FarmPolicy

August 17, 2019

House Budget; Ag Economy; Regulations; Biotech; and, Biofuels

House Budget Proposal

Ed O’Keefe reported in today’s Washington Post that, “House Budget Committee Chairman Paul Ryan (R-Wis.) introduced a budget proposal Tuesday that would cut more than $5 trillion in federal spending over the next decade, primarily by effectively repealing President Obama’s signature health-care law and greatly reducing funding for social programs.”

The Post article noted that, “Congress approved a bipartisan two-year budget agreement late last year, but Ryan said he drafted a separate proposal because the current plan ‘is nowhere near what we need’ to cut spending.”

Mr. O’Keefe added that, “But any fighting between Democrats and Republicans on spending will not result in the deadline-driven fiscal crises of recent years. Although the GOP-controlled House is expected to debate and pass Ryan’s plan, it will serve only as a political show vote because Democrats, who control the Senate, do not plan to propose or vote on a budget plan.”

With respect to SNAP (food stamps), the Ryan budget indicated at page 62 that, “This budget assumes that outreach funding for the SNAP program is reduced, and the reduction is shifted toward programs that facilitate upward mobility, such as properly reformed job-training programs.”

In addition, “The budget resolution envisions converting SNAP into an allotment tailored for each state’s low-income population, indexed for inflation and eligibility. This option would make no changes to SNAP until 2019—– after employment has recovered—–providing states with time to structure their own programs. It would also envision improving work incentives by requiring a certain amount of people to engage in work activity, such as job search, community-service activities, and education and job training. This proposal is estimated to save $125 billion over ten years.”

Also, the budget resolution would “Eliminate Broad-Based Categorical Eligibility,” and “Eliminate Abuse of LIHEAP.”

And at page 37, the proposed budget stated that, “The recently passed Farm Bill reformed commodity programs, most notably by eliminating Direct Payments. However, this area remains ripe for reform. The budget takes into consideration the savings that the Farm Bill achieved and then proposes that additional savings be found. Under this option, mandatory agricultural outlays, other than food and nutrition programs, will be reduced by $23 billion relative to the currently anticipated levels from fiscal year 2015 through fiscal year 2024. These savings could be achieved by continuing to reform assistance programs for agriculture.”

A news release yesterday from House Ag Committee Ranking Member Collin Peterson (D., Minn.) noted in part that, “Turning SNAP into a block grant would only create an unaccountable black hole for federal dollars. The 2014 Farm Bill cut $13 billion from the farm safety net; yet the Ryan Budget calls for an additional $23 billion cut in both farm and crop insurance programs, potentially jeopardizing farmers’ ability to produce a safe and affordable food supply.”

The update also noted that:

“Net SNAP cuts in 2014 Farm Bill: $8 billion
- Additional cuts in Ryan Budget: $125 billion

“Net farm and crop insurance program cuts in 2014 Farm Bill: $13 billion
- Additional cuts in Ryan Budget: $23 billion”

National Farmers Union President Roger Johnson indicated yesterday that, “The farm bill passed two months ago, with $23 billion in savings from reductions to farm, conservation and nutrition programs. Now the House Republican leadership wants to cut these programs again, by an additional $148 billion, and turn the Supplemental Nutrition Assistance Program into a block grant program? That ship has sailed. It’s time to move on to other important issues and to stop this annual exercise in budget slashing.”

Rep. Jim McGovern (D., Mass.) noted at a Budget Committee hearing last week that, “The billions of dollars in SNAP cuts are causing real pain to low-income families who are struggling to make ends meet.”  He added that, “The good news is that SNAP participation is falling because of the improving economy.”

The House Budget Committee will take up the proposal in a meeting this morning.

 

Agricultural Economy- Rural America

Tony C. Dreibus reported in today’s Wall Street Journal that, “Corn futures jumped to a fresh seven-month high as a U.S. government forecast for lower planting this spring continued to reverberate through the market.

“Corn prices also rose as chilly, wet weather in the Midwest prompted concerns that farmers will be delayed in completing spring field work that is already two weeks behind normal in some locations.”

Today’s article added that, “Futures advanced for the second straight session after the Agriculture Department on Monday projected that farmers will sow 91.7 million acres with corn, down 4% from last year and the lowest acreage since 2010. The forecast was below analysts’ estimate of about 92.9 million acres.

Corn prices have climbed 20% so far this year, buoyed by stronger export demand. Last year, corn futures tumbled 40% as farmers harvested a record U.S. crop.”

Also, Bloomberg writer Whitney McFerron reported yesterday that, “Farmers in Brazil and Paraguay are planting a second crop of soybeans this year after prices rose relative to corn, signaling oilseed supplies will remain ample and the market may soon turn bearish, Oil World said.”

University of Illinois agriculture economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Cash Rents on Professionally Managed Farmland Projected Down in 2014”) that, “Recently, the Illinois Society of Professional Farm Managers and Rural Appraisers announced 2014 cash rents on professionally managed farmland.  Overall, 2014 cash rents on professionally managed farmland are projected to be lower than 2013 rents, perhaps signaling a move to lower cash rents in broader categories of farmland in 2015.”

Dr. Schnitkey pointed out that, “Decreases in 2014 cash rents on professionally managed farmland result from much lower corn and soybean prices since the summer of 2013.  If corn prices remain in the low $4 per bushel range, average cash rents may decrease in 2015.  Even with projected 2014 cash rent decreases, cash rents on professionally managed farmland will have to decrease further to match agricultural return levels associated with lower commodity prices.”

Meanwhile, Jim Carlton reported in today’s Wall Street Journal that, “Recent wet weather has failed to break California’s worst drought in decades, according to measurements showing the state’s snowpack stands at about one-third of its normal average.

“That could result in higher prices nationally for some produce grown in the state, such as nuts, according to food-industry experts.”

Mr. Carlton explained that, “Officials at the California Farm Water Coalition, a trade group of irrigators, estimate 800,000 acres of farmland in the state, or about 10% of the total under irrigation, will be left unplanted this year. That is estimated to cause $7.5 billion in economic losses this year, including $3.6 billion from lost production alone, said Mike Wade, the coalition’s executive director. Among the crops being curtailed: 28% fewer acres for corn, 35% fewer for cotton and 20% for rice, according to 2014 forecasts released Monday by the U.S. Department of Agriculture.

“Americans are likely to see rising prices due to lower production of certain staples for which California is the nation’s biggest supplier, including almonds, walnuts and pistachios, said Umar Sheikh, a food-industry analyst for Euler Hermes North America, a U.S. subsidiary of the Paris-based provider of trade credit insurance. ‘The farmers are faced with removing trees out of production this year, which could reduce the supply of nuts this year and into 2015,’ he said.”

Bettina Boxall reported yesterday at the Los Angeles Times Online that, “Officials announced Tuesday that they are temporarily waiving an endangered species protection to enable water managers to send more Northern California water south.

“The move comes as fishery agencies are under increasing political pressure to take advantage of late winter storms and ramp up pumping from the Sacramento-San Joaquin Delta, the center of the state’s water distribution system.”

Also yesterday, Bloomberg writer Megan Durisin reported that, “In a year when most American farmers can expect lower earnings than in 2013, U.S. milk producers are having a windfall.

Prices have never been higher, feed costs are down, and output is headed for an all-time high as exports surge to buyers from Mexico to China. While the average farm will see a 21 percent drop in net-cash income, led by declines for corn, wheat and soybeans, dairy farmers will earn 28 percent more at $334,100, the U.S. Department of Agriculture predicts.”

(For a closer look at grain and livestock related prices, see this 75-second overview from FarmPolicy.com last week, see also this FarmPolicy.com update from March 20 with more background on dairy price and production issues).

And Reuters news reported yesterday that, “Some of the world’s biggest oil and grains traders see little risk of any disruption to supplies from Russia, they said on Tuesday, despite the worst East-West crisis since the Cold War.”

The USDA’s Economic Research Service indicated in an update yesterday that, “The number of people living in nonmetropolitan (nonmetro) counties stood at 46.2 million in 2013—nearly 15 percent of U.S. residents spread across 72 percent of the Nation’s land area. Nonmetro areas lost population between July 2012 and 2013, continuing a three-year trend. While hundreds of individual counties have lost population over the years, this is the first period of overall population decline in nonmetro America.”

Additional census related data regarding Rural America is available in this brief FarmPolicy.com update from March 27.

 

Regulations (EPA, CFTC)

A statement yesterday from the American Farm Bureau Federation President Bob Stallman noted in part that, “Last week, the American Farm Bureau Federation carefully reviewed EPA’s March 25 release of the ‘waters of the U.S.’ proposed rule. The results of our review are dismaying.

The EPA proposal poses a serious threat to farmers, ranchers and other landowners. Under EPA’s proposed new rule, waters – even ditches – are regulated even if they are miles from the nearest ‘navigable’ waters. Indeed, so-called ‘waters’ are regulated even if they aren’t wet most of the time. EPA says its new rule will reduce uncertainty, and that much seems to be true: there isn’t much uncertainty if most every feature where water flows or stands after a rainfall is federally regulated.

“Under this proposed rule, farmers, ranchers and every other landowner across the countryside will face a tremendous new roadblock to ordinary land use activities.”

Recall that Secretary of Agriculture Tom Vilsack discussed the EPA water proposal last week on the AgriTalk radio program with Mike Adams- FarmPolicy.com transcript here.

Matt Kelley reported yesterday at RadioIowa Online that, “Iowa Senator Chuck Grassley is accusing the head of the U.S. Environmental Protection Agency of overstepping her authority in trying to more closely regulate Iowa’s waterways. EPA administrator Gina McCarthy issued a proposal last week that outlines which rivers, streams and wetlands would be federally-protected by the Clean Water Act.

“Grassley, a Republican, says the proposed changes go too far. ‘She’s assuming jurisdiction over waterways that may not even have water in them,’ Grassley says. ‘So, if they don’t have water in them, how are you going to get a boat of a certain size in them? You’re not even going to get a canoe in them and she’s claiming jurisdiction over riverbeds that you might not even be able to get a canoe into.’”

Meanwhile, Andrew Ackerman reported yesterday at The Wall Street Journal Online that, “The Senate Agriculture Committee plans to meet as early as next week to vote on President Barack Obama’s three nominees to the Commodity Futures Trading Commission, according to Senate aides.

“The panel is expected to meet as soon as Tuesday to sign off on the nomination of Timothy Massad, a senior Treasury Department official tapped to head the agency. It also would vote on the nominations of Sharon Bowen, a partner at law firm Latham & Watkins LLP, and brokerage executive J. Christopher Giancarlo. Mr. Massad was tapped in November to succeed Gary Gensler, who left the agency in early January. The exact timing of the meeting was still being worked out, one aide said.”

 

Biotech

Benjamin Goad reported yesterday at The Hill’s RegWatch Blog that, “Rep. Mike Pompeo is poised to introduce business-backed legislation establishing a voluntary labeling system for food made with genetically modified organisms (GMO), according to an industry source with knowledge of the plan.

“A spokesman for the Kansas Republican declined to comment on the lawmaker’s intentions, saying only that he is engaged with issues related to agriculture and interstate commerce. Pompeo sits on the Energy and Commerce Committee’s subpanel on Manufacturing, Commerce and Trade.”

Jacob Bunge reported in today’s Wall Street Journal that, “The western corn rootworm, a Farm Belt scourge, is gaining further ground against genetically modified crops designed to kill it, marking a setback for biotech seed makers.

“The rootworm, a voracious bug that can undermine farmers’ crops, is developing resistance to pest-killing toxins in corn seed marketed in the U.S. by Syngenta AG of Switzerland, according to new research from Iowa State University.

“The study, published last month, expands on earlier research showing that the insect had developed resistance to a widely grown genetically modified corn developed by Monsanto Co.”

Mr. Bunge noted that, “To ensure resistance doesn’t become a widespread problem, however, academics and seed companies are calling on farmers to plant fields with different crops from year to year, and to use multiple bug-killing methods. In recent years, insecticide sales have surged, partly in response to resilient pests.”

A separate update in today’s Wall Street Journal reported that, “This is the big one for Monsanto Co.: The agribusiness firm on Wednesday should report not only what is typically its most profitable quarter of the year but, if analysts are right, its best ever.”

And DTN writer Katie Micik reported yesterday (link requires subscription) that, “Biotechnology ascended to the spotlight at this year’s National Grain and Feed Association meeting. The group’s membership raised concerns that the commercial release of seed traits that aren’t approved by major importers could damage exports.

“‘There’s a lot of focus at this convention on the biotechnology issues because of the market sensitivity and the actual rejections of corn and distillers grains shipments because of the Viptera trait MIR 162,’ said NGFA President Randy Gordon. ‘I think that it’s fair to say a lot of our members on the grain handling and export side still have a lot of concerns about the Duracade launch plans of Syngenta right now.’”

 

Biofuels

Bernie Becker reported yesterday at The Hill’s On the Money Blog that, “The Senate Finance Committee will consider a package extending a grab bag of expired tax provisions on Thursday, the panel said Tuesday.

A summary of the Chairman’s Mark included the following provisions:

Cellulosic Biofuels Producer Tax Credit- Under current law, facilities producing cellulosic biofuel can claim a $1.01 per gallon production tax credit on fuel produced before the end of 2013. The bill would extend this production tax credit for two additional years, for cellulosic biofuel produced through 2015. A two year extension of this provision is estimated to cost $55 million over 10 years.

Incentives for biodiesel and renewable diesel- The bill extends for two years, through 2015, the $1.00 per gallon tax credit for biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2015 the $1.00 per gallon tax credit for diesel fuel created from biomass. A two year extension of this provision is estimated to cost $2.6 billion over 10 years.

Keith Good

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