FarmPolicy

December 9, 2019

Farm Bill- Policy Issues; Ag Economy; CFTC; and, Political Notes

Farm Bill- Policy Issues

Justin Sink reported yesterday at The Hill Online that, “First lady Michelle Obama on Monday blasted back at critics of her school lunch program, arguing parents should ensure their children eat healthy meals.

“Obama said parents and school leaders can’t let children make the call to eat pizza and burgers for lunch every day.

“‘If I let my kids dictate what we have for dinner every day, it would be French fries, chips and candy, but we don’t run our households like that, and we can’t run our schools like that,’ the first lady said in an interview with MSN.”

Yesterday’s update noted that, “House Republicans are expected to hold a floor vote this week on a bill that would waive tougher nutritional standards on school lunches if the school shows it has operated at a net loss over six months.”

The White House has backed a compromise agreement adopted by the Senate Appropriations Committee. Under that deal, tougher requirements on sodium levels would not be implemented, although requirements for schools to offer fruits and vegetables would be kept,” the Hill article said.

Meanwhile, the Government Accountability Office (GAO) released a report yesterday on school meals, “USDA Has Enhanced Controls, but Additional Verification Could Help Ensure Legitimate Program Access.”

A one page summary of the GAO report indicated that, “In fiscal year 2012, over 31.6 million children participated in USDA’s National School Lunch Program (NSLP) at a cost of about $11.6 billion. In fiscal year 2013, USDA estimated NSLP certification errors of more than 8 percent, or $996 million. GAO was asked to review possible beneficiary fraud within the program.

“This report assesses (1) steps taken to help identify and prevent ineligible beneficiaries from receiving benefits in school-meal programs and (2) what opportunities exist to strengthen USDA’s oversight of the school-meals programs.”

The report stated that, “Among other things, GAO recommends that the Secretary of Agriculture develop a pilot program to explore the feasibility of using computer matching to identify households with income that exceeds program-eligibility thresholds for verification, and explore the feasibility of verifying a sample of categorically eligible households. USDA generally agreed with the recommendations.”

In conservation related developments, a news release yesterday from Sen. John Thune (R., S.D.) stated that, “Today [Sen. Thune] wrote U.S. Department of Agriculture (USDA) Secretary Tom Vilsack requesting that USDA stop requiring the destruction of vegetative cover on certain CRP contracts at a cost to taxpayers.

“‘CRP holds a significant role in the success of South Dakota’s agriculture and rural economies,’ said Thune, ‘which is why USDA needs to make the common-sense policy modifications I am requesting that would make CRP more attractive to participants and save taxpayers money. Not only does CRP provide an economic alternative to farming marginal land, CRP’s hundreds of thousands of acres of habitat in South Dakota have enhanced the economies of small towns and rural areas by supporting our pheasant and wildlife populations.’

“In his letter, Thune wrote, ‘Mid-contract management, conducted once on a 10-year contract and twice on a 15-year contract, is critical for enhancing permanent vegetative cover quality and wildlife productivity on CRP acreages. And, for certain practices, requires CRP participants to destroy the residue by baling and stacking the residue and burning it. The logic behind burning this vegetative cover, which could instead be used for feed, is not only difficult for producers and others to understand, but the burning creates a safety risk as well.’”

The news release noted that, “Current USDA policy on CRP lands enrolled under certain continuous CRP signups does not allow participants to utilize the vegetative cover required to be removed under mid-contract management. Instead, CRP participants are paid to destroy this cover. As an alternative, Thune is recommending that in return for a 25 percent annual payment reduction, producers be allowed to use this residue or have no payment reduction if they choose to donate the residue to a third party. The haying and grazing would not be conducted during the primary nesting season and frequency would be according to midterm requirements established by state and national policy.”

And an update yesterday at the National Sustainable Agriculture Coalition Blog noted that, “The U.S. Department of Agriculture’s (USDA) Natural Resource Conservation (NRCS) will begin accepting applications to re-enroll in the Conservation Stewardship Program (CSP) on July 11, 2014.  This renewal option is specifically for farmers and ranchers who enrolled in CSP initially in 2010.”

Marcia Zarley Taylor reported yesterday at DTN that, “The Eighth Circuit U.S. Court of Appeals heard oral arguments in a landmark tax case last week that would not only set a precedent for absentee landowners with Conservation Reserve Program contracts, but could potentially redefine tax treatment of cash rents, conservation easements and other types of passive income if allowed to stand, farm managers and legal scholars say.

“The appeal of a 2013 Tax Court ruling in Morehouse v. Commissioner seeks to eliminate the IRS position. In the initial case, the Tax Court ruled taxpayers could be subject to self-employment taxes simply by signing a CRP rental contract, even though the Tax Code specifically exempts rent from self-employment taxes. The case involves a non-farmer and Minnesota resident who inherited land in South Dakota, enrolled it in the CRP, and hired custom operators to manage weeds and other contract requirements.

The 2013 Tax Court decision shocked farm managers, legal scholars and agricultural accountants who, for most of the past three decades, have advised farm investors that they were exempt from the 15.3% tax if they were not otherwise ‘materially participating’ in an agricultural business.”

 

Agricultural Economy

Sarah Muirhead reported yesterday at Feedstuffs Online that, “The U.S. Department of Agriculture has extended a conditional license on a vaccine for porcine epidemic diarrhea virus (PEDv).

“The vaccine is the first to be licensed for PEDv and will be used to vaccinate sows with the intent that they build antibody, and transmit that antibody through their milk to newborn piglets. It is intended to protect the piglets against PEDv.

“The vaccine, called ‘iPED,’ was developed by Harrisvaccines, Ames, Iowa. Since its introduction, approximately 2 million doses of the vaccine have been prescribed by veterinarians. The approval, issued June 16, widens the marketing and distribution channels for the product and acknowledges that the technology offers a reasonable expectation of efficacy.”

Meanwhile, Cheri Zagurski reported yesterday at DTN (link requires subscription) that, “Corn condition improved slightly in the week ended June 15, while soybean condition worsened a similar slight amount, according to USDA’s weekly Crop Progress report.

The nation’s corn crop was rated 76% good to excellent in Monday’s report, compared to 75% last week. Corn is 97% emerged, compared to 92% last week and a 96% five-year average.”

The DTN update added that, “Soybeans were rated 73% good to excellent Monday, compared to 74% last week. Soybeans are 92% planted and 83% emerged, compared to 87% and 71% last week and 90% and 77% for a five-year average.”

Bloomberg writer Phoebe Sedgman reported today that, “Corn traded near a four-month low after crop conditions improved in the U.S., the world’s biggest exporter.”

University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdoc daily blog (“Potential for U.S. Average Corn and Soybean Yields”) that, “The critical part of the growing season for corn and soybeans is still to come. The record yields of 2004 and 2009 were the result of ample summer rainfall and cooler than average summer temperatures. A repeat of those conditions this year could result in an average corn yield above the record yield projected by the USDA. The 2009 average yield, for example, was four bushels above the 2004 average. A similar jump from 2009 to 2014 would result in an average of 168.7 bushels. Based on the current projection of harvested acreage, such a yield would produce a crop 286 million bushels larger than currently projected by the USDA.   For soybeans, the 2009 record yield was 0.9 bushels above the previous record of 2005. A similar jump from 2009 to 2014 would result in an average yield of 44.9 bushels, which is actually 0.3 bushels lower than the current USDA projection. Based on the current projection of harvested acreage, such a yield would produce a crop about 24 million bushels less than forecast by the USDA.

While it is too early to be confident of U.S. corn and soybean yield potential, the markets are clearly anticipating very large crops, particularly for corn. Prices will likely remain under pressure as long as conditions continue to point to average yields above trend value.”

In other news, AP writer Terence Chea reported earlier this week that, “In drought-stricken California, young Chinook salmon are hitting the road, not the river, to get to the Pacific Ocean.

Millions of six-month-old smolts are hitching rides in tanker trucks because California’s historic drought has depleted rivers and streams, making the annual migration to the ocean too dangerous for juvenile salmon.”

And Tom Curry reported late last week at Roll Call Online that, “What does highway funding have to do with your blueberry smoothie?

“Simple: More roadside habitat for honeybees could mean better pollination for berries, melons, and other crops. In a Dear Colleague letter last week Rep. Alcee Hastings, D- Fla., and Rep. Jeff Denham, R-Calif., urged colleagues to ‘BEE a Part of the Solution!’ — by co-sponsoring their bill — the Highways Bettering the Economy and Environment (BEE) Act — that would allow states to use federal highway maintenance funds to create highway habitats for honeybees.”

In trade related developments, DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Agriculture Secretary Tom Vilsack is in Europe this week to reiterate the Obama administration’s policy on agricultural trade talks, but no significant breakthrough is expected on positions that gridlock the Trans-Atlantic Trade and Investment Partnership.

“Vilsack held a conference call Monday morning with reporters following a ‘working lunch’ with 28 agricultural ministers and representatives from the EU. The lunch involved a ‘frank discussion’ about what is common in U.S. and European agriculture, he said. Vilsack said he sought to emphasize that broader market access for agriculture must be a significant part of the ultimate deal on the U.S.-European free trade agreement.

“‘I was very candid with my colleagues that, absent a real strong commitment to agriculture in this trade agreement, it would be very difficult for Congress to be able to get the votes necessary to pass TTIP,’ Vilsack said.”

Mr. Clayton explained that, “Another brewing issue concerns geographical indicators. U.S. officials have pushed back on European proposals to protect certain names of foods such as popular meats and cheeses. Europe argues products such as parmesan or feta deserve special status and protection from imports. GIs are also being suggested for meat such as bologna. U.S. Senators and others have complained about such gratuitous use of geographical indicators.

Vilsack said geographical indicators came up in almost every presentation made by his European counterparts during the lunch. The secretary pointed to the differences between a trademark or patent on a product that distinguishes it and ‘a system that essentially seeks to exclude the use of what have been treated up to this point as relatively generic terms.’”

An update yesterday from the National Association of Egg Farmers (NAEF) indicated that, “USDA Secretary Vilsack is meeting with EU Agriculture Ministers on trade issues today including concerns for protecting geographical indications — trade names that involve a product’s location of origin, such as Parmesan cheese. Word was circulating in the egg products industry that certain egg products plants in the EU were being considered for import privileges in the U.S.

“The National Association of Egg Farmers addressed the issue with Philip Derfler, the Deputy Administrator at the Food Safety Inspection Service today. NAEF noted that since all egg products sold for human food in the U.S. operate under the Egg Products Inspection Act 9 CFR Part 590, would the Deputy Administrator please confirm that no egg products are being imported aside from these requirements.”

Also, Shawn Donnan reported yesterday at The Financial Times Online that, “The US has defended a decision to exclude financial regulation from a vast transatlantic trade pact amid mounting pressure from the EU and the financial industry to include it, arguing that doing so would only complicate the regulatory landscape unnecessarily.

“European negotiators have spent much of the past year lobbying the US to include co-operation on financial regulation in the talks under way to draft a Transatlantic Trade and Investment Partnership, or TTIP. But according to leaked documents confirmed by European officials, the EU is now poised to increase the pressure on the US by threatening to exclude any discussions on financial services altogether unless Washington agrees to Brussels’ demands to put regulation on the table.”

 

Commodity Futures Trading Commission

Gregory Meyer reported yesterday at The Financial Times Online that, “A long-running effort to constrain speculation in commodities markets could face another round of revision.

“Almost five years after its first hearings on the issue, the US Commodity Futures Trading Commission has made the rare move of reopening public comment on position limits, or caps on the number of commodity trading contracts speculators may control.

“On Thursday, commission staff will host representatives of commodity trading houses such as Vitol and Cargill and exchanges such as CME Group to listen to complaints that a position limits rule proposed last year will make it harder to buy grain or store oil.”

The FT article explained that, “Congress directed the CFTC to impose limits on speculative positions in 28 commodities contracts after oil and grain prices soared to records in 2008. Europe has approved its own curbs.

“Writing a rule to implement the US legislation has proven tough, however. In September 2012, a federal judge struck down the first attempt in response to a lawsuit brought by two banking lobbies, saying that CFTC had failed to show limits were necessary.

“Last November, the CFTC unveiled a revised rule 163 pages long. While banks continued to oppose the new proposal, the concerns of trading houses – companies that buy, sell, transport and store bulk commodities, as well as trade derivatives – will be the main focus of this week’s meeting.”

Also, Reuters writer Philip Pullella reported yesterday that, “Pope Francis criticised the wealth made from financial speculation on Monday as ‘intolerable’ and said speculation on commodities was a ‘scandal’ that compromised the poor’s access to food.

“Since his election in March 2013, Francis has often attacked the global economic system as being insensitive to the poor and not doing enough to share wealth with those who need it most.”

 

Political Notes

Emma Dumain reported yesterday at Roll Call Online that, “The two front-runners in the race to become the next House majority whip spent the weekend shoring up support with potential allies — and, through staff, taking swipes at each other.

“A source close to Chief Deputy Whip Peter Roskam, in an emailed memo to CQ Roll Call, said the 90-plus members in the House who have pledged to vote for the Illinois Republican are ‘rock solid,’ while Louisiana Rep. Steve Scalise’s numbers are ‘soft’ and ‘all over the place since Thursday — at 100, 120, over 100, etc. etc.

“‘No one wants a whip who can’t count,’ the source continued, ‘and no one wants a whip who overpromises and under-delivers.’”

Keith Good

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