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Ag Economy; Farm Bill; Regulations; and, Immigration

Agricultural Economy

David Rogers reported yesterday at Politico that, “Updated projections by the Agriculture Department on Thursday forecast significant price declines for corn, wheat and even soybeans — all large enough to trigger potential payments under the new farm bill.

Corn stands out the most, with average prices dropping to $3.90 per bushel in the coming crop year, even after the department assumes reduced plantings. Wheat would fall to $5.30 a bushel, also with reduced plantings.

Soybeans fare best of the three and will continue to see increased plantings. But the $9.65-per-bushel price reflects an estimated 24 percent decline from what the department estimated for the current 2013-2014 farm cycle.”

Mr. Rogers explained that, “Economists emphasized that the new data also show that global corn and wheat stocks remain tight, meaning prices will continue to be vulnerable to supply shocks. Corn futures rose this week, for example, because of concern over dry, hot conditions in Brazil.

But in all three cases—corn, wheat, and soybeans— the new price projections are below what the Congressional Budget Office assumed when scoring the farm bill. And this makes it all the more likely that the updated CBO score in March will show billions more in outlays under the revised commodity title.”

Gregory Meyer reported yesterday at The Financial Times Online that, “Grain prices will sink to the lowest levels in half a decade as farmers plant aggressively to replenish low global stocks, the US government said in its first official forecast of the 2014 growing season.

“The forecast heralded an era of steadier food prices after years of intense swings unleashed by poor weather and adverse policy responses in the main growing regions, including a 2010 cereals export ban in Russia and damaging droughts in Brazil and the US in 2012.”

The FT article noted that, “Both corn and soyabean markets have plummeted from record levels reached in 2012, though soyabeans remain strong in relation to corn. As a result, Mr Glauber said US farmers will probably plant 92m acres with corn this year, 3.4m less than last year. They will add 3m soyabean acres, bringing the total to 79.5m acres.

“Overall, Mr Glauber forecast 253.8m US acres planted with the eight major grain and oilseed crops, a 0.7 per cent decline from last year.”

Mr. Meyer added that, “The department foresees US agricultural exports rising to a record $142.6bn in fiscal 2014, a new record as bigger volumes offset weaker prices. Exports to China – soyabeans, cotton and other agricultural products – alone would total record $25bn, Mr Glauber said.

China has signalled it would allow more corn imports, though it recently rejected shipments of foreign corn grown from an unapproved genetically modified seeds.”

Christopher Doering reported yesterday at The Des Moines Register Online that, “The U.S. Agriculture Department’s top economist said Thursday that U.S. ethanol production is set to grow, though he stopped short of offering details.

Joe Glauber, the department’s chief economist, told an audience of lobbyists, agribusiness executives and other officials, that after the amount of corn used to produce ethanol soared last decade to meet growing demand for the fuel, it has leveled off to around 5 billion bushels annually. Corn production in the U.S. last year was nearly 14 billion bushels.

“‘I think we’ll see growth’ resuming, Glauber said at the USDA’s Agricultural Outlook Forum. ‘A lot will depend on penetration of higher blends of ethanol . . .  and ethanol exports.’”

Also yesterday, a news release from USDA indicated that, “USDA today released the preliminary 2012 Census of Agriculture results.  Key findings include an increase in the value of agricultural products sold in the United States totaling $394.6 billion in 2012, up 33 percent ($97.4 billion) from 2007.  The number of farms and land in farms were down slightly, but held steady. Additionally, agriculture is becoming more diverse.”

Meanwhile, the U.S. Drought Monitor indicated this week that, “In contrast, southern California missed out on both week’s precipitation while unseasonable warmth persisted, further degrading conditions similar to the Southwest…[R]anchers are reducing their herds due to the lack of water and food sources” [related graph here].

Anthony York reported yesterday at the Los Angeles Times Online that, “A proposed $687.4-million drought-relief package unveiled Wednesday was met with mixed reactions, with one state Republican leader calling it a ‘drop in the bucket.’

“The proposal, presented by Gov. Jerry Brown and legislative leaders, aims to clean up drinking water, improve conservation and make irrigation systems more efficient.

“It also contains money to replenish groundwater supplies, and for state and local agencies to clear brush in drought-stricken areas that pose a high fire risk.”

Also yesterday, Jacob Bunge and Ben Fox Rubin reported at The Wall Street Journal Online that, “Hormel Foods Corp. reported an 18% increase in fiscal first-quarter profits, but spiking natural-gas prices will weigh on its turkey division over the coming months, executives said Thursday.

Higher costs for the fuel, relied on to heat livestock facilities, are diminishing the benefits from lower feed prices and will lift Hormel’s raw-materials costs over the next two quarters, Chief Executive Jeffrey Ettinger said.”

The Journal article added that, “U.S. natural-gas prices have surged 45% this year as homes and businesses across the Midwest and Northeast consume record amounts of the fuel during a series of cold snaps.”

“Hormel has increased revenue for more than three years running as U.S. consumers choose to eat at home more often. Rising commodity costs and customers’ resistance to higher prices have pressured margins recently, though sharply lower feed costs due to last year’s bumper grain and soybean harvests have cut the cost of feeding livestock,” the article said.

 

Farm Bill

In more specific Farm Bill developments, Tim Krohn reported this week at the Mankato Free Press (Minn.) Online that, “U.S. Rep. Collin Peterson said the long struggle to get a new farm bill, which started with hearings in 2010 and just recently passed, was due largely to the political harshness in the House but also because more and more misperceptions exist about rural America.

“‘Most of our urban friends don’t understand what we do,’ Peterson told a group of farmers Wednesday at South Central College.

“‘We have some groups in this country who make a living out of putting out misinformation,’ said the 7th District Democrat who serves an area covering most of western Minnesota.”

The article noted that, “Peterson, the ranking member of the House Agriculture Committee and one of the chief architects of the farm bill, told the farmers they will need to make some very important decisions about which programs to enroll in because they will be locked in to that choice for years. ‘Once you make (a decision), you can’t change it.’

“He said those choices, such as what type of crop insurance program to enroll in, will be vital as record-high crop prices of a couple of years ago have reversed. ‘I think we’re headed into an era of lower prices and I think they’ll be here for some time.’

“‘You’re going to pay less for insurance, but you’re not going to get as much as you did in the past,’ he said of the new farm bill, which ends direct subsidy payments to farmers but beefs up other crop-disaster and income-protection programs.”

Additional coverage of the event at South Central College, including video clips, is available at KEYC-TV (Mankato) Online.

In a related item regarding producer program decisions and the Farm Bill, Jonathan Coppess and Nick Paulson penned an update yesterday at the farmdoc daily blog titled, “Agriculture Risk Coverage and Price Loss Coverage in the 2014 Farm Bill,” which noted in part that, “The 2014 Farm Bill’s commodity title requires producers to make an important decision:  whether to sign up for one of two versions of the Agriculture Risk Coverage (ARC) program or the Price Loss Coverage (PLC) program (further information is available here, here, and here).  This decision is made for each Farm Service Agency (FSA) farm.  The choice of program is a one-time decision to be made by the deadline established by FSA and expected to be during the upcoming summer.  The decision cannot be changed during the five-year life of the 2014 Farm Bill.  Today’s post describes each of the program options using an example farm to illustrate payment calculations across a range of price levels for corn and soybeans.”

Also this week, Chairman Frank Lucas (R., Okla.) and Rep. Steve Southerland (R., Fla.) discussed the Farm Bill with Rahman Johnson, an Anchor on WTXL-ABC 27 television in Tallahassee, Fla.  (An audio replay of this discussion can also be heard here (MP3- 14:15)).

An update this week from the Georgia Farm Bureau indicated that, “U.S. Senate Agriculture Committee Chairman Debbie Stabenow (D-Mich.) met with Georgia Farm Bureau (GFB) leaders and staff at the organization’s state office in Macon Feb. 18.”

The update added that, “‘We have a really good farm bill for Georgia and for the country. There are areas that need to be worked out that deal with commodities, and we need to get that done as quickly as possible so that farmers know information when they make a choice as to which [crop insurance] program to be involved in,’ Sen. Stabenow said. ‘Our top priority is to provide a peanut revenue program through crop insurance. Dairy needs to get implemented, and there are a number of other areas that need to be implemented that I know the Department [of Agriculture] is working very hard on. The most important thing is we have the certainty of a five-year farm bill. We know what the parameters are. We know it’s good for agriculture. Now we just have to take the next step to get it implemented in a way that makes sense for farmers and ranchers.’”

“U.S. Senate Candidate Michelle Nunn accompanied Sen. Stabenow on her visit to GFB, expressing her interest in and support of Georgia agriculture,” the update said.

And an update yesterday at fibre2fashion.com indicated that, “The Government of Brazil would ask the World Trade Organization (WTO) to set up a panel for analyzing the new US Farm Bill and to determine whether the bill is in accordance with the WTO’s 2009 decision, which considered agricultural subsidies being against the rules of international trade, reports Agencia Brasil.

“The information was revealed by Luiz Alberto Figueiredo, Brazil’s Minister of Foreign Affairs, after participating in a meeting of Foreign Trade Chamber (Camex), an organization of the Brazilian Ministry of Development, Industry and Foreign Trade.”

The update added that, “Mr. Figueiredo said that Brazil is not going to immediately take any retaliatory measure against the US suspension of paying monthly installments to the Brazilian Cotton Institute (IBA).

He added that the issue of trade retaliatory measures is always open, but the Government would continue to negotiate with the US, as the primary interest is in solving the issue in a manner that serves Brazil’s national interest.”

A news release yesterday from the National Cotton Council (NCC) stated that, “In response to Brazil’s decision to request a panel at the World Trade Organization (WTO) to assess the new U.S. farm bill, the National Cotton Council stated that the new Stacked Income Protection Plan was developed specifically to bring the United States into compliance with the 2008 WTO Appellate Body decision thus resolving the long-standing dispute.

“NCC Chairman Wally Darneille said, ‘The farm bill makes several changes to cotton policy and the GSM 102 export credit program. These changes are significant, and we believe the matter is resolved. We are encouraged by statements by Brazilian officials which indicate a preference to resolve the case through continued discussions rather than retaliation. We encourage U.S. officials to continue to engage with their Brazilian counterparts to reach a resolution to the case.’”

 

Regulations

AP writer Dina Cappiello reported yesterday that, “The Environmental Protection Agency on Thursday proposed strengthening  20-year-old standards aimed at protecting farmworkers from toxic pesticides.”

The article noted that, “The changes would bar almost anyone 16 and younger from handling the most toxic pesticides and require no-entry zones around fields to protect workers from drift and fumes. Farms would also have to post no-entry signs to prohibit workers from entering fields until pesticide residues declined to safe levels.

“Farms would also have to provide annual training sessions on pesticide risk to workers, including how to protect their families when they return home with clothes and shoes potentially laced with pesticides. Now, farmworkers receive training once every five years.”

And DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “A top administrator for the Environmental Protection Agency sought to allay concern over agricultural exemptions in the Clean Water Act that could be affected by an upcoming proposed rule spelling out what ‘waters of the U.S.’ means in the Clean Water Act.

“EPA and the Army Corps of Engineers have been working on the proposed revision that is expected to become public soon. Farm groups are among those concerned about the breadth of the proposal because more bodies of water could be considered as falling under federal regulations. Dried creek beds that only flow in the heaviest of rainfall events could be classified as ‘navigable.’”

The DTN article stated that, “Nancy Stoner, acting assistant administrator for water programs at EPA, attended the National Cattlemen’s Beef Association annual meeting earlier this month in Nashville to talk about the proposed rule and tamper down some of the concerns. Agricultural exemptions from EPA permitting requirement will not be harmed, she said.

“‘I think farmers are going to see a lot in it that they like,’ Stoner said Wednesday. ‘All of the exemptions for agriculture both for jurisdiction and for permitting are either retained or expanded. We’re focusing hard on trying to make sure this work for agriculture.’

“Talking to DTN and the Brownfield Network, Stoner said EPA outreach to the agriculture industry continues and there will be more discussions with farmer groups once the proposed rule is released, which Stoner said will be soon. Agricultural groups have said the rule could come out within the next two weeks.”

With respect to other regulatory issues, Ben Goad reported yesterday at The Hill’s RegWatch Blog that, “The largest American food safety update in 70 years will be complete by spring 2016 under the terms of a settlement announced Thursday between food safety advocates.

“Seven separate rules under construction at the Food and Drug Administration are designed to shift the national food safety net from a system geared to respond to illness outbreaks to one designed to prevent them.”

The article added that, “The regulations are required by the 2011 Food Safety Modernization Act, which set a 2012 deadline for them to be finalized. But the process has been fraught with delays, which prompted the Center for Food Safety (CFS) to file a lawsuit against the FDA over the missed statutory deadlines.

“A consent agreement filed Thursday in federal district court in Oakland, Calif., cements a new, staggered set of deadlines for the rules.”

Also, Ron Nixon reported in today’s New York Times that, “The Agriculture Department is suffering from a shortage of inspectors at some of the nation’s meat and poultry plants, a top inspectors’ union official and a food safety group said this week, raising the possibility that contaminated products could reach consumers.”

 

Immigration

The Wall Street Journal editorial board opined today that, “Republicans are often first in line to vote for farm subsidies. But when it comes to lending farmers a hand by modernizing the country’s guest-worker program, many hide in the corn stalks. A new study quantifies the costs of the GOP’s immigration duck.

“The American Farm Bureau Federation commissioned independent economists to analyze how immigration reform would effect farm production and food prices. Their conclusion is that any fix that doesn’t expand the legal pathways for immigrants to enter and work in the U.S. will cost farmers and consumers a bundle.

“About half of the country’s 1.1 million hired farm hands are estimated to be undocumented, largely because the current H-2A visa program is a bureaucratic nightmare. The Labor Department is slow to process visa applications, so farmers often don’t get the labor they need in time for harvest—if workers show up at all. Guest workers also aren’t allowed to change jobs or stay in the country for more than a year. Thus many simply overstay and become illegal. In 2010 a labor shortage cost more than $320 million in farm losses.”

The Journal added that, “The only reform alternative in the study that wouldn’t harm farmers and consumers is a redesigned guest-worker program. The study proposes that the new visa be renewable after three years, allow workers to change employers and be available to dairy farmers and ranchers. This is similar to provisions that passed the Senate.

“However, the Senate bill also restricts farm guest workers to 337,000 over five years, which would only meet about two-thirds of farmers’ needs. A farm guest-worker bill that passed the HouseJudiciary Committee last summer would do better, though it invites political tinkering by allowing the Agriculture Secretary to lower, but not raise, its 500,000 cap on visas.

“Republicans have killed immigration reform for now, but the Farm Bureau study shows that in the real economy it’s still needed. The irony is that many Republicans who support handouts to farmers oppose reforms that wouldn’t cost taxpayers a dime and would help the economy.”

Keith Good