January 23, 2020

Farm Bill; Ag Economy; and, Biofuels

Farm Bill Issues

Reuters writer Christine Stebbins reported yesterday that, “U.S. farmers and bankers have almost a year to get ready for major changes in 2015 as crop insurance rather than direct cash payments to producers becomes the centerpiece of farm policy under the five-year farm bill signed by President Barack Obama earlier this month.

“For 2014 plantings, analysts said there will be no major changes to crop insurance except sharply lower grain prices than in 2013, which will lower potential payments and premiums. Then in 2015, farmers will have a new insurance option for supplemental coverage based on local county yields.”

“‘The message is crop insurance does become the foundation of the farm bill and the primary safety net for producers because they have lost all those direct payments,’ [Michael Barrett, senior vice president for crop insurance at Farm Credit Services of America] said.”

The Reuters article explained that, “Farm bankers and farm industry groups argue that the weather risk in farming, aside from any crop pests or disease, requires substantial insurance aid for farmers.

“‘Without government backing, it is unlikely that any insurance company would offer the coverage because the risk is too high,’ the National Corn Growers Association said in a statement. ‘Most farmers in the Midwest have paid far more in crop insurance premiums than they have received in claims.’

Gary Schnitkey, extension economist at the University of Illinois, said that since the farm bill does not change any crop insurance programs for 2014 from 2013, most grain farmers in Illinois, the No. 2 corn and soybean state behind Iowa, will use a standard revenue protection (RP) policy covering 80 to 85 percent of projected earnings, based on historical yields and prices.”

Ms. Stebbins added that, “For the 2012 crop, a drought year, insurance payments totaled $17.4 billion, or 12 percent of USDA’s annual budget of about $150 billion. In 2013, with a bumper harvest, payments were $10.7 billion.”

Also, James Fisher reported this week at The Daily Times (Salisbury, Md.) Online that, “Congress wants to find out if a federal crop insurance program is feasible when the crop in question is chickens or turkeys.

“An amendment to the farm bill, recently passed by both the House and Senate, calls for a report drawn up for Congress on whether a federal program should be launched to insure poultry growers ‘against business disruptions caused by integrator bankruptcy’ or by ‘a catastrophic event.’

“The provision in the bill was championed by Sens. Chris Coons, D-Del., and Saxby Chambliss, R-Ga. In a news conference Tuesday, Coons said he envisions an insurance program that would have helped growers for Allen Family Foods when the Sussex County-based company went bankrupt in 2011.”

Meanwhile, Chris Olwell reported earlier this week at The News Herald (Panama City, Fla.) Online that, “Two congressmen behind the recently signed into law farm bill visited a farm in one the Panhandle’s most agriculturally dependent counties to tout the impacts of the new law on local farmers.

“Rep. Steve Southerland, R-Panama City, and Rep. Frank Lucas, R-Yukon, Okla., the House Agriculture Committee chairman, spent part of their afternoon visiting Baggett Farms to discuss the bill, which is expected to cost about $1 trillion over 10 years and recently passed with bipartisan support. Though they said they wanted more reforms included in the bill, they said they were proud of the bill.

“‘It’s done. It’s a five-year farm bill that moves the curve forward in a number of areas,’ Lucas said. ‘We didn’t get everything.’”

“‘You’ll only get help when you have a weather failure or a market failure,’ Lucas said.”

The article stated that, “Southerland was instrumental in crafting the farm bill’s requirement that able-bodied adults work, enter a training program or do volunteer work in order to receive Supplemental Nutrition Assistant Program (SNAP) benefits. SNAP benefits used to be called food stamps. The provision will impact between four and five million people, they said.

“‘Our desire in the work requirement came from the belief that work is a blessing,’ Southerland said.

The original iteration of Southerland’s work requirement was more controversial and was blamed for delaying the passage of the bill. Southerland said he still hears about that.

“‘It’s funny that the detractors want to talk about last summer and the original bill going down, but they fail to finish the story,’ Southerland said.”

A separate update regarding the farm visit by Rep. Southerland and Chairman Lucas at WTVY (Dothan, Ala.) Online, noted that, “‘This has reforms in dairy, this has reforms in direct payments, this has reforms in citrus, and in Florida, the citrus element is enormous,’ said U.S. Representative Steve Sutherland, a Florida Republican.”

“‘If you’re a livestock producer, then the insurance programs that will address droughts and the indemnity programs that will address livestock loss, are funded permanently in the Farm Bill,’ said Frank Lucas (R-OK), Chairman of the House Agriculture Committee.”

Meanwhile, Allison Geyer reported this week at the La Crosse Tribune (Wis.) Online that, “Dairy farmers and the organic food industry were among the biggest winners when U.S. President Barack Obama signed the five-year Agriculture Act of 2014 Feb. 7. Partisan bickering in Congress over subsidies and food stamp cuts stalled the essential agriculture and nutrition policy legislation for two years.

Most significant are provisions to help dairy farmers manage risk, [Sen. Tammy Baldwin (D., Wis.)] said. A new dairy margin insurance program will replace the Milk Income Loss Contract, or MILC, which protects farmers when milk prices dropped. When the new program becomes available this fall, farmers producing less than 4 million pounds of milk per year pay lower premiums than larger operations.”

Note that Amanda Fries reported this week at the Utica Observer-Dispatch (N.Y.) Online that, “Margin insurance would be calculated by taking the difference between the milk price per 100 pounds and some index of farms’ feed costs. If that difference is $4 or less, the insurance would kick in.”

And a news update yesterday from Sen. Michael Bennet (D., Colo.) stated that, “As a member of the Senate Agriculture Committee, [Sen. Bennet] helped craft the Farm Bill with the help of Coloradans across the state.  He was also selected to serve on the conference committee convened to work out the differences between the House of Representatives and Senate versions of the bill.  Bennet helped ensure that Colorado priorities were in the final version of the Farm Bill, including a strengthened crop insurance program, improved conservation easements, reauthorization of the livestock disaster program, important forestry measures for reducing the risk of wildfires, and the continuation of Payment in Lieu of Taxes (PILT) funding for Colorado counties.”

In more specific developments regarding nutrition issues, Rep. Rodney Davis (R., Il.) was on WDWS radio (Champaign, Il) yesterday where he was asked about the push by Sen. Kirsten Gillibrand (D., N.Y.) and other Democrat lawmakers to delay one of the provisions of the recently passed farm relating to the SNAP program.

In part, Rep. Davis noted that, “I would hope that [Sec. of Agriculture Tom Vilsack] follows the law.  I would hope that he implements the law as we wrote it and as the President signed it.”

Rep. Davis added that, “What’s being lost in this debate is the majority of the savings to the taxpayers in this country in the Farm Bill are on the agricultural side, which is only 20% of the overall bill.  So I don’t think it is too much to ask to close that [SNAP ‘heat and eat’] loophole and keep it closed.”  (A related audio clip from the WDWS discussion is available here (MP3- 1:51)).

Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “Rep. Alcee Hastings (D-Fla.) on Tuesday proposed legislation setting up a federal pilot program to create new community gardens in poor areas of the country, a step he said would help offset cuts to the food stamp program made earlier this year.

“His Community Gardening and Nutrition Act would require the creation of at least 40 community garden projects in urban and rural areas with high poverty rates. It would have volunteers from the AmeriCorps VISTA program organize this work and requires the government to report to Congress on its progress after 90 days.”

And with respect to conservation, Cat Lazaroff reported yesterday at The Christian Science Monitor Online that, “Among the biggest conservation wins in the final bill is a provision linking crop insurance subsidies for farmers to conservation practices that protect land and water. Under ‘conservation compliance,’ farmers who receive subsidized crop insurance premiums have to agree to adopt certain practices to protect soil and keep pesticides out of freshwater supplies.”

Also yesterday, Ramsey Cox reported at The Hill’s Floor Action Blog that, “Sen. Charles Schumer (D-N.Y.) called for Department of Agriculture disaster assistance for Northeast vineyards that have been hit hard by this season’s extreme winter weather.

“Schumer said several New York vineyards have suffered major crop damage from the unusually cold weather, and the USDA could help through the Tree Assistance Program (TAP). The USDA could also approve a crop disaster declaration, which would allow vineyards to qualify for emergency loans.”

In news regarding animal production issues, the Los Angeles Times editorial board opined in yesterday’s paper that, “Proposition 2 is not going away, so instead of fighting it, Missouri should focus on building bigger henhouses.

“Starting next year, egg-laying hens in California will no longer be held in cramped cages that barely allow them to move. Proposition 2, the ballot measure that passed overwhelmingly in 2008 and goes into effect in 2015, requires all egg farms in the state to provide hens with space to stand up, lie down, turn around freely and fully extend their limbs. A complementary bill in the Legislature, passed in 2010, requires all out-of-state farmers to comply with these regulations if they want to sell eggs in California.

“Now, the Missouri state attorney general has asked a U.S. District Court in California to declare the law invalid and to stop it from being enforced because, he says, it violates the commerce clause of the U.S. Constitution. Last year, according to the suit, Californians bought a third of all the eggs produced in Missouri, making that state the second-largest supplier of eggs to California consumers (behind California itself). Either Missouri farmers will be forced to comply with the California law at great added expense, or they will lose a huge market for their eggs. That is unacceptable, the suit argues, because ‘California is attempting to regulate agricultural practices beyond its own borders.’”

The LA Times added that, “It’s time for egg producers to stop fighting the new requirements. Yes, the ideal solution to the chicken and egg problem would be one federal standard on hen housing. Legislation on that has stalled in Congress.”

Note that Lora Kolodny reported this week a the Venture Capital Dispatch Blog (Wall Street Journal) that, “Hampton Creek Foods Inc. has raised $23 million in Series B financing for plant-based food technology that replaces eggs in foods, from a simple scramble to muffins, cookie dough and condiments…[T]he company’s aim is to offer products that taste as good or better than their egg-based counterparts, that are cheaper to use, better for diners’ health, and far better for the environment than intensive animal agriculture practices that produce the majority of the 1.8 trillion eggs laid globally each year.”

And New York Times columnist Nicholas Kristof penned an item in today’s paper titled, “Is That Sausage Worth This?

More broadly, an update yesterday at the Economic Research Service (USDA) Chart Gallery webpage indicated that, “The U.S. livestock sector is slowly recovering from high feed prices and drought in the Southern Plains of the United States over the last few years.  Improving returns have provided incentives for increased production in the livestock sector.  As a result, total U.S. red meat and poultry production is projected to grow over the next decade” [see related graph].

In other policy related news, Mark Peters reported in today’s Wall Street Journal that, “Kevin Hollinger planted radishes and oats last fall in his corn and soybean fields, but he isn’t planning to harvest them. Instead, he is letting the crops die over the winter to improve the soil and keep fertilizer and other nutrients from running into nearby waterways.

“‘I could hardly go to town without someone asking: ‘What’s that in your field?’’ said Mr. Hollinger, a fourth-generation farmer.

“Helping to foot the bill for his experiment is a pilot program set to launch fully next month. Farmers in the Ohio River basin are being paid to make changes—from what they plant to how they handle manure—in an effort to minimize runoff that can cause hypoxia, or low oxygen levels, in waterways.”

The Journal article stated that, “Increasingly, several government and nonprofit groups, including the Electric Power Research Institute, the research arm of the U.S. utility industry, are trying an approach outside of traditional regulation. The institute is setting up a trading system, starting with about 30 farms across Indiana, Ohio, and Kentucky. Those farms create credits by keeping nitrogen and phosphorous from reaching the Ohio River. The credits can be sold to power plants, sewage plants and other facilities that release nutrients into local waterways.

“‘Our project is trying to set the table,’ said Jessica Fox, manager of the program, which is designed to work on a larger scale.

“The goal isn’t just to develop a new market. The projects also hope to persuade farmers that certain changes in the field can help the environment and boost their operations. Crop covers, for example, are sowed to improve soil quality for future plantings and reduce runoff by holding the soil in place and making it better able to absorb and retain water.”

For a closer look at cover crops, see this update by Chris Clayton posted yesterday at the DTN Ag Policy Blog, “Cover Crops: Health Care for the Soil.”


Agricultural Economy

Bloomberg writer James Nash reported today that, “The lack of rain also threatens winemaking in California, a state that produced 89 percent of the wine in the U.S. in 2012, from boutique labels like Nadeau Family Vintners to corporations like Constellation Brands Inc., the Victor, New York-based maker of Ravenswood, Robert Mondavi and Clos Du Bois wines.

“Almost 92 percent of California, including the Paso Robles winemaking region and parts of the Napa Valley, was experiencing severe, extreme or exceptional drought as of Feb. 11, according to the U.S. Drought Monitor, a federal website.”

AP writer Fenit Nirappil reported yesterday that, “Gov. Jerry Brown and the top Democratic lawmakers on Wednesday announced a $687 million plan to provide immediate help to drought-stricken communities throughout California, including $15 million for those with dangerously low drinking water supplies.”

Meanwhile, Seth Borenstein reported in today’s Washington Post that, “Wild bumblebees worldwide are in trouble, probably contracting deadly diseases from their commercialized honeybee cousins, a new study shows.

“That’s a problem even though bumblebees are not trucked from farm to farm as honeybees are. They provide a substantial portion of worldwide pollination of flowers and food crops, especially greenhouse tomatoes, insect experts said. And the ailments are hurting bumblebees even more, according to a study published Wednesday in the journal Nature.”

In trade news, Colleen McCain Nelson, Paul Vieira and Laurence Iliff reported yesterday at The Wall Street Journal Online that, “Leaders of the U.S., Canada and Mexico vowed Wednesday to strengthen trade ties and press on with an ambitious trans-Pacific trade pact, even if U.S. President Barack Obama may not be able to count on support from some in his own party.

“Mr. Obama met Mexican President Enrique Peña Nieto and Canadian Prime Minister Stephen Harper in this Mexican industrial city [Toluca], where the leaders unveiled a series of agreements, such as making it easier for travelers to move among the three countries and developing a regional transportation plan to boost road, rail and shipping links.”

Also yesterday, the White House released a Fact Sheet titled, “President Obama to Sign Executive Order on Streamlining the Export/Import Process for America’s Businesses.”



Reuters writer Michael Hirtzer reported earlier this week that, “An Iowa ethanol plant that will be one of the first producers of biofuels made from crop waste will be operating by June, a general manager of the plant said in an interview on Tuesday.

“POET-DSM, a joint operation between leading U.S. ethanol maker POET LLC and Dutch food and chemicals group DSM, will be among the largest to make so-called advanced biofuels on a commercial scale.”

And University of Illinois agricultural economist Scott Irwin indicated in an update yesterday at the farmdoc daily blog (“Will the EPA Reverse Itself on the Write Down of the Renewable Mandate for 2014? The Message from the RINs Market”) that, “The EPA announced preliminary RFS rulemaking for 2014 on November 15, 2013, and the proposal signaled a significant shift in EPA policy.  The most surprising and controversial aspect of the proposal was a write down of the renewable (ethanol) mandate from 14.4 to 13 billion gallons.  The proposal has been the subject of heated debate since it was released and the EPA received over 15,000 comments before the official comment period ended on January 28, 2014.  Biofuels groups have sent strong signals that they will mount a legal challenge if the final RFS rulemaking for 2014 includes the write down of the renewable mandate.  Previous farmdoc daily posts have examined the implications for grain, biofuel, and RINs markets of alternative scenarios for implementation of 2014 RFS rules (see the posts here, here, and here).  The purpose of today’s post is to show that the recent behavior of prices in the RINs market suggests the odds of the EPA reversing the proposed write down of the renewable mandate for 2014 in final rulemaking have increased sharply.”

At the conclusion of his analysis, Dr. Irwin noted that, “Once again, the RINs market may be providing an early warning signal about a change in EPA policy.  The recent rise of D6 ethanol prices relative to D4 biodiesel prices indicates that RINs traders believe the odds of the EPA reversing the proposed write down of the renewable mandate for 2014 in final rulemaking have increased sharply.  Interestingly, not much has been reported in the press that would support such a dramatic shift in expectations.  It was reported on February 3rd that the Administrator of the EPA, Gina McCarthy made the following statement at the meeting of the National Association of State Departments of Agriculture, ‘I have heard loud and clear that you don’t think we hit that right…[the final rule will be] in a shape that you will see that we have listened to your comments.’  It’s hard to parse from that statement alone that the EPA is on the verge of reversing itself.  Nonetheless, the recent track record of the RINs market in signaling changes in EPA policy is quite impressive and one should not easily dismiss the latest signals as a result.”

Keith Good

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