FarmPolicy

June 24, 2019

Farm Bill, CFTC Issues; Ag Economy; Biofuels; and, Immigration

Farm Bill, CFTC Issues

Ron Hays, of The Oklahoma Farm Report and Radio Oklahoma Network, spoke earlier this week with House Ag Committee Chairman Frank Lucas (R., Okla.) about Farm Bill issues, as well as the Commodity Futures Trading Commission (CFTC) reauthorization measure that recently passed the House of Representatives.

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

On the CFTC reauthorization issue, Chairman Lucas noted that, “The Ag Committee, in response to some of, I think, the mistakes made at the commission in recent years, some of the mistakes done in the Dodd-Frank so- called financial reform act, the Ag Committee has responded in a bipartisan way with a bill that had overwhelming bipartisan support yesterday to try and address those. Things like making it easier for folks who use these products to electronically access the activities of the firms that are handling their money, trying to make it harder to have another MF Global.

“There’s things in the bill that does stuff like requiring that the division heads and the folks who work at the Commodity Futures Trading Commission be responsible to all the commissioners, not just the chairman of the commission. There’s things in there that deal with end users that make it simpler for folks to participate in addressing margin requirements on small entities, addressing how these things are done. Basically it is a piece of legislation to try and make CFTC more responsible to the people that utilize it, more responsible to the market changes.

“Very controversial because a number of my liberal colleagues don’t want to change anything. But the Ag Committee, once again, put a bipartisan package together to make positive, real changes, passed it by an overwhelming vote across the floor of the United States House, and we wait for the Senate to respond.”

Chairman Lucas added that, “I was very proud of my 40 some Democrat colleagues who voted with me as the bill passed through. But the bill had passed by voice vote out of the Agriculture Committee a few months ago. A pretty strong statement there. So a step in the right direction. Now we’ll see if Senator Stabenow and the Senate Agriculture Committee are willing to take it up. The commission needs to be reauthorized, and that’s the vehicle we use to do these important things. Rumor has it the Senate would simply like to change the date on the authorization bill. But these other things need to be done, too.”

Also with respect to CFTC issues, a news release yesterday from Sen. Tammy Baldwin (D., Wis.) stated in part that, “[Sen. Baldwin] has joined her colleagues in support of legislation that gives federal regulators emergency power to stop Wall Street speculators from taking advantage of turmoil in Iraq to drive up oil prices and make hard-working Americans pay more for gasoline.

“The legislation, introduced by Senator Bernie Sanders (I-Vt.), would force the Commodity Futures Trading Commission, the federal agency that regulates oil markets, to use all of its authority, including its emergency powers, to eliminate excessive oil speculation.”

The release noted that, “There is mounting evidence linking excessive speculation on oil to the high pump prices for gasoline.”

And more specifically on the Farm Bill, in his interview with Chairman Lucas, Ron Hays noted that, “The first thing, obviously, that came out was the disaster assistance programs. We got some calls pretty quickly after that was going into effect and we passed along several of them to your staff, to your chief economist and others, some problems and some slowness with that livestock disaster assistance.”

Chairman Lucas explained that, “It turns out that the three software platforms that were necessary to use the computers to, in a speedy fashion, address these issues would not cross match. And I’ve had conversations with the Secretary of Agriculture himself about this. He’s assured me that the best minds at IBM have been working diligently on it. But what it amounts to is because everything won’t speak to everything else in their computer system, they’ve had to mechanically do it, to manually fill out the forms.

“And I know that slowed the process down, and I know a lot of our neighbors out there have appointments that run over into July to have time with an FSA employee to fill out the paperwork to do it. But I would urge people: be patient, make sure you’ve got an appointment, be prompt, take the information that’s requested of you to bring. It is worth your time to do. We are pushing, encouraging USDA in Washington, D.C. to do whatever it takes to make the systems work together.

“But for now, if it’s paper and pencil, you still need to do it.”

And on nutrition related issues, Chairman Lucas indicated that, “Well, remember in the farm bill process we had approximately $20 billion in nutrition savings when we came out of committee, and with the encouragement and the help of my friends on the floor, they essentially doubled that number to $40 billion, but created a bill that would not pass. That’s why ultimately, in the nutrition title, we wound up with $8 billion in savings, because I had to have a bill that would continue the crop insurance programs, would continue the conservation programs, the rural development programs, all of those sorts of things.

“Now, some of the governors, yes, are trying to game the system. But CBO leads me to believe that the overall savings in the nutrition title will be higher than they projected. And in some of the northeastern states that have really tried to game the system, if I am a part of a Congress next year where I have a Republican majority in the Senate and continue a Republican majority in the House, don’t be surprised, whether it’s the appropriations process or some area, that the nutrition programs are not revisited. So the old line about some of my friends in the northeast may have outsmarted themselves could well be the case next year.”

Kevin Concannon, the Under Secretary for Food, Nutrition and Consumer Services, noted yesterday at the USDA blog that, “Each year, as required by the Food and Nutrition Act of 2008, USDA issues the payment accuracy rate for Supplemental Nutrition Assistance Program (SNAP) nationally and state by state.

I’m happy to announce that the fiscal year (FY) 2013 SNAP payment accuracy rate is an impressive 96.8 percent. This is an all-time high, and is the seventh year in a row with record-breaking accuracy rates. Payment accuracy means providing the correct amount of SNAP benefits to eligible households.”

(As a side note on nutrition issues, Michael M. Grynbaum reported yesterday at The New York Times Online that, “The Bloomberg big-soda ban is officially dead. The state’s highest court on Thursday refused to reinstate New York City’s controversial limits on sales of jumbo sugary drinks, exhausting the city’s final appeal and dashing the hopes of health advocates who have urged state and local governments to curb the consumption of drinks and foods linked to obesity.”)

Meanwhile, DTN writer Cheryl Anderson reported yesterday (link requires subscription) that, “Wetter weather this spring and early summer has led to greener pastures in many parts of the country. But for farmers and ranchers whose pastures are still suffering from the effects of drought, financial help may be available.

USDA’s Risk Management Agency offers the Pasture Rangeland Forage Insurance program as a risk-management tool to provide income to help offset the loss of forage production due to drought. The trouble is, many ranchers and farmers are likely unaware of the program.

“The PRF program provides coverage for annual forage crops in Texas, Oklahoma, Kansas, Nebraska, South Dakota and North Dakota. It covers annual crops planted for forage or fodder used for grazing, haying, green chop and silage.”

And Jonathan Coppess of the University of Illinois indicated yesterday at the farmdoc daily blog (“Energy Programs in the New Farm Bill”) that, “The Agricultural Act of 2014 (the 2014 Farm Bill; series of articles available here) continues a suite of renewable energy programs in Title IX.  Known as the Energy Title, it is a relatively new addition to omnibus farm bill legislation, first appearing in the Farm Security and Rural Investment Act of 2002 and expanded by the Food, Conservation, and Energy Act of 2008.  The roots of these programs, however, go at least as far back as the Agricultural Adjustment Act of 1938, which directed the Secretary of Agriculture to conduct research and development on new scientific, chemical, and technical uses for agricultural commodities and byproducts.”

After a more detailed discussion, yesterday’s farmdoc update stated that, “While the energy title may not be considered a big ticket item in the Farm Bill debate, it does deliver significant results on the ground, on farms and in rural communities.”

In other developments, an update yesterday from the COOL Reform Coalition noted that, “In an effort to prevent billions of dollars in retaliatory tariffs against the U.S., a broad coalition of industries is urging Congress to take action on the U.S. Country of Origin Labeling (COOL) dispute with Canada and Mexico. The newly formed coalition has sent a letter to the leaders of the House and Senate Agriculture Committees asking Congress to take action directing the Secretary of Agriculture to suspend indefinitely the revised COOL rule if it is found to be in violation of U.S. international trade obligations.”

 

Agricultural Economy

A portion of a report (Southwest Economy, Second Quarter 2014) from the Federal Reserve Bank of Dallas indicated that, “U.S. farm income is expected to plummet 27 percent this year, driven largely by lower cash receipts from crops, according to an initial outlook from the U.S. Department of Agriculture (USDA). But the decline will be less substantial in Texas, where livestock dominates the agriculture sector.  Texas ranks No. 1 in livestock production among the states, and livestock and related products account for two-thirds of Texas’ agriculture cash receipts. Those receipts will increase slightly in 2014, the USDA predicts, likely allowing Texas farm income to dodge the steep national decline.”

“Besides the national double-digit decline in crop cash receipts, sharply reduced government payments resulting from the 2014 farm bill also contribute to the anticipated drop in U.S. farm income,” the report noted.

The June North American Agribusiness Review, a recent report from Rabobank Food & Agribusiness Research (FAR) and Advisory group, has provided an overview of several sectors of the U.S. agricultural economy.

With respect to pork (at page 11), the report noted that, “Profit margins for U.S. hog producers remained at very high levels in May and June as the threat of PEDv has pushed hog prices to historic highs, aided by more favorable feed prices. We estimate industry margins averaged USD 65 per head in May and USD 73 per head in June; this is significantly higher than the margins seen during that time last year, which came in slightly above break- even. Hog prices fell from the highs in April as the impact of the PEDv outbreak is now expected to be seen in late summer and early fall, rather than early summer. We expect 2014 margins to average USD 60 per head [related graphs here and here].”

An update yesterday at the USDA’s Economic Research Service chart gallery noted that, “Retail pork prices have been rising in recent months, increasing 2.8 percent in the first quarter of 2014. Higher prices at the meat counter are partly due to increasing farm prices for hogs, which rose 41 percent over the same time period. Higher hog prices to date are, in part, the result of strong demand, particularly in export markets, as well as the high price of pork substitutes such as beef and poultry. In addition, the outbreak of Porcine Epidemic Diarrhea virus (PEDv) has increased piglet mortality, reduced litter sizes, and lowered forecasts for U.S. hog slaughter and pork production later in 2014 [related graph].”

Also yesterday, Bob Meyer reported at Brownfield that, “The latest quarterly global dairy outlook from Rabobank says prices softened considerably during the second quarter of the year. Increasing milk production in exporting regions combined with an easing of forward purchasing by China causing the decline. The report says after a period of aggressive buying, China has increased domestic production while sales have weakened causing excess inventories of dairy products.”

In other news, a recent update of the U.S. Drought Monitor noted that, “The return of hot weather in California and the Southwest accelerated moisture losses and increased irrigation requirements [related graph].”

Allysia Finley noted yesterday at The Wall Street Journal Online that, “The U.S. Department of Agriculture on Wednesday predicted that fruit and vegetable prices will rise by 5% to 6% this year due largely to lower production in California’s Central Valley. While California has just suffered one of its driest years on records, extreme environmental policies deserve much of the blame for the forecasted spike.

“California produces more than half of the country’s fruits and vegetables, including the bulk of its lettuce, berries and tomatoes. Federal water regulators this year slashed farmers’ water allocations to zero due to a prolonged bout of dry weather. As a result, farmers had to triage their crops and pump groundwater. Many reserved their limited groundwater supply for high-value nuts and fruit trees, scaling back production of row crops.

“All in all, California farmers fallowed about 500,000 acres of land this year. But here’s the thing: much of this land could have been productive had the state stored up more water from wet years and not flushed 800,000 acre-feet into the San Francisco Bay last winter and an additional 445,000 acre-feet this spring to safeguard the endangered delta smelt. That’s enough for roughly three million households to live on and to irrigate 600,000 acres of land.”

And with respect to food consumption issues, Annie Gasparro reported in today’s Wall Street Journal that, “Americans’ ardor for frozen food is going cold.

“Long at the center of the supermarket and the heart of kitchen convenience, freezer-aisle items are struggling today as Americans shift their tastes to fresh food that they see as healthier [related graph].”

 

Biofuels

Timothy Cama reported yesterday at The Hill Online that, “Gasoline’s price will increase up to 9 percent, and diesel fuel will rise by up to 14 percent by 2017 because of the Renewable Fuel Standard (RFS) if Congress does not repeal it, the Congressional Budget Office (CBO) said Thursday.

“The CBO’s analysis estimated that, in order to comply with the increasing mandates called for under the Energy Independence and Security Act, fuel refiners would have to more than triple their use of advanced biofuels by 2017, and would have to use much more ethanol in gasoline than the 10 percent blend that older vehicles can tolerate.

“The agency predicted that the Environmental Protection Agency, which oversees the RFS, will keep the mandate levels similar through 2017, since increasing them ‘would require a large and rapid increase in the use of advanced biofuels and would cause the total percentage of ethanol in the nation’s gasoline supply to rise to levels that would require significant changes in the infrastructure of fueling stations.’”

 

Immigration

A news release yesterday from the Western Growers Association (WGA) stated that, “This afternoon, a group of agricultural leaders and producers met with Vice President Joe Biden to discuss immigration reform. Legislative action to address our broken immigration system remains the top priority for agriculture this year.”

Tom Nassif, WGA President and CEO, noted that, “Time is running out and the labor crisis facing agriculture must be addressed. I told the vice president that we will continue working with members of Congress and Republican Leadership to find a path forward on this critical issue. We understand that the time for leadership and action on this issue is now and we are committed to working to ensure steps are taken to address the immigration concerns of agriculture. I also emphasized that Democrats in the House need to compromise on a path to legalization and fight for citizenship in a conference and if they don’t have a problem with border security provisions they need to make that more clear.”

David Nakamura and Ed O’Keefe reported in today’s Washington Post that, “The two-year attempt to push immigration reform through Congress is effectively dead and unlikely to be revived until after President Obama leaves office, numerous lawmakers and advocates on both sides of the issue said this week.

“The slow collapse of new border legislation — which has unraveled in recent months amid persistent opposition from House Republicans — marks the end of an effort that Democrats and Republicans have characterized as central to the future of their parties. The failure also leaves about 12 million illegal immigrants in continued limbo over their status and is certain to increase political pressure on Obama from the left to act on his own.”

Keith Good

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