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Farm Bill; Ag Economy; and, Food Policy Issues

Farm Bill- Policy Issues

Matthew Weaver reported yesterday at the Capital Press Online that, “Rep. Cathy McMorris Rodgers, R-Wash., says she’ll be watching implementation of the 2014 Farm Bill to make sure new rules and provisions will be workable for farmers in Eastern Washington. McMorris Rodgers anticipates providing more leadership for agriculture issues after Rep. Doc Hastings retires at the end of 2014.

“Rep. Cathy McMorris Rodgers represents Washington’s 5th district, which includes much of Eastern Washington. As chair of the House Republican Conference, she is currently the fourth highest-ranking Republican. She was first elected in 2004.”

The Capital Press article, which continued in a “Q and A” format, added that, “Within the farm bill, the crop insurance program is especially important to our wheat growers. They gave up direct payments, but we need to have that crop insurance safety net as they move forward,” Rep. Rodgers noted.

And on the issue of immigration, Rep. Rodgers indicated that, “Obviously within agriculture, we continue to have significant workforce needs. For Washington state, in any given year, we need between 80,000 and 100,000 people to help pick our product. Our current H-2A guest worker program will provide 5,000 to 10,000, so it doesn’t come close to meeting the need. It is very important that we are taking steps to fix what is a broken immigration system. I’m hopeful we’re going to continue to see more progress on this front in 2014. Several of these bills have passed the judiciary committee in the House, and I think we’re going to start seeing more of those bills come to the floor.”

Marcia Zarley Taylor reported earlier this week at the DTN Minding’s Ag Business Blog that, “Which farm program option you choose under the 2014 Farm Act will be a split decision, largely along commodity lines, land grant university economists are finding.

“Growers and their landlords will have a one-time chance to commit to a farm program option, and that decision will be in force through the life of the 5-year law. Fortunately, it will take USDA months to write regulations, so analysts believe you’ll have until at least June to bone up on the alternatives and school your landlords on the specifics.”

The DTN article noted that, “Preliminary analysis shows wheat country is likely to opt for Price Loss Coverage (PLC)–the version similar to the traditional Counter Cyclical Program with fixed price guarantees, said Kansas State University economist Art Barnaby in a webinar Friday. Since wheat growers generally buy only 70% coverage on their federal crop insurance, they would also benefit from eligibility to buy subsidized Supplemental Coverage Option (SCO) insurance, effectively filling the ‘gap’ on some of their revenue losses.

“The reason is that only 11 cents separates ARC [Agriculture Risk Coverage] and PLC coverage, so growers will likely choose PLC and SCO to bolster coverage. Barnaby estimated 2014 ARC payments will trigger for normal yields when prices hit $5.61, versus $5.50 for PLC.

“In contrast, both Barnaby and economists at the University of Illinois conclude that Midwest corn growers will likely gravitate toward the [ARC] plan with county coverage. ARC kicks in at much higher price levels than PLC would and closer to levels land grant economists expect over the next few years.”

Ms. Taylor added that, “Barnaby contends that ARC works so well for corn that ‘only bears who believe season-average corn prices will dive to $3.30 or below’ will favor PLC over ARC. The doom-and-gloom scenario got some credence at last week’s Outlook conference when USDA estimated season average prices for corn at $3.65 in 2014-15 and $3.30 to $3.60 between 2015-2018 crops. However, Barnaby said ‘almost no one believes USDA’s numbers.’ When prices drop that low, he argued, it stimulates additional corn demand and cures the problem, so he advised growers not be too pessimistic in assumptions about future prices.

Jonathan Coppess and Nick Paulson, University of Illinois economists writing on Farmdoc.com last week, also emphasized that the choice of ARC or PLC hinges on price expectations. ‘If multi-year average prices for corn are expected to be over $3.70 over the next five years, ARC will provide better protection since PLC will never trigger payments,’ they wrote. ‘If prices are expected to be very low, averaging less than $3, PLC will provide better support.’ Corn prices between $3 and $3.70 are more of a toss up.’”

Richard Chin Quee reported yesterday at WGCU radio (NPR Member- Fort Myers, Fla.) Online that, “The recently enacted Farm Bill included major reforms for the nation’s farmers. Well, most of them that is. It ended direct crop subsidies and replaced them with taxpayer supported crop insurance. It also cut food stamps by around $8 billion. While those changes garnered bipartisan support, the sugar industry was protected by a bipartisan coalition. From the perch of most South Florida lawmakers, that’s a great thing. Democratic Congressman Alcee Hastings says the sugar program is vital for South Florida’s economy.”

The update noted that, “But critics argue the sugar program costs consumers more than $3 billion annually by inflating prices at the grocery store, which they contend costs 20,000 jobs each year.”

Yesterday’s report indicated that, “[House Ag Committee Chairman Frank Lucas (R., Okla.] says the sugar industry is surely one of the lobbying groups that stands out to him.

“‘What is lobbying? It’s about explaining to the members and the committees and the committee staffers why things work and how they should work and getting your perspective across’, described Lucas. ‘Arbitraging information I think is what the old economist professor would call it. Do the sugar lobbyists do a real good job? Yeah. But they’re one of a whole bunch of groups who do a real good job.’

“South Florida Republican Congressman Mario Diaz-Balart says he understands the argument for ending supports for sugar growers, but he says the U-S shouldn’t do it alone.”

And Matt Fuller reported yesterday at Roll Call Online that, “Steve King, apparently, isn’t conservative enough for the Club for Growth.

“He may be a tea party firebrand and, traditionally, one of the most conservative members of the House, but Club for Growth says that on votes they scored, King was wrong 29 percent of the time in 2013.”

The Roll Call update explained that, “The easy explanation, in two words? ‘Farm’ and ‘bill.’

“According to CQ Roll Call’s math, King lost about 15 percentage points over votes related to the farm bill. There were 87 possible points for a legislator this year in the Club for Growth scorecard, and King lost 13 of them with the farm bill: seven points for voting for the June farm bill, three points for the farm-only measure, two points for voting against a Paul Broun, R-Ga., amendment to repeal the permanent price support for milk, and one point for voting against a Steve Chabot, R-Ohio, amendment to eliminate the Market Access Program, which helps promote U.S. agricultural products.

Club for Growth — and Heritage Action for America, which has their own scorecard — hated the farm bill, and a healthy number of votes were related to the legislation. King did pick up some Club for Growth points on the farm bill for supporting a Tim Huelskamp, R-Kan., amendment to implement food stamp restrictions on able-bodied adults, as well as an amendment from the erstwhile-Rep. Trey Radel, R-Fla., to eliminate a $10 million annual authorization for a National Sheep Industry Improvement Center.”

(For more background on recent changes at the Heritage Foundation, see, “In the DeMint Era at Heritage, a Shift From Policy to Politics,” which was on the front page of yesterday’s New York Times).


Agricultural Economy

Yue Li and Isabella Steger reported recently at The Wall Street Journal Online that, “Chinese speculators are rushing to bet on the country’s rapidly growing menu of agricultural commodity futures such as soymeal and even eggs, as interest in hard commodities wanes.

“The surge in popularity of these derivatives has been fueled by commitments from Beijing that ensuring adequate food supplies and stronger pricing power is one of the country’s top priorities.”

The Journal article pointed out that, “Soymeal, used in animal feed, is especially popular because it is tied to rising meat consumption in China, where a growing and increasingly affluent middle class is spending more money on costlier food.

Soymeal futures are China’s most-traded commodity.”

University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdoc daily blog (“Potential Growth in Corn Used for Ethanol Production”) that, “In last week’s issue it was argued that corn consumption during the current marketing year appears to be more responsive to lower prices than generally anticipated, particularly in the export market.  The responsiveness reflects not only lower corn prices in absolute terms, but also in relation to the price of other feed ingredients.  Arguably, corn has become one of the cheaper feed ingredients currently available.

“In addition to increased feed consumption of corn in the domestic and foreign markets, there are also indications that domestic corn consumption could be boosted by growing export demand for ethanol.  It is argued that the combination of generally high crude oil prices, and therefore high gasoline prices, in relation to ethanol prices will make ethanol an attractive source of octane around the world.  With corn prices at current levels, U.S. ethanol is very competitively priced in the world market.  Anticipating export demand for ethanol, however, is difficult and opinions about the size of that market vary considerably.  U.S. ethanol exports totaled about 400 million gallons in 2010, but ballooned to almost 1.2 billion gallons in 2011 as high sugar prices and limited Brazilian ethanol supplies boosted demand for U.S. ethanol, particularly in Brazil.  Exports retreated to about 730 million gallons in 2012 as Brazilian ethanol production rebounded and totaled only about 620 million gallons in 2013.  However, exports were on the rise late in the year, totaling 82.5 million gallons in November 2013 and nearly 65 million gallons in December 2013.  Weekly statistics from the U.S. Energy Information Administration (EIA) suggest that exports have been brisk so far in 2014Canada is the largest importer of U.S. ethanol, accounting for 45 percent of U.S. exports in December 2013.  Brazil accounted for an additional 22 percent of U.S. exports. An additional 44 countries imported some U.S. ethanol in November or December 2013.”

Yesterday’s update noted that, “A combination of larger ethanol exports, increased domestic motor fuel consumption, and a final EPA rule making for the RFS for 2014 that provided more ‘push’ for higher ethanol blends in the domestic fuel supply could provide for meaningful expansion in domestic ethanol production and corn consumption.”

And after additional analysis, the farmdoc update concluded by noting that: “Ethanol is expected to continue to be a large and likely growing segment of demand for U.S. corn, suggesting that corn prices could be supported at higher levels than expected during a period of more abundant supplies.  However, there is a limit to growth without motivation to expand corn-based ethanol production capacity.”

In a related article regarding sugar prices, Leslie Josephs reported yesterday at The Wall Street Journal Online that, “Sugar and coffee prices rose to multi-month highs on Monday as a drought in Brazil fueled concerns about smaller crops from the world’s biggest exporter of these commodities.

“Producers and analysts have been cutting their production estimates as a hot and dry summer threatens some of Brazil’s crops. The adverse growing conditions could crimp world supplies, although there isn’t a danger of a shortage of any of the commodities.”

Brazil provides one-fifth of the world’s sugar,” the article said.

Neena Rai reported yesterday at the Middle Eastern Real Time blog (Wall Street Journal) that, “Sugar consumption growth in the Middle East, North Africa will likely slow in 2014 to a rate of 1.5% due to already saturated demand levels coupled with political unrest in parts of the region, said Cyrus Raja, general manager of the world’s largest standalone sugar refinery Al Khaleej in Dubai.

“Since 2000, average annual sugar demand in the MENA region has grown at a rate of around 3% up until last year, Mr. Raja told The Wall Street Journal.”

In other developments, Bloomberg writer Megan Durisin reported today that, “The worst California drought on record is forcing Jeff Schmiederer to spend $1.1 million on two new wells for his 1,200-acre almond orchard. Trees got so little water in 2013 that this year’s harvest may drop 25 percent, and the damage may be even worse in 2015.

“‘You’re making next year’s crop this year,’ Schmiederer, 49, said by telephone from Mendota, in the arid central valley that supplies 81 percent of the world’s almonds. With state water allotments cut to zero, Schmiederer’s wells may only help get irrigation to about 75 percent of normal. ‘I’m right on the edge of my water needs. Next year could be a disaster.’”

AP writer Scott Smith reported earlier this week that, “With California’s agricultural heartland entrenched in drought, almond farmers are letting orchards dry up and in some cases making the tough call to have their trees torn out of the ground, leaving behind empty fields.”

See also this interesting set of graphics regarding the drought and California food production from Mother Jones.

In trade related news, a news release yesterday from [Sen. Donnelly] indicated that, “On Friday, Senator Joe Donnelly (D-IN) joined a bipartisan group of senators in sending a letter to the United States Trade Representative, Ambassador Michael Froman, expressing concerns over Japan’s delay in making a comprehensive offer on agricultural products as part of the Trans-Pacific Partnership (TPP) negotiations. The senators laid out worries that such a delay may negatively impact the goal of increasing market access for U.S. agricultural products in TPP party countries.”

Also, the “Washington Insider” section of DTN noted in part yesterday (link requires subscription) that, “Speaking with reporters at last week’s annual USDA Agricultural Outlook Forum, Secretary of Agriculture Tom Vilsack said he does not believe that Transatlantic Trade and Investment Partnership (TTIP) negotiations will be successfully concluded unless the parties deal ‘seriously, comprehensively and fully’ with agricultural trade issues.

“Vilsack said that statements by the European Union’s trade commissioner, that with or without an agreement the EU would not import hormone-treated U.S. beef, did not mean that the issue was off the table for negotiations. In addition to the beef issue, Vilsack said that the parties must work on issues related to biotechnology, as well as ‘what could be significant trade barriers that are trying to be constructed by the Europeans under the guise of geographic preference.’”


Food Policy Issues

AP writer Mary Clare Jalonick reported today that, “Moving beyond the lunch line, new rules that will be proposed Tuesday by the White House and the Agriculture Department would limit marketing of unhealthy foods in schools. They would phase out the advertising of sugary drinks and junk foods around campuses during the school day and ensure that other promotions in schools were in line with health standards that already apply to school foods.”

And Helena Bottemiller Evich reported yesterday at Politico that, “Should a regular bag of Chex Mix be labeled as containing eight servings, or just two? Should pasta sauce jars tell how much sugar was added?

The Obama administration is expected to take a major step toward addressing questions like these on Thursday when it unveils the first update to nutrition labels on food packages in more than two decades.

“The big changes coming to the iconic Nutrition Facts panel are to be rolled out Thursday, sources say, when First Lady Michelle Obama is scheduled to make an announcement in the East Room at the White House ‘regarding proposals to help parents and other consumers make healthier choices.’ Neither White House nor Food and Drug Administration officials would confirm the timeline.”

Marc Lifsher reported in yesterday’s Los Angeles Times that, “California farmers markets want to get tough with interlopers who don’t sell what they grow.

“They’re backing a bill to crack down on vendors who falsely claim to offer pesticide-free or locally grown fruits, nuts and vegetables.”

The article noted that, “The [California] bill, AB 1871…[w]ould make it a misdemeanor to make false statements about the origin and quality of agricultural products.”

Also, Ricardo Lopez reported yesterday at the Los Angeles Times Online that, “The long-running ‘Got Milk?’ slogan promoting milk consumption in the U.S. has been nixed.

“The Milk Processor Education Program, funded by milk processors, has launched a new ad campaign that aims to emphasize milk’s protein content to get Americans to drink more milk.

“Rather than feature celebrities sporting milk mustaches, the new ad campaign – ‘Milk Life’ — touts milk’s nutritional qualities and urges Americans to drink more of it in the morning.”

Keith Good