- FarmPolicy - http://farmpolicy.com -

Ag Economy; Food Safety; Farm Bill; Regulations; and, the Budget

Agricultural Economy

An update yesterday from USDA’s Economic Research Service (ERS), “2014 Farm Sector Income Forecast,” stated that, “Net farm income is forecast to be $95.8 billion in 2014, down 26.6 percent from 2013’s forecast of $130.5 billion. The 2014 forecast would be the lowest since 2010, but would remain $8 billion above the previous 10-year average.”

The value of crop production is expected to decline substantially in 2014, falling back to pre-2011 levels.  Commensurate with this drop is an expected decline in both crop cash receipts and the value of crop inventory adjustment,” the ERS update said; adding that, “Large U.S. corn production increases are expected as U.S. farm operations continue bouncing back from the 2012 drought. Both sales receipts and value of inventory change for corn in 2014 are expected to decline significantly, reflecting a large forecast decline in the average price of corn for grain. The world corn market has become much more competitive.”

ERS noted that, “Soybean receipts and value of production are expected to decline significantly, reflecting a large expected decline (19.3 percent) in the annual price” [see related graphs here and here].

On the livestock side, yesterday’s update stated that, “Increased dairy receipts are expected to more than offset forecast declines in hog and egg receipts in 2014…[and]… Receipts for cattle and receipts for calves are expected to remain stable in 2014 as price gains offset a decline in beef and veal production” [related graph].

In addition, ERS noted that, “Production expenses in 2014 are expected to drop for the first time since 2009. However, their forecast $3.9-billion decrease from the revised 2013 forecast of production expenses is considerably less than 2009’s $11.0-billion drop.  They remain well above nominal 2012 production expenses, and are expected to be the second highest on record nominally and the third highest in inflation-adjusted dollars” [related graphs here and here].

On the issue of government payments, ERS explained that, “Government payments paid directly to producers are expected to total $6.12 billion in 2014, representing a 45.4-percent decrease from 2013 (see table on government payments). Under the provisions of the Agricultural Act of 2014 (see details on the ERS Farm Bill Resources page), cotton producers are eligible to receive fixed transition payments for crop years 2014 and 2015 as they transition into coverage authorized by the new Stacked Income Protection Plan (STAX). Fixed by legislation, these cotton transition payments are forecast to be $577 million in 2014.

“Based on 2013 crop-year revenue losses mostly for corn, farmers are currently expected to receive $190 million in Average Crop Revenue Election (ACRE) revenue payments in 2014. Producers will receive the first payments from the newly authorized Price Loss Coverage Program and Average Risk Coverage Program in calendar-year 2015” [related graph].

A separate update yesterday from ERS, “Farm Business Income,” pointed out that, “Average net cash farm income (NCFI) is forecast at $81,200 for all farm businesses in 2014, a decline of more than 21 percent from 2013, after several years of increasing income.”

And ERS pointed out yesterday (“Assets, Debt, and Wealth”) that, “While the growth in farmland values is forecast to slow relative to recent years due to lower income, lower prices, and higher interest rates, farmland values are expected to continue rising. This reflects the continued relative strength of commodity prices, interest rates that are still accommodating, and the expectation of continued favorable net returns from both the market and government programs, including crop insurance.”

Jesse Newman reported yesterday at The Wall Street Journal Online that, “Prices for corn and soybeans, the country’s two biggest crops, dropped sharply over the past year as U.S. growers harvested large crops, including the biggest U.S. corn crop in history. The price declines have more than erased gains for farmers from having more of the crops to sell. The USDA projected a decrease this year of $11 billion in U.S. corn receipts and more than $6 billion in soybean receipts.”

The Journal article added that, “Patrick Westhoff, economics professor at the University of Missouri, noted that even with the expected drop, the USDA expects incomes to remain well above the previous 10-year average. Still, he said the change marks ‘a real reversal of fortunes from the last couple years when incomes have been good for crop farmers and lower for livestock producers.’

“Livestock operators are expected to fare slightly better in 2014, according to the USDA report, which forecasts a 0.7% increase in livestock receipts this year, driven largely by an 11.3% drop in feed prices. The outlook is brightest for dairy farmers, who Mr. Westhoff said will benefit from an upswing in milk production, dairy prices, and robust international demand for U.S. milk.”

In related news, Jacob Bunge and Tess Stynes reported yesterday at The Wall Street Journal Online that, “Shares of Dean Foods Co. tumbled 7.4% on Tuesday as the biggest U.S. milk processor posted weaker earnings, buffeted by rising costs and sluggish sales.

“Dean reported a $37.7 million fourth-quarter loss, hurt by increased costs for raw milk that the company expects to rise further. It said costs for the commodity may still outpace increased production forecasts this year among U.S. and European dairy farms, due to strong export demand for dairy products.”

The Journal writers noted that, “More of the world’s milk is flowing to growing countries such as China, which boosted its total dairy imports by 42% last year as production there fell 5% to 15%.”

Meanwhile, Jim Carlton and Siobhan Hughes reported in today’s Wall Street Journal that, “California’s drought is becoming a hot issue on Capitol Hill, where bills from Senate Democrats and House Republicans offer rival solutions on how to best aid water-starved farmers.”

The Journal writers stated that, “A bill introduced Tuesday by Sen. Dianne Feinstein (D., Calif.) would aid farmers, businesses and communities in drought-ravaged parts of California and Oregon by providing $300 million for such things as new water projects and by making it easier to buy water from neighboring jurisdictions.”

Last week, the Republican-led House passed a measure sponsored by California GOP Reps. David Valadao, Kevin McCarthy and Devin Nunes that would temporarily exempt the state and federal water-delivery systems there from adhering to provisions of the Endangered Species Act, among other laws,” the Journal article said.

Today’s article explained that, “The White House has already threatened to veto the House bill, saying a more balanced approach was needed, but has left the door open to the Senate measure…[P]resident Barack Obama is scheduled to visit Fresno, Calif., on Friday, a stop designed to highlight the impact of the drought.”

Tom Nassif, CEO of Western Growers, indicated yesterday that, “The state of California is facing potentially devastating drought conditions and Western Growers’ members and other producers across the state welcome the introduction of California Emergency Drought Relief Act of 2014 by Senators Feinstein and Boxer…[W]e hope that this bill will be promptly taken up and passed in the Senate so it can move quickly to a conference with the House bill passed last week. I believe if reasonable accommodation can be made between the two and merged into a single bill in a bipartisan effort, benefits can be realized by all California water users.”

Bettina Boxall and Lee Romney noted in yesterday’s Los Angeles Times that after recent rain in the Golden State, “it wasn’t nearly enough for anyone to call an end to a drought that is focusing national attention on California.”

In other news, Leon Stafford reported yesterday at The Atlanta Journal-Constitution Online that, “Chick-fil-A said Tuesday that it plans to serve chicken raised without antibiotics in all the Atlanta-based chain’s stores nationwide within five years.

“The company said it believes its move will make it the first in the quick-service industry to commit to ‘a 100 percent ‘raised without antibiotics’ standard for poultry.’”

An update yesterday from the National Chicken Council (NCC) from Ashley Peterson, Ph.D., NCC vice president of scientific and regulatory affairs, noted that, “This is a business decision made by Chick-fil-A in response to consumer demand.  Many of our members offer antibiotic-free poultry lines to provide a choice in the marketplace for consumers… [A]ntibiotics are not always used in chicken production; rather, they are administered to prevent and treat disease, only under the care of a licensed veterinarian.  The science shows that responsible and judicious use of FDA-approved antibiotics to treat and prevent disease in livestock and poultry is both safe and effective.”

In trade related news, Rebecca Shabad reported yesterday at The Hill’s Global Affairs Blog that, “Sens. Patrick Leahy (D-Vt.) and Jeff Flake (R-Ariz.) on Tuesday called on President Obama to end the trade embargo on Cuba.

“In an op-ed for the Miami Herald, Leahy and Flake point to surveys that indicate a majority of people in the United States support a change in U.S. policy toward Cuba.”

And Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “High-level talks over an Asia-Pacific trade deal will pick up again later this month in Singapore.

“Ministers of the 12 nations who are working to hammer out an agreement will meet Feb. 22-25 to discuss the Trans-Pacific Partnership (TPP), several of the countries announced Tuesday.”

 

Food Safety

Ricardo Lopez reported yesterday at the Los Angeles Times Online that, “The U.S. Department of Agriculture’s inspector general has opened an investigation into the Northern California firm behind a massive recall of nearly 9 million pounds of beef products, raising the possibility of criminal wrongdoing by the company.

“A spokesman for the the USDA’s Food Safety and Inspection Service confirmed the investigation to The Times on Tuesday.

“Rancho Feeding Corp. of Petaluma on Saturday announced a recall of 8.7 million pounds of beef products processed at its plant over the last year and sold in California and three other states.”

The LA Times article noted that, “The involvement of the USDA’s inspector general signals that there may have been criminal wrongdoing, according to food safety attorney Bill Marler in Seattle.”

 

Farm Bill

In an interview yesterday morning with Doug Williams on K-101 radio (Woodward, Okla.), House Ag Committee Chairman Frank Lucas (R., Okla.) noted that, “The fact that it’s [the Farm Bill] signed into law, nothing short of a miracle.  It’s been four years since then Chairman Peterson and I, as Ranking Member, started the hearing process to begin to put the farm bill together, two and a half years since I’ve been Chairman that we’ve actually worked on it legislatively.  Considering that what you have is a bill that will spend $23 billion less in mandatory money over the next four or five years of the farm bill in comparison to the previous five years, that’s a miracle.”

(Note: For more background on the Farm Bill being signed into law, see this recent article by Jerry Hagstrom, “At the farm bill signing.”  Also see this update, “Five Things You Should Know about the New Bipartisan Farm Bill,” a summary released yesterday by the Senate Ag Committee).

In his discussion yesterday, Chairman Lucas noted that, “The old direct payment program goes away.  The focus is now on crop insurance.  The livestock drought disaster assistance program is reauthorized, last year’s back hole is filled in and it’s made permanent, which matters to the cow-calf operators out there who are listening.  It matters a lot.  And we also reform food stamps.  No more advertising, no more recruiting, no more pushing them, no more making deals with foreign governments to push food stamps outside of the United States.”

Jonathan Knutson reported yesterday at AgWeek Online that, “Working out [Farm Bill] details, particularly ones involving livestock disaster programs, won’t take as long, says Aaron Krauter, the executive state director of the North Dakota Farm Service Agency.

“Still, farmers and ranchers will need patience, Krauter says.

“‘It’s going to take a period of time to get all those rules and regulations written,’ he says. ‘The ones that will happen the fastest are the livestock disaster programs. We’re going to see those enacted really quick. I hate to put a date to it. But it could happen in April. It could happen in May.’”

Also yesterday, University of Illinois agricultural economist Gary Schnitkey indicated at the farmdoc daily blog (“2014 Crop Insurance Decisions: The 2014 Farm Bill and 2014 Product Recommendations”)  that, “Passage of the 2014 Farm Bill leads to questions on whether the Farm Bill impacts 2014 crop insurance decisions.   Because the 2014 Farm Bill does not change crop insurance programs in 2014, the 2014 Farm Bill will not impact 2014 decisions. The 2014 Farm Bill may impact crop insurance decisions in 2015.  The two most significant differences between the 2013 and 2014 crop insurance decision environments are 1) dramatically lower projected prices and 2) introduction of the Area Risk Protection Insurance policy. Even given these differences, the basic recommendation for policies do not change in 2014.  Most farmers will find adequate protection with a Revenue Protection (RP) policy at a 75% or higher coverage level using enterprise units and the Trend Adjusted Yield Endorsement. Some farmers will find the Area Revenue Protection (ARP) and Revenue Protection with the harvest price exclusion (RP-HPE) useful.”

A recent news release from National Crop Insurance Services (NCIS) noted that, “On the heels of the 2012 drought, farmers turned to crop insurance in record numbers to protect their crops in 2013, according to data released today at a convention hosted by [NCIS] and American Association of Crop Insurers.”

“Notable crop insurance statistics for 2013 included: Farmers spent $4.5 billion to purchase insurance policies. That is up from $4.1 billion in 2012 and brings farmers’ total investment in crop insurance to $38 billion since 2000.  [And] 52,000 more policies were sold in 2013 than 2012.”

Also, AP writer Mary Clare Jalonick reported yesterday that, “U.S. Agency for International Development Administrator Rajiv Shah says changes to the way the United States distributes food aid could help feed 800,000 more people abroad, many of them Syrian refugees.

“The changes come in a wide-ranging farm law signed by President Barack Obama last week and a bipartisan budget agreement that also became law earlier this year. The bills together would allow the United States to make a small increase in the amount of international food aid that is given out as cash or vouchers.”

And Chris Clayton reported yesterday at the DTN Ag Policy Blog (“Energy Programs in the New Farm Bill”) that, “Renewable energy programs are expected now to cost $625 million over the five-year life of the legislation. That translates into a $541 million mandatory increase on those programs.”

 

Regulations

Tim Devaney reported yesterday at The Hill’s RegWatch Blog that, “The Labor Department is quashing controversial family farm regulations after coming under pressure from Republican lawmakers.”

The update indicated that, “‘The Department of Labor takes the appropriations language very seriously and has prohibited OSHA activities at farming operations that employ 10 or fewer employees,’ assistant labor secretary Brian Kennedy wrote in a letter to the House Education and Workforce Committee, which had complained about OSHA’s regulatory efforts in a January letter to the agency.”

An update yesterday from Rep. Kevin Cramer (R., N.D.) stated that, “Today [Rep. Cramer] said a response he and other colleagues received from the Department of Labor regarding OSHA’s excessive regulation on small farming operations is a welcome step, but more action is needed.”

“‘I am cautiously optimistic OSHA is moving in the right direction. The removal of the misguided memo is a good step, but farmers need reassurance they will not be targeted by more rogue regulation attempts in the future. I hope the agencies involved realize the seriousness of their mistake and its implications for our food supply and the people who work every day to produce it,’ said Cramer.”

Also, Stephen Castle reported in today’s New York Times that, “After 13 years, six scientific opinions and two legal challenges, an insect-resistant type of corn is on the verge of being approved by the European Union. It would be only the third genetically modified crop to be authorized for cultivation in the 28-nation bloc.

“Despite clear and at times impassioned opposition from a majority of member countries, opponents of genetically modified crops failed on Tuesday to muster sufficient support to block the authorization under the European Union’s complex weighted voting system.”

Meanwhile, Reuters writer Nate Raymond reported yesterday that, “A federal judge on Tuesday allowed a lawsuit to move forward that seeks to hold former MF Global Holdings Ltd Chief Executive Officer Jon Corzine and other executives responsible for the brokerage’s collapse.”

 

Budget

Paul Kane, Robert Costa and Ed O’Keefe reported in today’s Washington Post that, “The House approved a year-long suspension of the nation’s debt limit Tuesday in a vote that left Republicans once again ceding control to Democrats after a collapse in support for an earlier proposal advanced by Speaker John A. Boehner (R-Ohio).

In a narrow vote, 221 to 201, just 28 Republicans joined nearly all Democrats to approve a ‘clean’ extension of the government’s borrowing authority — one without strings attached — sending the measure to the Senate for a final vote, probably this week.”

Keith Good