FarmPolicy

August 22, 2019

Policy Issues; Ag Economy; Biotech; Biofuels; Regs; and, Immigration

Policy Issues

Marcia Zarley Taylor reported yesterday at DTN that, “The ghost of the Southwest’s mega-drought continues to haunt growers even after a few rain showers this last growing season. Producers there have been used to paying dearly for each dollar of crop insurance coverage, but the cost-benefit ratio could reach a breaking point in 2015.

“‘Under old farm policies, lenders would look at your portfolio and see how much crop insurance guaranteed in gross revenue, than add in direct payments and that was the basis for your crop loans,’ said Matt Huie, a 38-year-old crop producer from Beesville near the Gulf Coast rim of Texas. ‘Now we’ve seen our basis for loans erode because of drought and erosion in commodity prices.’

“Texas state climatologist John Nielsen-Gammon describes prolonged drought in the Corpus Christi area as one of the two most severe in the region’s recorded history. Only the epic drought of the 1950s to the early 1960s matches it.”

The DTN article explained that, “In high-risk farming regions, federal crop insurance isn’t the financial cushion it offers the Corn Belt. While Midwesterners typically guarantee 80% or higher expected revenue, ‘nothing over 75% is offered on any crop here,’ he said. Not that he could afford it anyway.

Premiums are already so ‘crazy high’ in Texas, Huie typically only insures 65% optional unit coverage under revenue plans. Even then he normally pays $25 to $35/acre for a corn APH of 65 bushels. For the same price, someone in Indiana with a 160-170 bpa APH could buy an 85% policy, noted Cameron Silveus, an agent with the Silveus Insurance Group, who has clients in both states.”

Ms. Taylor pointed out that, “Huie and other mega-drought victims from Texas to Colorado had banked on a new 2014 farm bill provision forgiving Actual Production History (APH) yields that collapsed due to extreme weather. The APH fix forgave an individual’s actual yields in counties where planted-acre yield tumbled at least 50% below a 10-year average. Growers in contiguous counties would also qualify.

Because APHs are based on a 10-year history, the new rule would have erased Huie’s near-zero yields due to drought in 2006, 2009, 2012 and 2013. That would have lifted his 2015 cotton APH average 26% — with similar boosts for his dryland corn, grain sorghum and wheat. Establishing a realistic APH is doubly important now, since it is the basis for payments under the new Supplemental Coverage Option (SCO), an insurance rider that allows growers to buy up insurance coverage to 86% levels. Huie expects to need that option to supplement his base coverage.

“Instead, USDA’s Risk Management Agency said it is overwhelmed by monumental changes in crop insurance under the new farm law that affect almost all counties and crops within the federal crop insurance program. In July, officials said they recognized how significant the APH change would be, but announced they would not be able to implement this rule until 2016 crops.”

The DTN article added that, “Critics argue Congress intended to implement the rule now, not three years into a five-year farm bill. They think USDA has leeway to outsource some of its labor and software demands and can reuse the same county yield data it needed to compile SCO and the cotton industry’s STAX insurance policy.”

In a tweet yesterday, Rep. Mike Conaway (R., Tex.) provided a link to the DTN article and indicated that, “#USDA needs to implement #APH

High Risk and ‘Crazy High’ Premiums for #Texas #farmers #CropInsurance #FarmBill”

Meanwhile, Reuters writer Chris Arsenault reported yesterday that, “Wealthy countries are still subsidizing their farmers at the expense of developing nations, undermining market access for some of the world’s poorest producers, two farm ministers told a Food and Agriculture Organization meeting on Monday.

“‘Our cotton producers are constantly targeted by unfair subsidies from the North,’ Burkina Faso Agriculture Minister Mahama Zoungrana told delegates at a meeting of the U.N. agency in Rome.

“‘The rules and standards of international trade are not favorable to SMEs (small and medium sized enterprises) from Africa,’ he said.”

The article noted that, “Concerns over developed-world farm subsidies took a back seat for policy makers in recent years, as high prices for agricultural goods led to food riots and worries that a growing number of people in poor countries couldn’t afford to eat.”

And Warangkana Chomchuen reported yesterday at The Wall Street Journal Online that, “Thailand’s national rice policy committee said it plans to introduce measures to delay the sale of some rice from the coming harvest to try to support prices.

“Local farmers would be offered low-interest loans in exchange for keeping their Hom Mali—commonly called Thai jasmine rice—and parboiled rice, to be harvested in November and December, in storage, Deputy Prime Minister Pridiyathorn Devakula told reporters after the committee’s meeting.

The goal is to prevent rice prices from falling, said Mr. Pridiyathorn, a member of the committee. Supplies of fresh, newly harvested rice tend to pressure the price of older grain.”

The Journal article indicated that, “Last week, the Cabinet approved a one-time payment of about $1.2 billion in cash to help 3.4 million rice-farming families.

“The direct cash handouts were welcomed by the World Bank.

“‘The subsidy is specifically targeting poor farmers and it’s a one-time payment,’ Ulrich Zachau, the World Bank country director for Southeast Asia, said Monday.”

 

Agricultural Economy

Farm broadcaster Mike Hergert, of the Red River Farm Network, tweeted yesterday that, “Linn Group raises its corn yield estimate >2 bu/a to 176.9 bu/a. Production at 14.9 bbu. Bean yield up 1.5, to 48.6; crop almost 4.1 bbu.”

Bloomberg writer Ranjeetha Pakiam reported today that, “Soybeans retreated after posting the biggest jump in more than a year as separate surveys showed that world inventories and U.S. crops may be bigger than estimated by the Department of Agriculture last month.

“The contract for November delivery lost as much as 0.7 percent to $9.355 a bushel on the Chicago Board of Trade and was at $9.3825 by 1:12 p.m. in Singapore. Futures rose 3.3 percent yesterday, the most since August 2013, on signs of improved demand for U.S. supplies and as rain slowed harvesting. Prices tumbled 27 percent this year as farmers in the U.S., the top grower, prepared to harvest the biggest crop ever.”

And Reuters writer Naveen Thukral reported today that, “The U.S. Department of Agriculture said 20 percent of the soybean crop had been harvested as of Oct. 5, up from the 10 percent completed last week. Analysts had expected the crop to be 23 percent complete.

The agency pegged the corn harvest at 17 percent, up from 12 percent the week before, but still lower than market expectations of 20 percent.

More rain was in the forecast for the eastern Corn Belt this week, which will keep Ohio, Indiana and Kentucky farmers from running combines. Southern areas also were expecting rain from the remnants of Tropical Storm Simon.”

With respect to transportation issues, Mary Kennedy reported yesterday at DTN (link requires subscription) that, “Railroad officials should have anticipated this year’s bumper harvests and been ready with sufficient railcars for delivery, according to USDA Secretary Tom Vilsack.

“‘The reality is that we’re behind, the rail industry is behind, and they need to catch up,’ Vilsack said in an interview Oct. 3 with the Nebraska Radio Network.

“While two of the biggest railroads claim they’re investing in more staff and equipment, Vilsack said, ‘The moves aren’t coming quickly enough as farmers are already beginning to harvest crops.’”

The DTN article noted that, “Elevator officials and farmers in North and South Dakota continue to report that bin space is tight and many elevators are unable to take grain. There have been stories of wheat piles in Montana and South Dakota and there are expectations corn will end up on the ground due to lack of storage space. In fact, there were reports from farmers in southern Illinois that corn was being piled on the ground this past weekend.”

 

Biotech

Reuters writer Tom Polansek reported yesterday that, “Farmers from the biggest U.S. corn-growing states have sued Syngenta AG over sales of genetically modified corn seed not approved by China, joining global exporters in pursuing damages from the Swiss-based company.

“In coordinated lawsuits filed on Friday in federal courts in Iowa, Illinois, Nebraska, Kansas and Missouri, farmers accused Syngenta of being reckless when it launched U.S. sales of Agrisure Viptera corn seed in 2011 without obtaining import approval from China, a major buyer.

The farmers, who did not plant seed containing the unapproved trait, claimed they suffered losses because the price of U.S. corn dropped when China began rejecting boatloads of crops containing Viptera corn last year.”

Yesterday’s article indicated that, “Last month, agribusiness company Cargill Inc and another exporter separately sued Syngenta for selling Viptera corn seed before Beijing approved imports. The companies said they suffered combined damages of more than $131 million linked to China’s rejections of U.S. crops containing the trait.

“Syngenta had no immediate comment on the farmers’ lawsuits. The company has said the exporters’ complaints are without merit.”

Reuters writer Caroline Stauffer reported last week that, “At least one soybean exporter in Brazil has agreed with Monsanto to collect royalties, in exchange for a fee, from farmers who planted genetically engineered seeds marketed by the company, according to industry sources.

“The landmark deal, already finalized by a firm that declined to be identified, highlights an increasingly complex relationship between global grain merchants and biotech firms.”

The article explained that, “The trading firms are wary of serving as biotechnology police in Brazil, a role they have not had to play in the United States because biotech company’s patents are protected by laws that do not allow farmers to reuse seeds year after year there.

“In Brazil, where genetically modified seeds have only been legal since 2005, reusing seeds is more common and it is easier for farmers to skip out on Monsanto’s fees after buying the seeds the first season.”

 

Biofuels

University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdoc daily blog (“Big Year for Ethanol”) that, “Ethanol production, consumption, and stocks data are typically reviewed on a calendar year basis since Renewable Fuel Standards (RFS) are established for calendar years. However, since corn is the major feedstock for domestic ethanol production, ethanol data on a corn marketing year basis (September-August) are important for monitoring and anticipating marketing year corn consumption.

“For the 2013-14 corn marketing year, monthly estimates of domestic ethanol production and stocks are available from the U.S. Energy Information Administration (EIA) through July 2014. Weekly estimates are available for August. Census Bureau estimates of ethanol imports and exports are available for the entire marketing year. Based on these estimates, domestic ethanol production for the year totaled a record 14.15 billion gallons, 1.3 billion gallons more than produced during the 2012-13 marketing year and 354 million gallons more than the previous record production during the 2011-12 marketing year.”

The farmdoc daily update noted that, “With a record large U.S. corn crop this year, the magnitude of ethanol production will be important in determining the extent of the build-up in domestic corn inventories by the end of the current marketing year. With only limited potential for growth in domestic ethanol consumption, expansion in production will be dependent on continued small or declining imports and growth in exports of ethanol. Export potential is enhanced by the current low price of ethanol relative to gasoline, but increases are not yet evident in monthly Census Bureau export estimates.

“Weekly estimates from EIA indicate that ethanol production in September 2014 was about 6.5 percent larger than in September 2013. The large increase, however, reflects the relatively low level of production in September 2013 so that rate of expansion will not likely be maintained. Growth in ethanol production alone will not be sufficient to prevent a substantial build-up in corn inventories, but may be helpful in limiting the magnitude of the build-up.”

 

Regulations

Tim Devaney reported yesterday at The Hill Online that, “The Environmental Protection Agency (EPA) is again extending the comment period on a controversial rule that would give the agency more authority to regulate water as pressure mounts from the right to scrap the rule altogether.

“With tension surrounding the regulation increasing, the EPA announced Monday in an email to reporters it is extending the comment period for the second time through Nov. 14. The agency previously extended the comment period in June.

“In April, the EPA proposed the ‘waters of the United States’ rule, which would clarify the agency’s regulations as applying to smaller bodies of water, like streams and rivers, that flow into larger water sources that are already protected.”

An update yesterday from Sen. Mike Johanns (R., Neb.) noted that, “‘Though today’s announcement is little more than election-year politics from an Administration worried about retaining control of the Senate, I invite Nebraskans who recognize the rule as a power grab to take advantage of the opportunity to air their grievances,’ Johanns said. ‘The proposed rule could have enormous consequences for farmers and ranchers. I hope the agency is flooded with additional comments that bring much-needed commonsense to an out-of-touch EPA.’”

And Rep. Bob Gibbs (R., Ohio) noted yesterday that, “Today, the EPA has announced that they will be extending the comment period for the second time on the proposed Waters of the United States rule. The EPA should terminate the proposed rule and act on guidelines set in the bi-partisan bill, the Waters of the United States Regulatory Overreach Protection Act (H.R. 5078), that the House passed last month. This EPA’s power grab will only hurt businesses around the country and, rather than place burdensome regulations blindly, they should partner with the states to work together just as the Clean Water Act originally intended.”

Timothy Cama also reported yesterday at The Hill Online that, “The Environmental Protection Agency (EPA) is bringing back a retired leader from its Atlanta office to be the No. 2 official for the agency.

Stan Meiburg worked for the EPA since 1977, most recently as deputy regional administrator for the southeastern office before retiring earlier this year.

“EPA head Gina McCarthy announced Monday that Meiburg would become acting deputy administrator, replacing Lisa Feldt.”

 

Immigration

Ramsey Cox reported yesterday at The Hill Online that, “Sen. Amy Klobuchar (D-Minn.) called on the House to pass comprehensive immigration reform in order to boost the economy.

“‘The House of Representatives should take up comprehensive immigration reform,’ Klobuchar wrote in a Sunday op-ed for The Guardian. ‘While we allow unlimited visas for pro hockey players, we severely limit visas for engineers, doctors and their spouses. The House of Representatives needs to pass comprehensive immigration reform.’

The Senate passed bipartisan immigration reform last year, which increased visas, but the House has refused to act on the legislation. If the House doesn’t take up the bill by the end of the year, the Senate will have to start the process over again.”

Keith Good

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