FarmPolicy

July 21, 2017

Farm Bill; Trade; Ag Economy; Regulations; and, Immigration

Farm Bill- Policy Issues

David Rogers reported yesterday at Politico that, “After years of trying, the potato lobby may have found the votes to break into the government’s premier nutrition program for pregnant mothers and their infants.

“Prominent members of both parties have signed onto an industry-backed letter circulating this week in the Senate, and nutrition groups are clearly alarmed after successfully blocking the powerful lobby in final talks on the farm bill last winter.

“If successful, the industry will gain what it sees as an important marketing tool. But critics charge that the end result will open the door to more special interests and violate a long-standing commitment by Congress to let independent scientists decide what foods are most needed.”

Mr. Rogers noted that, “The next round is expected to be May 22, when the Senate Appropriations Committee is slated to mark up the fiscal 2015 budget for the Agriculture Department. Based on interviews and the 18 signatories so far on the Senate letter, Republican Sen. Susan Collins from potato-rich Maine appears to have the upper hand in the fight.

“The Senate letter, addressed to Agriculture Secretary Tom Vilsack, won’t be released until Friday. But it appears to have been designed by Collins — together with Sen. Mark Udall (D-Colo.) — as an organizing tool for the Appropriations debate.”

Yesterday’s article added that, “As a moderate Republican willing to work across the aisle, Collins brings her own cachet with Democrats. While not on Appropriations, those signing her letter to Vilsack include Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) and New York Sen. Chuck Schumer, a top member of the Democratic leadership. Having these names should help her pick up more Democratic support in the committee.

“The food program at issue is popularly known as WIC because it is geared to women and their infant children. But unlike food stamps, for example, its core mission is to be a source of ‘supplemental nutrition’ for these households and is much more tailored to meet special needs.”

Meanwhile, The Washington Post editorial board indicated in today’s paper that, “Costly, inefficient and skewed to benefit domestic special interests rather than starving people overseas, U.S. food aid programs are overdue for reform. Both President Obama and his Republican predecessor, George W. Bush, advocated such changes, only to be defeated by maritime and agriculture lobbies on Capitol Hill. The most recent farm bill, signed into law by Mr. Obama in February, included a few remnants of the president’s ambitious plans to buy and distribute more food grown near recipients abroad, as opposed to the costly current practice of shipping U.S.-grown products on U.S.-flagged ships. Basically, though, the old system, which treats food aid as a means of subsidizing U.S. farmers and shipping companies rather than of just helping the hungry, remained intact.

“Or so it seemed until April 1, when the House of Representatives approved a measure that would actually take a step backward. Specifically, the House passed an appropriations bill for the Coast Guard with a provision that would require 75percent of all U.S. food aid to travel on U.S.-flagged vessels, up from 50 percent under current law.”

The Post opinion item noted that, “Though the bill effectively returns U.S. policy to the status quo of 30 years ago, we can’t fault the measure’s sponsor, California Republican Duncan D. Hunter, for lacking candor. A standard justification for the cargo preference subsidy to U.S. ships is that the country needs to maintain a merchant marine fleet in case of military emergency. ‘The secondary reason for food aid is food,’ Mr. Hunter told the Wall Street Journal. ‘The No. 1 reason is military readiness.’ The only problem with that is that the Defense Department avowed last year that reform would affect fewer than a dozen vessels, none of which is militarily useful.

“Politically unrealistic though it may be to reform food aid in the short term, at least Congress can avoid making matters worse.”

In other developments, Lydia DePillis reported yesterday at the WonkBlog (Washington Post) that, “Conventional marketing wisdom is pretty clear on ‘Made in the USA’ labels: If you can actually prove your product is made and assembled domestically, trumpeting the fact can’t hurt. That’s true, at least, of things like apparel, phones, and kids’ toys. Turns out it’s not really true about meat.

“For many products, country-of-origin labeling has been a requirement for a long time. But it was only mandated for food in the 2008 Farm Bill, which decreed that most meat and produce carry a sticker with the place it came from (or, at least, where it was born, raised, and slaughtered). At the time, the benefits were thought to outweigh the costs: Consumers said they wanted to know the source of their staples, and even indicated they might pay more for U.S. products if they thought they were safer.

But after a few years of that, it appears consumers barely notice the labels, and American meats aren’t commanding a premium because of them. A 2012 study from Kansas State University found that buyers didn’t realize whether something was produced in America or produced in North America, and there was no change in demand either way.”

The Post item explained that, “At the same time, however, Canada and Mexico do think the labels were having an impact — or at least might start having one eventually — and sued the United States over the new mandate at the World Trade Organization. They won, and the U.S. was ordered to revise its statute so that it doesn’t discriminate against foreign producers, or at least so that the labels provide enough information to justify their effect. If U.S. regulators don’t manage to do so to the satisfaction of our neighbors to the north and south, they could slap similar sanctions on U.S. products, which could pose a problem for American protein providers that depend heavily on exports.

“So in May of last year, the U.S. Department of Agriculture issued a new rule, which makes the labeling requirements more substantive by requiring meat producers to separate U.S.-born from foreign-born livestock at every step of the process — no commingling allowed.”

Ms. DePillis indicted that, “As several meatpacking trade associations led by the American Meat Institute put it in their lawsuit against the new rules: ‘In short, beef is beef, whether the cattle were born in Montana, Manitoba, or Mazatlán. The same goes for hogs, chickens, and other livestock.’ (The lawsuit, which will get a full hearing before the D.C. Circuit Court of Appeals, alleges that the labeling requirements are a form of ‘compelled speech’ that violate meatpackers’ first amendment rights.)”

Yesterday’s article noted that, “In a somewhat unlikely demonstration of the power of smaller producers over massive agribusiness interests, the National Farmers Union, U.S. Cattlemen’s Association and their allies have played the political game fairly effectively, and now the meatpackers have hung their hopes on the outcome of their lawsuit as well as Canada and Mexico’s cases before the WTO to make the labels go away. But if you buy their argument, you probably didn’t notice the labels anyway.”

At the House Agriculture Committee’s Subcommittee on Livestock, Rural Development, and Credit hearing earlier this week on the state of the U.S. livestock industry, Rep. Randy Neugebauer (R., Tex.) questioned USDA Chief Economist Joe Glauber about COOL and consumer benefits of the policy. An audio clip of this exchange can be heard here (MP3- 0:50).

And an update yesterday at the National Farmers Union Blog noted in part that, “Today’s ‘throwback Thursday’ is a little different from the old photos circulating around Facebook. Yesterday NFU President Roger Johnson testified at a U.S. House Agriculture Subcommittee hearing on the state of the livestock industry, where he was the lone voice in support of Country-of-Origin Labeling (COOL) for meat. Given the vitriol from other panelists and subcommittee members toward COOL, one would think NFU’s position is out of left field. However, many other organizations support COOL — and at one point in time, so did some of the other groups at yesterday’s hearing.

“Fifteen years ago, nearly to the day, the House Agriculture Committee held a similar hearing dealing specifically with COOL and, at the time, proposed legislation that later became the law that’s currently on the books. COOL garnered significant support, both from members of the committee and, interestingly, the National Cattlemen’s Beef Association, one of the loudest voices in opposition to COOL today.”

Also, at a Senate Finance Committee hearing yesterday, Pat Roberts (R., Kans.) asked U.S. Trade Representative Michael Froman about the COOL issue; an audio replay of this exchange is available here (MP3- 1:00).

In other policy news, University of Illinois agricultural economist John Newton indicated yesterday at the farmdoc daily blog (“2014 Farm Bill: The Margin Protection Program Dashboard MPP-Dairy”) that, “The 2014 Farm Bill provides the most comprehensive reform to the U.S. federal dairy farm safety net seen in decades. In place of milk price and revenue support programs the new Farm Bill creates a Margin Protection Program for Dairy Producers (MPP-Dairy). MPP-Dairy is specifically designed to be simple to use and appealing to all dairy producers regardless of management style or business model. First, it provides dairy producers the opportunity to annually self-select coverage levels to protect against declines in national, rather than farm-level, income-over-feed-cost margins. Second, the premium rates are fixed at predetermined levels explicitly written into the Farm Bill. Finally, farms of all sizes can purchase margin protection near their historical maximum levels of milk production. For a detailed discussion of the specific dairy title provisions of the new 2014 Farm Bill see here.

In today’s post I will introduce an interactive dashboard demonstrating the features of the Margin Protection Program.”

Meanwhile, a news release yesterday from Sen. Heidi Heitkamp (D., N.D.) stated that, “[Sen. Heitkamp] today led a Senate hearing that highlighted challenges as well as proven tactics for sparking economic development in rural America.”

The release added that, “The hearing also featured testimony from U.S. Department of Agriculture (USDA) Deputy Under Secretary for Rural Development Doug O’Brien and Mark Tilson, CEO of Native American Natural Foods in South Dakota. Tilson and Keeley spoke about how they have collaborated with USDA to spur economic development.

“USDA Rural Development has played a key role in recent years supporting local North Dakota economies through regional planning. These include: the financing of the $52 million Jamestown Regional Medical Center; major water projects in Emmons, Logan, and McIntosh Counties; and bringing fiber-optic high-speed Internet service to about 16,000 businesses and homes in south central North Dakota.”

A news release yesterday from Sen. Joe Donnelly (D., Ind.) noted that, “During a Senate Agriculture Subcommittee hearing today, [Sen. Donnelly] questioned [USDA] Deputy Under Secretary for Rural Development Doug O’Brien on what the USDA is doing to help train the next generation of workers and invest in infrastructure in our rural communities. O’Brien agreed with Donnelly that workforce development in rural areas is of the utmost importance.

“Donnelly said: ‘One of the things I worry about is losing our young people in a lot of our rural communities, and it’s jobs, it’s quality of life, it is the chance to have them trained with appropriate skills, to have the infrastructure in the town or community to encourage good jobs to come. But losing the young people it almost creates a spiral that starts, and so after skills and after infrastructure, what are the other things that you look at and say, ‘here are the kind of elements that are critical to keeping people at home and having them build their future right here?’

“O’Brien stated that workforce development investments in rural areas often give the greatest return while also acknowledging the need to invest in infrastructure, including greater high-speed internet capabilities, in rural areas. O’Brien commented that some of the best ways the USDA can help in these efforts is through business grant programs, as well as by working closely with community colleges to train young people.”

 

Trade

AP writer Matthew Pennington reported yesterday that, “Senators from both parties provided a reality check Thursday to the Obama administration’s optimism overs its trade agenda following some progress in key negotiations with Japan.

“The administration said last week it narrowed differences on access to Japan’s automobile and agriculture sectors, following President Barack Obama’s visit last week to Tokyo. The trade negotiations were a central issue in Obama’s visit, including in his lengthy discussions with Japanese Prime Minister Shinzo Abe.”

The article added that, “But Democratic lawmakers, including New York’s Sen. Charles Schumer, told the administration’s top trade official Thursday that the 12-nation Trans-Pacific Partnership won’t win congressional approval anyway, unless it also addresses alleged currency manipulation by Japan.

“Trade Representative Michael Froman conceded at a Senate Finance Committee hearing that currency issues have not been discussed yet in TPP talks.

“The committee’s top-ranking Republican, Sen. Orrin Hatch of Utah, questioned the president’s commitment to securing trade promotion authority. He said without it, the administration’s ambitious trade agenda ‘will almost certainly fail.’”

The article added that, “Froman said while the recent talks with Japan didn’t result in an agreement between them, it was a ‘milestone’ in tackling some sensitive market access issues.

“‘There’s further work to do certainly but we think there was enough progress to give further momentum to the TPP negotiations overall,’ he said.”

And Reuters writer Krista Hughes reported yesterday that, “A senior Democratic senator said on Thursday he would take the time needed to put together a bill granting the White House power to fast-track trade agreements while Republicans called for swift action.

“Senate Finance Committee chairman Ron Wyden, a Democrat, said he was still mulling how best to modernize fast-track rules, which many see as crucial to the United States’ ability to wrap up talks on a 12-nation Pacific trade pact.”

Also at yesterday’s Finance Committee hearing, Sen. Pat Roberts (R., Kans.) questioned Ambassador Froman about “fast track,” and “geographical indicator” issues within the context of the U.S.-EU trade talks (The Transatlantic Trade and Investment Partnership (TTIP)). An audio clip from this discussion is available here (MP3- 3:48).

Meanwhile, a news release yesterday from Sen. Bob Casey (D., Pa.) stated yesterday that, “Today [Sen. Casey] called on U.S. Trade Representative Michael Froman and Secretary of Agriculture Tom Vilsack to secure immediate duty elimination of Japan’s tariff on American grape juice concentrate. Casey, along with Senators Patty Murray (D-WA), Kirsten Gillibrand (D-NY), Maria Cantwell (D-WA), Chuck Schumer (D-NY) and Carl Levin (D-MI) wrote in a letter that Japan’s tariffs on premium U.S. grape juice imports harm American growers who compete with producers from Argentina, Brazil, Chile, Italy, and Spain. Reducing Japan’s tariffs would make American exports more competitive and give consumers a wider range of quality options.”

Former U.S. Trade Representative Susan Schwab was a guest on yesterday’s AgriTalk radio program with Mike Adams where the conversation focused on trade issues. To listen to a brief clip from yesterday’s program containing remarks from Amb. Schwab on Japan and TPP issues, just click here (MP3- 1:25).

 

Agricultural Economy

An update yesterday from the Kansas City Federal Reserve Bank indicated that, “Farm borrowing ramped up in the first quarter as farmers prepared for spring planting. Operating loan volumes reached a record high, exceeding year-ago levels by 28 percent (Chart 1). Crop prices at the beginning of 2014 had fallen 40 percent from the previous year, lowering cash receipts for producers still marketing fall crops. In addition, while prices fell for some crop inputs, such as fertilizer, others, such as seed and fuel, were expected to hold at high levels (Chart 2). Reduced cash flow coupled with elevated crop production costs contributed to the upswing in operating loan volumes. The volume of feeder livestock loans also rose as low cow inventories kept feeder cattle prices elevated and hog prices jumped as an ongoing swine virus continued to limit hog supplies.”

Bloomberg writer Elizabeth Campbell reported yesterday that, “Feeder-cattle futures surged to a record to cap the longest rally in 22 years as U.S. ranchers sent fewer animals to slaughter, signaling an increase in beef costs that already are the highest ever.”

A recent update from the U.S. Drought Monitor indicated that, “But the southern parts of the South received little to no rainfall, with extensive dust storms developing across parts of the southern Plains…All of the drought categories expanded across parts of Texas, resulting in D4 covering virtually all of the Texas panhandle, and D3-D4 expanded in northern Oklahoma [related graph].”

Ken Anderson reported yesterday at Brownfield that, “A representative of California-based Harris Ranch, one of the largest agribusiness entities in the western U.S., says they will be forced to idle two-thirds of their 17-thousand acres of farm ground this year due to a lack of water.

USDA’s Economic Research Service has noted that, “The ongoing drought in California—with the driest year on record for the State following several prior years of drought—is likely to have a major impact on the State’s agricultural production in 2014. Despite a relatively recent series of major storms, long-term moisture deficits across most of the State remain at near-record levels. Because California is a major producer in the fruit, vegetable, tree nut, and dairy sectors, the drought has potential implications for U.S. supplies and prices of affected products in 2014 and beyond.”

And a report yesterday from USDA’s National Agricultural Statistics Service pointed out that, “The subjective forecast for the 2014 California almond production is 1.95 billion pounds. This is 2.5 percent below last year’s production of 2.00 billion pounds. Yield is expected to average 2,270 pounds per acre, down 4.6 percent from the 2013 yield of 2,380 pounds per acre. Forecasted bearing acreage for 2014 is 860 thousand.”

Tony C. Dreibus reported in today’s Wall Street Journal that, “Drought is battering the nation’s wheat belt, curtailing the prospects for output of the grain and boosting prices in the $22 billion wheat-futures market. Prices have jumped 15% this year in Chicago trading, rallying as concerns have mounted about a lack of moisture in Kansas, the biggest U.S. wheat producer, and elsewhere in the Great Plains [related graph].”

 

Regulations

Benjamin Goad reported yesterday at The Hill Online that, “More than 200 House members are calling on the Obama administration to drop its plans to expand the Environmental Protection Agency’s jurisdiction over smaller bodies of water around the country.

“The EPA and Army Corps of Engineers proposed the so-called Waters of the United States rule last month, seeking to clarify which bodies of water the agencies can regulate. The draft rule would include smaller wetlands and streams, and has drawn fire from critics who describe the plan as a blatant power grab.

“Led by Reps. Chris Collins (R-N.Y.) and Kurt Schrader (D-Ore.), the lawmakers sent a forcefully worded letter Thursday to EPA Administrator Gina McCarthy and Department of the Army Secretary John M. McHugh, asking them to withdraw the proposal.”

 

Immigration

Barney Jopson reported yesterday at The Financial Times Online that, “Undocumented immigrants serving in the US military who came to the country illegally as children have become the latest test of Republican willingness to support reforms to the immigration system.

“A Republican lawmaker from California is promoting a bill to grant legal status to undocumented members of the military, as he and others representing Hispanic populations seek to appeal to a group that voted overwhelmingly for Barack Obama in 2008 and 2012.”

The FT article noted that, “The military bill, known as the Enlist Act, is being pushed by Jeff Denham, a congressman from a district in California’s Central Valley where agriculture is the primary industry and 40 per cent of the population is Hispanic.”

Keith Good

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