ‘actively engaged’ provision. The criteria for management has been strengthened compared to current law, a source said, but the provision appears be scaled back from the labor requirement in the earlier versions of the bills.”

Mr. Wasson also indicated that, “In another last minute decision, Senate Ranking Member Thad Cochran (R-Miss.) succeeded in keeping in place a catfish inspection program that importers and Vietnam have called an illegal trade barrier.”

Kristina Peterson reported in today’s Wall Street Journal that, “The bill is expected to pass the House Wednesday, lawmakers and aides from both parties said, with some caution since an earlier version failed last year.”

(Note: See this photo of the reaction from Chairman Lucas at the conclusion of that vote in June).

Ms. Peterson added that, “Some conservative Republicans are expected to oppose the food-program cuts as too small, while a number of Democrats have said the program shouldn’t see further reductions. Recipients saw a cut late last year when an increase in funding from the 2009 Recovery Act ended.

“‘My line in the sand has always been, I’m not going to vote for a farm bill that makes hunger worse in America,’ said Rep. Jim McGovern (D., Mass.), who said in an interview he would vote against the bill.”

Niels Lesniewski reported yesterday at Roll Call Online that, “Majority Leader Harry Reid announced Monday his plans for the chamber’s business for next month — warning of the potential for another long slog on nominations…‘This work period, the Senate will also consider a farm conference report. This legislation is a compromise reached thanks to the leadership of Chairwoman Stabenow. It’ll reduce the deficit and cut waste and fraud, all while protecting hungry children and families.’”

Lawmakers issued statements regarding the Farm Bill yesterday; some of then are included below:

Randy Neugebauer (R., Tex.)- “Instead of sending out direct payments, which aren’t tied to a farmer’s current production, the conference committee strengthened crop insurance, which requires farmers to pay a premium and only pays out in the event of a loss.  I’m also proud that my market-based Shallow Loss Coverage Option (SCO) was included in the final report.  This group insurance program helps farmers manage smaller losses—bad seasons that wouldn’t necessarily trigger an individual crop insurance policy, but over time could put a farmer out of business.”

– Sen. Heidi Heitkamp (D., N.D.)- “Ranchers who experienced losses due to natural disasters will be able to recoup portions of their losses, backdated when the programs initially expired in October of 2011.”

– Rep. Tim Walz (D., Minn.)- “I urge my colleagues to support this common sense compromise so we can finally get this bill signed into law.”

– Sen. Michael Bennet (D., Colo.)- “Both the House and Senate should quickly take up and pass this final version of the bill.”

– Sen. John Hoeven (R., N.D.)- “The farm bill includes a strong safety net for producers. Hoeven underscored that the safety net in the farm bill is focused on enhanced crop insurance. The legislation not only retains current individual crop insurance, but enhances crop insurance by helping farmers improve their yield history under the current program and by creating a new Supplemental Coverage Option (SCO). The SCO enables producers to purchase a supplemental policy beyond their individual farm-based policy.”

Meanwhile, Molly Ball penned a lengthy article recently at The Atlantic Online titled, “How Republicans Lost the Farm: The Tea Party has pulled the GOP away from the interests of rural Americans—some of the party’s most loyal constituents.”)

 

Political Notes

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “A Tea Party challenger announced Monday he will run against House Agriculture Committee Chairman Frank Lucas (R-Okla.).

“Lucas was straining to put the finishing touches on a five-year farm bill on Monday as the local businessman Robert Hubbard announced his candidacy in Oklahoma’s 3rd district.”

“The Club for Growth targeted Lucas for a primary challenge but weren’t yet ready to back Hubbard on Monday,” The Hill update said.

Ron Hays has posted audio from Mr. Hubbard’s announcement yesterday at The Oklahoma Farm Report Online.

 

Agricultural Economy

Edward Ortiz reported earlier this week The Sacramento Bee Online that, “It’s easy to see how harshly drought has visited Stanley Van Vleck’s 10,000-acre cattle ranch. In all directions, across plain and foothill, the landscape is colored sickly brown.

“Winter is normally the time that California ranchers rely on the rain to turn the grass green, providing food for cattle that roam the hillsides. This year, though, there is no green grass to be found on Van Vleck’s sprawling ranch south of Highway 16 near Rancho Murieta.”

The Bee article indicated that, “‘We’re downsizing like we never have had to,’ said Van Vleck, who sells premium Kobe beef to Snake River Farms. ‘This is now more a drastic situation than we thought it would be.’

“On an average year, Van Vleck keeps 2,000 head of cattle on his ranch, but this year he has whittled the herd to 200 animals. Recently, during a meeting with his family and an agricultural financial consultant, the bitter-pill option of selling off all his animals was discussed. That option is becoming more and more likely if no rain falls by spring, Van Vleck said.”

Reuters writer Rod Nickel reported yesterday that, “The piglet-killing Porcine Epidemic Diarrhea virus (PEDv) has spread to a second Canadian farm, government officials said on Monday.”

Mr. Nickel explained that, “Last week, the Ontario government said the virus, which has killed at least 1 million pigs in the United States, was found on a hog farm in southern Ontario’s Middlesex County, marking the first confirmed case of the virus on a Canadian farm.”

Meanwhile, Peter Gray reported on Friday at Harvest Public Media Online that, “With the price of farmland at record levels across the Corn Belt, many farmers have been renting acres to plant. Now, with the price of corn and soybeans in freefall, farmers that depend on renting risk big losses if they’re unable to negotiate lower rents.

“In the Corn Belt, farmers often pay neighboring landowners a premium to cash rent, a contract under which the landlord and tenant farmer agree to a fixed price per acre. In some fertile counties of Illinois and Iowa, cash rents reached nearly $400 per acre in 2013, about four times the median lease price for non-irrigated farmland in the Corn Belt, according to the USDA.

Corn hit a record high at over $8 per bushel in 2012. With corn expected to remain closer to $4 per bushel this year, growers are caught between those high rents and the low corn prices.”

And University of Illinois agricultural economist Darrel Good indicated in part yesterday at the farmdoc daily blog (“A Slower Pace of Soybean Consumption Is Needed”) that, “Prices for the 2013 soybean crop will be determined by how the soybean supply and consumption balance is maintained.  Cancellation of export sales would be the most negative development for prices.  The market continues to expect cancellations by China, but none have been confirmed.  A slowdown in the pace of the domestic crush would also indicate that supplies are adequate and point to lower prices. A lot of attention, then, will be focused on the January NOPA crush report.  A continuation of large export shipments and sales would be the most friendly for prices, indicating that larger imports would be needed this summer and that year ending stocks will be smaller than now forecast.  Prices appear locked into a broad side-ways pattern until the likely pathway becomes more obvious.  For producers still holding old crop soybeans, the higher price pathway would be welcome, but holds the most risk since a larger U.S. crop in 2014 is expected to eventually lead to lower prices.  Protecting the downside price risk on old crop soybeans still seems prudent.”

In trade related developments, The Wall Street Journal editorial board indicated today that, “Ways and Means Chairman Dave Camp and Senate Finance powers Max Baucus and Orrin Hatch recently introduced Trade Promotion Authority legislation, also known as fast-track, which would let Congress approve trade agreements by up-or-down vote without amendment. The President needs this to negotiate accords with 11 Pacific Rim countries and the European Union, which won’t consent to deals that 535 Members of Congress can later rewrite…[M]r. Obama can get a bipartisan victory that would help the economy and his legacy, but he’s going to have to work for it.”

And Tony C. Dreibus reported yesterday at The Wall Street Journal Online that, “U.S. ethanol makers are banking on export markets as they grapple with Obama administration plans to cut U.S. consumption requirements, but the industry is hampered by a distribution structure built almost exclusively around the domestic market.”

 

Regulations

A news release yesterday from Rep. Kevin Cramer (R., N.D.) stated that, “Today [Rep. Cramer] responded to reports of excessive regulatory fines being imposed on small farming operations by calling on U.S. Secretary of Labor Thomas Perez to cease such action. The Occupational Safety and Health Administration (OSHA) has begun enforcement action against small farms with less than 10 employees, despite being prohibited by Congress from doing so under the Occupational Safety and Health Act of 1976.”

Yesterday’s news update added that, “News reports indicate small farming operations are receiving up to $132,000 in OSHA fines. The recent fines stem from a 2011 operations memo which acknowledges the 1976 law prohibiting use of OSHA funds for regulating farms with ten or fewer employees, while at the same time implying authority over grain drying and fumigating operations by declaring they are not central to an agricultural operation…[T]he 2014 omnibus budget signed into law last week includes a provision further prohibiting OSHA from enforcing such fines. Cramer said this bipartisan consensus makes it clear OSHA needs to dismiss any outstanding fines issued in violation of the provision, and cease its unnecessary overreach into small farming operations.”

And, Brady Dennis reported yesterday at The Washington Post Online that, “The Food and Drug Administration has continued to allow dozens of antibiotics to be used in livestock feed, despite findings from its researchers that the drugs could expose humans to antibiotic-resistant bacteria through the food supply, an environmental advocacy group said in a report Monday.”

Keith Good