FarmPolicy

August 17, 2019

Farm Bill Hearing; Ag Economy; Biofuels; and, CFTC

Farm Bill: Senate Ag Committee Hearing with Sec. Vilsack- Policy Issues

Senate Ag Committee Chairwoman Debbie Stabenow (D., Mich.) convened a hearing yesterday to examine USDA’s ongoing implementation of the 2014 Farm Bill. Secretary of Agriculture Tom Vilsack provided testimony at yesterday’s hearing.

In light of this week’s executive branch report on climate change, and the noted emphasis on Farm Bill programs that will be key policy variables in protecting the soil from erosion, DTN Ag Policy Editor Chris Clayton reported yesterday that “emphasis on various conservation programs” was “one theme” at yesterday’s Ag Committee hearing.

More specifically, Mr. Clayton indicated that, “[Chairwoman Stabenow] asked Vilsack about the Regional Conservation Partnership Program. ‘This is probably one of the most understated policies in the 2014 farm bill. It has the potential really to transform the face and the future of agricultural stewardship,’ Stabenow said.

“The partnerships are expected to leverage local and private money to broaden conservation efforts. Vilsack said USDA has started a series of listening sessions about the regional partnerships program. The department plans to identify the critical areas that would be eligible for the regional partnerships. Vilsack also said USDA wants to get the program launched in time to highlight the issues of bringing investment capital to rural America as part of the White House Rural Council.”

The DTN article noted that, “Stabenow also wanted an outline of how USDA was preparing to implement the conservation compliance provisions in the farm bill that relate to crop insurance.

“‘First of all, it’s important to note this is effective the day the President signs the farm bill,’ Vilsack said. ‘So farmers are under this obligation and responsibility if they want to continue to receive the government subsidy for crop insurance, as of Feb. 7th of this year.’” (A broader audio clip on this discussion from yesterday’s hearing, can be heard here (MP3- 2:00)).

“Sen. Michael Bennet, D-Colo., also said the regional partnerships program will be a big deal, particularly if USDA designates parts of the Colorado River as a critical conservation area. Bennet also suggested groups want parts of Ogallala aquifer to be considered a critical conservation area. Bennet noted western parts of the country ‘water-stretched regions of the country facing regulatory challenges.’”

And the DTN article added that, “Sen. John Hoeven, R-N.D., encouraged Vilsack to implement conservation compliance ‘in a way that is farmer friendly and doesn’t impose undue burdens or costs on our producers.’ Hoeven also wanted to ensure USDA implemented the Wetlands Mitigation Bank, which is a trading program regarding wetlands acres. Hoeven was opposed to tying compliance to crop insurance premiums and said the wetlands mitigation program is one way of offsetting some of the burdens farmers may face.

“On the Conservation Reserve Program, Vilsack told Sen. John Thune, R-S.D., that he had not yet made a decision on whether there will be a general sign up for CRP this year. Continuous sign up will resume sometime this spring.”

Jacqui Fatka reported yesterday at Feedstuffs Online that, “The new farm bill has also hoped to alleviate trade tensions between the U.S. and Brazil over a World Trade Organization cotton ruling that came down in favor of Brazil. Vilsack said USDA is in the ‘education process’ of showing Brazil that the farm bill was a ‘good faith effort’ to respond to Brazil’s concerns.

Vilsack said it is his ‘sincere hope and belief’ that the farm bill responds to Brazil’s concerns, but also said the agency is ready to defend the changes within the WTO if Brazil chooses to challenge the new rules.” (A broader audio clip on this discussion between Sen. Saxby Chambliss (R., Ga.) and Sec. Vilsack from yesterday’s hearing, can be heard here (MP3- 2:00)).

Ms. Fatka pointed out that, “Sen. Mike Johanns (R., Neb.) who is also a former secretary of agriculture, asked for an update on how USDA is proceeding with a study on how to institute a new undersecretary of trade and foreign development at USDA, which was approved to in the farm bill. A study was due at the beginning of August, but Vilsack said that timeline may be difficult to meet.

“Johanns said so much of what he did while the head of USDA was trade related. ‘I would have given anything to have this in place,’ he said.

“Vilsack agreed of the importance of the post, and with the anticipated departure of Darci Vetter to be the chief agricultural negotiator at USTR, it’s timely. However, Vilsack said there are many different divisions of USDA that touch trade, and so the restructuring needs to be done in a way that’s right.”

(Note that the Senate Finance Committee will hold a hearing today with respect to Darci Vetter’s USTR nomination).

Sen. Johanns also discussed Trade Promotion Authority (TPA, or “fast track”), as well as the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP) agreement with Sec. Vilsack; a portion of this discussion can be heard here (MP3- 2:00).

And Julie Harker reported yesterday at Brownfield that, “[Sec. Vilsack] says he believes his authority in defining ‘actively engaged’ farming operations has been diminished in the 2014 Farm Bill. At a Senate Ag Committee hearing on Farm Bill implementation, Vilsack told Iowa Senator Charles Grassley that he has limited authority – outside of the broad definition of ‘family farms.’

Vilsack agreed with Grassley that defining ‘actively engaged’ is about the credibility of the Farm Program to the 99% of Americans that do not farm. He said, ‘You also have to take a look at ways in which people have been quite creative and ask yourself — is this consistent with what the purpose of these programs are? And, I think the purpose is to reduce the risk of farming so people can stay in the business when Mother Nature doesn’t cooperate.’ Senate Ag Chair Debbie Stabenow told Vilsack the committee HAS given him the authority to determine ‘actively engaged.’ ‘I’m confident that you’ll be able to proceed to do that,’ said Stabenow. ‘Some authority, Madam Chair,’ Vilsack laughed. She replied, ‘Well, we’re looking forward to you using the authority you have.’”

Daniel Looker reported yesterday at Agriculture.com that, “[Sec. Vilsack] said Wednesday that farmers might be able to re-allocate their planting history, known as base acres, at Farm Service Agency offices by this fall and that money for helping farmers make signup decisions will be going to universities and educators by the end of this month.

“‘It’s our hope that by the fall folks will be able to make appropriate adjustments to their acres and production,’ Vilsack said during a Senate Agriculture Committee hearing on the implementation of the 2014 Farm Bill, known as the Agricultural Act of 2014.”

Also at yesterday’s hearing, Sen. Pat Roberts (R, Kans.) noted the importance of crop insurance, and discussed this issue in more detail (Supplemental Coverage Option- SCO) with Sec. Vilsack- related audio (2:00).

Meanwhile, a news release yesterday from Ag. Committee Ranking Member Thad Cochran (R., Miss.) indicated that, “[Sen. Cochran] today received assurances that the U.S. Department of Agriculture has resources to help Mississippi’s farm, livestock and forestry sectors recover from recent tornado damage.”

And a news release yesterday from the American Soybean Association (ASA) noted that, “In a letter to [Sec. Vilsack] this morning, [ASA] and six other national farm groups urged USDA to consider the needs of soybean growers and growers of all crops when awarding funds included in the 2014 Farm Bill to land grant universities for the development of websites and web-based tools to assist producers in deciding which of the new law’s farm programs to sign up for.”

In other policy related news, Ron Hays, of The Oklahoma Farm Report and Radio Oklahoma Network, spoke yesterday with House Ag Committee Chairman Frank Lucas (R., Okla.) about the Farm Bill and other policy related issues.

An audio replay and summary of yesterday’s conversation can be found here, while an unofficial FarmPolicy.com transcript yesterday’s conversation with Ron Hays and Chairman Lucas is available here.

Mr. Hays noted that, “Congressman, let’s talk a little bit about several things going on right now. Since last we talked, at the Oklahoma City Farm Show, we have seen the announcement and the actual start of the signup for livestock disaster assistance. I’ve heard people have actually got their checks. That’s going good.

Chairman Lucas indicated that, “Absolutely. The Department said that they would make it a priority, they’d move first. Because of the timing, the need to address the California drought, and with the situation in the Southwest actually coming first, they understand they’ve got to clear, so that’s all very good. The indication I get from the constituents is that we’ve had a record number of people going in. But then, Ron, after ‘11, ‘12, the first half of ’13 and now miserable conditions since basically the beginning of the year in Oklahoma, if there was ever a need for livestock SURE, if there was ever a need for NAP on the grass issues, this is it.”

Mr. Hays also queried: “You’ve heard from Mr. Vilsack in your committee, he’s over at the Senate today talking about issues. Seems that one of those hot button issues right now is the definition of ‘actively engaged in farming.’”

Chairman Lucas responded by noting: “That’s always been a challenge. We discuss that in markups, we discuss that in conference. I would hope that the Department will be as flexible as possible. Because we all know, we all live in rural America. We understand the diversity of how farms are handled, and families are handled. And the size varies from very small to very large. Let’s just let people farm.”

In addition, this exchange also took place yesterday with Mr. Hays and Chairman Lucas: “We’ve got some real regulatory battles going on right now, and there’s a couple in your jurisdiction, in your purview area. And one is this APHIS rule that they’ve just closed comments on regarding Brazilian beef coming into the United States.  A lot of worries by some of your farmers and a lot of others, ranchers, about the safety of possibly getting FMD from Brazil.”

Chairman Lucas: “I think that’s a legitimate concern. And I agree with my various groups that the comment period needs to be reopened and extended for another 120 days. That will give us time to look at the information that the federal government used to craft this rule that would allow it to happen. I mean, we’re all in favor of free trade, but we have had such a good health record in fighting disease in the United States, in particular foot and mouth. We just need to be very, very cautious. And the standards, in all fairness, are not the same around the world in how other countries, how other producers address these issues.”

Chairman Lucas also discussed EPA’s recent “Waters of the U.S.” proposed definition yesterday;  while, Benjamin Goad reported yesterday at The Hill Online that, “Arizona’s senators are urging Environmental Protection Agency Administrator Gina McCarthy to scrap plans to expand the agency’s regulatory authority to smaller bodies of water.

“Sens. Jeff Flake (R) and John McCain (R) join a growing chorusof GOP criticism of the EPA’s so-called Waters of the United States rule, which seeks to clarify which bodies of water the agency can regulate.”

And with respect to SNAP and nutrition issues, Rep. Jim McGovern (D., Mass.) indicated on the House floor yesterday that, “Now, this has not been a particularly kind Congress to those who struggle with hunger. We’ve seen nearly $20 billion cut from our nation’s pre-eminent anti-hunger program known as SNAP. SNAP is a lifeline for the 46 million Americans who rely on it to have something to eat each day. Yet this Congress decided that Americans who live at or below the poverty line can simply absorb massive cuts to SNAP. Sadly, Republicans and some Democrats joined together to cut a benefit that was already meager and didn’t last through the month even before these cuts took effect.”

And in other policy news, Bloomberg writer John Tozzi reported yesterday that, “The Food and Drug Administration announced plans to stop antibiotics from being fed to farm animals to make them grow faster late last year. The goal was to limit the rise of resistant bacteria that have developed immunity to the cures we have.

“Since then, there’s been considerable debate about whether the rules, which ask companies to adjust drug label instructions to make sure animals only get antibiotics for medical reasons, would make any difference. One sign that the widespread use of antibiotics to raise livestock isn’t going away: The companies selling them don’t seem too worried.”

 

Agricultural Economy- Trade

Bloomberg writer Phoebe Sedgman reported today that, “Wheat fell for a second day on signs that escalating tension failed to slow exports from Ukraine, the sixth-biggest shipper, and as investors await the U.S. Department of Agriculture’s report on supply and demand.”

Meanwhile, a news release yesterday from the American Farm Bureau Federation [AFBF] noted that, “Summer grilling season will cost meat lovers a few more dollars this year, according to the [AFBF]. Wholesale meat prices climbed higher during the first quarter of the year and retail meat prices quickly followed suit.

“‘Retail prices for beef and pork cuts have steadily pushed into new record territory,’ said John Anderson, AFBF’s deputy chief economist.”

The release added that, “The sharp increase in retail beef prices has not occurred in a vacuum, Anderson noted. Retail pork prices are currently 18 percent higher than in 2010-2012 while chicken is up 9 percent.”

However in a broader historic context, USDA’s Economic Research Service noted yesterday that, “U.S. food price inflation has trended downward since the 1970s.”

Chuin-Wei Yap reported yesterday at The Wall Street Journal Online that, “China’s government opened a new round of buying for its pork reserves Wednesday, its second bid this year to lift prices for the country’s favorite meat from their lowest levels in almost four years.

“The frozen-pork reserves are China’s one-of-a-kind version of the range of strategic stockpiling practiced in other parts of the world for the most economically sensitive commodities, notably petroleum in the U.S.

“In part because pork is perishable, however, China maintains a reserve that is less than 1% of the nation’s total annual consumption of around 53 million metric tons. China’s demand is the world’s largest and analysts say it is too daunting for the government to absorb enough supply to force price changes. The pork bank is therefore often used less as an outright pricing weapon than as a way to encourage markets to follow the state’s cues.”

With respect to trade issues, Vicki Needham reported yesterday at The Hill Online that, “Election-year politics have complicated President Obama’s trade agenda, which is in danger of being punted into the second half of his final term.”

Reuters news reported yesterday that, “President Barack Obama gave the U.S. Congress official notice on Wednesday that he plans to pull Russia from a program that allows duty-free imports of certain goods, known as the Generalized System of Preferences, the White House said.”

And U.S. trade representative Michael Froman discussed the Trans-Pacific Partnership and trade issues in a brief interview yesterday on CNBC- video here (3:00).

 

Biofuels

Reuters writers Ayesha Rascoe and Cezary Podkul reported this week that, “A U.S. appeals court on Tuesday threw out an oil industry challenge to the Obama administration’s 2013 biofuel mandate, ruling that the government has ‘wide latitude’ to decide whether to modify renewable fuel use targets, and by how much.”

University of Illinois agricultural economist Scott Irwin indicated yesterday at the farmdoc daily blog (“Off-the-Chart Profitability of Ethanol Production”) that, “Trends in the profitability of ethanol production were examined in a farmdoc daily post on March 14. Using a model of a representative Iowa ethanol plant, it was estimated that a plant earned $23 million in profits during 2013.  This was one of the best years ever for ethanol producers in terms of profitability. A new high in weekly profits of $2.55 per bushel of corn processed was reached in early December 2013.  The high profits were driven by a drop in corn prices that substantially exceeded declines in ethanol and DDGS prices.  It was also argued in the same post that there were logical reasons to suspect that the extended run of profits was unlikely to continue.  Just the opposite occurred, as ethanol production profits subsequently exploded off-the-chart.  Today’s post will examine the spike in the profits of ethanol producers in recent months and the reasons behind it.”

Ken Klippen of The National Association of Egg Farmers, and Greg Gibeson a member of the board of directors for the Recreational Boaters of California, noted in an update yesterday at The Hill’s Congress Blog that, “Today, seventeen industry leaders from a diverse swath of America’s business landscape have convened in Washington united in concern over bad government policy albeit hopeful that a solution is near. Representing interests as disparate as cattle ranchers to snowmobile manufacturers and concrete producers, these men and women have come from across the country to make a final plea to the Environmental Protection Agency (EPA) to stick to proposed reductions to the Renewable Fuel Standard’s biofuel blending requirements in 2014. As the EPA’s final ruling looms, it’s become all too clear that America’s biofuels policy has failed as consumers face consequences like engine damage, greater gasoline costs, rising food prices and dirtier air as more and more ethanol is blended into our gasoline supply.”

And an update yesterday from Rep. Michael Conaway (R., Tex.) noted in part that, “[Rep. Conaway] issued the following statement on approval of his amendments eliminating biofuel requirements to the FY2015 National Defense Authorization Act…‘It is foolish to require the military to purchase biofuels that are far more expensive than traditional petroleum products, which is why I offered an amendment that would allow the Department of Defense to only produce and procure biofuels if the cost is equal to conventional fuels or sequestration is replaced with an exemption for research and development…’”

 

Commodity Futures Trading Commission (CFTC) Issues

Reuters writer Douwe Miedema reported earlier this week that, “The U.S. derivatives regulator is working on a proposed rule for computer-driven trading, a commissioner at the agency said on Tuesday, after the agency asked market participants for insights on a long list of issues on the controversial practice.”

The Reuters article noted that, “Separately on Tuesday, a Senate panel said it would hold a hearing next week on high-frequency trading and other forms of automated trading in futures markets to see how the CFTC can keep the market safe.”

Bloomberg writer Silla Brush reported earlier this week that, “The U.S. Commodity Futures Trading Commission isn’t keeping up with high-speed derivatives trading and needs to invest in tools to detect manipulative and disruptive practices, said Scott O’Malia, a Republican commissioner.

“The CFTC lacks the technology necessary to routinely oversee the millions of messages traders send every day to futures exchanges operated by CME Group Inc. and IntercontinentalExchange Group Inc., O’Malia said yesterday in a speech prepared for a Tabb Forum conference in Chicago.”

Keith Good

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