February 28, 2020

Farm Bill- Policy Issues; Ag Economy; Biofuels; Tax Extenders; and, CFTC

Farm Bill- Policy Issues

Yesterday, USDA Under Secretary for Farm and Foreign Agriculture Services Michael Scuse testified before the House Appropriations Agriculture Subcommittee.

In his prepared remarks to the Subcommittee, Under Sec. Scuse noted that, “The President’s Budget includes a proposal to consolidate 250 field offices. However, there are steps that need to be taken to reshape and restructure our county offices and workforce before we can begin actively planning any office consolidation plan. So far, the agency has not identified any specific offices for closure and implementation of these changes will carry over beyond FY 2015.  FSA is proposing to reduce non-federal staff by 815 FTEs, saving $61.6 million, and realigning approximately 300 federal headquarters and state office oversight staff to the county offices, saving $6.8 million.

To promote increased efficiency, the IT request includes base funding to continue contract services that support modernization, development and maintenance of applications systems, and deployment support (e.g. data and database administration, testing and certification, and security). These funds will enable FSA to maintain essential program delivery and operations in the field, as well as provide support for improvements. This funding includes 65.0 million for MIDAS.”

In his opening statement, Subcommittee Chairman Robert Aderholt (R., Ala.) indicated that, “We will explore two of the more controversial proposals from the Farm Service Agency that call for a reduction of 815 non-federal permanent full time staff years and the closure of 250 county offices. While all of us on the Subcommittee are proponents of efficiencies, many of us here are not convinced that FSA has fully developed these plans and the savings associated with the proposals.”

Chairman Aderholt inquired about proposed technological advancements at yesterday’s hearing.  He noted that proposed efficiencies from fewer FSA offices are contingent on successful implementation of necessary technological variables that are used in the field offices, including the FSA “MIDAS” software.  To listen to a portion of a discussion on this issue, including remarks about MIDAS between Chairman Aderholt and Under Sec. Scuse, just click here (MP3- 1:43).

And additional remarks at yesterday’s hearing from FSA Administrator Juan Garcia on the issue of FSA office closures can be heard here (MP3- 0:51).

In response to a question from Rep. Sanford Bishop (D., Ga.) on trade related issues, Under Sec. Scuse offered remarks on the WTO Brazil cotton caserelated audio (MP3- 0:55).

On a separate issue relating to technology, Brian Fung reported yesterday at The Switch Blog (Washington Post) that, “Someday, your phone will be able to talk to your fridge, letting you know when you’re low on milk. But wouldn’t it be cooler if you could know everything about the cow your milk came from?

“We’re not quite at that stage yet. But dairy farmers are getting an enormous boost from data and analytics as a result of new technology that helps them track detailed information about their entire herd, down to the individual cow. That technology is boosting milk yields, preventing illness and — for the ranchers — increasing profits.

“Much of the research into cow tech is taking place in Britain, where efforts to track cattle have resulted in a number of experiments. One, such as the Scotland-based Silent Herdsman, uses wireless collars to transmit data about a cow’s estrus (reproductive) cycle back to a computer. The data can be read from a mobile device, or loaded into an Excel spreadsheet or integrated with other herd management software. With better information, ranchers can determine when each cow is ready to be inseminated, increasing the chances of pregnancy and the amount of milk that the cow can produce. The Silent Herdsman claims it’s raised milk yields on one farm by 12 percent over the course of a year.”

And DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Congress would have to expand its portfolio of livestock disaster programs to compensate pork producers for pig losses from the porcine epidemic diarrhea virus [PED], Agriculture Secretary Tom Vilsack said Monday.”

The DTN article explained that, “The secretary noted that USDA’s suite of livestock disaster programs are not set up to help producers hit with a livestock disease such as PED. The Livestock Indemnity Program is designed more for livestock deaths from a weather disaster. Other programs, such as the Emergency Assistance for Livestock, Honey Bees, & Farm-Raised Fish (ELAP) Program, help in niche circumstances and its funding, $20 million, isn’t large enough to help with such a widespread disease, Vilsack said.

“‘If you were to suggest that is a source of compensation, it would have to be 10 times the size to deal with the losses that have occurred,’ Vilsack said. ‘Congress may want to take a look at the ELAP program and decide. They knew about this issue when they chose to do the farm bill. They chose to stick at $20 million. They may want to rethink that if they want to reopen the opportunity.’”


Agricultural Economy

AP writer M.L. Johnson reported yesterday that, “A virus never before seen in the U.S. [PED] has killed millions of baby pigs in less than a year, and with little known about how it spreads or how to stop it, it’s threatening pork production and pushing up prices by 10 percent or more.”

The AP article noted that, “The U.S. is both a top producer and exporter of pork, but production could decline about 7 percent this year compared to last — the biggest drop in more than 30 years, according to a recent report from Rabobank, which focuses on the food, beverage and agribusiness industries.

“Already, prices have shot up: A pound of bacon averaged $5.46 in February, 13 percent more than a year ago, according to the U.S. Bureau of Labor Statistics. Ham and chops have gone up too, although not as much.”

And David Pierson and Tiffany Hsu reported yesterday at the Los Angeles Times Online that, “Come grilling season, expect your sirloin steak to come with a hearty side of sticker shock.

Beef prices have reached all-time highs in the U.S. and aren’t expected to come down any time soon [related graph].

Extreme weather has thinned the nation’s beef cattle herds to levels last seen in 1951, when there were about half as many mouths to feed in America.”

The article indicated that, “The biggest fast-food chains aren’t immune to the price pressure either. Experts say $1 value menus could soon be a thing of the past.”

“‘We’re dealing with chronically low herds,’ said Richard Volpe, an economist for the USDA. ‘Beef prices should remain at near-record highs this year and into 2015.’”

However, Bloomberg writers Aya Takada and Ichiro Suzuki reported yesterday that, “U.S. beef shipments to Japan may drop after the largest Asian buyer agreed with Australia to begin reducing import tariffs as early as next year, Japan’s agriculture ministry said.

Japan agreed to gradually lower tariffs on imports of frozen beef from Australia to 19.5 percent and cut duties on chilled beef to 23.5 percent in a bilateral accord reached yesterday. The levies are now 38.5 percent and the reductions will take place over 18 years and 15 years, respectively.”

And Jesse Newman and Caroline Porter reported in today’s Wall Street Journal that, “The unusually cold temperatures and heavy snowfall that enveloped much of the U.S. this past winter have taken a toll on farms—from New York to Kansas to California—that grow everything from grapes used to make wine to wheat for baking bread.

“In Michigan, fruit growers are assessing the damage after months of continuous snow cover and a high number of subzero days [related graph].”

The Journal writers explained that, “The extent of the crop damage in the Midwest isn’t yet known, said Annemarie Kuhns, an agricultural economist at the U.S. Department of Agriculture. Already, the USDA projects the cost of fresh fruit will rise 2.5% to 3.5% nationwide this year.”

The article added that, “Extreme temperatures, coupled with several years of drought, also hurt the wheat crop in parts of the southern Plains, where winter varieties of the grain are grown. ‘We’ve seen pretty significant deterioration,’ said Brad Rippey, a meteorologist for the USDA, who added that wheat in Kansas, Colorado, Oklahoma and Texas has been hardest hit. ‘It gives producers very little margin of error.’

Before extreme weather hit, 63% of the winter wheat crop in Kansas was rated good or excellent, according to the USDA. Cold weather combined with persistent drought has caused crop ratings in the state to decline to just 29% good or excellent on April 6.”

John Perkins reported yesterday at Brownfield that, “USDA reports nearly a third of the U.S. winter wheat crop is in poor to very poor condition.

Most of that is in the drought stricken U.S. Plains, with Oklahoma and Texas currently in the worst shape. Overall, 29% of the U.S. winter wheat crop is poor to very poor, with 35% rated good to excellent and 36% called fair. A year ago, 30% was in poor to very poor shape, with 36% good to excellent and 34% fair.”

For more background on weather conditions in the Plains and wheat prospects, see this one-minute overview from Friday.

And Houston Chronicle writer Matthew Tresaugue reported earlier this week that, “Brothers Stewart and Kirby Savage should be out right now, planting rice, a crop their family has grown in Matagorda County for nearly a century. But here they sit, in their low-slung office along Texas 60, talking water, or the lack of it.

“The Savage family, like many rice farmers, are facing a third year in a row without irrigation water from the Colorado River. That’s because Texas officials have cut off deliveries to maintain reservoirs near drought-stricken Austin, more than 100 miles away.”

In other news, Reuters writers Niu Shuping and David Stanway reported yesterday that, “China has allowed Brazilian corn imports to start this month, a further blow to U.S. exports to the world’s No.2 consumer of the grain already hurt by the discovery of an unapproved genetically modified strain in shipments.”

More broadly, USDA agricultural economists Kevin Patrick and Jennifer Ifft indicated yesterday at Amber Waves (USDA-Economic Research Service) that, “Farm businesses’ borrowing decisions can affect their growth and survival, as well as the economic vitality of farm-dependent rural communities. During the early 1980s, farm income plummeted and interest rates rose rapidly, leaving many farm businesses that relied on debt to finance their operations over-extended. The resulting jump in farm bankruptcies and rural bank failures had widespread detrimental effects on many rural communities. Today, the farm sector overall is in a strong financial position after several years of generally rising income and historically low interest rates. However, the potential for lower income and higher interest rates in the future has raised concerns about recent growth in farm business debt.”

Yesterday’s update pointed out that, “After adjusting for inflation, the amount of debt owed by all but small family farms increased over the past two decades, but the increase was particularly noticeable for large-scale family farms. The share of farm business debt held by large-scale family farms increased from 16 percent in 1992 to 35 percent in 2011. Over the same period, the share of debt held by small family farms with a farming occupation declined from 46 percent of all farm business debt to 27 percent. These shifts largely reflect changes in large and small farm production over this period. In 1992, small family farms accounted for 35 percent of the value of production of farm businesses while large-scale family farms contributed only 24 percent. By 2011, these shares had reversed, with large-scale family farms contributing 37 percent and small family farms 20 percent of the total value of production by farm businesses.”

Also yesterday, Reuters writer Michael Hirtzer reported that, “The U.S. Coast Guard on Tuesday closed the Mississippi River at Sabula, Iowa, after a barge struck a railroad bridge, said Eric Washburn, bridge administrator for the agency’s Eighth District Western Rivers Bridge Branch.”



DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription)  that, “Former stock-car driver and current NASCAR team owner Richard Childress explained to senators Tuesday that NASCAR race cars perform well with 15% ethanol fuel blends and could even run at 30% blends without problems.

“Childress and other supporters of advanced biofuels testified Tuesday before the Senate Agriculture Committee about the need for Congress and the Obama administration to stick with the Renewable Fuels Standard levels for advanced and cellulosic biofuels. Biofuels are staring at proposals by the Environmental Protection Agency to lower the renewable fuel volumes for 2014. At the same time, petroleum companies continue litigation, arguing that the RFS volumes remain too high and must be cut even more by EPA.”

Mr. Clayton explained that, “EPA proposed reducing the RFS for 2014 because of a lack of production in advanced biofuels and cellulosic ethanol, coupled with the lack of infrastructure to push higher blends of corn-based ethanol. EPA’s proposal, which could become final later this spring, would set the 2014 blend requirements for all renewable fuels at 15.2 billion gallons, a reduction of 3 billion gallons from the standard set in the RFS. Petroleum companies would have to use 2.2 billion gallons of advanced fuels, which is scaled back from 3.75 billion that had been mandated under the RFS. The proposal reduces cellulosic ethanol projections from 1.7 billion gallons down to 17 million.

“Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., said for the biofuels industry to grow, the right policies must continue to support it. She questioned why ethanol blends remain impeded from moving to 15% when Brazil easily blends 30% of its gasoline with ethanol. ‘In fact, they have lower gas prices because of the higher blends. Meanwhile, here in the United States, ethanol makes up 10% of our fuel supply,’ she said.”

An update yesterday from the Senate Ag Committee noted that, “The 2014 Farm Bill, authored by Chairwoman Stabenow, included significant new investments in renewable energy programs which are helping farmers and businesses generate on-farm energy by harnessing new technologies. An overview of the Farm Bill’s energy initiatives can be found here.”

A news release yesterday from Ag Committee member Sen. Heidi Heitkamp (D., N.D.) noted that, “Heitkamp has long been a proponent of the Renewable Fuel Standard (RFS) which supports good jobs in North Dakota, the state’s strong ethanol industry, and the economy. During today’s hearing, Heitkamp again voiced her opposition to a recent EPA proposal to reduce the effectiveness of the RFS [related video here].”

An update yesterday from Sen. John Hoeven (R., N.D.), which also included a video clip, stated that, “At a hearing of the Senate Agriculture Committee today, [Hoeven] pressed the importance of advancing biofuel use across the country using market-based solutions, specifically by increasing the number of blender pumps available at gas stations.”

Christopher Doering reported yesterday at The Des Moines Register Online that, “The Obama administration has halted investments in advanced biofuels plants following its proposal last year to reduce how much renewable fuels must be blended into the country’s fuel supply in 2014, an executive representing the industry told Senate lawmakers Tuesday.

“‘What the (Environmental Protection Agency) proposal did, first the leaked version in October and then in November is frozen everything,’ Brooke Coleman, executive director of the Advanced Ethanol Council, told sympathetic lawmakers on the Senate Agriculture Committee. ‘Every single one of my companies. There are no exceptions.’”

And a news release yesterday from Sen. Chuck Grassley (R., Iowa) noted that, “Grassley was a key supporter in creating the Renewable Fuel Standard in legislation enacted in 2005 and expanded in 2007.  As a legislative leader for tax policy, Grassley also worked to extend incentives for cellulosic ethanol production.

“‘The EPA’s actions, from the RFS to the recent proposed rules claiming jurisdiction on nearly all waters, including creeks with no water, have a very negative impact on rural America,’ Grassley said.  ‘The hearing today sends a clear message to the EPA and others about the benefits of advanced biofuels for Americans nationwide, from jobs to energy security, to environmental impact.’”


Tax Extenders

A news release yesterday from the American Farm Bureau Federation [AFBF] indicated that, “Farmers and ranchers need tax certainty to thrive in a modern economy, and making permanent deductions that expired in 2013 is a good first step, the [AFBF] told the House Ways and Means Committee today.”

The release added, in part, that, “In written testimony submitted to the Committee, [AFBF President Bob Stallman] called for extensions of several now-expired deductions to benefit the economy as a whole, including: …[C]ellulosic Biofuel Producer Tax Credit: a $1.01 per gallon income tax credit for cellulosic biofuel sold for fuel plus an additional first-year, 50-percent bonus depreciation for cellulosic biofuel production facilities; A $1.00 per-gallon tax credit for production of biodiesel and renewable diesel fuels…”

And a video clip from yesterday’s hearing, that includes remarks and discussion between Rep. Adrian Smith (R., Neb.) and Mr. Stallman, is available here.


Commodity Futures Trading Commission (CFTC)

Andrew Ackerman reported in today’s Wall Street Journal that, “A Senate panel on Tuesday approved President Barack Obama’s three nominees to the Commodity Futures Trading Commission, advancing their nominations to the full Senate.

“The panel acted by voice vote on the nominations of Timothy Massad, a senior Treasury Department official tapped to head the five-member CFTC, and Sharon Bowen and J. Christopher Giancarlo for two commissioner slots at the swaps regulator. The full Senate must now vote to confirm the nominees, though it is unclear when the nominees will come up for votes.”

The article noted that, “Sen. Saxby Chambliss (R., Ga.) said he didn’t believe Ms. Bowen was qualified and opposed her nomination. Mr. Chambliss said Ms. Bowen didn’t have a ‘strong background’ in the futures market and wasn’t knowledgeable enough to serve as a CFTC commissioner. ‘We need the most qualified regulators available to navigate these complex and uncertain markets,’ he said.

The nominees’ paths through the full Senate are unclear. At least two additional senators, David Vitter (R., La.) and Thad Cochran (R., Miss), have raised questions about Ms. Bowen’s role as acting chair of the Securities Investor Protection Corp., an industry association that maintains a special reserve fund authorized by Congress to compensate investors who lose money in failed brokerages. The lawmakers are upset about the fund’s decision not to compensate victims of R. Allen Stanford’s $7 billion Ponzi scheme.

Mr. Vitter announced Tuesday he would place a hold on Ms. Bowen, which would likely delay her nomination and could also hold up the nominations of Messrs. Massad and Giancarlo.”

In a statement yesterday, Sen. Cochran noted that, “All three nominees are accomplished and skilled lawyers with respectable resumes.  However, I hope that before Senators are asked to vote to confirm Mr. Massad and Ms. Bowen that the nominees will provide stronger assurances that their lack of experience in agriculture or futures markets will not hinder their ability to address the complex issues before the Commission.  Ms. Bowen’s role in denying compensation to victims of the Stanford Ponzi scheme in which investors in Mississippi and across the country lost billions of dollars continues to concern me.  Finally, I will support Mr. Giancarlo’s confirmation because of his expertise in swaps markets, which are important to U.S. agriculture.”

Keith Good

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