FarmPolicy

August 20, 2019

Policy Issues; Ag Economy; Regulations; and, Biofuels

Policy Issues

Tyrel Linkhorn reported yesterday at the Toledo Blade Online that, “Two years ago, farmers in the four-county Toledo metro area collected more than $10.5 million in direct payments from the federal government, a subsidy program that had become increasingly seen as a poor use of taxpayer money.

Starting this year, those payments disappear. In their place are federal safety-net programs that officials say will slightly reduce federal expenditures and better reflect the purpose of protecting the nation’s farmers in dire times.

“‘The fundamental political problem that direct payments ran into is a question of fairness,’ said Carl Zulauf, an agricultural economist at Ohio State University. ‘Is it fair farmers were receiving these payments when income was at record or near-record levels? We as a country decided that was not something we felt comfortable with.’”

The article stated that, “Direct payments were included in the 1996 Farm Bill as a temporary safeguard against bad years, but eventually became permanent. The subsidies drew heavy fire recently as farm income rose to record levels. Mr. Zulauf said as long as farmers met the basic qualifications, direct payments were made regardless of need. In the new system, payments will only be made when certain market conditions exist — either revenue declines or low market prices for grain and other commodities.

President Obama signed the five-year Farm Bill this year.

“Agricultural observers say there’s a lot of changes farmers must consider in the new bill, but the implementation of those programs hasn’t yet been sorted out, making an already confusing choice even more complicated.”

The Blade article also noted that, “Though that alters farm economics somewhat, the changes have generally been supported by farm organizations.

This is a fair system,’ said Alan Sundermeier, the Ohio State University Extension educator for Wood County. ‘I know the Corn Growers [Association] and other groups have supported this, knowing the budget needs to be reduced on farm spending and this was a fair way of getting this accomplished.’”

A news release yesterday from USDA indicated that, “Agriculture Secretary Tom Vilsack today reminded producers that changes mandated through the 2014 Farm Bill require them to have on file a Highly Erodible Land Conservation and Wetland Conservation Certification (AD-1026). The Farm Bill relinked highly erodible land conservation and wetland conservation compliance with eligibility for premium support paid under the federal crop insurance program.”

And recall that the Senate Ag Committee will hold a hearing this morning on nutrition related issues: “Meeting the Challenges of Feeding America’s School Children.”

Meanwhile, the White House yesterday highlighted an initiative to “expand job-driven training and broaden the pathway to the middle class.”

Referred to as “Ready to Work,”  [full report] a summary of the executive branch measure stated that: “$200 million SNAP Employment and Training (E&T) Pilots. The E&T program within the Supplemental Nutrition Assistance Program provides employment assistance and training for participants registered for work, including unemployed individuals with some recent work experience, others out of work for many years, and still others work at low-paying jobs. In August, USDA will announce a $200 million funding opportunity for up to 10 SNAP E&T pilot projects that will test strategies designed to increase employment among SNAP work registrants. USDA will incorporate elements of the job-driven checklist as a factor in evaluating applications and require collaboration with workforce boards with an emphasis on strong supportive services for all pilot participants.”

And with respect to federal funding issues, Cristina Marcos reported yesterday at The Hill Online that, “House Republicans are considering a vote before the August recess on a stopgap bill that would avoid a government shutdown on Oct. 1.

“Congressional aides cautioned that no final decision has been made, but the party appears to have a strong interest in completing a continuing resolution (CR) well before the deadline.”

The Hill article explained that, “As recently as last week, the House was churning through the individual annual spending bills for fiscal 2015. The House on Wednesday passed its seventh fiscal 2015 appropriations bill for the Financial Services Committee, which provides funding for the IRS, Wall Street enforcement agencies and federal payments for the District of Columbia.

But the Senate has not passed a single appropriations bill for the new fiscal year, due to fights over amendments.”

 

Agricultural Economy

Bloomberg writer Megan Durisin reported yesterday that, “Corn futures extended a slump to a four-year low as crops got the highest rating in a decade amid favorable weather in the U.S., the world’s top producer. Soybeans, wheat and soybean oil fell to the cheapest since 2010.”

A news release yesterday from University of Missouri Extension noted that, “‘I’ve never seen Missouri corn looking this good,’ said University of Missouri Extension corn specialist Brent Myers.

“In their weekly teleconference on Tuesday, July 22, MU Extension agronomy specialists across the state echoed Myers’ outlook. The July 18 USDA Missouri Crop Progress and Condition report shows 84 percent of Missouri corn in good to excellent condition.”

Yesterday’s update pointed out that, “However, it’s still too early to call bushels in the bin. Missouri cornfields appear to have ample nitrogen, but they need timely rainfalls to bring a bumper crop, Myers said. Agronomy specialists across the state said crops need rain now. Cool conditions have prevented drought stress so far.”

Jacob Bunge and Anna Prior reported yesterday at The Wall Street Journal Online that, “Farmers’ preference for planting soybeans over corn will continue to challenge DuPont, one of the world’s largest sellers of high-tech seeds, executives said Tuesday.

“Plunging corn prices, weighed down by last year’s record U.S. corn harvest and expectations for another bumper crop this year, are encouraging farmers in North and South America to reduce their corn acreage, cutting into DuPont’s main line of seeds.”

The Journal writers explained that, “The abundance of grain and oilseeds expected to hit the market this autumn has pushed corn futures prices 25% lower over the past 12 months, while soybean prices have declined 17%.

“For seed and chemical companies, big crops have a mixed effect. While the cost of producing seeds to sell in upcoming seasons typically declines, lower crop prices leave farmers with less money to spend on farm supplies like seeds, chemicals and fertilizer. Farmers, for example, may be less willing to buy the newest versions of genetically engineered seeds.”

Meanwhile, University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Renegotiating Cash Rents Down for 2015”) that, “Actual cropland returns in 2013 and projected returns in 2014 and 2015 are considerably below returns from 2010 through 2012.   In many cases, projected 2015 returns will be lower than current cash rents, likely require renegotiating for lower cash rents.”

Yesterday’s update noted that, “Two factors will impact the need for adjusting rents downward.  The first is the farm’s cash rent relative to the average rent for farmland of similar productivity.  There is a considerable range in cash rents for farmland of similar type.  Some rents are $100 per acre higher than the average, and some farms can be $100 lower than the average. Those cash rents that are relatively lower will not require adjusting downwards.   Downward adjustment in cash rents likely are needed for relatively high cash rents.

“Sources for average cash rents are readily available.  A map with average cash rents by Illinois County is available (farmdoc daily September 10, 2013).”

“The second factor is how fast cash rents on a farm have gone up in recent years. Between 2006 through 2013, average cash rents increased in Illinois by an average of 7.7% per year.   This means that the average cash rent is 68% higher in 2013 as compared to 2006. If the cash rent on a farm has lagged these increases, there may be rational for keeping the cash rent high into 2015,” the farmdoc update said.

Marcia Zarley Taylor pointed out yesterday at the DTN Minding’s Ag Business blog that, “‘It will take two years of losses to reduce cash rents,’ said Doug Stark, president of Farm Credit Services of America, which covers a four-state region based in Omaha. ‘The conversation will go like this: The tenant tells the landowner, ‘At $3.50 corn, I can’t make money.’ The landowner will say, ‘You’ve had it good, we’ll just leave the rent where it’s at.’ Next year, the farmer will come back, ‘I’ve had two years of losses and my banker said I can’t do it again.’ The landowner will say, ‘OK, I’ll take $50 an acre less.’ The farmer will say, ‘I was thinking $100 to $150 an acre less.’ And if he can’t get that, he’ll walk away,’ Stark explained. ‘That’s when you will see cash rents go lower.’”

The USDA’s National Agricultural Statistics Service released its monthly Chicken and Eggs report yesterday, which stated that, “United States egg production totaled 7.96 billion during June 2014, up 3 percent from last year [graph]  … All layers in the United States on July 1, 2014 totaled 352 million, up 2 percent from last year [graph].”

And with respect to bee production, Henry I. Miller noted in a column posted yesterday at The Wall Street Journal Online that, “On June 20 the White House issued a presidential memorandum creating a Pollinator Health Task Force and ordering the Environmental Protection Agency to ‘assess the effect of pesticides, including neonicotinoids, on bee and other pollinator health and take action, as appropriate.’

“Why the fuss over bees? Is the U.S. in the midst of a bee-pocalypse? The science says no. Bee populations in the U.S. and Europe remain at healthy levels for reproduction and the critical pollination of food crops and trees. But during much of the past decade we have seen higher-than-average overwinter bee-colony losses in the Northern Hemisphere, as well as cases of bees abruptly abandoning their hives, a phenomenon known as ‘colony collapse disorder.’

“Citing this disorder, antipesticide activists and some voluble beekeepers want to ban the most widely used pesticides in modern agriculture—neonicotinoids (‘neonics’ for short)—that account for 20% of pesticide sales world-wide. This would have disastrous effects on modern farming and food prices.”

Dr. Miller explained that, “A neonic ban would, however, devastate North American agriculture and the communities that depend on it. Neonics are the last line of defense for Florida’s citrus industry against the Asian citrus psyllid, an insect that spreads a devastating disease of citrus trees called huanglongbing, or HLB. They’re also the first line of defense in Texas and California, where HLB is beginning. Without neonic protection, tomatoes in Florida and vegetable crops in Arizona, California and the Pacific Northwest would be imperiled. If whitefly infestations weren’t kept in check with neonics, much of the U.S. winter vegetable production would be lost.

Grape-growing in California and the Pacific Northwest could be devastated by the viral scourges of leaf-roll and red blotch without neonic pesticides to control the leafhoppers that spread them. Without neonic protection against thrips in cotton, water weevil in rice and grape colaspis in soybeans, yields in the mid-South could be so damaged that farmers would either go out of business or turn to already abundant crops like corn.”

In transportation related news, Reuters news reported earlier this week that, “Canadian National Railway Co, the country’s largest rail operator, reported a big spike in profit on Monday as it moved record volumes of goods and made a swift recovery from last quarter’s brutal winter weather.

“The Montreal-based railway also bolstered its 2014 financial outlook, saying it sees ongoing volume growth in such key markets as energy, grain and intermodal shipping containers.”

And a news release yesterday from Sen. Heidi Heitkamp (D., N.D.) stated that, “[Sen. Heitkamp] today called on Canadian Pacific Railroad to provide information about the steps that railroad will take to address the needs of farmers in the coming harvest. Additionally, Heitkamp called on Canadian Pacific Railroad to release more information on the extent of agriculture shipment delays in North Dakota.

With harvest approaching, Heitkamp is greatly concerned about the ability of the grain storage and delivery system in North Dakota to withstand further difficulty in accessing needed rail service to move grain to market.”

In international news, Shanoor Seervai reported yesterday at the India Real Time blgo that, “Cheese in India once meant only paneer, the traditional, unaged farmer cheese made across the country. But, with rising incomes and more Indians exposed to foreign cheeses, the market for Western-style cheeses is growing.

“‘We have seen [gourmet cheese] sales grow exponentially… it contributes to just short of a tenth of our revenues,’ said Mohit Khattar, managing director of Godrej Nature’s Basket, a premium grocery chain.”

Neil Gough reported in today’s New York Times that, “Three months after it scrapped plans for a $5.3 billion share sale in Hong Kong, China’s WH Group, the world’s biggest pork producer, is back with a leaner offering that will seek to raise about $2 billion.

“WH Group was created last year after Shuanghui International of China paid $4.7 billion in cash for Smithfield Foods, the biggest pork producer in the United States. That deal remains the biggest-ever buyout of an American company by a Chinese one.”

The Times article added that, “The company plans to raise 15.9 billion Hong Kong dollars by selling 2.567 billion new shares, or an 18 percent stake, in an I.P.O. priced at 6.20 dollars per share, a person with direct knowledge of the deal said Tuesday, declining to be named because the information was not yet public. In April, the company had sought to sell the shares in a price range of 8 dollars to 11.25 dollars apiece.”

 

Regulations

Jacob Bunge reported yesterday at The Wall Street Journal Online that, “Federal regulators denied Texas farmers’ push to use a powerful herbicide against invasive ‘super weeds’ threatening to strangle cotton crops.

“The U.S. Environmental Protection Agency cited risks to drinking water and other hazards in its refusal of state officials’ emergency request to allow the farmers to use Milo-Pro. The herbicide includes the chemical propazine, a restricted product that requires a license to purchase and use.”

The article noted that, “Texas had asked the EPA for an exemption that would have permitted use of the pesticide on up to 3 million acres–roughly half the state’s land planted with cotton this year–to combat palmer amaranth, or pigweed, a fast-growing weed that can grow 3 inches a day and has developed a resistance to widely used chemicals.

“A spokesman for the Texas Department of Agriculture, said it was ‘very disappointed’ by the ruling. ‘Once again, members of the current administration have turned their back on the hard-working farmers of Texas,’ said Bryan Black.”

A news release yesterday from Sen. Pat Roberts (R., Kans.) stated that, “In a meeting today with Senate Agriculture Committee Republicans and Gina McCarthy, Administrator of the Environmental Protection Agency (EPA), U.S. Senator Pat Roberts said the agency has unfairly targeted farmers, ranchers and rural America with burdensome regulations.

“‘Kansans tell me the Agency’s work to regulate fuel storage tanks, prescribed burning of the Flint Hills prairie, cap and trade, pesticide permits, fugitive dust, let alone coal power and our water resources is an assault on our way of life,’ Roberts said. ‘The rocky relationship between Midwest agriculture and the EPA is not new, but the latest round of proposed regulations is making many folks believe the rules are driven by an anti-agriculture agenda that is hurting the Kansas economy.’”

 

Biofuels

Sens. Chuck Grassley (R., Iowa) and Amy Klobuchar (D., Minn.) indicated in a column in yesterday’s Des Moines Register that, “Biofuels also are facing stiff resistance from ‘big oil.’ This time, it’s not OPEC putting a stranglehold on the marketplace. It is instead the powerful oil industry that reports show is blocking the pipeline for biofuels to get to market.

“Last fall, we asked the Department of Justice and Federal Trade Commission to investigate possible anticompetitive practices by the oil industry. We shared concerns we heard that oil companies allegedly are mandating retailers to carry and sell premium gasoline, which as a result prevents the retailer from selling renewable fuels without installing expensive infrastructure upgrades. By forcing a franchisee to carry premium gasoline as a condition of carrying regular gas, the oil company may be using its economic power to leverage unreasonable, discriminatory arrangements that are in violation of federal laws.”

The Senators added that, “The Department of Justice and FTC responded with assurances that they are taking steps to identify, prevent and prosecute practices in the petroleum markets that violate anticompetitive business practices.

On the one hand, big oil argues that the RFS [Renewable Fuel Standard] is broken because the industry says it can’t mix the higher blends. On the other hand, those same companies appear to be doing everything they can to prevent any widespread investment in infrastructure by their franchisees and smaller stations that are buying and selling their gasoline.”

Keith Good

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