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Budget- Policy Issues; Ag Economy; Biotech; Biofuels; Tax Extenders, and Climate

Budget- Policy Issues

David Rogers reported yesterday at Politico that, “House-Senate negotiators neared agreement Sunday on the last pieces of a $1.1 trillion spending bill designed to avert any shutdown this week and put most government agencies on firm footing through next September.

“Building on a long weekend of talks, the goal was to file the giant measure by late Monday and then push for quick floor action before the current funding runs out Thursday night.”

The article noted that, “Child nutrition standards backed by first lady Michelle Obama were in play, though the House agreed to back away from some of its earlier demands.”

The article added that, “To appease the right, the Department of Homeland Security will be kept on a short leash so Republicans can revisit the issue of Obama’s executive order on immigration.”

Amie Parnes reported on Friday at The Hill Online that, “White House press secretary Josh Earnest said Friday that the administration is still ‘waiting to see the details’ on the government funding bill being prepared by Congress.

“As he has stated for the last two days, Earnest said he wouldn’t discuss whether President Obama would veto the funding bill.”

More specifically on nutrition issues, AP writer Mary Clare Jalonick reported on Friday that, “House Republicans are making a final push this month to give schools a temporary break [a one-year waiver that would allow schools to opt out of the standards if they lost money on meal programs over a six-month period] from healthier school meal standards.”

Ms. Jalonick explained that, “But the waiver has new life this month as lawmakers are expected to pass a catchall spending bill to keep government programs running. Republican Rep. Robert Aderholt of Alabama, the chairman of the House subcommittee that oversees the school meal spending, has been pushing to include the waiver in the wide-ranging bill.

“Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., and Republican Sen. John Hoeven of North Dakota both said Thursday that there are ongoing negotiations between the House and the Senate over the waiver. A Senate bill approved by a spending committee in May did not include the waiver, but called for further study on sodium and whole grains requirements.

“At the time, Hoeven said there was not enough support for the House’s one-year waiver in the Senate, even though he was supportive of it himself. But he said this week that could change as lawmakers negotiate the massive year-end spending bill.”

The AP article stated that, “On Friday, House Minority Leader Nancy Pelosi, D-Calif., listed ‘lowering standards for school lunches for our children’ as one of a few ‘very destructive riders’ that would be unacceptable to Democrats in the spending bill.”

Meanwhile, Ken Anderson reported on Friday at Brownfield that, “The chief lobbyist for the American Farm Bureau Federation, Mary Kay Thatcher, says crop insurance could be a major target as Congress begins work on a federal budget in 2015.

“‘I think with the Republicans in charge, they’re going to want to produce a budget. We haven’t had one in eight or nine years,’ Thatcher says. ‘So you look at appropriations bills, there’s always cuts that come along. We’re anticipating in Appropriations that crop insurance will be a major target.’

“One scenario has politicians who seek further cuts in the food stamp program agreeing to make cuts in crop insurance as well. But Chip Bowling, president of the National Corn Growers Association, says they’re very much opposed to Congress tinkering with any portion of the farm bill.”

DTN Ag Policy Editor Chris Clayton reported on Friday that, “The Obama administration has proposed cutting the percentage of premium subsidy [for federal crop insurance] every year since the president took office. Last year, the White House proposed cutting the rate of return to insurance companies from 14% to 12%, as well as capping administrative and operating reimbursements to $900 million a year. The White House also proposed cutting premium subsidies for some policies by 3% and cutting other policies up to 7%.

“‘I have no reason to believe USDA or the president would be backing off on that,’ Thatcher said.

“Congress restricted USDA’s ability to negotiate budget cuts through reinsurance agreements with companies. In the farm bill, lawmakers effectively established that such cuts are the purview of Congress and not USDA. Insurers might actually seek increases in administrative and operating expense reimbursements from USDA because some of the companies have lost money in years since USDA renegotiated the standard reinsurance agreement with insurers back in 2011.”

More broadly on the legislative agenda, Jonathan Weisman reported in Saturday’s New York Times that, “A strikingly improving labor market, coupled with broad economic growth and a falling federal budget deficit, is improving the prospects of bipartisan cooperation next year — if Republicans and Democrats can seize on easing fiscal pressures to give both sides some of their wish lists.

“On Friday, the Labor Department reported that United States payrolls rose by 321,000 jobs in November and that hourly wages jumped, easily beating economists’ expectations. This year will be the best for job creation since the boom years of the late 1990s.”

Beyond the budget measure, the House this week will likely consider the California Emergency Drought Relief Act of 2014 (H. R. 5781).

Philip Brasher reported today at Agri-Pulse Online that, “The California drought also will get some attention this week. The House will vote as soon as Tuesday on another drought-relief bill for the state. Although it’s scaled back from the version that Republicans pushed through the House earlier this year, H.R. 5781 doesn’t appear to have any future in the Senate because of its impact on environmental protections. Rep. Jim Costa, D-Calif., worked on the bill with his GOP colleagues, but the state’s Democratic senators were not part of the negotiations.”


Agricultural Economy

Bloomberg writer Tom Randall reported on Friday that, “Record rains fell in California this week. They’re not enough to change the course of what scientists are now calling the region’s worst drought [related graph] in at least 1,200 years.

“Just how bad has California’s drought been? Modern measurements already showed it’s been drier than the 1930s dustbowl, worse than the historic droughts of the 1970s and 1980s. That’s not all. New research going back further than the Viking conquests in Europe still can’t find a drought as bad as this one.”

Matt Stevens reported on Friday at the Los Angeles Times Online that, “State water resources officials said this week that it would take 150% of the average rainfall for California to recover from the current drought. The DWR measures rainfall at eight stations in the northern Sierra because water from those areas feeds the State Water Project. The water project, in turn, delivers water to farmland in the Central Valley and urban Southern California through a vast network of reservoirs and canals.

An average of 50 inches of rain fell at those stations annually between 1922 and 1998. Using that average, officials said 75 inches of rain would need to fall in those Northern California spots by the end of the year to end the drought.

“Since Oct. 1, only about 11 inches of rain has fallen at those eight stations [related graph].”

Also, a news release late last week from the Commodity Futures Trading Commission (CFTC) indicated that, “The [CFTC] announced today the agenda for the upcoming Agricultural Advisory Committee (AAC) meeting on Tuesday, December 9, 2014 at 10:00 a.m., at its headquarters in Washington, DC. The agenda includes USDA Secretary Tom Vilsack, who will present on the state of the agriculture economy.”

Meanwhile, Alexandra Wexler reported in today’s Wall Street Journal that, “Sugar is getting dearer in the U.S. even as it is getting cheaper in most other places. Prices in the global market traded near 5½-year lows in September, though they have rallied a bit since. In the U.S. futures market, the sweetener is 58% more expensive than on the global market.

“U.S. sugar for delivery in March settled at 23.98 cents per pound Friday on ICE Futures U.S., while the contract used as a benchmark for global prices ended at 15.14 cents a pound [related graph].

And on Friday, University of Illinois agricultural economist Gary Schnitkey indicated at the farmdoc daily blog (“Setting Cash Rents and Variability in Returns”) that, “Returns to farmland likely will vary considerably over the next several years. This variability will make it difficult to set a cash rent that can remain the same for several years. Prices projected for 2015 are lower than likely long-run prices. As a result, cash rents based on 2015 returns may have to be raised in the future. Similarly, rents may need to be lowered if those cash rents were set based on returns in 2010 through 2013, particularly given that prices in 2010 through 2013 were above likely long-run average prices.”

In transportation news, Reuters writers Karl Plume and Michael Hirtzer reported on Friday that, “U.S. grain transportation costs have slumped to multi-year lows as last winter’s weather-related shipping problems have so far failed to materialize, but even a modest cold snap could still overwhelm the nation’s train, barge and truck network and send costs soaring again.

“Food company Kraft Foods Group Inc warned recently that industry wide logistic problems would drag on earnings, and grain processor Archer Daniels Midland Co said this week that rail service troubles could flare up in the first quarter of 2015.

“‘We still have room to have issues here as we get into the winter and I don’t know that we have a large amount of confidence that the rail situation’s going to get better,’ Craig Willis, vice president of ADM’s ethanol business, told investors at a presentation.”

From an international perspective, Richard Marosi reported on the front page of yesterday’s Los Angeles Times that, “The tomatoes, peppers and cucumbers arrive year-round by the ton, with peel-off stickers proclaiming ‘Product of Mexico.’

Farm exports to the U.S. from Mexico have tripled to $7.6 billion in the last decade, enriching agribusinesses, distributors and retailers.”

The article noted that, “American consumers get all the salsa, squash and melons they can eat at affordable prices. And top U.S. brands — Wal-Mart, Whole Foods, Subway and Safeway, among many others — profit from produce they have come to depend on.

“These corporations say their Mexican suppliers have committed to decent treatment and living conditions for workers.

But a Los Angeles Times investigation found that for thousands of farm laborers south of the border, the export boom is a story of exploitation and extreme hardship.”

In trade news regarding the Trans-Pacific Partnership, an article posted today at the Japan Times reported that, “Chief negotiators from 12 countries involved in the Trans-Pacific Partnership initiative resumed negotiations in Washington after their leaders reaffirmed last month they will conclude an agreement as soon as possible.

The six-day working-level meeting started Sunday. This round follows a summit held Nov. 10 in Beijing, where U.S. President Barack Obama, Prime Minister Shinzo Abe and the 10 other leaders instructed officials and ministers to make concluding the free-trade deal ‘a top priority.’

“The United States, which leads the free-trade scheme, seeks to reach a broad agreement early in the new year before it enters campaign mode toward the presidential election in 2016, according to negotiation sources. However, the outlook is uncertain.”



Tracy Loew reported on Friday at the Statesman Journal (Salem, Ore.) Online that, “The No on 92 Coalition attempted to place out-of-state election observers in at least four Oregon counties Tuesday, in violation of state law, proponents are complaining.

“Measure 92, which would require foods containing genetically modified ingredients to be labeled, failed by just 812 votes during the first, computerized tally last month. A hand recount began Tuesday in 19 counties and continues in the rest through Dec. 9.”

The article added that, “Under Oregon law, each campaign may authorize an observer to watch each counting table. Authorized observers must be registered Oregon voters.

“But out-of-state observers still registered and showed up in Marion, Multnomah, Linn and Benton Counties, said Dave Murphy of Food Democracy Now, which is helping coordinate volunteers for the Yes on 92 Campaign.”

On Wednesday, the Energy and Commerce Committee will examine FDA’s Role in the Regulation of Genetically Modified Food Ingredients and will consider H. R. 4432 – a bill to “amend the Federal Food, Drug, and Cosmetic Act with respect to food produced from, containing, or consisting of a bioengineered organism, the labeling of natural foods, and for other purposes.”

The measure, which is sponsored by Rep. Mike Pompeo (R., Kans.) and George Butterfield (D., N.C.), “would establish a federal labeling standard for foods with genetically modified ingredients, giving sole authority to the Food and Drug Administration to require mandatory labeling on such foods if they are ever found to be unsafe or materially different from foods produced without GM ingredients.”



With respect to biofuels, the House Committee on Oversight and Government Reform will also be holding a hearing on Wednesday titled: “Examining EPA’s Management of the Renewable Fuel Standard Program.”


Tax Extenders

Ramsey Cox reported late last week at The Hill Online that, “Majority Leader Harry Reid (D-Nev.) said Thursday night that the Senate might not be able to pass the House tax extenders bill before the end of the year.

“Reid said it was ‘imperative’ for the Senate to pass a government funding bill and a defense spending measure before adjourning for the year but that senators would have to wait and see if a tax deal makes it to the floor.

“‘Everyone knows we have to do a spending bill. Everyone knows we have to do a defense bill,’ Reid said on the Senate floor. ‘Everyone knows that we’re trying to do some tax extenders. We’re trying to do that, but we’ll see.’”


Climate Issues

Pilita Clark reported yesterday at The Financial Times Online that, “ExxonMobil and Shell would cease to exist in their current forms in 35 years under measures UN negotiators are considering for a legally binding global climate pact to be sealed in Paris next year.

“The oil and gas these companies produce, and the coal mined by groups such as Rio Tinto, would have to be phased out by 2050 in one proposal at UN climate talks in Lima this week, which aim to smooth a path to the Paris deal.

“Another option would still allow such fossil fuels to be used, but only if countries could ensure ‘net zero emissions by 2050.’”

The FT article noted that, “In other words, all the warming carbon dioxide emissions produced when fossil fuels are burnt would have to be stored underground or offset by steps such as planting vast numbers of trees.

“Shell declined to respond directly but pointed to a speech by chief executive Ben van Beurden arguing ‘we need to temper our expectations of a zero-carbon future’, because demand for energy is so strong and renewable energy sources were unlikely to be a realistic alternative to fossil fuels for many decades.”

Keith Good